Sales Week 5 Cases PDF

G.R. No.
109125 December 2, 1994 the contract itself, the failure of the condition would prevent such perfection. If the
ANG YU ASUNCION, ARTHUR GO AND KEH TIONG, petitioners, vs. condition is imposed on the obligation of a party which is not fulfilled, the other party
THE HON. COURT OF APPEALS and BUEN REALTY DEVELOPMENT may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil Code).
CORPORATION, respondents. Same; Same; Same; An unconditional mutual promise to buy and sell, with an
Antonio M. Albano for petitioners. object that is determinate and the price fixed, can be obligatory on the parties.—An
Umali, Soriano & Associates for private respondent. unconditional mutual promise to buy and sell, as long as the object is made determinate
and the price is fixed, can be obligatory on the parties, and compliance therewith may
Obligations; Essential elements of an obligation.—An obligation is a juridical
accordingly be exacted.
necessity to give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted
Same; Same; Same; Options; An accepted unilateral promise which specifies
upon the concurrence of the essential elements thereof, viz: (a) The vinculum
the thing to be sold and the price to be paid, when coupled with a valuable consideration
juris or juridical tie which is the efficient cause established by the various sources of
distinct and separate from the price, may be termed a perfected contract of option.—
obligations (law, contracts, quasi-contracts, delicts and quasi-delicts); (b)
An accepted unilateral promise which specifies the thing to be sold and the price to be
the object which is the prestation or conduct, required to be observed (to give, to do or
paid, when coupled with a valuable consideration distinct and separate from the price,
not to do); and (c) the subject-persons who, viewed from the demandability of the
is what may properly be termed a perfected contract of option. This contract is legally
obligation, are the active (obligee) and the passive (obligor) subjects.
binding, and in sales, it conforms with the second paragraph of Article 1479 of the Civil
Same; Contracts; Various stages of a contract.—Among the sources of an
Code. Observe, however, that the option is not the contract of sale itself. The optionee
obligation is a contract (Art. 1157, Civil Code), which is a meeting of minds between
has the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the
two persons whereby one binds himself, with respect to the other, to give something or
offer is accepted before a breach of the option, a bilateral promise to sell and to buy
to render some service (Art. 1305, Civil Code). A contract undergoes various stages
ensues and both parties are then reciprocally bound to comply with their respective
that include its negotiation or preparation, its perfection and, finally, its
undertakings.
consummation. Negotiation covers the period fromthe time the prospective contracting
Same; Same; Same; Same; Rules applicable where a period is given to the
parties indicate interest in the contract to the time the contract is concluded (perfected).
offeree within which to accept the offer.—Where a period is given to the offeree within
The perfection of the contract takes place upon the concurrence of the essential
which to accept the offer, the following rules generally govern: (1) If the period is not
elements thereof. A contract which is consensual as to perfection is so established
itself founded upon or supported by a consideration, the offeror is still free and has the
upon a mere meeting of minds, i.e., the concurrence of offer and acceptance, on the
right to withdraw the offer before its acceptance, or, if an acceptance has been made,
object and on the cause thereof. A contract which requires, in addition to the above,
before the offeror’s coming to know of such fact, by communicating that withdrawal to
the delivery of the object of the agreement, as in a pledge or commodatum, is
the offeree. The right to withdraw, however, must not be exercised whimsically or
commonly referred to as a real contract. In a solemn contract, compliance with certain
arbitrarily; otherwise, it could give rise to a damage claim under Article 19 of the Civil
formalities prescribed by law, such as in a donation of real property, is essential in order
Code; (2) If the period has a separate consideration, a contract of “option” is deemed
to make the act valid, the prescribed form being thereby an essential element thereof.
perfected, and it would be a breach of that contract to withdraw the offer during the
The stage of consummation begins when the parties perform their respective
agreed period. The option, however, is an independent contract by itself, and it is to be
undertakings under the contract culminating in the extinguishment thereof.
distinguished from the projected main agreement (subject matter of the option) which
Same; Same; Sales; In sales, the contract is perfected when the seller obligates
is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the offer
himself, for a price certain, to deliver and to transfer ownership of a thing or right to the
before its acceptance (exercise of the option) by the optionee-offeree, the latter may
buyer, over which the latter agrees.—Until the contract is perfected, it cannot, as an
not sue for specific performance on the proposed contract (“object” of the option) since
independent source of obligation, serve as a binding juridical relation. In sales,
it has failed to reach its own stage of perfection. The optionee-offeror, however, renders
particularly, to which the topic for discussion about the case at bench belongs, the
himself liable for damages for breach of the option. In these cases, care should be
contract is perfected when a person, called the seller, obligates himself, for a price
taken on the real nature of the consideration given, for if, in fact, it has been intended
certain, to deliver and to transfer ownership of a thing or right to another, called the
to be part of the consideration for the main contract with a right of withdrawal on the
buyer, over which the latter agrees.
part of the optionee, the main contract could be deemed perfected; a similar instance
Same; Same; Same; When the sale is not absolute but conditional, the breach of
would be an “earnest money” in a contract of sale that can evidence its perfection (Art.
the condition will prevent the obligation to convey title from acquiring an obligatory
1482, Civil Code).
force.—When the sale is not absolute but conditional, such as in a “Contract to Sell”
Same; Same; Same; Same; Words and Phrases; “Right of First Refusal,”
where invariably the ownership of the thing sold is retained until the fulfillment of a
Explained; In the law on sales, the so-called “right of first refusal” is an innovative
positive suspensive condition (normally, the full payment of the purchase price), the
juridical relation, but it cannot be deemed a perfected contract of sale under Article
breach of the condition will prevent the obligation to convey title from acquiring an
1458 of the Civil Code.—In the law on sales, the so-called “right of first refusal” is an
obligatory force. In Dignos vs. Court of Appeals (158 SCRA 375), we have said that,
innovative juridical relation. Needless to point out, it cannot be deemed a perfected
although denominated a “Deed of Conditional Sale,” a sale is still absolute where the
contract of sale under Article 1458 of the Civil Code, Neither can the right of first refusal,
contract is devoid of any proviso that title is reserved or the right to unilaterally rescind
understood in its normal concept, per se be brought within the purview of an option
is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to
under the second paragraph of Article 1479, aforequoted, or possibly of an offer under
the buyer upon actual or constructive delivery (e.g., by the execution of a public
Article 1319 of the same Code. An option or an offer would require, among other things,
document) of the property sold. Where the condition is imposed upon the perfection of
a clear certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate, the offering to sell the premises and are giving them priority to acquire the same;
exercise of the right, however, would be dependent not only on the grantor’s eventual that during the negotiations, Bobby Cu Unjieng offered a price of P6-million
intention to enter into a binding juridical relation with another but also on terms, while plaintiffs made a counter offer of P5-million; that plaintiffs thereafter
including the price, that obviously are yet to be later firmed up. Prior thereto, it can at asked the defendants to put their offer in writing to which request defendants
best be so described as merely belonging to a class of preparatory juridical relations acceded; that in reply to defendant's letter, plaintiffs wrote them on October
governed not by contracts (since the essential elements to establish the vinculum 24, 1986 asking that they specify the terms and conditions of the offer to sell;
juris would still be indefinite and inconclusive) but by, among other laws of general that when plaintiffs did not receive any reply, they sent another letter dated
application, the pertinent scattered provisions of the Civil Code on human conduct. January 28, 1987 with the same request; that since defendants failed to
Same; Same; Same; Same; Same; Same; Breach of a right of first refusal specify the terms and conditions of the offer to sell and because of information
decreed under a final judgment does not entitle the aggrieved party to a writ of received that defendants were about to sell the property, plaintiffs were
execution of the judgment but to an action for damages.—Even on the premise that compelled to file the complaint to compel defendants to sell the property to
such right of first refusal has been decreed under a final judgment, like here, its breach them.
cannot justify correspondingly an issuance of a writ of execution under a judgment that Defendants filed their answer denying the material allegations of the complaint
merely recognizes its existence, nor would it sanction an action for specific performance and interposing a special defense of lack of cause of action.
without thereby negating the indispensable element of consensuality in the perfection After the issues were joined, defendants filed a motion for summary judgment
of contracts. It is not to say, however, that the right of first refusal would be which was granted by the lower court. The trial court found that defendants'
inconsequential for, such as already intimated above, an unjustified disregard thereof, offer to sell was never accepted by the plaintiffs for the reason that the parties
given, for instance, the circumstances expressed in Article 19 of the Civil Code, can did not agree upon the terms and conditions of the proposed sale, hence,
warrant a recovery for damages. The final judgment in Civil Case No. 87-41058, it must there was no contract of sale at all. Nonetheless, the lower court ruled that
be stressed, has merely accorded a “right of first refusal” in favor of petitioners. The should the defendants subsequently offer their property for sale at a price of
consequence of such a declaration entails no more than what has heretofore been said. P11-million or below, plaintiffs will have the right of first refusal. Thus the
In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of dispositive portion of the decision states:
private respondents to honor the right of first refusal, the remedy is not a writ of WHEREFORE, judgment is hereby rendered in favor of the
execution on the judgment, since there is none to execute, but an action for damages defendants and against the plaintiffs summarily dismissing the
in a proper forum for the purpose. complaint subject to the aforementioned condition that if the
Due Process; Actions; A party not impleaded in an action cannot be held subject defendants subsequently decide to offer their property for sale for a
to the writ of execution issued therein.—Furthermore, whether private respondent Buen purchase price of Eleven Million Pesos or lower, then the plaintiffs
Realty Development Corporation, the allegedpurchaser of the property, has acted in has the option to purchase the property or of first refusal, otherwise,
good faith or bad faith and whether or not it should, in any case, be considered bound defendants need not offer the property to the plaintiffs if the purchase
to respect the registration of the lis pendens in Civil Case No. 87-41058 are matters price is higher than Eleven Million Pesos.
that must be independently addressed in appropriate proceedings. Buen Realty, not SO ORDERED.
having been impleaded in Civil Case No.87-41058, cannot be held subject to the writ Aggrieved by the decision, plaintiffs appealed to this Court in
of execution issued by respondent Judge, let alone ousted from the ownership and CA-G.R. CV No. 21123. In a decision promulgated on September 21, 1990
possession of the property, without first being duly afforded its day in court. (penned by Justice Segundino G. Chua and concurred in by Justices Vicente
V. Mendoza and Fernando A. Santiago), this Court affirmed with modification
PETITION for review of a decision of the Court of Appeals.
the lower court's judgment, holding:
In resume, there was no meeting of the minds between the parties
VITUG, J.:
concerning the sale of the property. Absent such requirement, the
Assailed, in this petition for review, is the decision of the Court of Appeals, dated 04
claim for specific performance will not lie. Appellants' demand for
December 1991, in CA-G.R. SP No. 26345 setting aside and declaring without force
actual, moral and exemplary damages will likewise fail as there exists
and effect the orders of execution of the trial court, dated 30 August 1991 and 27
no justifiable ground for its award. Summary judgment for defendants
September 1991, in Civil Case No. 87-41058.
was properly granted. Courts may render summary judgment when
The antecedents are recited in good detail by the appellate court thusly:
there is no genuine issue as to any material fact and the moving party
On July 29, 1987 a Second Amended Complaint for Specific Performance was
is entitled to a judgment as a matter of law (Garcia vs. Court of
filed by Ang Yu Asuncion and Keh Tiong, et al., against Bobby Cu Unjieng,
Appeals, 176 SCRA 815). All requisites obtaining, the decision of the
Rose Cu Unjieng and Jose Tan before the Regional Trial Court, Branch 31,
court a quo is legally justifiable.
Manila in Civil Case No. 87-41058, alleging, among others, that plaintiffs are
WHEREFORE, finding the appeal unmeritorious, the judgment
tenants or lessees of residential and commercial spaces owned by defendants
appealed from is hereby AFFIRMED, but subject to the following
described as Nos. 630-638 Ongpin Street, Binondo, Manila; that they have
modification: The court a quo in the aforestated decision gave the
occupied said spaces since 1935 and have been religiously paying the rental
plaintiffs-appellants the right of first refusal only if the property is sold
and complying with all the conditions of the lease contract; that on several
for a purchase price of Eleven Million pesos or lower; however,
occasions before October 9, 1986, defendants informed plaintiffs that they are
considering the mercurial and uncertain forces in our market
economy today. We find no reason not to grant the same right of first 1991, stating that the aforesaid modified decision had already
refusal to herein appellants in the event that the subject property is become final and executory.
sold for a price in excess of Eleven Million pesos. No pronouncement It is the observation of the Court that this property in dispute was the
as to costs. subject of the Notice of Lis Pendens and that the modified decision
SO ORDERED. of this Court promulgated by the Court of Appeals which had become
The decision of this Court was brought to the Supreme Court by petition for final to the effect that should the defendants decide to offer the
review on certiorari. The Supreme Court denied the appeal on May 6, 1991 property for sale for a price of P11 Million or lower, and considering
"for insufficiency in form and substances" (Annex H, Petition). the mercurial and uncertain forces in our market economy today, the
On November 15, 1990, while CA-G.R. CV No. 21123 was pending same right of first refusal to herein plaintiffs/appellants in the event
consideration by this Court, the Cu Unjieng spouses executed a Deed of Sale that the subject property is sold for a price in excess of Eleven Million
(Annex D, Petition) transferring the property in question to herein petitioner pesos or more.
Buen Realty and Development Corporation, subject to the following terms and WHEREFORE, defendants are hereby ordered to execute the
conditions: necessary Deed of Sale of the property in litigation in favor of
1. That for and in consideration of the sum of FIFTEEN MILLION plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for the
PESOS (P15,000,000.00), receipt of which in full is hereby consideration of P15 Million pesos in recognition of plaintiffs' right of
acknowledged, the VENDORS hereby sells, transfers and conveys first refusal and that a new Transfer Certificate of Title be issued in
for and in favor of the VENDEE, his heirs, executors, administrators favor of the buyer.
or assigns, the above-described property with all the improvements All previous transactions involving the same property
found therein including all the rights and interest in the said property notwithstanding the issuance of another title to Buen Realty
free from all liens and encumbrances of whatever nature, except the Corporation, is hereby set aside as having been executed in bad
pending ejectment proceeding; faith.
2. That the VENDEE shall pay the Documentary Stamp Tax, SO ORDERED.
registration fees for the transfer of title in his favor and other On September 22, 1991 respondent Judge issued another order, the
expenses incidental to the sale of above-described property dispositive portion of which reads:
including capital gains tax and accrued real estate taxes. WHEREFORE, let there be Writ of Execution issue in the above-
As a consequence of the sale, TCT No. 105254/T-881 in the name of the Cu entitled case directing the Deputy Sheriff Ramon Enriquez of this
Unjieng spouses was cancelled and, in lieu thereof, TCT No. 195816 was Court to implement said Writ of Execution ordering the defendants
issued in the name of petitioner on December 3, 1990. among others to comply with the aforesaid Order of this Court within
On July 1, 1991, petitioner as the new owner of the subject property wrote a a period of one (1) week from receipt of this Order and for defendants
letter to the lessees demanding that the latter vacate the premises. to execute the necessary Deed of Sale of the property in litigation in
On July 16, 1991, the lessees wrote a reply to petitioner stating that petitioner favor of the plaintiffs Ang Yu Asuncion, Keh Tiong and Arthur Go for
brought the property subject to the notice of lis pendens regarding Civil Case the consideration of P15,000,000.00 and ordering the Register of
No. 87-41058 annotated on TCT No. 105254/T-881 in the name of the Cu Deeds of the City of Manila, to cancel and set aside the title already
Unjiengs. issued in favor of Buen Realty Corporation which was previously
The lessees filed a Motion for Execution dated August 27, 1991 of the executed between the latter and defendants and to register the new
Decision in Civil Case No. 87-41058 as modified by the Court of Appeals in title in favor of the aforesaid plaintiffs Ang Yu Asuncion, Keh Tiong
CA-G.R. CV No. 21123. and Arthur Go.
On August 30, 1991, respondent Judge issued an order (Annex A, Petition) SO ORDERED.
quoted as follows: On the same day, September 27, 1991 the corresponding writ of execution
Presented before the Court is a Motion for Execution filed by plaintiff (Annex C, Petition) was issued.1
represented by Atty. Antonio Albano. Both defendants Bobby Cu On 04 December 1991, the appellate court, on appeal to it by private respondent, set
Unjieng and Rose Cu Unjieng represented by Atty. Vicente Sison aside and declared without force and effect the above questioned orders of the court a
and Atty. Anacleto Magno respectively were duly notified in today's quo.
consideration of the motion as evidenced by the rubber stamp and In this petition for review on certiorari, petitioners contend that Buen Realty can be held
signatures upon the copy of the Motion for Execution. bound by the writ of execution by virtue of the notice of lis pendens, carried over on
The gist of the motion is that the Decision of the Court dated TCT No. 195816 issued in the name of Buen Realty, at the time of the latter's purchase
September 21, 1990 as modified by the Court of Appeals in its of the property on 15 November 1991 from the Cu Unjiengs.
decision in CA G.R. CV-21123, and elevated to the Supreme Court We affirm the decision of the appellate court.
upon the petition for review and that the same was denied by the A not too recent development in real estate transactions is the adoption of such
highest tribunal in its resolution dated May 6, 1991 in G.R. No. arrangements as the right of first refusal, a purchase option and a contract to sell. For
L-97276, had now become final and executory. As a consequence, ready reference, we might point out some fundamental precepts that may find some
there was an Entry of Judgment by the Supreme Court as of June 6, relevance to this discussion.
An obligation is a juridical necessity to give, to do or not to do (Art. 1156, Civil Code). An accepted unilateral promise which specifies the thing to be sold and the price to
The obligation is constituted upon the concurrence of the essential elements be paid, when coupled with a valuable consideration distinct and separate from the
thereof, viz: (a) The vinculum juris or juridical tie which is the efficient cause price, is what may properly be termed a perfected contract of option. This contract is
established by the various sources of obligations (law, contracts, quasi-contracts, legally binding, and in sales, it conforms with the second paragraph of Article 1479 of
delicts and quasi-delicts); (b) the object which is the prestation or conduct; required to the Civil Code, viz:
be observed (to give, to do or not to do); and (c) the subject-persons who, viewed from Art. 1479. . . .
the demandability of the obligation, are the active (obligee) and the passive (obligor) An accepted unilateral promise to buy or to sell a determinate thing for a price
subjects. certain is binding upon the promissor if the promise is supported by a
Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a consideration distinct from the price. (1451a)6
meeting of minds between two persons whereby one binds himself, with respect to the Observe, however, that the option is not the contract of sale itself.7 The optionee has
other, to give something or to render some service (Art. 1305, Civil Code). A contract the right, but not the obligation, to buy. Once the option is exercised timely, i.e., the
undergoes various stages that include its negotiation or preparation, its perfection and, offer is accepted before a breach of the option, a bilateral promise to sell and to buy
finally, its consummation. Negotiation covers the period from the time the prospective ensues and both parties are then reciprocally bound to comply with their respective
contracting parties indicate interest in the contract to the time the contract is concluded undertakings.8
(perfected). The perfection of the contract takes place upon the concurrence of the Let us elucidate a little. A negotiation is formally initiated by an offer. An imperfect
essential elements thereof. A contract which is consensual as to perfection is so promise (policitacion) is merely an offer. Public advertisements or solicitations and the
established upon a mere meeting of minds, i.e., the concurrence of offer and like are ordinarily construed as mere invitations to make offers or only as proposals.
acceptance, on the object and on the cause thereof. A contract which requires, in These relations, until a contract is perfected, are not considered binding commitments.
addition to the above, the delivery of the object of the agreement, as in a pledge Thus, at any time prior to the perfection of the contract, either negotiating party may
or commodatum, is commonly referred to as a real contract. In a solemn contract, stop the negotiation. The offer, at this stage, may be withdrawn; the withdrawal is
compliance with certain formalities prescribed by law, such as in a donation of real effective immediately after its manifestation, such as by its mailing and not necessarily
property, is essential in order to make the act valid, the prescribed form being thereby when the offeree learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a
an essential element thereof. The stage of consummation begins when the parties period is given to the offeree within which to accept the offer, the following rules
perform their respective undertakings under the contract culminating in the generally govern:
extinguishment thereof. (1) If the period is not itself founded upon or supported by a consideration, the offeror
Until the contract is perfected, it cannot, as an independent source of obligation, serve is still free and has the right to withdraw the offer before its acceptance, or, if an
as a binding juridical relation. In sales, particularly, to which the topic for discussion acceptance has been made, before the offeror's coming to know of such fact, by
about the case at bench belongs, the contract is perfected when a person, called the communicating that withdrawal to the offeree (see Art. 1324, Civil Code; see also
seller, obligates himself, for a price certain, to deliver and to transfer ownership of a Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule is applicable to a
thing or right to another, called the buyer, over which the latter agrees. Article 1458 of unilateral promise to sell under Art. 1479, modifying the previous decision in South
the Civil Code provides: Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see also Art. 1319, Civil Code; Rural
Art. 1458. By the contract of sale one of the contracting parties obligates Bank of Parañaque, Inc., vs. Remolado, 135 SCRA 409; Sanchez vs. Rigos, 45 SCRA
himself to transfer the ownership of and to deliver a determinate thing, and the 368). The right to withdraw, however, must not be exercised whimsically or arbitrarily;
other to pay therefor a price certain in money or its equivalent. otherwise, it could give rise to a damage claim under Article 19 of the Civil Code which
A contract of sale may be absolute or conditional. ordains that "every person must, in the exercise of his rights and in the performance of
When the sale is not absolute but conditional, such as in a "Contract to Sell" where his duties, act with justice, give everyone his due, and observe honesty and good faith."
invariably the ownership of the thing sold is retained until the fulfillment of a positive (2) If the period has a separate consideration, a contract of "option" is
suspensive condition (normally, the full payment of the purchase price), the breach of deemed perfected, and it would be a breach of that contract to withdraw the offer during
the condition will prevent the obligation to convey title from acquiring an obligatory the agreed period. The option, however, is an independent contract by itself, and it is
force.2 In Dignos vs. Court of Appeals (158 SCRA 375), we have said that, although to be distinguished from the projected main agreement (subject matter of the option)
denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is which is obviously yet to be concluded. If, in fact, the optioner-offeror withdraws the
devoid of any proviso that title is reserved or the right to unilaterally rescind is offer before its acceptance (exercise of the option) by the optionee-offeree, the latter
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to may not sue for specific performance on the proposed contract ("object" of the option)
the buyer upon actual or constructive delivery (e.g., by the execution of a public since it has failed to reach its own stage of perfection. The optioner-offeror, however,
document) of the property sold. Where the condition is imposed upon the perfection of renders himself liable for damages for breach of the option. In these cases, care should
the contract itself, the failure of the condition would prevent such perfection.3 If the be taken of the real nature of the consideration given, for if, in fact, it has been intended
condition is imposed on the obligation of a party which is not fulfilled, the other party to be part of the consideration for the main contract with a right of withdrawal on the
may either waive the condition or refuse to proceed with the sale (Art. 1545, Civil part of the optionee, the main contract could be deemed perfected; a similar instance
Code).4 would be an "earnest money" in a contract of sale that can evidence its perfection (Art.
An unconditional mutual promise to buy and sell, as long as the object is made 1482, Civil Code).
determinate and the price is fixed, can be obligatory on the parties, and compliance In the law on sales, the so-called "right of first refusal" is an innovative juridical relation.
therewith may accordingly be exacted.5 Needless to point out, it cannot be deemed a perfected contract of sale under Article
1458 of the Civil Code. Neither can the right of first refusal, understood in its normal WHEREFORE, we UPHOLD the Court of Appeals in ultimately setting aside the
concept, per se be brought within the purview of an option under the second paragraph questioned Orders, dated 30 August 1991 and 27 September 1991, of the court a quo.
of Article 1479, aforequoted, or possibly of an offer under Article 13199 of the same Costs against petitioners.
Code. An option or an offer would require, among other things,10 a clear certainty on SO ORDERED.
both the object and the cause or consideration of the envisioned contract. In a right of Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason,
first refusal, while the object might be made determinate, the exercise of the right, Puno and Mendoza, JJ., concur.
however, would be dependent not only on the grantor's eventual intention to enter into Kapunan, J., took no part.
a binding juridical relation with another but also on terms, including the price, that Feliciano, J., is on leave.
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as
merely belonging to a class of preparatory juridical relations governed not by contracts #Footnotes
(since the essential elements to establish the vinculum juris would still be indefinite and 1 Rollo, pp. 32-38.
inconclusive) but by, among other laws of general application, the pertinent scattered 2 Roque vs. Lapuz, 96 SCRA 741; Agustin vs. CA, 186 SCRA 375.
provisions of the Civil Code on human conduct. 3 See People's Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777.
Even on the premise that such right of first refusal has been decreed under a final 4 Delta Motor Corporation vs. Genuino, 170 SCRA 29.
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of 5 See Art. 1459; Atkins, Kroll and Co., Inc. vs. Cua Hian Tek, 102 Phil. 948.
execution under a judgment that merely recognizes its existence, nor would it sanction 6 It is well to note that when the consideration given, for what otherwise would have
an action for specific performance without thereby negating the indispensable element been an option, partakes the nature in reality of a part payment of the purchase price
of consensuality in the perfection of contracts.11 It is not to say, however, that the right (termed as "earnest money" and considered as an initial payment thereof), an actual
of first refusal would be inconsequential for, such as already intimated above, an contract of sale is deemed entered into and enforceable as such.
unjustified disregard thereof, given, for instance, the circumstances expressed in Article 7 Enriquez de la Cavada vs. Diaz, 37 Phil. 982.
1912 of the Civil Code, can warrant a recovery for damages. 8 Atkins, Kroll & Co., Inc., vs. Cua Hian Tek, 102 Phil. 948.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely 9 Article 1319, Civil Code, provides:
accorded a "right of first refusal" in favor of petitioners. The consequence of such a Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon
declaration entails no more than what has heretofore been said. In fine, if, as it is here the thing and the cause which are to constitute the contract. The offer must be
so conveyed to us, petitioners are aggrieved by the failure of private respondents to certain and the acceptance absolute. A qualified acceptance constitutes a counter-
honor the right of first refusal, the remedy is not a writ of execution on the judgment, offer. (Emphasis supplied.)
since there is none to execute, but an action for damages in a proper forum for the 10 It is also essential for an option to be binding that valuable consideration distinct
purpose. from the price should be given (see Montilla vs. Court of Appeals, 161 SCRA 167; Sps.
Furthermore, whether private respondent Buen Realty Development Corporation, the Natino vs. IAC, 197 SCRA 323; Cronico vs. J.M. Tuason & Co., Inc., 78 SCRA 331).
alleged purchaser of the property, has acted in good faith or bad faith and whether or 11 See Article 1315 and 1318, Civil Code; Madrigal & Co. vs. Stevenson & Co., 15 Phil.
not it should, in any case, be considered bound to respect the registration of the lis 38; Salonga vs. Ferrales, 105 SCRA 359).
pendens in Civil Case No. 87-41058 are matters that must be independently addressed 12 Art. 19. Every person must, in the exercise of his rights and in the performance of
in appropriate proceedings. Buen Realty, not having been impleaded in Civil Case No. his duties, act with justice, give everyone his due, and observe honesty and good faith.
87-41058, cannot be held subject to the writ of execution issued by respondent Judge, 13 The decision referred to reads:
let alone ousted from the ownership and possession of the property, without first being In resume, there was no meeting of the minds between the parties concerning the sale
duly afforded its day in court. of the property. Absent such requirement, the claim for specific performance will not lie.
We are also unable to agree with petitioners that the Court of Appeals has erred in Appellants' demand for actual, moral and exemplary damages will likewise fail as there
holding that the writ of execution varies the terms of the judgment in Civil Case No. 87- exists no justifiable ground for its award. Summary judgment for defendants was
41058, later affirmed in CA-G.R. CV-21123. The Court of Appeals, in this regard, has properly granted. Courts may render summary judgment when there is no genuine
observed: issue as to any material fact and the moving party is entitled to a judgment as a matter
Finally, the questioned writ of execution is in variance with the decision of the of law (Garcia vs. Court of Appeals, 176 SCRA 815). All requisites obtaining, the
trial court as modified by this Court. As already stated, there was nothing in decision of the court a quo is legally justifiable.
said decision 13 that decreed the execution of a deed of sale between the Cu WHEREFORE, finding the appeal unmeritorious, the judgment appealed from is hereby
Unjiengs and respondent lessees, or the fixing of the price of the sale, or the AFFIRMED, but subject to the following modification: The court a quo in the aforestated
cancellation of title in the name of petitioner (Limpin vs. IAC, 147 SCRA 516; decision, gave the plaintiffs — considering the mercurial and uncertain forces in our
Pamantasan ng Lungsod ng Maynila vs. IAC, 143 SCRA 311; De Guzman vs. market economy today. We find no reason not to grant the same right of first refusal to
CA, 137 SCRA 730; Pastor vs. CA, 122 SCRA 885). herein appellants in the event that the subject property is sold for a price in excess of
It is likewise quite obvious to us that the decision in Civil Case No. 87-41058 could not Eleven Million pesos. No pronouncement as to costs.
have decreed at the time the execution of any deed of sale between the Cu Unjiengs
and petitioners.
G.R. No. 106063 November 21, 1996 The sale of the subject real property by Carmelo to Equatorial should now be rescinded
EQUATORIAL REALTY DEVELOPMENT, INC. & CARMELO & BAUERMANN, considering that Mayfair, which had substantial interest over the subject property, was
INC., petitioners, vs.MAYFAIR THEATER, INC., respondent. prejudiced by the sale of the subject property to Equatorial without Carmelo conferring
Civil Law; Contracts; Sales; The contractual stipulation provides for a right of first to Mayfair every opportunity to negotiate within the 30-day stipulated period.
refusal in favor of Mayfair.—We agree with the respondent Court of Appeals that the
aforecited contractual stipulation provides for a right of first refusal in favor of Mayfair. It HERMOSISIMA, JR., J.:
is not an option clause or an option contract. It is a contract of a right of first refusal. Before us is a petition for review of the decision1 of the Court of
Same; Same; Same; The deed of option or the option clause in a contract in Appeals2 involving questions in the resolution of which the respondent appellate court
order to be valid and enforceable must among other things indicate the definite price at analyzed and interpreted particular provisions of our laws on contracts and sales. In its
which the person granting the option is willing to sell.—The rule so early established in assailed decision, the respondent court reversed the trial court3 which, in dismissing
this jurisdiction is that the deed of option or the option clause in a contract, in order to the complaint for specific performance with damages and annulment of contract,4 found
be valid and enforceable, must, among other things, indicate the definite price at which the option clause in the lease contracts entered into by private respondent Mayfair
the person granting the option, is willing to sell. Theater, Inc. (hereafter, Mayfair) and petitioner Carmelo & Bauermann, Inc. (hereafter,
Same; Same; Same; An accepted unilateral promise which specifies the thing to Carmelo) to be impossible of performance and unsupported by a consideration and the
be sold and the price to be paid when coupled with a valuable consideration distinct subsequent sale of the subject property to petitioner Equatorial Realty Development,
and separate from the price is what may properly be termed a perfected contract of Inc. (hereafter, Equatorial) to have been made without any breach of or prejudice to,
option.—An accepted unilateral promise which specifies the thing to be sold and the the said lease contracts.5
price to be paid, when coupled with a valuable consideration distinct and separate from We reproduce below the facts as narrated by the respondent court, which narration, we
the price, is what may properly be termed a perfected contract of option. This contract note, is almost verbatim the basis of the statement of facts as rendered by the
is legally binding, and in sales, it conforms with the second paragraph of Article 1479 petitioners in their pleadings:
of the Civil Code, viz: ‘ART. 1479. x x x An accepted unilateral promise to buy or to sell Carmelo owned a parcel of land, together with two 2-storey buildings
a determinate thing for a price certain is binding upon the promisor if the promise is constructed thereon located at Claro M Recto Avenue, Manila, and covered
supported by a consideration distinct from the price. by TCT No. 18529 issued in its name by the Register of Deeds of Manila.
Same; Same; Same; The option is not the contract of sale itself.—Observe, On June 1, 1967 Carmelo entered into a contract of lease with Mayfair for the
however, that the option is not the contract of sale itself. The optionee has the right, but latter's lease of a portion of Carmelo's property particularly described, to wit:
not the obligation, to buy. Once the option is exercised timely, i.e., the offer is accepted A PORTION OF THE SECOND FLOOR of the two-storey building,
before a breach of the option, a bilateral promise to sell and to buy ensues and both situated at C.M. Recto Avenue, Manila, with a floor area of 1,610
parties are then reciprocally bound to comply with their respective undertakings. square meters.
Same; Same; Same; Respondent Court of Appeals correctly ruled that THE SECOND FLOOR AND MEZZANINE of the two-storey building,
paragraph 8 grants the right of first refusal to Mayfair and is not an option contract.—In situated at C.M. Recto Avenue, Manila, with a floor area of 150
the light of the foregoing disquisition and in view of the wording of the questioned square meters.
provision in the two lease contracts involved in the instant case, we so hold that no for use by Mayfair as a motion picture theater and for a term of twenty (20)
option to purchase in contemplation of the second paragraph of Article 1479 of the Civil years. Mayfair thereafter constructed on the leased property a movie house
Code, has been granted to Mayfair under the said lease contracts. Respondent Court known as "Maxim Theatre."
of Appeals correctly ruled that the said paragraph 8 grants the right of first refusal to Two years later, on March 31, 1969, Mayfair entered into a second contract of
Mayfair and is not an option contract. It also correctly reasoned that as such, the lease with Carmelo for the lease of another portion of Carmelo's property, to
requirement of a separate consideration for the option, has no applicability in the instant wit:
case. A PORTION OF THE SECOND FLOOR of the two-storey building,
Same; Same; Same; An option is a contract granting a privilege to buy or sell situated at C.M. Recto Avenue, Manila, with a floor area of 1,064
within an agreed time and at a determined price.—An option is a contract granting a square meters.
privilege to buy or sell within an agreed time and at a determined price. It is a separate THE TWO (2) STORE SPACES AT THE GROUND FLOOR and
and distinct contract from that which the parties may enter into upon the consummation MEZZANINE of the two-storey building situated at C.M. Recto
of the option. It must be supported by consideration. In the instant case, the right of first Avenue, Manila, with a floor area of 300 square meters and bearing
refusal is an integral part of the contracts of lease. The consideration is built into the street numbers 1871 and 1875,
reciprocal obligations of the parties. for similar use as a movie theater and for a similar term of twenty (20) years.
Same; Same; Same; Rescission; Rescission is a relief allowed for the protection Mayfair put up another movie house known as "Miramar Theatre" on this
of one of the contracting parties and even third persons from all injury and damage the leased property.
contract may cause or to protect some incompatible and preferred right by the Both contracts of lease provides (sic) identically worded paragraph 8, which
contract.—The facts of the case and considerations of justice and equity require that reads:
we order rescission here and now. Rescission is a relief allowed for the protection of That if the LESSOR should desire to sell the leased premises, the
one of the contracting parties and even third persons from all injury and damage the LESSEE shall be given 30-days exclusive option to purchase the
contract may cause or to protect some incompatible and preferred right by the contract. same.
In the event, however, that the leased premises is sold to someone 1. That there was a deed of sale of the contested premises by the
other than the LESSEE, the LESSOR is bound and obligated, as it defendant Carmelo . . . in favor of defendant Equatorial . . .;
hereby binds and obligates itself, to stipulate in the Deed of Sale 2. That in both contracts of lease there appear (sic) the stipulation
hereof that the purchaser shall recognize this lease and be bound by granting the plaintiff exclusive option to purchase the leased
all the terms and conditions thereof. premises should the lessor desire to sell the same (admitted subject
Sometime in August 1974, Mr. Henry Pascal of Carmelo informed Mr. Henry to the contention that the stipulation is null and void);
Yang, President of Mayfair, through a telephone conversation that Carmelo 3. That the two buildings erected on this land are not of the
was desirous of selling the entire Claro M. Recto property. Mr. Pascal told Mr. condominium plan;
Yang that a certain Jose Araneta was offering to buy the whole property for 4. That the amounts stipulated and mentioned in paragraphs 3 (a)
US Dollars 1,200,000, and Mr. Pascal asked Mr. Yang if the latter was willing and (b) of the contracts of lease constitute the consideration for the
to buy the property for Six to Seven Million Pesos. plaintiff's occupancy of the leased premises, subject of the same
Mr. Yang replied that he would let Mr. Pascal know of his decision. On August contracts of lease, Exhibits A and B;
23, 1974, Mayfair replied through a letter stating as follows: xxx xxx xxx
It appears that on August 19, 1974 your Mr. Henry Pascal informed 6. That there was no consideration specified in the option to buy
our client's Mr. Henry Yang through the telephone that your company embodied in the contract;
desires to sell your above-mentioned C.M. Recto Avenue property. 7. That Carmelo & Bauermann owned the land and the two buildings
Under your company's two lease contracts with our client, it is erected thereon;
uniformly provided: 8. That the leased premises constitute only the portions actually
8. That if the LESSOR should desire to sell the leased premises the occupied by the theaters; and
LESSEE shall be given 30-days exclusive option to purchase the 9. That what was sold by Carmelo & Bauermann to defendant
same. In the event, however, that the leased premises is sold to Equatorial Realty is the land and the two buildings erected thereon.
someone other than the LESSEE, the LESSOR is bound and xxx xxx xxx
obligated, as it is (sic) herebinds (sic) and obligates itself, to stipulate After assessing the evidence, the court a quo rendered the appealed decision,
in the Deed of Sale thereof that the purchaser shall recognize this the decretal portion of which reads as follows:
lease and be bound by all the terms and conditions hereof (sic). WHEREFORE, judgment is hereby rendered:
Carmelo did not reply to this letter. (1) Dismissing the complaint with costs against the plaintiff;
On September 18, 1974, Mayfair sent another letter to Carmelo purporting to (2) Ordering plaintiff to pay defendant Carmelo & Bauermann
express interest in acquiring not only the leased premises but "the entire P40,000.00 by way of attorney's fees on its counterclaim;
building and other improvements if the price is reasonable. However, both (3) Ordering plaintiff to pay defendant Equatorial Realty P35,000.00
Carmelo and Equatorial questioned the authenticity of the second letter. per month as reasonable compensation for the use of areas not
Four years later, on July 30, 1978, Carmelo sold its entire C.M. Recto Avenue covered by the contract (sic) of lease from July 31, 1979 until plaintiff
land and building, which included the leased premises housing the "Maxim" vacates said area (sic) plus legal interest from July 31, 1978;
and "Miramar" theatres, to Equatorial by virtue of a Deed of Absolute Sale, for P70,000 00 per month as reasonable compensation for the use of
the total sum of P11,300,000.00. the premises covered by the contracts (sic) of lease dated (June 1,
In September 1978, Mayfair instituted the action a quo for specific 1967 from June 1, 1987 until plaintiff vacates the premises plus legal
performance and annulment of the sale of the leased premises to Equatorial. interest from June 1, 1987; P55,000.00 per month as reasonable
In its Answer, Carmelo alleged as special and affirmative defense (a) that it compensation for the use of the premises covered by the contract of
had informed Mayfair of its desire to sell the entire C.M. Recto Avenue lease dated March 31, 1969 from March 30, 1989 until plaintiff
property and offered the same to Mayfair, but the latter answered that it was vacates the premises plus legal interest from March 30, 1989; and
interested only in buying the areas under lease, which was impossible since P40,000.00 as attorney's fees;
the property was not a condominium; and (b) that the option to purchase (4) Dismissing defendant Equatorial's crossclaim against defendant
invoked by Mayfair is null and void for lack of consideration. Equatorial, in its Carmelo & Bauermann.
Answer, pleaded as special and affirmative defense that the option is void for The contracts of lease dated June 1, 1967 and March 31, 1969 are
lack of consideration (sic) and is unenforceable by reason of its impossibility declared expired and all persons claiming rights under these
of performance because the leased premises could not be sold separately contracts are directed to vacate the premises.6
from the other portions of the land and building. It counterclaimed for The trial court adjudged the identically worded paragraph 8 found in both aforecited
cancellation of the contracts of lease, and for increase of rentals in view of lease contracts to be an option clause which however cannot be deemed to be binding
alleged supervening extraordinary devaluation of the currency. Equatorial on Carmelo because of lack of distinct consideration therefor.
likewise cross-claimed against co-defendant Carmelo for indemnification in The court a quo ratiocinated:
respect of Mayfair's claims. Significantly, during the pre-trial, it was admitted by the parties that the option
During the pre-trial conference held on January 23, 1979, the parties in the contract of lease is not supported by a separate consideration. Without
stipulated on the following: a consideration, the option is therefore not binding on defendant Carmelo &
Bauermann to sell the C.M. Recto property to the former. The option invoked of this Decision, and ordering Equatorial Realty Development, Inc. to accept
by the plaintiff appears in the contracts of lease . . . in effect there is no option, such payment;
on the ground that there is no consideration. Article 1352 of the Civil Code, 3. Upon payment of the sum of P11,300,000, directing Equatorial Realty
provides: Development, Inc. to execute the deeds and documents necessary for the
Contracts without cause or with unlawful cause, produce no effect issuance and transfer of ownership to Mayfair of the lot registered under TCT
whatever. The cause is unlawful if it is contrary to law, morals, good Nos. 17350, 118612, 60936, and 52571; and
custom, public order or public policy. 4. Should plaintiff-appellant Mayfair Theater, Inc. be unable to pay the amount
Contracts therefore without consideration produce no effect whatsoever. as adjudged, declaring the Deed of Absolute Sale between the defendants-
Article 1324 provides: appellants Carmelo & Bauermann, Inc. and Equatorial Realty Development,
When the offeror has allowed the offeree a certain period to accept, Inc. as valid and binding upon all the parties.8
the offer may be withdrawn at any time before acceptance by Rereading the law on the matter of sales and option contracts, respondent Court of
communicating such withdrawal, except when the option is founded Appeals differentiated between Article 1324 and Article 1479 of the Civil Code,
upon consideration, as something paid or promised. analyzed their application to the facts of this case, and concluded that since paragraph
in relation with Article 1479 of the same Code: 8 of the two lease contracts does not state a fixed price for the purchase of the leased
A promise to buy and sell a determine thing for a price certain is premises, which is an essential element for a contract of sale to be perfected, what
reciprocally demandable. paragraph 8 is, must be a right of first refusal and not an option contract. It explicated:
An accepted unilateral promise to buy or to sell a determine thing for Firstly, the court a quo misapplied the provisions of Articles 1324 and 1479,
a price certain is binding upon the promissor if the promise is second paragraph, of the Civil Code.
supported by a consideration distinct from the price. Article 1324 speaks of an "offer" made by an offeror which the offeree may or
The plaintiff cannot compel defendant Carmelo to comply with the promise may not accept within a certain period. Under this article, the offer may be
unless the former establishes the existence of a distinct consideration. In other withdrawn by the offeror before the expiration of the period and while the
words, the promisee has the burden of proving the consideration. The offeree has not yet accepted the offer. However, the offer cannot be withdrawn
consideration cannot be presumed as in Article 1354: by the offeror within the period if a consideration has been promised or given
Although the cause is not stated in the contract, it is presumed that it by the offeree in exchange for the privilege of being given that period within
exists and is lawful unless the debtor proves the contrary. which to accept the offer. The consideration is distinct from the price which is
where consideration is legally presumed to exists. Article 1354 applies to part of the offer. The contract that arises is known as option. In the case
contracts in general, whereas when it comes to an option it is governed of Beaumont vs. Prieto, 41 Phil. 670, the Supreme court, citing Bouvier,
particularly and more specifically by Article 1479 whereby the promisee has defined an option as follows: "A contract by virtue of which A, in consideration
the burden of proving the existence of consideration distinct from the price. of the payment of a certain sum to B, acquires the privilege of buying from or
Thus, in the case of Sanchez vs. Rigor, 45 SCRA 368, 372-373, the Court selling to B, certain securities or properties within a limited time at a specified
said: price," (pp. 686-7).
(1) Article 1354 applies to contracts in general, whereas the second Article 1479, second paragraph, on the other hand, contemplates of an
paragraph of Article 1479 refers to sales in particular, and, more "accepted unilateral promise to buy or to sell a determinate thing for a price
specifically, to an accepted unilateral promise to buy or to sell. In within (which) is binding upon the promisee if the promise is supported by a
other words, Article 1479 is controlling in the case at bar. consideration distinct from the price." That "unilateral promise to buy or to sell
(2) In order that said unilateral promise may be binding upon the a determinate thing for a price certain" is called an offer. An "offer", in laws, is
promissor, Article 1479 requires the concurrence of a condition, a proposal to enter into a contract (Rosenstock vs. Burke, 46 Phil. 217). To
namely, that the promise be supported by a consideration distinct constitute a legal offer, the proposal must be certain as to the object, the price
from the price. and other essential terms of the contract (Art. 1319, Civil Code).
Accordingly, the promisee cannot compel the promissor to comply Based on the foregoing discussion, it is evident that the provision granting
with the promise, unless the former establishes the existence of said Mayfair "30-days exclusive option to purchase" the leased premises is NOT
distinct consideration. In other words, the promisee has the burden AN OPTION in the context of Arts. 1324 and 1479, second paragraph, of the
of proving such consideration. Plaintiff herein has not even alleged Civil Code. Although the provision is certain as to the object (the sale of the
the existence thereof in his complaint. 7 leased premises) the price for which the object is to be sold is not stated in
It follows that plaintiff cannot compel defendant Carmelo & Bauermann to sell the provision Otherwise stated, the questioned stipulation is not by itself, an
the C.M. Recto property to the former. "option" or the "offer to sell" because the clause does not specify the price for
Mayfair taking exception to the decision of the trial court, the battleground shifted to the the subject property.
respondent Court of Appeals. Respondent appellate court reversed the court a quo and Although the provision giving Mayfair "30-days exclusive option to purchase"
rendered judgment: cannot be legally categorized as an option, it is, nevertheless, a valid and
1. Reversing and setting aside the appealed Decision; binding stipulation. What the trial court failed to appreciate was the intention
2. Directing the plaintiff-appellant Mayfair Theater Inc. to pay and return to of the parties behind the questioned proviso.
Equatorial the amount of P11,300,000.00 within fifteen (15) days from notice xxx xxx xxx
The provision in question is not of the pro-forma type customarily found in a covering the whole Claro M. Recto property, made reference to four titles: TCT
contract of lease. Even appellees have recognized that the stipulation was Nos. 17350, 118612, 60936 and 52571. Based on the information submitted
incorporated in the two Contracts of Lease at the initiative and behest of by Mayfair in its appellant's Brief (pp. 5 and 46) which has not been
Mayfair. Evidently, the stipulation was intended to benefit and protect Mayfair controverted by the appellees, and which We, therefore, take judicial notice of
in its rights as lessee in case Carmelo should decide, during the term of the the two theaters stand on the parcels of land covered by TCT No. 17350 with
lease, to sell the leased property. This intention of the parties is achieved in an area of 622.10 sq. m and TCT No. 118612 with an area of 2,100.10 sq. m.
two ways in accordance with the stipulation. The first is by giving Mayfair "30- The existence of four separate parcels of land covering the whole Recto
days exclusive option to purchase" the leased property. The second is, in case property demonstrates the legal and physical possibility that each parcel of
Mayfair would opt not to purchase the leased property, "that the purchaser land, together with the buildings and improvements thereof, could have been
(the new owner of the leased property) shall recognize the lease and be bound sold independently of the other parcels.
by all the terms and conditions thereof." At the time both parties executed the contracts, they were aware of the
In other words, paragraph 8 of the two Contracts of lease, particularly the physical and structural conditions of the buildings on which the theaters were
stipulation giving Mayfair "30-days exclusive option to purchase the (leased to be constructed in relation to the remainder of the whole Recto property. The
premises)," was meant to provide Mayfair the opportunity to purchase and peculiar language of the stipulation would tend to limit Mayfair's right under
acquire the leased property in the event that Carmelo should decide to dispose paragraph 8 of the Contract of Lease to the acquisition of the leased areas
of the property. In order to realize this intention, the implicit obligation of only. Indeed, what is being contemplated by the questioned stipulation is a
Carmelo once it had decided to sell the leased property, was not only to notify departure from the customary situation wherein the buildings and
Mayfair of such decision to sell the property, but, more importantly, to make improvements are included in and form part of the sale of the subjacent land.
an offer to sell the leased premises to Mayfair, giving the latter a fair and Although this situation is not common, especially considering the non-
reasonable opportunity to accept or reject the offer, before offering to sell or condominium nature of the buildings, the sale would be valid and capable of
selling the leased property to third parties. The right vested in Mayfair is being performed. A sale limited to the leased premises only, if hypothetically
analogous to the right of first refusal, which means that Carmelo should have assumed, would have brought into operation the provisions of co-ownership
offered the sale of the leased premises to Mayfair before offering it to other under which Mayfair would have become the exclusive owner of the leased
parties, or, if Carmelo should receive any offer from third parties to purchase premises and at the same time a co-owner with Carmelo of the subjacent land
the leased premises, then Carmelo must first give Mayfair the opportunity to in proportion to Mayfair's interest over the premises sold to it.10
match that offer. Carmelo and Equatorial now comes before us questioning the correctness and legal
In fact, Mr. Pascal understood the provision as giving Mayfair a right of first basis for the decision of respondent Court of Appeals on the basis of the following
refusal when he made the telephone call to Mr. Yang in 1974. Mr. Pascal thus assigned errors:
testified: I
Q Can you tell this Honorable Court how you made the offer to Mr. THE COURT OF APPEALS GRAVELY ERRED IN CONCLUDING THAT THE OPTION
Henry Yang by telephone? CLAUSE IN THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST
A I have an offer from another party to buy the property and having REFUSAL PROVISO. IN DOING SO THE COURT OF APPEALS DISREGARDED
the offer we decided to make an offer to Henry Yang on a first-refusal THE CONTRACTS OF LEASE WHICH CLEARLY AND UNEQUIVOCALLY PROVIDE
basis. (TSN November 8, 1983, p. 12.). FOR AN OPTION, AND THE ADMISSION OF THE PARTIES OF SUCH OPTION IN
and on cross-examination: THEIR STIPULATION OF FACTS.
Q When you called Mr. Yang on August 1974 can you remember II
exactly what you have told him in connection with that matter, Mr. WHETHER AN OPTION OR RIGHT OF FIRST REFUSAL, THE COURT OF APPEALS
Pascal? ERRED IN DIRECTING EQUATORIAL TO EXECUTE A DEED OF SALE EIGHTEEN
A More or less, I told him that I received an offer from another party (18) YEARS AFTER MAYFAIR FAILED TO EXERCISE ITS OPTION (OR, EVEN ITS
to buy the property and I was offering him first choice of the enter RIGHT OF FIRST REFUSAL ASSUMING IT WAS ONE) WHEN THE CONTRACTS
property. (TSN, November 29, 1983, p. 18). LIMITED THE EXERCISE OF SUCH OPTION TO 30 DAYS FROM NOTICE.
We rule, therefore, that the foregoing interpretation best renders effectual the III
intention of the parties.9 THE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DIRECTED
Besides the ruling that paragraph 8 vests in Mayfair the right of first refusal as to which IMPLEMENTATION OF ITS DECISION EVEN BEFORE ITS FINALITY, AND WHEN
the requirement of distinct consideration indispensable in an option contract, has no IT GRANTED MAYFAIR A RELIEF THAT WAS NOT EVEN PRAYED FOR IN THE
application, respondent appellate court also addressed the claim of Carmelo and COMPLAINT.
Equatorial that assuming arguendo that the option is valid and effective, it is impossible IV
of performance because it covered only the leased premises and not the entire Claro THE COURT OF APPEALS VIOLATED ITS OWN INTERNAL RULES IN THE
M. Recto property, while Carmelo's offer to sell pertained to the entire property in ASSIGNMENT OF APPEALED CASES WHEN IT ALLOWED THE SAME DIVISION
question. The Court of Appeals ruled as to this issue in this wise: XII, PARTICULARLY JUSTICE MANUEL HERRERA, TO RESOLVE ALL THE
We are not persuaded by the contentions of the defendants-appellees. It is to MOTIONS IN THE "COMPLETION PROCESS" AND TO STILL RESOLVE THE
be noted that the Deed of Absolute Sale between Carmelo and Equatorial MERITS OF THE CASE IN THE "DECISION STAGE".11
We shall first dispose of the fourth assigned error respecting alleged irregularities in the to the stipulations made in the said document. But it is not shown that there
raffle of this case in the Court of Appeals. Suffice it to say that in our Resolution,12 dated was any cause or consideration for that agreement, and this omission is a bar
December 9, 1992, we already took note of this matter and set out the proper applicable which precludes our holding that the stipulations contained in Exhibit E is a
procedure to be the following: contract of option, for, . . . there can be no contract without the requisite,
On September 20, 1992, counsel for petitioner Equatorial Realty among others, of the cause for the obligation to be established.
Development, Inc. wrote a letter-complaint to this Court alleging certain In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract,
irregularities and infractions committed by certain lawyers, and Justices of the in the following language:
Court of Appeals and of this Court in connection with case CA-G.R. CV No. A contract by virtue of which A, in consideration of the payment of a
32918 (now G.R. No. 106063). This partakes of the nature of an administrative certain sum to B, acquires the privilege of buying from, or selling to
complaint for misconduct against members of the judiciary. While the letter- B, certain securities or properties within a limited time at a specified
complaint arose as an incident in case CA-G.R. CV No. 32918 (now G.R. No. price. (Story vs. Salamon, 71 N.Y., 420.)
106063), the disposition thereof should be separate and independent from From vol. 6, page 5001, of the work "Words and Phrases," citing the case
Case G.R. No. 106063. However, for purposes of receiving the requisite of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following
pleadings necessary in disposing of the administrative complaint, this Division quotation has been taken:
shall continue to have control of the case. Upon completion thereof, the same An agreement in writing to give a person the option to purchase lands
shall be referred to the Court En Banc for proper disposition.13 within a given time at a named price is neither a sale nor an
This court having ruled the procedural irregularities raised in the fourth assigned error agreement to sell. It is simply a contract by which the owner of
of Carmelo and Equatorial, to be an independent and separate subject for an property agrees with another person that he shall have the right to
administrative complaint based on misconduct by the lawyers and justices implicated buy his property at a fixed price within a certain time. He does not
therein, it is the correct, prudent and consistent course of action not to pre-empt the sell his land; he does not then agree to sell it; but he does sell
administrative proceedings to be undertaken respecting the said irregularities. something; that is, the right or privilege to buy at the election or option
Certainly, a discussion thereupon by us in this case would entail a finding on the merits of the other party. The second party gets in praesenti, not lands, nor
as to the real nature of the questioned procedures and the true intentions and motives an agreement that he shall have lands, but he does get something of
of the players therein. value; that is, the right to call for and receive lands if he elects. The
In essence, our task is two-fold: (1) to define the true nature, scope and efficacy of owner parts with his right to sell his lands, except to the second party,
paragraph 8 stipulated in the two contracts of lease between Carmelo and Mayfair in for a limited period. The second party receives this right, or, rather,
the face of conflicting findings by the trial court and the Court of Appeals; and (2) to from his point of view, he receives the right to elect to buy.
determine the rights and obligations of Carmelo and Mayfair, as well as Equatorial, in But the two definitions above cited refer to the contract of option, or, what
the aftermath of the sale by Carmelo of the entire Claro M. Recto property to Equatorial. amounts to the same thing, to the case where there was cause or
Both contracts of lease in question provide the identically worded paragraph 8, which consideration for the obligation, the subject of the agreement made by the
reads: parties; while in the case at bar there was no such cause or
That if the LESSOR should desire to sell the leased premises, the LESSEE consideration. 16 (Emphasis ours.)
shall be given 30-days exclusive option to purchase the same. The rule so early established in this jurisdiction is that the deed of option or the option
In the event, however, that the leased premises is sold to someone other than clause in a contract, in order to be valid and enforceable, must, among other things,
the LESSEE, the LESSOR is bound and obligated, as it hereby binds and indicate the definite price at which the person granting the option, is willing to sell.
obligates itself, to stipulate in the Deed of Sale thereof that the purchaser shall Notably, in one case we held that the lessee loses his right to buy the leased property
recognize this lease and be bound by all the terms and conditions thereof.14 for a named price per square meter upon failure to make the purchase within the time
We agree with the respondent Court of Appeals that the aforecited contractual specified;17 in one other case we freed the landowner from her promise to sell her land
stipulation provides for a right of first refusal in favor of Mayfair. It is not an option clause if the prospective buyer could raise P4,500.00 in three weeks because such option was
or an option contract. It is a contract of a right of first refusal. not supported by a distinct consideration;18 in the same vein in yet one other case, we
As early as 1916, in the case of Beaumont vs. Prieto,15 unequivocal was our also invalidated an instrument entitled, "Option to Purchase" a parcel of land for the
characterization of an option contract as one necessarily involving the choice granted sum of P1,510.00 because of lack of consideration;19 and as an exception to the
to another for a distinct and separate consideration as to whether or not to purchase a doctrine enumerated in the two preceding cases, in another case, we ruled that the
determinate thing at a predetermined fixed price. option to buy the leased premises for P12,000.00 as stipulated in the lease contract, is
It is unquestionable that, by means of the document Exhibit E, to wit, the letter not without consideration for in reciprocal contracts, like lease, the obligation or promise
of December 4, 1911, quoted at the beginning of this decision, the defendant of each party is the consideration for that of the other. 20 In all these cases, the selling
Valdes granted to the plaintiff Borck the right to purchase the Nagtajan price of the object thereof is always predetermined and specified in the option clause
Hacienda belonging to Benito Legarda, during the period of three months and in the contract or in the separate deed of option. We elucidated, thus, in the very recent
for its assessed valuation, a grant which necessarily implied the offer or case of Ang Yu Asuncion vs. Court of Appeals21 that:
obligation on the part of the defendant Valdes to sell to Borck the said . . . In sales, particularly, to which the topic for discussion about the case at
hacienda during the period and for the price mentioned . . . There was, bench belongs, the contract is perfected when a person, called the seller,
therefore, a meeting of minds on the part of the one and the other, with regard obligates himself, for a price certain, to deliver and to transfer ownership of a
thing or right to another, called the buyer, over which the latter agrees. Article of his duties, act with justice, give everyone his due, and observe honesty and
1458 of the Civil Code provides: good faith."
Art. 1458. By the contract of sale one of the contracting parties (2) If the period has a separate consideration, a contract of "option" deemed
obligates himself to transfer the ownership of and to deliver a perfected, and it would be a breach of that contract to withdraw the offer during
determinate thing, and the other to pay therefor a price certain in the agreed period. The option, however, is an independent contract by itself;
money or its equivalent. and it is to be distinguished from the projected main agreement (subject matter
A contract of sale may be absolute or conditional. of the option) which is obviously yet to be concluded. If, in fact, the optioner-
When the sale is not absolute but conditional, such as in a "Contract to Sell" offeror withdraws the offer before its acceptance (exercise of the option) by
where invariably the ownership of the thing sold in retained until the fulfillment the optionee-offeree, the latter may not sue for specific performance on the
of a positive suspensive condition (normally, the full payment of the purchase proposed contract ("object" of the option) since it has failed to reach its own
price), the breach of the condition will prevent the obligation to convey title stage of perfection. The optioner-offeror, however, renders himself liable for
from acquiring an obligatory force. . . . damages for breach of the opinion. . .
An unconditional mutual promise to buy and sell, as long as the object is made In the light of the foregoing disquisition and in view of the wording of the questioned
determinate and the price is fixed, can be obligatory on the parties, and provision in the two lease contracts involved in the instant case, we so hold that no
compliance therewith may accordingly be exacted. option to purchase in contemplation of the second paragraph of Article 1479 of the Civil
An accepted unilateral promise which specifies the thing to be sold and the Code, has been granted to Mayfair under the said lease contracts.
price to be paid, when coupled with a valuable consideration distinct and Respondent Court of Appeals correctly ruled that the said paragraph 8 grants the right
separate from the price, is what may properly be termed a perfected contract of first refusal to Mayfair and is not an option contract. It also correctly reasoned that
of option. This contract is legally binding, and in sales, it conforms with the as such, the requirement of a separate consideration for the option, has no applicability
second paragraph of Article 1479 of the Civil Code, viz: in the instant case.
Art. 1479. . . . There is nothing in the identical Paragraphs "8" of the June 1, 1967 and March 31, 1969
An accepted unilateral promise to buy or to sell a determinate thing contracts which would bring them into the ambit of the usual offer or option requiring
for a price certain is binding upon the promisor if the promise is an independent consideration.
supported by a consideration distinct from the price. (1451a). An option is a contract granting a privilege to buy or sell within an agreed time and at a
Observe, however, that the option is not the contract of sale itself. The determined price. It is a separate and distinct contract from that which the parties may
optionee has the right, but not the obligation, to buy. Once the option is enter into upon the consummation of the option. It must be supported by
exercised timely, i.e., the offer is accepted before a breach of the option, a consideration.22 In the instant case, the right of first refusal is an integral part of the
bilateral promise to sell and to buy ensues and both parties are then contracts of lease. The consideration is built into the reciprocal obligations of the
reciprocally bound to comply with their respective undertakings. parties.
Let us elucidate a little. A negotiation is formally initiated by an offer. An To rule that a contractual stipulation such as that found in paragraph 8 of the contracts
imperfect promise (policitacion) is merely an offer. Public advertisements or is governed by Article 1324 on withdrawal of the offer or Article 1479 on promise to buy
solicitations and the like are ordinarily construed as mere invitations to make and sell would render in effectual or "inutile" the provisions on right of first refusal so
offers or only as proposals. These relations, until a contract is perfected, are commonly inserted in leases of real estate nowadays. The Court of Appeals is correct
not considered binding commitments. Thus, at any time prior to the perfection in stating that Paragraph 8 was incorporated into the contracts of lease for the benefit
of the contract, either negotiating party may stop the negotiation. The offer, at of Mayfair which wanted to be assured that it shall be given the first crack or the first
this stage, may be withdrawn; the withdrawal is effective immediately after its option to buy the property at the price which Carmelo is willing to accept. It is not also
manifestation, such as by its mailing and not necessarily when the offeree correct to say that there is no consideration in an agreement of right of first refusal. The
learns of the withdrawal (Laudico vs. Arias, 43 Phil. 270). Where a period is stipulation is part and parcel of the entire contract of lease. The consideration for the
given to the offeree within which to accept the offer, the following rules lease includes the consideration for the right of first refusal. Thus, Mayfair is in effect
generally govern: stating that it consents to lease the premises and to pay the price agreed upon provided
(1) If the period is not itself founded upon or supported by a consideration, the the lessor also consents that, should it sell the leased property, then, Mayfair shall be
offeror is still free and has the right to withdraw the offer before its acceptance, given the right to match the offered purchase price and to buy the property at that price.
or if an acceptance has been made, before the offeror's coming to know of As stated in Vda. De Quirino vs. Palarca,23 in reciprocal contract, the obligation or
such fact, by communicating that withdrawal to the offeree (see Art. 1324, Civil promise of each party is the consideration for that of the other.
Code; see also Atkins, Kroll & Co. vs. Cua, 102 Phil. 948, holding that this rule The respondent Court of Appeals was correct in ascertaining the true nature of the
is applicable to a unilateral promise to sell under Art. 1479, modifying the aforecited paragraph 8 to be that of a contractual grant of the right of first refusal to
previous decision in South Western Sugar vs. Atlantic Gulf, 97 Phil. 249; see Mayfair.
also Art. 1319, Civil Code; Rural Bank of Parañaque, Inc. vs. Remolado, 135 We shall now determine the consequential rights, obligations and liabilities of Carmelo,
SCRA 409; Sanchez vs. Rigos, 45 SCRA 368). The right to withdraw, Mayfair and Equatorial.
however, must not be exercised whimsically or arbitrarily; otherwise, it could The different facts and circumstances in this case call for an amplification of the
give rise to a damage claim under Article 19 of the Civil Code which ordains precedent in Ang Yu Asuncion vs. Court of Appeals.24
that "every person must, in the exercise of his rights and in the performance
First and foremost is that the petitioners acted in bad faith to render Paragraph 8 A purchaser in good faith and for value is one who buys the property of another
"inutile". without notice that some other person has a right to or interest in such property
What Carmelo and Mayfair agreed to, by executing the two lease contracts, was that and pays a full and fair price for the same at the time of such purchase or
Mayfair will have the right of first refusal in the event Carmelo sells the leased premises. before he has notice of the claim or interest of some other person in the
It is undisputed that Carmelo did recognize this right of Mayfair, for it informed the latter property. Good faith connotes an honest intention to abstain from taking
of its intention to sell the said property in 1974. There was an exchange of letters unconscientious advantage of another. Tested by these principles, the
evidencing the offer and counter-offers made by both parties. Carmelo, however, did petitioner cannot tenably claim to be a buyer in good faith as it had notice of
not pursue the exercise to its logical end. While it initially recognized Mayfair's right of the lease of the property by the Bonnevies and such knowledge should have
first refusal, Carmelo violated such right when without affording its negotiations with cautioned it to look deeper into the agreement to determine if it involved
Mayfair the full process to ripen to at least an interface of a definite offer and a possible stipulations that would prejudice its own interests.
corresponding acceptance within the "30-day exclusive option" time granted Mayfair, The petitioner insists that it was not aware of the right of first priority granted
Carmelo abandoned negotiations, kept a low profile for some time, and then sold, by the Contract of Lease. Assuming this to be true, we nevertheless agree
without prior notice to Mayfair, the entire Claro M Recto property to Equatorial. with the observation of the respondent court that:
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property If Guzman-Bocaling failed to inquire about the terms of the Lease
in question rescissible. We agree with respondent Appellate Court that the records bear Contract, which includes Par. 20 on priority right given to the
out the fact that Equatorial was aware of the lease contracts because its lawyers had, Bonnevies, it had only itself to blame. Having known that the property
prior to the sale, studied the said contracts. As such, Equatorial cannot tenably claim it was buying was under lease, it behooved it as a prudent person to
to be a purchaser in good faith, and, therefore, rescission lies. have required Reynoso or the broker to show to it the Contract of
. . . Contract of Sale was not voidable but rescissible. Under Article 1380 to Lease in which Par. 20 is contained.25
1381(3) of the Civil Code, a contract otherwise valid may nonetheless be Petitioners assert the alleged impossibility of performance because the entire property
subsequently rescinded by reason of injury to third persons, like creditors. The is indivisible property. It was petitioner Carmelo which fixed the limits of the property it
status of creditors could be validly accorded the Bonnevies for they had was leasing out. Common sense and fairness dictate that instead of nullifying the
substantial interests that were prejudiced by the sale of the subject property agreement on that basis, the stipulation should be given effect by including the
to the petitioner without recognizing their right of first priority under the indivisible appurtenances in the sale of the dominant portion under the right of first
Contract of Lease. refusal. A valid and legal contract where the ascendant or the more important of the
According to Tolentino, rescission is a remedy granted by law to the two parties is the landowner should be given effect, if possible, instead of being nullified
contracting parties and even to third persons, to secure reparation for on a selfish pretext posited by the owner. Following the arguments of petitioners and
damages caused to them by a contract, even if this should be valid, by means the participation of the owner in the attempt to strip Mayfair of its rights, the right of first
of the restoration of things to their condition at the moment prior to the refusal should include not only the property specified in the contracts of lease but also
celebration of said contract. It is a relief allowed for the protection of one of the appurtenant portions sold to Equatorial which are claimed by petitioners to be
the contracting parties and even third persons from all injury and damage the indivisible. Carmelo acted in bad faith when it sold the entire property to Equatorial
contract may cause, or to protect some incompatible and preferent right without informing Mayfair, a clear violation of Mayfair's rights. While there was a series
created by the contract. Rescission implies a contract which, even if initially of exchanges of letters evidencing the offer and counter-offers between the parties,
valid, produces a lesion or pecuniary damage to someone that justifies its Carmelo abandoned the negotiations without giving Mayfair full opportunity to negotiate
invalidation for reasons of equity. within the 30-day period.
It is true that the acquisition by a third person of the property subject of the Accordingly, even as it recognizes the right of first refusal, this Court should also order
contract is an obstacle to the action for its rescission where it is shown that that Mayfair be authorized to exercise its right of first refusal under the contract to
such third person is in lawful possession of the subject of the contract and that include the entirety of the indivisible property. The boundaries of the property sold
he did not act in bad faith. However, this rule is not applicable in the case should be the boundaries of the offer under the right of first refusal. As to the remedy
before us because the petitioner is not considered a third party in relation to to enforce Mayfair's right, the Court disagrees to a certain extent with the concluding
the Contract of Sale nor may its possession of the subject property be part of the dissenting opinion of Justice Vitug. The doctrine enunciated in Ang Yu
regarded as acquired lawfully and in good faith. Asuncion vs.Court of Appeals should be modified, if not amplified under the peculiar
Indeed, Guzman, Bocaling and Co. was the vendee in the Contract of Sale. facts of this case.
Moreover, the petitioner cannot be deemed a purchaser in good faith for the As also earlier emphasized, the contract of sale between Equatorial and Carmelo is
record shows that it categorically admitted it was aware of the lease in favor characterized by bad faith, since it was knowingly entered into in violation of the rights
of the Bonnevies, who were actually occupying the subject property at the time of and to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals,
it was sold to it. Although the Contract of Lease was not annotated on the Equatorial admitted that its lawyers had studied the contract of lease prior to the sale.
transfer certificate of title in the name of the late Jose Reynoso and Africa Equatorial's knowledge of the stipulations therein should have cautioned it to look
Reynoso, the petitioner cannot deny actual knowledge of such lease which further into the agreement to determine if it involved stipulations that would prejudice
was equivalent to and indeed more binding than presumed notice by its own interests.
registration. Since Mayfair has a right of first refusal, it can exercise the right only if the fraudulent
sale is first set aside or rescinded. All of these matters are now before us and so there
should be no piecemeal determination of this case and leave festering sores to what, at the time, was a full and fair price for the property. It has used the
deteriorate into endless litigation. The facts of the case and considerations of justice P11,300,000.00 all these years earning income or interest from the amount. Equatorial,
and equity require that we order rescission here and now. Rescission is a relief allowed on the other hand, has received rents and otherwise profited from the use of the
for the protection of one of the contracting parties and even third persons from all injury property turned over to it by Carmelo. In fact, during all the years that this controversy
and damage the contract may cause or to protect some incompatible and preferred was being litigated, Mayfair paid rentals regularly to the buyer who had an inferior right
right by the contract.26 The sale of the subject real property by Carmelo to Equatorial to purchase the property. Mayfair is under no obligation to pay any interests arising
should now be rescinded considering that Mayfair, which had substantial interest over from this judgment to either Carmelo or Equatorial.
the subject property, was prejudiced by the sale of the subject property to Equatorial WHEREFORE, the petition for review of the decision of the Court of Appeals, dated
without Carmelo conferring to Mayfair every opportunity to negotiate within the 30-day June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute
stipulated period.27 Sale between petitioners Equatorial Realty Development, Inc. and Carmelo &
This Court has always been against multiplicity of suits where all remedies according Bauermann, Inc. is hereby deemed rescinded; petitioner Carmelo & Bauermann is
to the facts and the law can be included. Since Carmelo sold the property for ordered to return to petitioner Equatorial Realty Development the purchase price. The
P11,300,000.00 to Equatorial, the price at which Mayfair could have purchased the latter is directed to execute the deeds and documents necessary to return ownership
property is, therefore, fixed. It can neither be more nor less. There is no dispute over it. to Carmelo and Bauermann of the disputed lots. Carmelo & Bauermann is ordered to
The damages which Mayfair suffered are in terms of actual injury and lost opportunities. allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.
The fairest solution would be to allow Mayfair to exercise its right of first refusal at the SO ORDERED.
price which it was entitled to accept or reject which is P11,300,000.00. This is clear Regalado, Davide, Jr., Bellosillo, Melo, Puno, Kapunan, Mendoza and Francisco, JJ.,
from the records. concur.
To follow an alternative solution that Carmelo and Mayfair may resume negotiations for Narvasa, C.J., took no part.
the sale to the latter of the disputed property would be unjust and unkind to Mayfair
because it is once more compelled to litigate to enforce its right. It is not proper to give
it an empty or vacuous victory in this case. From the viewpoint of Carmelo, it is like
asking a fish if it would accept the choice of being thrown back into the river. Why should
Carmelo be rewarded for and allowed to profit from, its wrongdoing? Prices of real
estate have skyrocketed. After having sold the property for P11,300,000.00, why should
it be given another chance to sell it at an increased price?
Under the Ang Yu Asuncion vs. Court of Appeals decision, the Court stated that there
was nothing to execute because a contract over the right of first refusal belongs to a
class of preparatory juridical relations governed not by the law on contracts but by the
codal provisions on human relations. This may apply here if the contract is limited to
the buying and selling of the real property. However, the obligation of Carmelo to first
offer the property to Mayfair is embodied in a contract. It is Paragraph 8 on the right of
first refusal which created the obligation. It should be enforced according to the law on
contracts instead of the panoramic and indefinite rule on human relations. The latter
remedy encourages multiplicity of suits. There is something to execute and that is for
Carmelo to comply with its obligation to the property under the right of the first refusal
according to the terms at which they should have been offered then to Mayfair, at the
price when that offer should have been made. Also, Mayfair has to accept the offer.
This juridical relation is not amorphous nor is it merely preparatory. Paragraphs 8 of the
two leases can be executed according to their terms.
On the question of interest payments on the principal amount of P11,300,000.00, it
must be borne in mind that both Carmelo and Equatorial acted in bad faith. Carmelo
knowingly and deliberately broke a contract entered into with Mayfair. It sold the
property to Equatorial with purpose and intend to withhold any notice or knowledge of
the sale coming to the attention of Mayfair. All the circumstances point to a calculated
and contrived plan of non-compliance with the agreement of first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because it bought the
property with notice and full knowledge that Mayfair had a right to or interest in the
property superior to its own. Carmelo and Equatorial took unconscientious advantage
of Mayfair.
Neither may Carmelo and Equatorial avail of considerations based on equity which
might warrant the grant of interests. The vendor received as payment from the vendee
EN BANC for specific performance. It compelled the vendee to incur expenses to protect its
G.R. No. L-26872 July 25, 1975 interest. Moreover, this is a case where it is just and equitable that the plaintiff should
VILLONCO REALTY COMPANY, plaintiff-appellee and EDITH PEREZ DE recover attorney’s fees.
TAGLE, intervenor-appellee, vs. BORMAHECO, INC., FRANCISCO N.
APPEAL from a decision of the Court of First Instance of Rizal. Andres Reyes, J.
CERVANTES and ROSARIO N. CERVANTES, defendants-appellants. Meer, Meer
& Meer for plaintiff-appellee. The facts are stated in the opinion of the Court.
J. Villareal, Navarro and Associates for defendants-appellants. Meer, Meer & Meer for plaintiff-appellee.
P. P. Gallardo and Associates for intervenor-appellee. J. Villareal, Navarra & Associates for defendants-appellants.
Sales; Definition of.—By the contract of sale one of the contracting parties P. P. Gallardo & Associates for intervenor-appellee.
obligates himself to transfer the ownership of and to deliver a determinate thing, and AQUINO, J.:
the other to pay therefor a price certain in money or its equivalent. A contract of sale This action was instituted by Villonco Realty Company against Bormaheco, Inc. and
may be absolute or conditional. the spouses Francisco N. Cervantes and Rosario N. Cervantes for the specific
Same; Requisites for perfection of.—The contract of sale is perfected at the performance of a supposed contract for the sale of land and the improvements thereon
moment there is a meeting of minds upon the thing which is the object of the contract for one million four hundred thousand pesos. Edith Perez de Tagle, as agent,
and upon the price. From that moment, the parties may reciprocally demand intervened in order to recover her commission. The lower court enforced the sale.
performance, subject to the provisions of the law governing the form of contracts. Bormaheco, Inc. and the Cervantes spouses, as supposed vendors, appealed.
Same; Same; Consent.—Consent is manifested by the meeting of the offer and
the acceptance upon the thing and the cause which are to constitute the contract. The This Court took cognizance of the appeal because the amount involved is more than
offer must be certain and the acceptance absolute. A qualified acceptance constitutes P200,000 and the appeal was perfected before Republic Act No. 5440 took effect on
a counter-offer. An acceptance may be express or implied. September 9, 1968. The facts are as follows:
Same; Same; Offer and acceptance; Acceptance which contains request for Francisco N. Cervantes and his wife, Rosario P. Navarra-Cervantes, are the owners of
changes in offer but does not essentially change terms of offer does not constitute a lots 3, 15 and 16 located at 245 Buendia Avenue, Makati, Rizal with a total area of three
counter-offer.—It is true that an acceptance may contain a request for certain changes thousand five hundred square meters (TCT Nos. 43530, 43531 and 43532, Exh. A, A-
in the terms of the offer and yet be a binding acceptance. So long as it is clear that the 1 and A-2). The lots were mortgaged to the Development Bank of the Phil (DBP) on
meaning of the acceptance is positively and unequivocally to accept the offer, whether April 21, 1959 as security for a loan of P441,000. The mortgage debt was fully paid on
such request is granted or not, a contract is formed. The vendor’s change in a phrase July 10, 1969.
of the offer to purchase, which change does not essentially change the terms of the
offer, does not amount to a rejection of the offer and the tender of a counter-offer. Cervantes is the president of Bormaheco, Inc., a dealer and importer of industrial and
Same; Payment of earnest money as part of price and as proof of perfection of agricultural machinery. The entire lots are occupied by the building, machinery and
contract.—The controlling fact is that there was agreement between the parties on the equipment of Bormaheco, Inc. and are adjacent to the property of Villonco Realty
subject matter, the price and the mode of payment and that part of the price was paid. Company situated at 219 Buendia Avenue.
Whenever earnest money is given in a contract of sale, it shall be considered as part In the early part of February, 1964 there were negotiations for the sale of the said lots
of the price and as proof of the perfection of the contract. and the improvements thereon between Romeo Villonco of Villonco Realty Company
Same; Sale subject to negative resolutory condition.—The vendor’s acceptance "and Bormaheco, Inc., represented by its president, Francisco N. Cervantes, through
of the part payment of one hundred thousand pesos shows that the sale was the intervention of Edith Perez de Tagle, a real estate broker".
conditionally consummated or partly executed subject to the purchase by the vendor of
the Punta property. The nonconsummation of that purchase would be a negative In the course of the negotiations, the brothers Romeo Villonco and Teofilo Villonco
resolutory condition. conferred with Cervantes in his office to discuss the price and terms of the sale. Later,
Same; Obligations arising from contracts have force of low;Compliance in good Cervantes "went to see Villonco for the same reason until some agreement" was arrived
faith with obligations; Case at bar.—Obligations arising from contracts have the force at. On a subsequent occasion, Cervantes, accompanied by Edith Perez de Tagle,
of law between the contracting parties and should be complied with in good faith. discussed again the terms of the sale with Villonco.
Inasmuch as the sale was perfected and even partly executed, the vendors as a matter During the negotiations, Villonco Realty Company assumed that the lots belonged to
of justice and good faith, are bound to comply with their contractual commitments. Bormaheco, Inc. and that Cervantes was duly authorized to sell the same. Cervantes
Pleadings and practice; Defenses not pleaded deemed waived;Case at bar.— did not disclose to the broker and to Villonco Realty Company that the lots were
The defense that the vendor’s wife opposed the sale must have been an afterthought conjugal properties of himself and his wife and that they were mortgaged to the DBP.
or was evolved post litem motamsince it was never disclosed in the husband’s letter of
rescission and in his letter to the real estate broker. Moreover, the vendor’s wife did not Bormaheco, Inc., through Cervantes, made a written offer dated February 12, 1964, to
testify at the trial to fortify that defense which had already been waived for not having Romeo Villonco for the sale of the property. The offer reads (Exh. B):
been pleaded. BORMAHECO, INC.
Attorney’s fees; Recovery of; Case at bar.—It is evident that the vendor acted in
February 12,1964
gross and evident bad faith in refusing to satisfy the valid and just demand of the vendee
Mr. Romeo Mr. Francisco Cervantes.
Villonco Villonco Building Bormaheco, Inc.
Buendia Avenue 245 Buendia Avenue
Makati, Rizal. Makati, Rizal
Dear Mr. Villonco: Dear Mr. Cervantes:

This is with reference to our telephone conversation this noon on the matter of the sale
of our property located at Buendia Avenue, with a total area of 3,500 sq. m., under the In reference to the letter of Miss E. Perez de Tagle dated February 12th and 26, 1964
following conditions: in respect to the terms and conditions on the purchase of your property located at
(1) That we are offering to sell to you the above property at the price of Buendia Ave., Makati, Rizal, with a total area of 3,500 sq. meters., we hereby revise
P400.00 per square meter; our offer, as follows:
(2) That a deposit of P100,000.00 must be placed as earnest money on the 1. That the price of the property shall be P400.00 per sq. m., including the
purchase of the above property which will become part payment of the improvements thereon;
property in the event that the sale is consummated; 2. That a deposit of P100,000.00 shall be given to you as earnest money which will
(3) That this sale is to be consummated only after I shall have also become as part payment in the event the sale is consummated;
consummated my purchase of another property located at Sta. Ana, Manila; 3. This sale shall be cancelled, only if your deal with another property in Sta. Ana shall
(4) That if my negotiations with said property will not be consummated by not be consummated and in such case, the P100,000-00 earnest money will be
reason beyond my control, I will return to you your deposit of P100,000 and returned to us with a 10% interest p.a. However, if our deal with you is finalized, said
the sale of my property to you will not also be consummated; and P100,000.00 will become as part payment for the purchase of your property without
(5) That final negotiations on both properties can be definitely known after 45 interest:
days. 4. The manner of payment shall be as follows:
If the above terms is (are) acceptable to your Board, please issue out the said earnest a. P100,000.00 earnest money and
money in favor of Bormaheco, Inc., and deliver the same thru the bearer, Miss Edith 650,000.00 as part of the down payment, or
Perez de Tagle. P750,000.00 as total down payment
Very truly yours, b. The balance is payable as follows:
SGD. FRANCISCO N. CERVANTES P100,000.00 after 3 months
President 125,000.00 -do-
The property mentioned in Bormaheco's letter was the land of the National Shipyards 212,500.00 -do-
& Steel Corporation (Nassco), with an area of twenty thousand square meters, located P650,000.00 Total
at Punta, Sta. Ana, Manila. At the bidding held on January 17, 1964 that land was
awarded to Bormaheco, Inc., the highest bidder, for the price of P552,000. The Nassco As regards to the other conditions which we have discussed during our last conference
Board of Directors in its resolution of February 18, 1964 authorized the General on February 27, 1964, the same shall be finalized upon preparation of the contract to
Manager to sign the necessary contract (Exh. H). sell.*
On February 28, 1964, the Nassco Acting General Manager wrote a letter to the
If the above terms and conditions are acceptable to you, kindly sign your conformity
Economic Coordinator, requesting approval of that resolution. The Acting Economic
hereunder. Enclosed is our check for ONE HUNDRED THOUSAND (P100,000.00)
Coordinator approved the resolution on March 24, 1964 (Exh. 1).
PESOS, MBTC Check No. 448314, as earnest money.
In the meanwhile, Bormaheco, Inc. and Villonco Realty Company continued their Very truly yours,
negotiations for the sale of the Buendia Avenue property. Cervantes and Teofilo VILLONCO REALTY COMPANY
Villonco had a final conference on February 27, 1964. As a result of that conference (Sgd.) TEOFILO VILLONCO
Villonco Realty Company, through Teofilo Villonco, in its letter of March 4, 1964 made CONFORME:
a revised counter- offer (Romeo Villonco's first counter-offer was dated February 24,
1964, Exh. C) for the purchase of the property. The counter-offer was accepted by BORMAHECO, INC.
Cervantes as shown in Exhibit D, which is quoted below: (Sgd.) FRANCISCO CERVANTES
VILLONCO REALTY COMPANY
V. R. C. Building That this sale shall be subject to favorable consummation of a property in Sta. Ana we
219 Buendia Avenue, Makati, are negotiating.
Rizal, Philippines
(Sgd.) FRANCISCO CERVANTES
March 4, 1964
The check for P100,000 (Exh. E) mentioned in the foregoing letter-contract was the said spouses as defendants. Bormaheco, Inc. and the Cervantes spouses filed
delivered by Edith Perez de Tagle to Bormaheco, Inc. on March 4, 1964 and was separate answers.
received by Cervantes. In the voucher-receipt evidencing the delivery the broker
As of January 15, 1965 Villonco Realty Company had paid to the Manufacturers' Bank
indicated in her handwriting that the earnest money was "subject to the terms and
& Trust Company the sum of P8,712.25 as interests on the overdraft line of P100,000
conditions embodied in Bormaheco's letter" of February 12 and Villonco Realty
and the sum of P27.39 as interests daily on the same loan since January 16, 1965.
Company's letter of March 4, 1964 (Exh. E-1; 14 tsn).
(That overdraft line was later settled by Villonco Realty Company on a date not
Then, unexpectedly, in a letter dated March 30, 1964, or twenty-six days after the mentioned in its manifestation of February 19, 1975).
signing of the contract of sale, Exhibit D, Cervantes returned the earnest money, with
Villonco Realty Company had obligated itself to pay the sum of P20,000 as attorney's
interest amounting to P694.24 (at ten percent per annum). Cervantes cited as an
fees to its lawyers. It claimed that it was damaged in the sum of P10,000 a month from
excuse the circumstance that "despite the lapse of 45 days from February 12, 1964
March 24, 1964 when the award of the Punta lot to Bormaheco, Inc. was approved. On
there is no certainty yet" for the acquisition of the Punta property (Exh. F; F-I and F-2).
the other hand, Bormaheco, Inc. claimed that it had sustained damages of P200,000
Villonco Realty Company refused to accept the letter and the checks of Bormaheco,
annually due to the notice of lis pendens which had prevented it from constructing a
Inc. Cervantes sent them by registered mail. When he rescinded the contract, he was
multi-story building on the three lots. (Pars. 18 and 19, Stipulation of Facts).
already aware that the Punta lot had been awarded to Bormaheco, Inc. (25-26 tsn).
Miss Tagle testified that for her services Bormaheco, Inc., through Cervantes, obligated
Edith Perez de Tagle, the broker, in a letter to Cervantes dated March 31, 1964
itself to pay her a three percent commission on the price of P1,400,000 or the amount
articulated her shock and surprise at Bormaheco's turnabout. She reviewed the history
of forty-two thousand pesos (14 tsn).
of the deal and explained why Romeo Villonco could not agree to the rescission of the
sale (Exh. G).** After trial, the lower court rendered a decision ordering the Cervantes spouses to
execute in favor of Bormaheco, Inc. a deed of conveyance for the three lots in question
Cervantes in his letter of April 6, 1964, a reply to Miss Tagle's letter, alleged that the
and directing Bormaheco, Inc. (a) to convey the same lots to Villonco Realty Company,
forty-five day period had already expired and the sale to Bormaheco, Inc. of the Punta
(b) to pay the latter, as consequential damages, the sum of P10,000 monthly from
property had not been consummated. Cervantes said that his letter was a
March 24, 1964 up to the consummation of the sale, (c) to pay Edith Perez de Tagle
"manifestation that we are no longer interested to sell" the Buendia Avenue property to
the sum of P42,000 as broker's commission and (d) pay P20,000 as to attorney's fees
Villonco Realty Company (Annex I of Stipulation of Facts). The latter was furnished with
(Civil Case No. 8109).
a copy of that letter.
Bormaheco, Inc. and the Cervantes spouses appealed. Their principal contentions are
In a letter dated April 7, 1964 Villonco Realty Company returned the two checks to
(a) that no contract of sale was perfected because Cervantes made a supposedly
Bormaheco, Inc., stating that the condition for the cancellation of the contract had not
qualified acceptance of the revised offer contained in Exhibit D, which acceptance
arisen and at the same time announcing that an action for breach of contract would be
amounted to a counter-offer, and because the condition that Bormaheco, inc. would
filed against Bormaheco, Inc. (Annex G of Stipulation of Facts).
acquire the Punta land within the forty-five-day period was not fulfilled; (2) that
On that same date, April 7, 1964 Villonco Realty Company filed the complaint (dated Bormaheco, Inc. cannot be compelled to sell the land which belongs to the Cervantes
April 6) for specific performance against Bormaheco, Inc. Also on that same date, April spouses and (3) that Francisco N. Cervantes did not bind the conjugal partnership and
7, at eight-forty-five in the morning, a notice of lis pendens was annotated on the titles his wife when, as president of Bormaheco, Inc., he entered into negotiations with
of the said lots. Villonco Realty Company regarding the said land.
Bormaheco, Inc. in its answers dated May 5 and 25, 1964 pleaded the defense that the We hold that the appeal, except as to the issue of damages, is devoid of merit.
perfection of the contract of sale was subject to the conditions (a) "that final acceptance
"By the contract of sale one of the contracting parties obligates himself to transfer the
or not shall be made after 45 days" (sic) and (b) that Bormaheco, Inc. "acquires the Sta.
ownership of and to deliver a determining thing, and the other to pay therefor a price
Ana property".
certain in money or its equivalent. A contract of sale may be absolute or conditional"
On June 2, 1964 or during the pendency of this case, the Nassco Acting General (Art. 1458, Civil Code).
Manager wrote to Bormaheco, Inc., advising it that the Board of Directors and the
"The contract of sale is perfected at the moment there is a meeting of minds upon the
Economic Coordinator had approved the sale of the Punta lot to Bormaheco, Inc. and
thing which is the object of the contract and upon the price. From that moment, the
requesting the latter to send its duly authorized representative to the Nassco for the
parties may reciprocally demand performance, subject to the provisions of the law
signing of the deed of sale (Exh. 1).
governing the form of contracts" (Art. 1475, Ibid.).
The deed of sale for the Punta land was executed on June 26, 1964. Bormaheco, Inc.
"Contracts are perfected by mere consent, and from that moment the parties are bound
was represented by Cervantes (Exh. J. See Bormaheco, Inc. vs. Abanes, L-28087, July
not only to the fulfillment of what has been expressly stipulated but also to all the
31, 1973, 52 SCRA 73).
consequences which, according to their nature, may be in keeping with good faith,
In view of the disclosure in Bormaheco's amended answer that the three lots were usage and law" (Art. 1315, Civil Code).
registered in the names of the Cervantes spouses and not in the name of Bormaheco,
"Consent is manifested by the meeting of the offer and the acceptance upon the thing
Inc., Villonco Realty Company on July 21, 1964 filed an amended complaint impleading
and the cause which are to constitute the contract. The offer must be certain and the
acceptance absolute. A qualified acceptance constitutes a counter-offer" (Art. 1319, Cervantes allegedly crossed out the word "Nassco" in paragraph 3 of Villonco's revised
Civil Code). "An acceptance may be express or implied" (Art. 1320, Civil Code). counter-offer and substituted for it the word "another" so that the original phrase,
"Nassco's property in Sta. Ana", was made to read as "another property in Sta. Ana".
Bormaheco's acceptance of Villonco Realty Company's offer to purchase the Buendia
That change is trivial. What Cervantes did was merely to adhere to the wording of
Avenue property, as shown in Teofilo Villonco's letter dated March 4, 1964 (Exh. D),
paragraph 3 of Bormaheco's original offer (Exh. B) which mentions "another property
indubitably proves that there was a meeting of minds upon the subject matter and
located at Sta. Ana." His obvious purpose was to avoid jeopardizing his negotiation with
consideration of the sale. Therefore, on that date the sale was perfected. (Compare
the Nassco for the purchase of its Sta. Ana property by unduly publicizing it.
with McCullough vs. Aenlle & Co., 3 Phil. 285; Goyena vs. Tambunting, 1 Phil. 490).
Not only that Bormaheco's acceptance of the part payment of one hundred ,thousand It is noteworthy that Cervantes, in his letter to the broker dated April 6, 1964 (Annex 1)
pesos shows that the sale was conditionally consummated or partly executed subject or after the Nassco property had been awarded to Bormaheco, Inc., alluded to the
to the purchase by Bormaheco, Inc. of the Punta property. The nonconsummation of "Nassco property". At that time, there was no more need of concealing from the public
that purchase would be a negative resolutory condition (Taylor vs. Uy Tieng Piao, 43 that Bormaheco, Inc. was interested in the Nassco property.
Phil. 873).
Similarly, Cervantes' alleged insertion of the letters "PA" ( per annum) after the word
On February 18, 1964 Bormaheco's bid for the Punta property was already accepted "interest" in that same paragraph 3 of the revised counter-offer (Exh. D) could not be
by the Nassco which had authorized its General Manager to sign the corresponding categorized as a major alteration of that counter-offer that prevented a meeting of the
deed of sale. What was necessary only was the approval of the sale by the Economic minds of the parties. It was understood that the parties had contemplated a rate of ten
Coordinator and a request for that approval was already pending in the office of that percent per annum since ten percent a month or semi-annually would be usurious.
functionary on March 4, 1964.
Appellants Bormaheco, Inc. and Cervantes further contend that Cervantes, in clarifying
Bormaheco, Inc. and the Cervantes spouses contend that the sale was not perfected in the voucher for the earnest money of P100,000 that Bormaheco's acceptance thereof
because Cervantes allegedly qualified his acceptance of Villonco's revised offer and, was subject to the terms and conditions embodied in Bormaheco's letter of February
therefore, his acceptance amounted to a counter-offer which Villonco Realty Company 12, 1964 and your (Villonco's) letter of March 4, 1964" made Bormaheco's acceptance
should accept but no such acceptance was ever transmitted to Bormaheco, Inc. which, "qualified and conditional".
therefore, could withdraw its offer.
That contention is not correct. There is no incompatibility between Bormaheco's offer
That contention is not well-taken. It should be stressed that there is no evidence as to of February 12, 1964 (Exh. B) and Villonco's counter-offer of March 4, 1964 (Exh. D).
what changes were made by Cervantes in Villonco's revised offer. And there is no The revised counter-offer merely amplified Bormaheco's original offer.
evidence that Villonco Realty Company did not assent to the supposed changes and
The controlling fact is that there was agreement between the parties on the subject
that such assent was never made known to Cervantes.
matter, the price and the mode of payment and that part of the price was paid.
What the record reveals is that the broker, Miss Tagle, acted as intermediary between "Whenever earnest money is given in a contract of sale, it shall be considered as part
the parties. It is safe to assume that the alleged changes or qualifications made by of the price and as proof of the perfection of the contract" (Art. 1482, Civil Code).
Cervantes were approved by Villonco Realty Company and that such approval was
"It is true that an acceptance may contain a request for certain changes in the terms of
duly communicated to Cervantes or Bormaheco, Inc. by the broker as shown by the
the offer and yet be a binding acceptance. 'So long as it is clear that the meaning of the
fact that Villonco Realty Company paid, and Bormaheco, Inc. accepted, the sum of
acceptance is positively and unequivocally to accept the offer, whether such request is
P100,000 as earnest money or down payment. That crucial fact implies that Cervantes
granted or not, a contract is formed.' " (Stuart vs. Franklin Life Ins. Co., 165 Fed. 2nd
was aware that Villonco Realty Company had accepted the modifications which he had
965, citing Sec. 79, Williston on Contracts).
made in Villonco's counter-offer. Had Villonco Realty Company not assented to those
insertions and annotations, then it would have stopped payment on its check for Thus, it was held that the vendor's change in a phrase of the offer to purchase, which
P100,000. The fact that Villonco Realty Company allowed its check to be cashed by change does not essentially change the terms of the offer, does not amount to a
Bormaheco, Inc. signifies that the company was in conformity with the changes made rejection of the offer and the tender of a counter-offer (Stuart vs. Franklin Life Ins. Co.,
by Cervantes and that Bormaheco, Inc. was aware of that conformity. Had those supra).
insertions not been binding, then Bormaheco, Inc. would not have paid interest at the The instant case is not governed by the rulings laid down in Beaumont vs. Prieto, 41
rate of ten percent per annum, on the earnest money of P100,000. Phil. 670, 985, 63 L. Ed. 770, and Zayco vs. Serra, 44 Phil. 326. In those two cases the
The truth is that the alleged changes or qualifications in the revised counter — offer acceptance radically altered the offer and, consequently, there was no meeting of the
(Exh. D) are not material or are mere clarifications of what the parties had previously minds of the parties.
agreed upon. Thus, in the Zayco case, Salvador Serra offered to sell to Lorenzo Zayco his sugar
Thus, Cervantes' alleged insertion in his handwriting of the figure and the words "12th central for P1,000,000 on condition that the price be paid in cash, or, if not paid in cash,
and" in Villonco's counter-offer is the same as the statement found in the voucher- the price would be payable within three years provided security is given for the payment
receipt for the earnest money, which reads: "subject to the terms and conditions of the balance within three years with interest. Zayco, instead of unconditionally
embodied in Bormaheco's letter of Feb. 12, 1964 and your letter of March 4, 1964" accepting those terms, countered that he was going to make a down payment of
(Exh. E-1). P100,000, that Serra's mortgage obligation to the Philippine National Bank of P600,000
could be transferred to Zayco's account and that he (plaintiff) would give a bond to
secure the payment of the balance of the price. It was held that the acceptance was consent to the sale of the three lots and (c) when Bormaheco, Inc. had to decide what
conditional or was a counter-offer which had to be accepted by Serra. There was no to do with the DBP encumbrance.
such acceptance. Serra revoked his offer. Hence, there was no perfected contract.
Cervantes in paragraph 3 of his offer of February 12, 1964 stated that the sale of the
In the Beaumont case, Benito Valdes offered to sell to W Borck the Nagtahan Hacienda Buendia lots would be consummated after he had consummated the purchase of the
owned by Benito Legarda, who had empowered Valdes to sell it. Borck was given three Nassco property. Then, in paragraph 5 of the same offer he stated "that final
months from December 4, 1911 to buy the hacienda for P307,000. On January 17, negotiations on both properties can be definitely known after forty-five days" (See Exh.
1912 Borck wrote to Valdes, offering to purchase the hacienda for P307,000 payable B).
on May 1, 1912. No reply was made to that letter. Borck wrote other letters modifying
It is deducible from the tenor of those statements that the consummation of the sale of
his proposal. Legarda refused to convey the property.
the Buendia lots to Villonco Realty Company was conditioned on Bormaheco's
It was held that Borck's January 17th letter plainly departed from the terms of the offer acquisition of the Nassco land. But it was not spelled out that such acquisition should
as to the time of payment and was a counter-offer which amounted to a rejection of be effected within forty-five days from February 12, 1964. Had it been Cervantes'
Valdes' original offer. A subsequent unconditional acceptance could not revive that intention that the forty-five days would be the period within which the Nassco land
offer. should be acquired by Bormaheco, then he would have specified that period in
paragraph 3 of his offer so that paragraph would read in this wise: "That this sale is to
The instant case is different from Laudico and Harden vs. Arias Rodriguez, 43 Phil. 270
be consummated only after I shall have consummated my purchase of another property
where the written offer to sell was revoked by the offer or before the offeree's
located at Sta. Ana, Manila within forty-five days from the date hereof ." He could have
acceptance came to the offeror's knowledge.
also specified that period in his "conforme" to Villonco's counter-offer of March 4, 1964
Appellants' next contention is that the contract was not perfected because the condition (Exh. D) so that instead of merely stating "that this sale shall be subject to favorable
that Bormaheco, Inc. would acquire the Nassco land within forty-five days from consummation of a property in Sta. Ana we are negotiating" he could have said: "That
February 12, 1964 or on or before March 28, 1964 was not fulfilled. This contention is this sale shall be subject to favorable consummation within forty-five days from
tied up with the following letter of Bormaheco, Inc. (Exh. F): February 12, 1964 of a property in Sta. Ana we are negotiating".
BORMAHECO, INC. No such specification was made. The term of forty-five days was not a part of the
March 30, 1964 condition that the Nassco property should be acquired. It is clear that the statement
"that final negotiations on both property can be definitely known after 45 days" does not
Villonco Realty Company and cannot mean that Bormaheco, Inc. should acquire the Nassco property within forty-
V.R.C. Building five days from February 12, 1964 as pretended by Cervantes. It is simply a surmise
219 Buendia Ave., that after forty-five days (in fact when the forty-five day period should be computed is
Makati, Rizal not clear) it would be known whether Bormaheco, Inc. would be able to acquire the
Nassco property and whether it would be able to sell the Buendia property. That
Gentlemen: aforementioned paragraph 5 does not even specify how long after the forty-five days
We are returning herewith your earnest money together with interest thereon the outcome of the final negotiations would be known.
at 10% per annum. Please be informed that despite the lapse of the 45 days
It is interesting to note that in paragraph 6 of Bormaheco's answer to the amended
from February 12, 1964 there is no certainty yet for us to acquire a substitute
complaint, which answer was verified by Cervantes, it was alleged that Cervantes
property, hence the return of the earnest money as agreed upon.
accepted Villonco's revised counter-offer of March 4, 1964 subject to the condition that
Very truly yours,
"the final negotiations (acceptance) will have to be made by defendant within 45 days
SGD. FRANCISCO N. CERVANTES
from said acceptance" (31 Record on Appeal). If that were so, then the consummation
President
of Bormaheco's purchase of the Nassco property would be made within forty-five days
Encl.: P.N.B. Check No. 112994 J
from March 4, 1964.
P.N.B. Check No. 112996J
What makes Bormaheco's stand more confusing and untenable is that in its three
That contention is predicated on the erroneous assumption that Bormaheco, Inc. was answers it invariably articulated the incoherent and vague affirmative defense that its
to acquire the Nassco land within forty-five days or on or before March 28, 1964. acceptance of Villonco's revised counter-offer was conditioned on the circumstance
"that final acceptance or not shall be made after 45 days" whatever that means. That
The trial court ruled that the forty-five-day period was merely an estimate or a forecast
affirmative defense is inconsistent with the other aforequoted incoherent statement in
of how long it would take Bormaheco, Inc. to acquire the Nassco property and it was
its third answer that "the final negotiations (acceptance) will have to be made by
not "a condition or a deadline set for the defendant corporation to decide whether or
defendant within 45 days from said acceptance" (31 Record on Appeal).
not to go through with the sale of its Buendia property".
Thus, Bormaheco's three answers and paragraph 5 of his offer of February 12, 1964
The record does not support the theory of Bormaheco, Inc. and the Cervantes spouses
do not sustain at all its theory that the Nassco property should be acquired on or before
that the forty-five-day period was the time within which (a) the Nassco property and two
March 28, 1964. Its rescission or revocation of its acceptance cannot be anchored on
Pasong Tamo lots should be acquired, (b) when Cervantes would secure his wife's
that theory which, as articulated in its pleadings, is quite equivocal and unclear.
It should be underscored that the condition that Bormaheco, Inc. should acquire the However, it filed an amended answer dated May 25, 1964 wherein it denied that it was
Nassco property was fulfilled. As admitted by the appellants, the Nassco property was the owner of the three lots. It revealed that the three lots "belong and are registered in
conveyed to Bormaheco, Inc. on June 26, 1964. As early as January 17, 1964 the the names of the spouses Francisco N. Cervantes and Rosario N. Cervantes."
property was awarded to Bormaheco, Inc. as the highest bidder. On February 18, 1964
The three answers of Bormaheco, Inc. contain the following affirmative defense:
the Nassco Board authorized its General Manager to sell the property to Bormaheco,
Inc. (Exh. H). The Economic Coordinator approved the award on March 24, 1964. It is 13. That defendant's insistence to finally decide on the proposed sale of the
reasonable to assume that had Cervantes been more assiduous in following up the land in question after 45 days had not only for its purpose the determination
transaction, the Nassco property could have been transferred to Bormaheco, Inc. on or of its acquisition of the said Sta. Ana (Nassco) property during the said period,
before March 28, 1964, the supposed last day of the forty-five-day period. but also to negotiate with the actual and registered owner of the parcels of
land covered by T.C.T. Nos. 43530, 43531 and 43532 in question which
The appellants, in their fifth assignment of error, argue that Bormaheco, Inc. cannot be
plaintiff was fully aware that the same were not in the name of the defendant
required to sell the three lots in question because they are conjugal properties of the
(sic; Par. 18 of Answer to Amended Complaint, 10, 18 and 34, Record on
Cervantes spouses. They aver that Cervantes in dealing with the Villonco brothers
Appeal).
acted as president of Bormaheco, Inc. and not in his individual capacity and, therefore,
he did not bind the conjugal partnership nor Mrs. Cervantes who was allegedly opposed In that affirmative defense, Bormaheco, Inc. pretended that it needed forty- five days
to the sale. within which to acquire the Nassco property and "to negotiate" with the registered owner
of the three lots. The absurdity of that pretension stands out in bold relief when it is
Those arguments are not sustainable. It should be remembered that Cervantes, in
borne in mind that the answers of Bormaheco, Inc. were verified by Cervantes and that
rescinding the contract of sale and in returning the earnest money, cited as an excuse
the registered owner of the three lots is Cervantes himself. That affirmative defense
the circumstance that there was no certainty in Bormaheco's acquisition of the Nassco
means that Cervantes as president of Bormaheco, Inc. needed forty-five days in order
property (Exh. F and Annex 1). He did not say that Mrs. Cervantes was opposed to the
to "negotiate" with himself (Cervantes).
sale of the three lots. He did not tell Villonco Realty Company that he could not bind
the conjugal partnership. In truth, he concealed the fact that the three lots were The incongruous stance of the Cervantes spouses is also patent in their answer to the
registered "in the name of FRANCISCO CERVANTES, Filipino, of legal age, married amended complaint. In that answer they disclaimed knowledge or information of certain
to Rosario P. Navarro, as owner thereof in fee simple". He certainly led the Villonco allegations which were well-known to Cervantes as president of Bormaheco, Inc. and
brothers to believe that as president of Bormaheco, Inc. he could dispose of the said which were admitted in Bormaheco's three answers that were verified by Cervantes.
lots. He inveigled the Villoncos into believing that he had untrammelled control of It is significant to note that Bormaheco, Inc. in its three answers, which were verified by
Bormaheco, Inc., that Bormaheco, Inc. owned the lots and that he was invested with Cervantes, never pleaded as an affirmative defense that Mrs. Cervantes opposed the
adequate authority to sell the same. sale of the three lots or that she did not authorize her husband to sell those lots.
Thus, in Bormaheco's offer of February 12, 1964, Cervantes first identified the three Likewise, it should be noted that in their separate answer the Cervantes spouses never
lots as "our property" which "we are offering to sell ..." (Opening paragraph and par. 1 pleaded as a defense that Mrs. Cervantes was opposed to the sale of three lots or that
of Exh. B). Whether the prounoun "we" refers to himself and his wife or to Bormaheco, Cervantes could not bind the conjugal partnership. The appellants were at first hesitant
Inc. is not clear. Then, in paragraphs 3 and 4 of the offer, he used the first person and to make it appear that Cervantes had committed the skullduggery of trying to sell
said: "I shall have consummated my purchase" of the Nassco property; "... my property which he had no authority to alienate.
negotiations with said property" and "I will return to you your deposit". Those It was only during the trial on May 17, 1965 that Cervantes declared on the witness
expressions conveyed the impression and generated the belief that the Villoncos did stand that his wife was opposed to the sale of the three lots, a defense which, as already
not have to deal with Mrs. Cervantes nor with any other official of Bormaheco, Inc. stated, was never interposed in the three answers of Bormaheco, Inc. and in the
The pleadings disclose that Bormaheco, Inc. and Cervantes deliberately and studiously separate answer of the Cervantes spouses. That same viewpoint was adopted in
avoided making the allegation that Cervantes was not authorized by his wife to sell the defendants' motion for reconsideration dated November 20, 1965.
three lots or that he acted merely as president of Bormaheco, Inc. That defense was But that defense must have been an afterthought or was evolved post litem motam
not interposed so as not to place Cervantes in the ridiculous position of having acted since it was never disclosed in Cervantes' letter of rescission and in his letter to Miss
under false pretenses when he negotiated with the Villoncos for the sale of the three Tagle (Exh. F and Annex 1). Moreover, Mrs. Cervantes did not testify at the trial to
lots. fortify that defense which had already been waived for not having been pleaded (See
Villonco Realty Company, in paragraph 2 of its original complaint, alleged that "on sec. 2, Rule 9, Rules of Court).
February 12, 1964, after some prior negotiations, the defendant (Bormaheco, Inc.) Taking into account the situation of Cervantes vis-a-vis Bormaheco, Inc. and his wife
made a formal offer to sell to the plaintiff the property of the said defendant situated at and the fact that the three lots were entirely occupied by Bormaheco's building,
the abovenamed address along Buendia Avenue, Makati, Rizal, under the terms of the machinery and equipment and were mortgaged to the DBP as security for its obligation,
letter-offer, a copy of which is hereto attached as Annex A hereof", now Exhibit B (2 and considering that appellants' vague affirmative defenses do not include Mrs.
Record on Appeal). Cervantes' alleged opposition to the sale, the plea that Cervantes had no authority to
That paragraph 2 was not, repeat, was not denied by Bormaheco, Inc. in its answer sell the lots strains the rivets of credibility (Cf. Papa and Delgado vs. Montenegro, 54
dated May 5, 1964. It did not traverse that paragraph 2. Hence, it was deemed admitted. Phil. 331; Riobo vs. Hontiveros, 21 Phil. 31).
"Obligations arising from contracts have the force of law between the contracting 2. Within five (5) days from the execution of such deed of conveyance, Bormaheco, Inc.
parties and should be complied with in good faith" (Art. 1159, Civil Code). Inasmuch as should execute in favor of Villonco Realty Company, V. R. C. Building, 219 Buendia
the sale was perfected and even partly executed, Bormaheco, Inc., and the Cervantes Avenue, Makati, Rizal a registerable deed of sale for the said three lots and all the
spouses, as a matter of justice and good faith, are bound to comply with their improvements thereon, free from all lien and encumbrances, at the price of four
contractual commitments. hundred pesos per square meter, deducting from the total purchase price the sum of
P100,000 previously paid by Villonco Realty Company to Bormaheco, Inc.
Parenthetically, it may be observed that much misunderstanding could have been
avoided had the broker and the buyer taken the trouble of making some research in the 3. Upon the execution of such deed of sale, Villonco Realty Company is obligated to
Registry of Deeds and availing themselves of the services of a competent lawyer in pay Bormaheco, Inc. the balance of the price in the sum of one million three hundred
drafting the contract to sell. thousand pesos (P1,300,000).
Bormaheco, Inc. and the Cervantes spouses in their sixth assignment of error assail 4. Bormaheco, Inc. is ordered (a) to pay Villonco Realty Company twenty thousand
the trial court's award to Villonco Realty Company of consequential damage amounting pesos (P20,000) as attorney's fees and (b) to pay Edith Perez de Tagle the sum of
to ten thousand pesos monthly from March 24, 1964 (when the Economic Coordinator forty-two thousand pesos (P42,000) as commission. Costs against the defendants-
approved the award of the Nassco property to Bormaheco, Inc.) up to the appellants.
consummation of the sale. The award was based on paragraph 18 of the stipulation of
SO ORDERED.
facts wherein Villonco Realty Company "submits that the delay in the consummation of
Makalintal, C.J, Castro. Fernando, Makasiar, Antonio, Esguerra, Muñoz Palma,
the sale" has caused it to suffer the aforementioned damages.
Concepcion Jr. and Martin, JJ., concur.
The appellants contend that statement in the stipulation of facts simply means that Teehankee, J., is on leave.
Villonco Realty Company speculates that it has suffered damages but it does not mean Footnotes
that the parties have agreed that Villonco Realty Company is entitled to those damages. * Underscoring supplied. Note that, according to the defendants, Cervantes inserted
"12th and" between the "February" and "26" in the second line of the foregoing letter,
Appellants' contention is correct. As rightly observed by their counsel, the damages in
that in paragraph 3 of the terms and conditions he crossed out "Nassco's" and wrote
question were not specifically pleaded and proven and were "clearly conjectural and
"another" and that he inserted "pa" after "interest" (p. 7, defendants-appellants' brief).
speculative".
There is no stipulation nor testimony on the alleged insertions.
However, appellants' view in their seventh assignment of error that the trial court erred
in ordering Bormaheco, Inc. to pay Villonco Realty Company the sum of twenty ** "March 31,1964
thousand pesos as attorney's fees is not tenable. Under the facts of the case, it is
evident that Bormaheco, Inc. acted in gross and evident bad faith in refusing to satisfy Mr. Francisco Cervantes
the valid and just demand of Villonco Realty Company for specific performance. It President, BORMAHECO, INC.
compelled Villonco Realty Company to incure expenses to protect its interest.
245 Buendia Avenue
Moreover, this is a case where it is just and equitable that the plaintiff should recover Makati, Rizal
attorney's fees (Art. 2208, Civil Code).
The appellants in their eighth assignment of error impugn the trial court's adjudication Dear Mr. Cervantes:
of forty-two thousand pesos as three percent broker's commission to Miss Tagle. They As your official and authorized representative on the sale of your property located at
allege that there is no evidence that Bormaheco, Inc. engaged her services as a broker 245 Buendia Avenue, Makati, Rizal, with a total area of 3,500 square meters, at
in the projected sale of the three lots and the improvements thereon. That allegation is P400.00 per square meter or a total purchase cost of P1,400.000.00, in favor of Mr.
refuted by paragraph 3 of the stipulation of facts and by the documentary evidence. It Romeo Villonco of Villonco Realty Co., I was surprised and shocked at the news of your
was stipulated that Miss Tagle intervened in the negotiations for the sale of the three actions yesterday afternoon when you had a certain Mr. de Guzman bring to Mr. Romeo
lots. Cervantes in his original offer of February 12, 1964 apprised Villonco Realty Villonco, your letter dated March 30th, 1964, together with 2 checks. One for
Company that the earnest money should be delivered to Miss Tagle, the bearer of the P100.000.00 and another for P694.25 as 10% interest on the same.
letter-offer. See also Exhibit G and Annex I of the stipulation of facts. If you will recall, this deal on selling your property started way back in October 1963
when you ordered me to negotiate for you certain properties to buy in order that you
We hold that the trial court did not err in adjudging that Bormaheco, Inc. should pay
could move to a bigger location than that at 245 Buendia Avenue which was becoming
Miss Tagle her three percent commission.
too small for your needs.
WHEREFORE, the trial court's decision is modified as follows: You also authorized me to negotiate with my BUYERS, one of whom was the Villonco
1. Within ten (10) days from the date the defendants-appellants receive notice from the Brothers who owned the adjacent property, on the sale of your property. Plenty of
clerk of the lower court that the records of this case have been received from this Court, conferences were held between you and me, and also between the Villoncos and me
the spouses Francisco N. Cervantes and Rosario P. Navarra-Cervantes should on the said property, specially after your Formal Bidding of the NASSCO PROPERTY,
execute a deed conveying to Bormaheco, Inc. their three lots covered by Transfer located at Punta. Sta. Ana, was made on January 17, 1964.
Certificate of Title Nos. 43530, 43531 and 43532 of the Registry of Deeds of Rizal. After this made (sic) was made, you called me and had me offer your property at 245
Buendia Avenue to the Villoncos. For this you made your formal offer as per your letter
dated February 12, 1964. And that after there were many personal conferences made
between you and the Villoncos either by phone and also personally at their office in my
presence.
After your Formal Offer of February 12, 1964, and the subsequent acceptance by the
Villoncos of your offer, and the payment of the EARNEST MONEY of P100,000.00
which you accepted on March 4, 1964 and signed CONFORME to the LETTER
CONTRACT of the same date, this deal become a close deal as the said Earnest
Money becomes a part of the down payment on the property.
The only stipulation mentioned in your Contractual Letter of March 4, 1964 which
followed your letter of February 12, 1964, was that the said sale becomes ineffective
only if the purchase of the property at Sta. Ana is not approved by the NASSCO or the
OEC. However, from all my follow up on the matter at the NASSCO and the OEC, it
appears that your bid on purchasing the said property at Sta. Ana has been approved
by the NASSCO BOARD on March 3, 1964, and subsequently approved by the Office
of the Economic Coordinator and signed by Mr. Adevoso on March 25,1964. This,
therefore, removes the stipulation on your letter of Feb. 12, 1964 and thus effecting the
consummation of this deal.
Mr. Romeo Villonco has called me to his office and has returned to me your letter and
the checks, as he is not agreeable to a cancellation of this deal with them on the
purchase of your property at 245 Buendia Avenue, Makati, Rizal, for the following
reasons:
(1.) That this deal has been made after a Formal Written Offer from you after several
lengthy verbal conferences between you, and which terms have been agreed upon;
(2.) That after the Earnest Money had been received by you, I, as your official
representative have followed the matter and have kept them informed on the progress
of the deal with the NASSCO and the OEC, this being the only stipulation on the
consummation of the deal; and as such made it necessary that the Villoncos mortgage
several of their properties with the bank to have ready the Cash payment required by
you as per your Contractual Letter of March 4, 1964;
(3.) That in all big business firms, the presence of a large amount of spot cash is always
not present, thus it was necessary that the Villoncos raised this spot cash which was
one of your requirements for this sale;
(4.) That the Villoncos have put aside all other projects in favor of this deal, since the
same requires a large amount of cash, not only for the payment of the land, but also for
the cost of the new building to be erected; (5.) That the stipulation on the letters of
February 12, 1964 and March 4, 1964 wherein the approval and consequent purchase
of the lot at Sta. Ana, Manila has been removed by the approval of your bid purchase
of the property of the NASSCO, at Punta, Sta. Ana which has been approved by the
NASSCO BOARD on March 3, 1964 and the OEC on March 25, 1964;
For all the above reasons, Mr. Romeo Villonco will not agree to your backing out of this
deal or rescinding your Contractual Agreement with them for any other reason
whatsoever.
Trusting that you will see your way clear in all this, I am
Very truly yours,
(Sgd.) Edith Perez de
Tagle
(Typed) Edith Perez
de Tagle
Realtor"
G.R. No. L-36083 September 5, 1975 terms and conditions stipulated in the contract.” The stipulation in the public evidence
Spouses RAMON DOROMAL, SR., and ROSARIO SALAS, and Spouses RAMON of the contract, made public by both vendors and vendees is that the price was
DOROMAL, JR., and GAUDELIA VEGA, petitioners, vs. HON. COURT OF APPEALS P30,000; (2) If the price paid is “grossly excessive” redemptioner is required to pay only
and FILOMENA JAVELLANA, respondents. a reasonable one; (3) If the vendees had only complied with the law, they would have
Salonga, Ordonez, Yap, Parlade and Associates and Marvin J. Mirasol for petitioners. been obligated to accept the redemption money of only P30,000 and if it be argued that
Arturo H. Villanueva, Jr. for private respondent. the solution would mean unjust enrichment for the co-owner who seeks redemption, it
need only be remembered that her right is not contractual, but a mere legal one, the
Sales; Earnest Money; Where earnest money given as guarantee that vendee
exercise of a right granted by the law, and the law is definite that she can subrogate
would not back out; Case at bar.—While P5,000 might have indeed been paid to one
herself in place of the buyer, “upon the same terms and conditions stipulated in the
of the co-owners, there is nothing to show that the same was in the concept of the
contract,” in the words of Article 1619, and the price “stipulated in the contract” was
earnest money contemplated in Article 1482 of the Civil Code as signifying perfection
P30,000.
of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record,
the said P5,000 were paid in the concept of earnest money as the term was understood PETITION for review of the decision of the Court of Appeals.
under the Old Civil Code, that is, as a guarantee that the buyer would not back out,
BARREDO, J.:
considering that it is not clear that there was already definite agreement as to the price
Petition for review of the decision of the Court of Appeals in CA-G.R. No.
then and that the vendees were decided to buy 6/7 only of the property should one of
the co-owners refuse to agree to part with her 1/7 share. 47945-R entitled Filomena Javellana vs. Spouses Ramon Doromal, Sr., et al. which
Same; Legal redemption; Redemption of co-owner; Notice in writing should be reversed the decision of the Court of First Instance of Iloilo that had in turn dismissed
not only of perfected sale but also of actual execution and delivery of deed of sale; herein private respondent Filomena Javellana's action for redemption of a certain
Reasons.—For purposes of the co-owner’s right of redemption granted by Article 1620 property sold by her co-owners to herein petitioners for having been made out of time.
of the Civil Code, the notice in writing which Article 1623 requires to be made to the The factual background found by the Court of Appeals and which is binding on this
other co-owners and from receipt of which the 30-day period to redeem should be Court, the same not being assailed by petitioners as being capricious, is as follows:
counted is a notice not only of a perfected sale but of the actual execution and delivery IT RESULTING: That the facts are quite simple; Lot 3504 of the cadastral
of the deed of sale. This is implied from the latter portion of Article 1623 which requires survey of Iloilo, situated in the poblacion of La Paz, one of its districts, with an
that before a register of deeds can record a sale by a co-owner, there must be area of a little more than 2-½ hectares was originally decreed in the name of
presented to him an affidavit to the effect that the notice of the sale had been sent in the late Justice Antonio Horilleno, in 1916, under Original Certificate of Title
writing to the other co-owners. A sale may not be presented to the register of deeds for No. 1314, Exh. A; but before he died, on a date not particularized in the record,
registration unless it be in the form of a duly executed public instrument. Moreover, the he executed a last will and testament attesting to the fact that it was a co-
law prefers that all the terms and conditions of the sale should be definite and in writing. ownership between himself and his brothers and sisters, Exh. C; so that the
Same; Same; Same; Thirty-day redemption period counted from notice in writing truth was that the owners or better stated, the co-owners were; beside Justice
of actual execution and delivery of deeds of sale.—Article 1619 of the Civil Code Horilleno,
bestows unto a co-owner the right to redeem and “to be subrogated under the same "Luis, Soledad, Fe, Rosita, Carlos and Esperanza,"
terms and conditions stipulated in the contract,” and to avoid any controversy as to the all surnamed Horilleno, and since Esperanza had already died, she was
terms and conditions under which the right to redeem may be exercised, it is best that succeeded by her only daughter and heir herein plaintiff. Filomena Javellana,
the period therefor should not be deemed to have commenced unless the notice of the in the proportion of 1/7 undivided ownership each; now then, even though their
disposition is made after the formal deed of disposal has been duly executed. right had not as yet been annotated in the title, the co-owners led by Carlos,
Same; Same; Same; Redemption price; Understatement of purchase price to and as to deceased Justice Antonio Horilleno, his daughter Mary, sometime
evade taxes and fees due the Government; Effect of; Cane at bar.—The trial court since early 1967, had wanted to sell their shares, or if possible if Filomena
found that “the consideration of P30,000 only was placed in the deed of sale to minimize Javellana were agreeable, to sell the entire property, and they hired an
the payment of the registration fees, stamps and sales tax.” With this undisputed fact acquaintance Cresencia Harder, to look for buyers, and the latter came to
in mind, it is impossible for the Supreme Court to sanction the vendees’ pragmatic but interest defendants, the father and son, named Ramon Doromal, Sr. and Jr.,
immoral posture. Being patently violative of public policy and injurious to public interest, and in preparation for the execution of the sale, since the brothers and sisters
the seemingly wide practice of understating considerations of transactions for the Horilleno were scattered in various parts of the country, Carlos in Ilocos Sur,
purpose of evading taxes and fees due to the government must be condemned and all Mary in Baguio, Soledad and Fe, in Mandaluyong, Rizal, and Rosita in Basilan
parties guilty thereof must be made to suffer the consequences of their ill-advised City, they all executed various powers of attorney in favor of their niece, Mary
agreement to defraud the state. The co-owners who sold the property are in pari- H. Jimenez Exh. 1-8, they also caused preparation of a power of attorney of
delicto with the vendees in committing tax evasion and should not receive any identical tenor for signature by plaintiff, Filomena Javellana, Exh. M, and sent
consideration from any court in respect to the money paid for the sale in dispute. Their it with a letter of Carlos, Exh. 7 dated 18 January, 1968 unto her thru Mrs.
situation is similar to that of parties to an illegal contract. Harder, and here, Carlos informed her that the price was P4.00 a square
Same; Same; Same; Same; Redemption should be only for price stipulated in meter, — although it now turns out according to Exh. 3 that as early as 22
deed of sale; Reasons; Case at bar.—The redemption should be only for the price October, 1967, Carlos had received in check as earnest money from
stipulated in the deed. (1) The redemptioner right is to be subrogated “upon the same defendant Ramon Doromal, Jr., the sum of P5,000.00 and the price therein
agreed upon was five (P5.00) pesos a square meter as indeed in another letter p. 26, Exh. "J", Manual of Exhibits.
also of Carlos to Plaintiff in 5 November, 1967, Exh. 6, he had told her that the and then and there said lawyer manifested to the Doromals that he had the
Doromals had given the earnest money of P5,000.00 at P5.00 a square meter, P30,000.00 with him in cash, and tendered it to them, for the exercise of the
— at any rate, plaintiff not being agreeable, did not sign the power of attorney, legal redemption, the Doromals were aghast, and refused. and the very next
and the rest of the co-owners went ahead with their sale of their 6/7, Carlos day as has been said. 11 June, 1968, plaintiff filed this case, and in the trial,
first seeing to it that the deed of sale by their common attorney in fact, Mary thru oral and documentary proofs sought to show that as co-owner, she had
H. Jimenez be signed and ratified as it was signed and ratified in Candon, the right to redeem at the price stated in the deed of sale, Exh. 2, namely
Ilocos Sur, on 15 January, 1968, Exh. 2, then brought to Iloilo by Carlos in the P30,000.00 of the but defendants in answer, and in their evidence, oral and
same month, and because the Register of Deeds of Iloilo refused to register documentary sought to show that plaintiff had no more right to redeem and
right away, since the original registered owner, Justice Antonio Horilleno was that if ever she should have, that it should be at the true and real price by them
already dead, Carlos had to ask as he did, hire Atty. Teotimo Arandela to file paid, namely, the total sum of P115,250.00, and trial judge, after hearing the
a petition within the cadastral case, on 26 February, 1968, for the purpose, evidence, believed defendants, that plaintiff had no more right, to redeem,
Exh. C, after which Carlos returned to Luzon, and after compliance with the because,
requisites of publication, hearing and notice, the petition was approved, and "Plaintiff was informed of the intended sale of the 6/7 share belonging
we now see that on 29 April, 1968, Carlos already back in Iloilo went to the to the Horillenos."
Register of Deeds and caused the registration of the order of the cadastral and that,
court approving the issuance of a new title in the name of the co-owners, as "The plaintiff have every reason to be grateful to Atty. Carlos Horilleno
well as of the deed of sale to the Doromals, as a result of which on that same because in the petition for declaration of heirs of her late uncle Antonio
date, a new title was issued TCT No. 23152, in the name of the Horillenos to Horilleno in whose name only the Original Certificate of Title covering the Lot
6/7 and plaintiff Filomena Javellana to 1/7, Exh. D, only to be cancelled on the in question was issued, her uncle Atty. Carlos Horilleno included her as one
same day under TCT No. 23153, Exh. 2, already in the names of the vendees of the heirs of said Antonio Horilleno. Instead, she filed this case to redeem
Doromals for 6/7 and to herein plaintiff, Filomena Javellana, 1/7, and the next the 6/7 share sold to the Doromals for the simple reason that the consideration
day 30 April, 1968, the Doromals paid unto Carlos by check, the sum of in the deed of sale is the sum of P30,000.00 only instead of P115,250.00
P97,000.00 Exh. 1, of Chartered Bank which was later substituted by check approximately which was actually paid by the defendants to her co-owners,
of Phil. National Bank, because there was no Chartered Bank Branch in Ilocos thus she wants to enrich herself at the expense of her own blood relatives who
Sur, but besides this amount paid in check, the Doromals according to their are her aunts, uncles and cousins. The consideration of P30,000.00 only was
evidence still paid an additional amount in cash of P18,250.00 since the placed in the deed of sale to minimize the payment of the registration fees,
agreed price was P5.00 a square meter; and thus was consummated the stamps, and sales tax. pp. 77-78, R.A.,
transaction, but it is here where complications set in, and dismiss and further condemned plaintiff to pay attorney's fees, and moral
On 10 June, 1968, there came to the residence of the Doromals in Dumangas, Iloilo, and exemplary damages as set forth in few pages back, it is because of this
plaintiff's lawyer, Atty. Arturo H. Villanueva, bringing with him her letter of that date, that plaintiff has come here and contends, that Lower Court erred:
reading, "I. ... in denying plaintiff-appellant, as a co-owner of Lot No. 3504, of the Iloilo
"P.O. Box 189, Bacolod City Cadastre, the right of legal redemption under Art. 1620, of the Civil Code:
June 10, 1968 "II. ... as a consequence of the above error, in refusing to order the defendants-
Mr. & Mrs. Ramon Doromal, Sr. appellees, the vendees of a portion of the aforesaid Lot No. 3504 which they
and Mr. and Mrs. Ramon Doromal, Jr. bought from the co-owners of the plaintiff-appellant, to reconvey the portion
they purchased to the herein plaintiff-appellant..
"Dumangas Iloilo "III. ... in admitting extrinsic evidence in the determination of the consideration
of the sale, instead of simply adhering to the purchase price of P30,000.00,
Dear Mr. and Mrs. Doromal: set forth in the pertinent Deed of Sale executed by the vendors and owners of
The bearer of this letter is my nephew, Atty. Arturo H. Villanueva, Jr., the plaintiff-appellant in favor of the defendants-appellees.
of this City. Through him, I am making a formal offer to repurchase "IV. ... in dismissing the complaint filed in this case." pp. 1-3, Appellant's Brief,.
or redeem from you the 6/7 undivided share in Lot No. 3504, of the which can be reduced to the simple question of whether or not on tile basis of
Iloilo Cadastre, which you bought from my erstwhile co-owners, the the evidence and the law, the judgment appealed from should be maintained;
Horillenos, for the sum of P30,000.00, Atty. Villanueva has with him (Pp. 16-22, Record.) .
the sum of P30,000.00 in cash, which he will deliver to you as soon Upon these facts, the Court of Appeals reversed the trial court's decision and held that
as you execute the contract of sale in my favor. although respondent Javellana was informed of her co-owners' proposal to sell the land
Thank you very much for whatever favorable consideration you can give this in question to petitioners she was, however, "never notified ... least of all, in writing", of
request. the actual execution and registration of the corresponding deed of sale, hence, said
Very truly yours, respondent's right to redeem had not yet expired at the time she made her offer for that
(SIGNED) purpose thru her letter of June 10, 1968 delivered to petitioners on even date. The
Mrs. FILOMENA JAVELLANA" intermediate court further held that the redemption price to be paid by respondent
should be that stated in the deed of sale which is P30,000 notwithstanding that the as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof
preponderance of the evidence proves that the actual price paid by petitioners was extant in the record, We are more inclined to believe that the said P5,000 were paid in
P115,250. Thus, in their brief, petitioners assign the following alleged errors: the concept of earnest money as the term was understood under the Old Civil Code,
I that is, as a guarantee that the buyer would not back out, considering that it is not clear
IT IS ERROR FOR THE COURT OF APPEALS TO HOLD THAT THE NOTICE IN that there was already a definite agreement as to the price then and that petitioners
WRITING OF THE SALE CONTEMPLATED IN ARTICLE 1623 OF THE CIVIL CODE were decided to buy 6/7 only of the property should respondent Javellana refuse to
REFERS TO A NOTICE IN WRITING AFTER THE EXECUTION AND REGISTRATION agree to part with her 1/7 share.
OF THE INSTRUMENT OF SALE, HENCE, OF THE DOCUMENT OF SALE. In the light of these considerations, it cannot be said that the Court of Appeals erred in
II holding that the letters aforementioned sufficed to comply with the requirement of notice
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE INSCRIPTION OF of a sale by co-owners under Article 1623 of the Civil Code. We are of the considered
THE SALE IN THE REGISTRY OF PROPERTY TAKES EFFECT AS AGAINST THIRD opinion and so hold that for purposes of the co-owner's right of redemption granted by
PERSONS INCLUDING CLAIMS OF POSSIBLE REDEMPTIONERS. Article 1620 of the Civil Code, the notice in writing which Article 1623 requires to be
ASSUMING, ARGUENDO THAT PRIVATE RESPONDENT HAS THE RIGHT TO made to the other co-owners and from receipt of which the 30-day period to redeem
REDEEM, THE COURT OF APPEALS ERRED IN HOLDING THAT THE should be counted is a notice not only of a perfected sale but of the actual execution
REDEMPTION PRICE SHOULD BE THAT STATED IN THE DEED OF SALE. (Pp. 1- and delivery of the deed of sale. This is implied from the latter portion of Article 1623
2, Brief for Petitioner, page 74-Rec.) which requires that before a register of deeds can record a sale by a co-owner, there
We cannot agree with petitioners. must be presented to him, an affidavit to the effect that the notice of the sale had been
Petitioners do not question respondent's right to redeem, she being admittedly a 1/7 sent in writing to the other co-owners. A sale may not be presented to the register of
co-owner of the property in dispute. The thrust of their first assignment of error is that deeds for registration unless it be in the form of a duly executed public instrument.
for purposes of Article 1623 of the Civil Code which provides that: Moreover, the law prefers that all the terms and conditions of the sale should be definite
ART. 1623. The right of legal pre-emption or redemption shall not be exercised and in writing. As aptly observed by Justice Gatmaitan in the decision under review,
except within thirty days from the notice in writing by the prospective vendor, Article 1619 of the Civil Code bestows unto a co-owner the right to redeem and "to be
or by the vendor, as the case may be. The deed of sale shall not be recorded subrogated under the same terms and conditions stipulated in the contract", and to
in the Registry of Property, unless accompanied by an affidavit of the vendor avoid any controversy as to the terms and conditions under which the right to redeem
that he has given written notice thereof to all possible redemptioners. may be exercised, it is best that the period therefor should not be deemed to have
commenced unless the notice of the disposition is made after the formal deed of
The right of redemption of co-owners excludes that of adjoining owners. disposal has been duly executed. And it being beyond dispute that respondent herein
the letters sent by Carlos Horilleno to respondent and dated January 18, 1968, Exhibit has never been notified in writing of the execution of the deed of sale by which
7, and November 5, 1967, Exhibit 6, constituted the required notice in writing from which petitioners acquired the subject property, it necessarily follows that her tender to
the 30-day period fixed in said provision should be computed. But to start with, there is redeem the same made on June 10, 1968 was well within the period prescribed by law.
no showing that said letters were in fact received by respondent and when they were Indeed, it is immaterial when she might have actually come to know about said deed, it
actually received. Besides, petitioners do not pinpoint which of these two letters, their appearing she has never been shown a copy thereof through a written communication
dates being more than two months apart, is the required notice. In any event, as found by either any of the petitioners-purchasers or any of her co-owners-vendees. (Cornejo
by the appellate court, neither of said letters referred to a consummated sale. As may et al. vs. CA et al., 16 SCRA 775.)
be observed, it was Carlos Horilleno alone who signed them, and as of January 18, The only other pivotal issue raised by petitioners relates to the price which respondent
1968, powers of attorney from the various co-owners were still to be secured. Indeed, offered for the redemption in question. In this connection, from the decision of the Court
the later letter of January 18, 1968 mentioned that the price was P4.00 per square of Appeals, We gather that there is "decisive preponderance of evidence" establishing
meter whereas in the earlier letter of November 5, 1967 it was P5.00, as in fact, on that "that the price paid by defendants was not that stated in the document, Exhibit 2, of
basis, as early as October 27, 1967, Carlos had already received P5,000 from P30,000 but much more, at least P97,000, according to the check, Exhibit 1, if not a
petitioners supposedly as earnest money, of which, however, mention was made by total of P115,250.00 because another amount in cash of P18,250 was paid afterwards."
him to his niece only in the later letter of January 18, 1968, the explanation being that
"at later negotiation it was increased to P5.00 per square meter." (p. 4 of petitioners' It is, therefore, the contention of petitioners here that considering said finding of fact of
brief as appellees in the Court of Appeals quoting from the decision of the trial court.) the intermediate court, it erred in holding nevertheless that "the redemption price should
In other words, while the letters relied upon by petitioners could convey the idea that be that stated in the deed of sale."
more or less some kind of consensus had been arrived at among the other co-owners Again, petitioners' contention cannot be sustained. As stated in the decision under
to sell the property in dispute to petitioners, it cannot be said definitely that such a sale review, the trial court found that "the consideration of P30,000 only was placed in the
had even been actually perfected. The fact alone that in the later letter of January 18, deed of sale to minimize the payment of the registration fees, stamps and sales tax."
1968 the price indicated was P4.00 per square meter while in that of November 5, 1967, With this undisputed fact in mind, it is impossible for the Supreme Court to sanction
what was stated was P5.00 per square meter negatives the possibility that a "price petitioners' pragmatic but immoral posture. Being patently violative of public policy and
definite" had already been agreed upon. While P5,000 might have indeed been paid to injurious to public interest, the seemingly wide practice of understating considerations
Carlos in October, 1967, there is nothing to show that the same was in the concept of of transactions for the purpose of evading taxes and fees due to the government must
the earnest money contemplated in Article 1482 of the Civil Code, invoked by petitioner, be condemned and all parties guilty thereof must be made to suffer the consequences
of their ill-advised agreement to defraud the state. Verily, the trial court fell short of its prohibitive should be understood to have no purpose at all, that would be an
devotion and loyalty to the Republic in officially giving its stamp of approval to the stand absurdity, that purpose could not but have been to give a clear and
of petitioners and even berating respondent Javellana as wanting to enrich herself "at unmistakable guide to redemptioner, on how much he should pay and when
the expense of her own blood relatives who are her aunts, uncles and cousins." On the he should redeem; from this must follow that that notice must have been
contrary, said "blood relatives" should have been sternly told, as We here hold, that intended to state the truth and if vendor and vendee should have instead,
they are in pari-delicto with petitioners in committing tax evasion and should not receive decided to state an untruth therein, it is they who should bear the
any consideration from any court in respect to the money paid for the sale in dispute. consequences of having thereby misled the redemptioner who had the right
Their situation is similar to that of parties to an illegal contract.1 to rely and act thereon and on nothing else; stated otherwise, all the elements
Of course, the Court of Appeals was also eminently correct in its considerations of equitable estoppel are here since the requirement of the law is to submit
supporting the conclusion that the redemption in controversy should be only for the the affidavit of notice to all possible redemptioners, that affidavit to be a
price stipulated in the deed, regardless of what might have been actually paid by condition precedent to registration of the sale therefore, the law must have
petitioners that style inimitable and all his own, Justice Gatmaitan states those intended that it be by the parties understood that they were there asking a
considerations thus: solemn representation to all possible redemptioners, who upon faith of that
CONSIDERING: As to this that the evidence has established with decisive are thus induced to act, and here worse for the parties to the sale, they sought
preponderance that the price paid by defendants was not that stated in the to avoid compliance with the law and certainly refusal to comply cannot be
document, Exh. 2 of P30,000.00 but much more, at least P97,000.00 rewarded with exception and acceptance of the plea that they cannot be now
according to the check, Exh. 1 if not a total of P115,250.00 because another estopped by their own representation, and this Court notes that in the trial and
amount in cash of P18,250.00 was paid afterwards, perhaps it would be to this appeal, plaintiff earnestly insisted and insists on their estoppel;
neither correct nor just that plaintiff should be permitted to redeem at only 3rd — If therefore, here vendors had only attempted to comply with the law,
P30,000.00, that at first glance would practically enrich her by the difference, they would have been obligated to send a copy of the deed of sale unto
on the other hand, after some reflection, this Court can not but have to bear Filomena Javellana and from that copy, Filomena would have been notified
in mind certain definite points. that she should if she had wanted to redeem, offered no more, no less, that
1st — According to Art. 1619 P30,000.00, within 30 days, it would have been impossible for vendors and
"Legal redemption is the right to be subrogated, upon the same terms and vendees to have inserted in the affidavit that the price was truly P97,000.00
conditions stipulated in the contract, in the place of one who acquires a thing plus P18,250.00 or a total of P115,250.00; in other words, if defendants had
by purchase or dation in payment, or by any other transaction whereby only complied with the law, they would have been obligated to accept the
ownership is transmitted by onerous title." pp. 471-472, New Civil Code, redemption money of only P30,000.00;
and note that redemptioner right is to be subrogated 4th — If it be argued that foregoing solution would mean unjust enrichment for
"upon the same terms and conditions stipulated in the contract." plaintiff, it need only be remembered that plaintiff's right is not contractual, but
and here, the stipulation in the public evidence of the contract, made public by a mere legal one, the exercise of a right granted by the law, and the law is
both vendors and vendees is that the price was P30,000.00; definite that she can subrogate herself in place of the buyer,
2nd — According to Art. 1620, "upon the same terms and conditions stipulated in the contract,"
"A co-owner of a thing may exercise the right of redemption in case the share of all the in the words of Art. 1619, and here the price
other co-owners or any of them, are sold to a third person. If the price of the alienation
is grossly excessive, the redemptioner shall pay only a reasonable one. p. 472, New "stipulated in the contract"
Civil Code, . was P30,000.00, in other words, if this be possible enrichment on the part of
from which it is seen that if the price paid is 'grossly excessive' redemptioner Filomena, it was not unjust but just enrichment because permitted by the law;
is required to pay only a reasonable one; not that actually paid by the vendee, if it still be argued that plaintiff would thus be enabled to abuse her right, the
going to show that the law seeks to protect redemptioner and converts his answer simply is that what she is seeking to enforce is not an abuse but a
position into one not that of a contractually but of a legally subrogated creditor mere exercise of a right; if it be stated that just the same, the effect of
as to the right of redemption, if the price is not 'grossly excessive', what the sustaining plaintiff would be to promote not justice but injustice, the answer
law had intended redemptioner to pay can be read in Art. 1623. again simply is that this solution is not unjust because it only binds the parties
to make good their solemn representation to possible redemptioners on the
The right of a legal pre-emption or redemption shall not be exercised price of the sale, to what they had solemnly averred in a public document
except within thirty (30) days from the notice in writing by the required by the law to be the only basis for that exercise of redemption; (Pp.
prospective vendor, or by the vendor as the case may be. The deed 24-27, Record.)
of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written WHEREFORE, the decision of the Court of Appeals is affirmed, with costs against
notice thereof of all possible redemptioners.' p. 473, New Civil Code, petitioners..
Fernando, Makasiar, Esguerra, Aquino and Martin, JJ., concur.
if that be so that affidavit must have been intended by the lawmakers for a Makalintal, CJ., took no part.
definite purpose, to argue that this affidavit has no purpose is to go against all Muñoz Palma, J., took no part. Antonio and Concepcion Jr., JJ., are on leave.
canons of statutory construction, no law mandatory in character and worse,
FIRST DIVISION DECISION
[G.R. No. 126812. November 24, 1998] BELLOSILLO, J.:
GOLDENROD, INC., petitioner vs. COURT OF APPEALS, PIO BARRETTO & In the absence of a specific stipulation, may the seller of real estate keep the earnest
SONS, INC., PIO BARRETTO REALTY DEVELOPMENT, INC., money to answer for damages in the event the sale fails due to the fault of the
and ANTHONY QUE, respondents. prospective buyer?
Pio Barretto and Sons, Inc. (BARRETTO & SONS) owned forty-three (43) parcels of
Civil Law; Sales; Whenever earnest money is given in a contract of sale, it shall
registered land with a total area of 18,500 square meters located at Carlos Palanca St.,
be considered as part of the purchase price and as proof of the perfection of the
Quiapo, Manila, which were mortgaged with the United Coconut Planters Bank
contract.—Under Art. 1482 of the Civil Code, whenever earnest money is given in a
(UCPB). In 1988, the obligation of the corporation with UCPB remained unpaid making
contract of sale, it shall be considered as part of the purchase price and as proof of the
foreclosure of the mortgage imminent.
perfection of the contract. Petitioner clearly stated without any objection from private
Goldenrod, Inc. (GOLDENROD), offered to buy the property from BARRETTO &
respondents that the earnest money was intended to form part of the purchase price. It
SONS. On 25 May 1988, through its president Sonya G. Mathay, petitioner wrote
was an advance payment which must be deducted from the total price. Hence, the
respondent Anthony Que, President of respondent BARRETTO & SONS,as follows:
parties could not have intended that the earnest money or advance payment would be
Thank you for your reply to our letter offering to buy your property in Echague (C.
forfeited when the buyer should fail to pay the balance of the price, especially in the
Palanca) Quiapo.
absence of a clear and express agreement thereon. By reason of its failure to make
We are happy that you have accepted our offer except the two amendments concerning
payment petitioner, through its agent, informed private respondents that it would no
the payment of interest which should be monthly instead of semi-annually and the
longer push through with the sale. In other words, petitioner resorted to extrajudicial
period to remove the trusses, steel frames etc. which shall be 180 days instead of 90
rescission of its agreement with private respondents.
days only. Please be advised that we agree to your amendments.
Same; Same; Contracts; Rescission; The right to rescind contracts is not As to your other query, we prefer that the lots be reconsolidated back to its (sic) mother
absolute and is subject to scrutiny and review by the proper court; Rescission of titles.
reciprocal contracts may be extrajudicially rescinded unless successfully impugned in Enclosed is the earnest money of P1 million which shall form part of the purchase price.
court.—In University of the Philippines v. de los Angeles, the right to rescind contracts Payment of the agreed total consideration shall be effected in accordance with our offer
is not absolute and is subject to scrutiny and review by the proper court. We held further, as you have accepted and upon execution of the necessary documents of sale to be
in the more recent case of Adelfa Properties, Inc. v. Court of Appeals, that rescission implemented after the said reconsolidation of the lots.
of reciprocal contracts may be extrajudicially rescinded unless successfully impugned Kindly acknowledge receipt of the earnest money.
in court. If the party does not oppose the declaration of rescission of the other party, When the term of existence of BARRETTO & SONS expired, all its assets and liabilities
specifying the grounds therefor, and it fails to reply or protest against it, its silence including the property located in Quiapo were transferred to respondent Pio Barretto
thereon suggests an admission of the veracity and validity of the rescinding party’s Realty Development, Inc. (BARRETTO REALTY).Petitioners offer to buy the property
claim. resulted in its agreement with respondent BARRETTO REALTY that petitioner would
Same; Same; Same; Same; Rescission creates the obligation to return the pay the following amounts: (a) P24.5 million representing the outstanding obligations
things which were the object of the contract together with their fruits and interest.— of BARRETTO REALTY with UCPB on 30 June 1988, the deadline set by the bank
Article 1385 of the Civil Code provides that rescission creates the obligation to return for payment; and, (b) P20 million which was the balance of the purchase price of the
the things which were the object of the contract together with their fruits and interest. property to be paid in installments within a 3-year period with interest at 18% per
The vendor is therefore obliged to return the purchase price paid to him by the buyer if annum.
the latter rescinds the sale, or when the transaction was called off and the subject Petitioner did not pay UCPB the P24.5 million loan obligation of BARRETTO REALTY
property had already been sold to a third person, as what obtained in this case. on the deadline set for payment; instead, it asked for an extension of one (1) month or
Therefore, by virtue of the extrajudicial rescission of the contract to sell by petitioner up to 31 July 1988 to settle the obligation, which the bank granted. On 31 July 1988,
without opposition from private respondents who, in turn, sold the property to other petitioner requested another extension of sixty (60) days to pay the loan. This time the
persons, private respondent BARRETTO REALTY, as the vendor, had the obligation bank demurred.
to return the earnest money of P1,000,000.00 plus legal interest from the date it In the meantime BARRETTO REALTY was able to cause the reconsolidation of the
received notice of rescission from petitioner, i.e., 30 August 1988, up to the date of the forty-three (43) titles covering the property subject of the purchase into two (2) titles
return or payment. It would be most inequitable if respondent BARRETTO REALTY covering Lots 1 and 2, which were issued on 4 August 1988. The reconsolidation of the
would be allowed to retain petitioner’s payment of P1,000,000.00 and at the same time titles was made pursuant to the request of petitioner in its letter to private respondents
appropriate the proceeds of the second sale made to another. on 25 May 1988. Respondent BARRETTO REALTY allegedly incurred expenses for
the reconsolidation amounting to P250,000.00.
PETITION for review on certiorari of a decision of the Court of Appeals. On 25 August 1988 petitioner sought reconsideration of the denial by the bank of its
The facts are stated in the opinion of the Court. request for extension of sixty (60) days by asking for a shorter period of thirty (30)
days. This was again denied by UCPB.
Tinoco, Tinoco & Associates for petitioner. On 30 August 1988 Alicia P. Logarta, President of Logarta Realty and Development
Pete Quirino-Quadra for private respondents. Corporation (LOGARTA REALTY), which acted as agent and broker of petitioner, wrote
private respondent Anthony Que informing him on behalf of petitioner that it could not
go through with the purchase of the property due to circumstances beyond its fault, i.e., court.If the party does not oppose the declaration of rescission of the other party,
the denial by UCPB of its request for extension of time to pay the obligation. In the specifying the grounds therefor, and it fails to reply or protest against it, its silence
same letter, Logarta also demanded the refund of the earnest money of P1 million thereon suggests an admission of the veracity and validity of the rescinding party's
which petitioner gave to respondent BARRETTO REALTY. claim.
On 31 August 1988 respondent BARRETTO REALTY sold to Asiaworld Trade Center Private respondents did not interpose any objection to the rescission by petitioner of
Phils., Inc. (ASIAWORLD), Lot 2, one of the two (2) consolidated lots, for the price the agreement. As found by the Court of Appeals, private respondent BARRETTO
of P23 million. On 13 October 1988 respondent BARRETTO REALTY executed a deed REALTY even sold Lot 2 of the subject consolidated lots to another buyer,
transferring by way of dacion the property reconsolidated as Lot 1 in favor of UCPB, ASIAWORLD, one day after its President Anthony Que received the broker's letter
which in turn sold the property to ASIAWORLD for P24 million. rescinding the sale.Subsequently, on 13 October 1988 respondent BARRETTO
On 12 December 1988 Logarta again wrote respondent Que demanding the return of REALTY also conveyed ownership over Lot 1 to UCPB which, in turn, sold the same to
the earnest money to GOLDENROD. On 7 February 1989 petitioner through its lawyer ASIAWORLD.
reiterated its demand, but the same remained unheeded by private respondents. This Article 1385 of the Civil Code provides that rescission creates the obligation to return
prompted petitioner to file a complaint with the Regional Trial Court of Manila against the things which were the object of the
private respondents for the return of the amount of P1 million and the payment of contract together with their fruits and interest. The vendor is therefore obliged to return
damages including lost interests or profits. In their answer, private respondents the purchase price paid to him by the buyer if the latter rescinds the sale,[4] or when the
contended that it was the agreement of the parties that the earnest money of P1 million transaction was called off and the subject property had already been sold to a third
would be forfeited to answer for losses and damages that might be suffered by private person, as what obtained in this case.[5] Therefore, by virtue of the extrajudicial
respondents in case of failure by petitioner to comply with the terms of their purchase rescission of the contract to sell by petitioner without opposition from private
agreement. respondents who, in turn, sold the property to other persons, private respondent
On 15 March 1991 the trial court rendered a decision[1] ordering private respondents BARRETTO REALTY, as the vendor, had the obligation to return the earnest money
jointly and severally to pay petitioner P1,000,000.00 with legal interest from 9 February of P1,000,000.00 plus legal interest from the date it received notice of rescission from
1989 until fully paid, P50,000.00 representing unrealized profits and P10,000.00 as petitioner, i.e., 30 August 1988, up to the date of the return or payment. It would be
attorneys fees. The trial court found that there was no written agreement between the most inequitable if respondent BARRETTO REALTY would be allowed to retain
parties concerning forfeiture of the earnest money if the sale did not push through. It petitioners payment of P1,000,000.00 and at the same time appropriate the proceeds
further declared that the earnest money givenby petitioner to respondent BARRETTO of the second sale made to another.[6]
REALTY was intended to form part of the purchase price; thus, the refusal of the latter WHEREFORE, the Petition is GRANTED. The decision of the Court of Appeals is
to return the money when the sale was not consummated violated Arts. 22 and 23 of REVERSED and SET ASIDE.Private respondent Pio Barretto Realty Development, Inc.
the Civil Code against unjust enrichment. (BARRETTO REALTY), its successors and assigns are ordered to return to petitioner
Obviously dissatisfied with the decision of the trial court, private respondents appealed Goldenrod, Inc. (GOLDENROD), the amount
to the Court of Appeals which reversed the trial court and ordered the dismissal of the of P1,000,000.00 with legal interest thereon from 30 August 1988, the date of notice of
complaint; hence, this petition. extrajudicial rescission, until the amount is fully paid, with costs against private
Petitioner alleges that the Court of Appeals erred in disregarding the finding of the trial respondents. SO ORDERED.
court that the earnest money given by petitioner to respondent BARRETTO REALTY Davide Jr. (Chairman), Vitug, Panganiban, and Quisumbing JJ., concur
[1]
should be returned to the former. The absence of an express stipulation that the same Rollo, p. 48.
[2]
shall be forfeited in favor of the seller in case the buyer fails to comply with his obligation No. L-28602, 29 September 1970, 35 SCRA 102.
[3]
is compelling. It argues that the forfeiture of the money in favor of respondent G.R. No. 111238, 25 January 1995, 240 SCRA565.
[4]
BARRETTO REALTY would amount to unjust enrichment at the expense of petitioner. Halili v. Doret, 95 Phil 78 [1954].
[5]
We sustain petitioner. Under Art. 1482 of the Civil Code, whenever earnest money is Palay Inc. v. Clave, G.R. No. 56076, 21 September 1983, 124 SCRA 638.
[6]
given in a contract of sale, it shall be considered as part of the purchase price and as Ibid.
proof of the perfection of the contract. Petitioner clearly stated without any objection
from private respondents that the earnest money was intended to form part of the
purchase price. It was an advance payment which must be deducted from the total
price. Hence, the parties could not have intended that the earnest money or advance
payment would be forfeited when the buyer should fail to pay the balance of the price,
especially in the absence of a clear and express agreement thereon. By reason of its
failure to make payment petitioner, through its agent, informed private respondents that
it would no longer push through with the sale. In other words, petitioner resorted to
extrajudicial rescission of its agreement with private respondents.
In University of the Philippines v. de los Angeles,[2] the right to rescind contracts is not
absolute and is subject to scrutiny and review by the proper court. We held further, in
the more recent case of Adelfa Properties, Inc. v. Court of Appeals,[3] that rescission of
reciprocal contracts may be extrajudicially rescinded unless successfully impugned in
G.R. No. 78903 February 28, 1990 Destriza and Titon Veloso, East, by Feliciano Destriza, by Barbara Bonesa
SPS. SEGUNDO DALION AND EPIFANIA SABESAJE-DALION, petitioners, (sic); and West, by Catalino Espina. (pp. 36-37, Rollo)
vs. THE HONORABLE COURT OF APPEALS AND RUPERTO SABESAJE, The decision affirms in toto the ruling of the trial court 1 issued on January 17, 1984,
JR., respondents. the dispositive portion of which provides as follows:
WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby renders
Contracts; Sale of Real Property; The necessity of a public instrument provided
judgment.
for in Art. 1358 is only for convenience, not for validity or enforceability.—Assuming
(a) Ordering the defendants to deliver to the plaintiff the parcel of land subject
authenticity of his signature and the genuineness of the document, Dalion nonetheless
of this case, declared in the name of Segundo Dalion previously under Tax
still impugns the validity of the sale on the ground that the same is embodied in a private
Declaration No. 11148 and lately under Tax Declaration No. 2297 (1974) and
document, and did not thus convey title or right to the lot in question since “acts and
to execute the corresponding formal deed of conveyance in a public document
contracts which have for their object the creation, transmission, modification or
in favor of the plaintiff of the said property subject of this case, otherwise,
extinction of real rights over immovable property must appear in a public instrument”
should defendants for any reason fail to do so, the deed shall be executed in
(Art. 1358, par 1, NCC). This argument is misplaced. The provision of Art. 1358 on the
their behalf by the Provincial Sheriff or his Deputy;
necessity of a public document is only for convenience, not for validity or enforceability.
(b) Ordering the defendants to pay plaintiff the amount of P2,000.00 as
It is not a requirement for the validity of a contract of sale of a parcel of land that this
attorney's fees and P 500.00 as litigation expenses, and to pay the costs; and
be embodied in a public instrument.
(c) Dismissing the counter-claim. (p. 38, Rollo)
Same; Same; Contract of sale, perfected by mere consent.—A contract of sale
The facts of the case are as follows:
is a consensual contract, which means that the sale is perfected by mere consent. No
On May 28, 1973, Sabesaje sued to recover ownership of a parcel of land, based on a
particular form is required for its validity. Upon perfection of the contract, the parties
private document of absolute sale, dated July 1, 1965 (Exhibit "A"), allegedly executed
may reciprocally demand performance (Art. 1475, NCC), i.e., the vendee may compel
by Dalion, who, however denied the fact of sale, contending that the document sued
transfer of ownership of the object of the sale, and the vendor may require the vendee
upon is fictitious, his signature thereon, a forgery, and that subject land is conjugal
to pay the thing sold (Art. 1458, NCC). The trial court thus rightly and legally ordered
property, which he and his wife acquired in 1960 from Saturnina Sabesaje as evidenced
Dalion to deliver to Sabesaje the parcel of land and to execute the corresponding formal
by the "Escritura de Venta Absoluta" (Exhibit "B"). The spouses denied claims of
deed of conveyance in a public document. Under Art. 1498, NCC, when the sale is
Sabesaje that after executing a deed of sale over the parcel of land, they had pleaded
made through a public instrument, the execution thereof is equivalent to the delivery of
with Sabesaje, their relative, to be allowed to administer the land because Dalion did
the thing. Delivery may either be actual (real) or constructive. Thus, delivery of a parcel
not have any means of livelihood. They admitted, however, administering since 1958,
of land may be done by placing the vendee in control and possession of the land (real)
five (5) parcels of land in Sogod, Southern Leyte, which belonged to Leonardo
or by embodying the sale in a public instrument (constructive).
Sabesaje, grandfather of Sabesaje, who died in 1956. They never received their agreed
Same; Same; Parties to a perfected contract of sale have the right to reciprocally
10% and 15% commission on the sales of copra and abaca, respectively. Sabesaje's
demand performance, and to observe a particular form if warranted.—As regards
suit, they countered, was intended merely to harass, preempt and forestall Dalion's
petitioners’ contention that the proper action should have been one for specific
threat to sue for these unpaid commissions.
performance, We believe that the suit for recovery of ownership is proper. As earlier
From the adverse decision of the trial court, Dalion appealed, assigning errors some of
stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of sale the
which, however, were disregarded by the appellate court, not having been raised in the
right to reciprocally demand performance, and to observe a particular form, if
court below. While the Court of Appeals duly recognizes Our authority to review matters
warranted, (Art. 1357). The trial court, aptly observed that Sa-besaje’s complaint
even if not assigned as errors in the appeal, We are not inclined to do so since a review
sufficiently alleged a cause of action to compel Dalion to execute a formal deed of sale,
of the case at bar reveals that the lower court has judicially decided the case on its
and the suit for recovery of ownership, which is premised on the binding effect and
merits.
validity inter partes of the contract of sale, merely seeks consummation of said contract.
As to the controversy regarding the identity of the land, We have no reason to dispute
“x x x. A sale of a real property may be in a private instrument, but that contract is valid
the Court of Appeals' findings as follows:
and binding between the parties upon its perfection. And a party may compel the other
To be sure, the parcel of land described in Exhibit "A" is the same property
party to execute a public instrument embodying their contract affecting real rights once
deeded out in Exhibit "B". The boundaries delineating it from adjacent lots are
the contract appearing in a private instrument has been perfected (See Art. 1357).
identical. Both documents detail out the following boundaries, to wit:
PETITION to review the decision of the Court of Appeals. On the North-property of Sergio Destriza and Titon Veloso;
MEDIALDEA, J.: On the East-property of Feliciano Destriza;
This is a petition to annul and set aside the decision of the Court of Appeals rendered On the South-property of Barbara Boniza and
on May 26, 1987, upholding the validity of the sale of a parcel of land by petitioner On the West-Catalino Espina.
Segundo Dalion (hereafter, "Dalion") in favor of private respondent Ruperto Sabesaje, (pp. 41-42, Rollo)
Jr. (hereafter, "Sabesaje"), described thus: The issues in this case may thus be limited to: a) the validity of the contract of sale of
A parcel of land located at Panyawan, Sogod, Southern Leyte, declared in the a parcel of land and b) the necessity of a public document for transfer of ownership
name of Segundo Dalion, under Tax Declaration No. 11148, with an area of thereto.
8947 hectares, assessed at P 180.00, and bounded on the North, by Sergio The appellate court upheld the validity of the sale on the basis of Secs. 21 and 23 of
Rule 132 of the Revised Rules of Court.
SEC. 21. Private writing, its execution and authenticity, how proved.-Before any signature, an unnecessary one, for fear he may commit a revealing error or an
private writing may be received in evidence, its due execution and authenticity must erroneous stroke. (Decision, p. 10) (pp. 42-43, Rollo)
be proved either: We see no reason for deviating from the appellate court's ruling (p. 44, Rollo) as we
(a) By anyone who saw the writing executed; reiterate that
(b) By evidence of the genuineness of the handwriting of the maker; or Appellate courts have consistently subscribed to the principle that conclusions
(c) By a subscribing witness and findings of fact by the trial courts are entitled to great weight on appeal
xxx xxx xxx and should not be disturbed unless for strong and cogent reasons, since it is
SEC. 23. Handwriting, how proved. — The handwriting of a person may be proved undeniable that the trial court is in a more advantageous position to examine
by any witness who believes it to be the handwriting of such person, and has seen real evidence, as well as to observe the demeanor of the witnesses while
the person write, or has seen writing purporting to be his upon which the witness testifying in the case (Chase v. Buencamino, Sr., G.R. No. L-20395, May 13,
has acted or been charged, and has thus acquired knowledge of the handwriting 1985, 136 SCRA 365; Pring v. Court of Appeals, G.R. No. L-41605, August
of such person. Evidence respecting the handwriting may also be given by a 19, 1985, 138 SCRA 185)
comparison, made by the witness or the court, with writings admitted or treated as Assuming authenticity of his signature and the genuineness of the document, Dalion
genuine by the party against whom the evidence is offered, or proved to be genuine nonetheless still impugns the validity of the sale on the ground that the same is
to the satisfaction of the judge. (Rule 132, Revised Rules of Court) embodied in a private document, and did not thus convey title or right to the lot in
And on the basis of the findings of fact of the trial court as follows: question since "acts and contracts which have for their object the creation,
Here, people who witnessed the execution of subject deed positively testified on transmission, modification or extinction of real rights over immovable property must
the authenticity thereof. They categorically stated that it had been executed and appear in a public instrument" (Art. 1358, par 1, NCC).
signed by the signatories thereto. In fact, one of such witnesses, Gerardo M. This argument is misplaced. The provision of Art. 1358 on the necessity of a public
Ogsoc, declared on the witness stand that he was the one who prepared said deed document is only for convenience, not for validity or enforceability. It is not a
of sale and had copied parts thereof from the "Escritura De Venta Absoluta" requirement for the validity of a contract of sale of a parcel of land that this be embodied
(Exhibit B) by which one Saturnina Sabesaje sold the same parcel of land to in a public instrument.
appellant Segundo Dalion. Ogsoc copied the bounderies thereof and the name of A contract of sale is a consensual contract, which means that the sale is perfected by
appellant Segundo Dalion's wife, erroneously written as "Esmenia" in Exhibit "A" mere consent. No particular form is required for its validity. Upon perfection of the
and "Esmenia" in Exhibit "B". (p. 41, Rollo) contract, the parties may reciprocally demand performance (Art. 1475, NCC), i.e., the
xxx xxx xxx vendee may compel transfer of ownership of the object of the sale, and the vendor may
Against defendant's mere denial that he signed the document, the positive require the vendee to pay the thing sold (Art. 1458, NCC).
testimonies of the instrumental Witnesses Ogsoc and Espina, aside from the The trial court thus rightly and legally ordered Dalion to deliver to Sabesaje the parcel
testimony of the plaintiff, must prevail. Defendant has affirmatively alleged forgery, of land and to execute corresponding formal deed of conveyance in a public document.
but he never presented any witness or evidence to prove his claim of forgery. Each Under Art. 1498, NCC, when the sale is made through a public instrument, the
party must prove his own affirmative allegations (Section 1, Rule 131, Rules of execution thereof is equivalent to the delivery of the thing. Delivery may either be actual
Court). Furthermore, it is presumed that a person is innocent of a crime or wrong (real) or constructive. Thus delivery of a parcel of land may be done by placing the
(Section 5 (a),Idem), and defense should have come forward with clear and vendee in control and possession of the land (real) or by embodying the sale in a public
convincing evidence to show that plaintiff committed forgery or caused said forgery instrument (constructive).
to be committed, to overcome the presumption of innocence. Mere denial of having As regards petitioners' contention that the proper action should have been one for
signed, does not suffice to show forgery. specific performance, We believe that the suit for recovery of ownership is proper. As
In addition, a comparison of the questioned signatories or specimens (Exhs. A-2 earlier stated, Art. 1475 of the Civil Code gives the parties to a perfected contract of
and A-3) with the admitted signatures or specimens (Exhs. X and Y or 3-C) sale the right to reciprocally demand performance, and to observe a particular form, if
convinces the court that Exhs. A-2 or Z and A-3 were written by defendant Segundo warranted, (Art. 1357). The trial court, aptly observed that Sabesaje's complaint
Dalion who admitted that Exhs. X and Y or 3-C are his signatures. The questioned sufficiently alleged a cause of action to compel Dalion to execute a formal deed of sale,
signatures and the specimens are very similar to each other and appear to be and the suit for recovery of ownership, which is premised on the binding effect and
written by one person. validity inter partes of the contract of sale, merely seeks consummation of said
Further comparison of the questioned signatures and the specimens with the contract.
signatures Segundo D. Dalion appeared at the back of the summons (p. 9, Record); ... . A sale of a real property may be in a private instrument but that contract
on the return card (p. 25, Ibid.); back of the Court Orders dated December 17, 1973 is valid and binding between the parties upon its perfection. And a party may
and July 30, 1974 and for October 7, 1974 (p. 54 & p. 56, respectively, Ibid.), and compel the other party to execute a public instrument embodying their contract
on the open court notice of April 13, 1983 (p. 235, Ibid.) readily reveal that the affecting real rights once the contract appearing in a private instrument hag
questioned signatures are the signatures of defendant Segundo Dalion. been perfected (See Art. 1357).
It may be noted that two signatures of Segundo D. Dalion appear on the face of ... . (p. 12, Decision, p. 272, Records)
the questioned document (Exh. A), one at the right corner bottom of the document ACCORDINGLY, the petition is DENIED and the decision of the Court of Appeals
(Exh. A-2) and the other at the left hand margin thereof (Exh. A-3). The second upholding the ruling of the trial court is hereby AFFIRMED. No costs.
signature is already a surplusage. A forger would not attempt to forge another SO ORDERED. Narvasa, Cruz, Gancayco and Grino-Aquino, JJ., concur.
G.R. No. L-55048 May 27, 1981 other way, under the Statute of Frauds, the contents of the note or memorandum,
SUGA SOTTO YUVIENCO, BRITANIA SOTTO, and MARCELINO whether in one writing or in separate ones merely indicative for an adequate
SOTTO, petitioners, vs.HON. AUXENCIO C. DACUYCUY, Judge of the CFI of understanding of all the essential elements of the entire agreement, may be said to be
Leyte, DELY RODRIGUEZ, FELIPE ANG CRUZ, CONSTANCIA NOGAR, MANUEL the contract itself, except as to the form.
GO, INOCENTES DIME, WILLY JULIO, JAIME YU, OSCAR DY, DY CHIU SENG, Same; Same; Same; Duty of plaintiff when a motion to dismiss based on the
BENITO YOUNG, FERNANDO YU, SEBASTIAN YU, CARLOS UY, HOC CHUAN Statute of Frauds is filed.—We are of the considered opinion that under the rules on
and MANUEL DY, respondents. proper pleading, the ruling of the trial court that, even if the allegation of the existence
of a sale of real property in a complaint is challenged as barred from enforceability by
Remedial Law; Civil Procedure; Pleadings; Rule that a motion to dismiss based
the Statute of Frauds, the plaintiff may simply say there are documents, notes or
on lack of cause of action the movant is deemed to admit the factual allegations of the
memoranda without either quoting them in or annexing them to the complaint, as if
complaint, not applicable where no absolute acceptance of prospective buyer to buy
holding an ace in the sleeves is not correct. To go directly to the point, for Us to sanction
the property.—Respondents maintain that under existing jurisprudence relative to a
such a procedure is to tolerate and even encourage undue delay in litigation, for the
motion to dismiss on the ground of failure of the complaint to state a cause of action,
simple reason that to await the stage of trial for the showing or presentation of the
the movant-defendant is deemed to admit the factual allegations of the complaint,
requisite documentary proof when it already exists and is asked to be produced by the
hence, petitioners cannot deny, for purposes of their motion, that such terms of
adverse party would amount to unnecessarily postponing, with the concomitant waste
payment had indeed been agreed upon. While such is the rule, those allegations do
of time and the prolongation of the proceedings, something that can immediately be
not detract from the fact that under Article 1319 of the Civil Code above-quoted, and
evidenced and thereby determinable with decisiveness and precision by the court
judged in the light of the telegram-reply of Yao to Atty. Gamboa’s letter of July 12, 1978,
without further delay.
there was not an absolute acceptance, hence from that point of view, petitioners’
contention that the complaint of respondents state no cause of action is correct. BARREDO, J.:
Civil Law; Sales; Although there was no perfected contract of sale, the complaint Petition for certiorari and prohibition to declare void for being in grave abuse of
has a cause of action when there was an agreement of sale of the property and a down discretion the orders of respondent judge dated November 2, 1978 and August 29,
payment of the sale was made.—Our conclusion, therefore, is that although there was 1980, in Civil Case No. 5759 of the Court of First Instance of Leyte, which denied the
no perfected contract of sale in the light of the letter of Atty. Gamboa of July 12, 1978 motion filed by petitioners to dismiss the complaint of private respondents for specific
and the letter-reply thereto of Yao; it being doubtful whether or not, under Article 1319 performance of an alleged agreement of sale of real property, the said motion being
of the Civil Code, the said letter may be deemed as an offer to sell that is “certain”, and based on the grounds that the respondents' complaint states no cause of action and/or
more, the Yao telegram is far from being an “absolute” acceptance under said article, that the claim alleged therein is unenforceable under the Statute of Frauds.
still there appears to be a cause of action alleged in Paragraphs 8 to 12 of the Finding initially prima facie merit in the petition, We required respondents to answer
respondents’ complaint, considering it is alleged therein that subsequent to the and We issued a temporary restraining order on October 7, 1980 enjoining the
telegram of Yao, it was agreed that the petitioners would sell the property to execution of the questioned orders.
respondents for P6.5 M, by paying P2 M down and the balance in 90 days and which In essence, the theory of petitioners is that while it is true that they did express
agreement was allegedly violated when in the deeds prepared by Atty. Gamboa and willingness to sell to private respondents the subject property for P6,500,000 provided
taken to Tacloban, only 30 days were given to the respondents. the latter made known their own decision to buy it not later than July 31, 1978, the
Same; Same; Statute of Frauds; Mere claim that petitioners have unjustifiably respondents' reply that they were agreeable was not absolute, so much so that when
refused to proceed with the sale of the property is unenforceable under the Statute of ultimately petitioners' representative went to Cebu City with a prepared and duly signed
Frauds in the absence of any note or memorandum and signed agreement of sale.— contract for the purpose of perfecting and consummating the transaction, respondents
We hold that either way We view the situation, the conclusion is inescapable that the and said representative found variance between the terms of payment stipulated in the
claim of respondents that petitioners have unjustifiably refused to proceed with the sale prepared document and what respondents had in mind, hence the bankdraft which
to them of the property in question is unenforceable under the Statute of Frauds. It is respondents were delivering to petit loners' representative was returned and the
nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing or document remained unsigned by respondents. Hence the action below for specific
memorandum, much less a duly signed agreement to the effect that the price of performance.
P6,500,000 fixed by petitioners for the real property herein involved was agreed to be To be more specific, the parties do not dispute that on July 12, 1978, petitioners, thru
paid not in cash but in installments as alleged by respondents. a certain Pedro C. Gamboa, sent to respondents the following letter:
Same; Same; Same; In any sale of real property on installments, the Statute of Mr. Yao King Ong
Frauds read together with the perfection requirements of Article 1475 of the Civil Code Life Bakery
must be applied such that payment on installments of the sale must be in the requisite Tacloban City
note or memorandum.—We hold that in any sale of real property on installments, the Dear Mr. Yao:
Statute of Frauds read together with the perfection requirements of Article 1475 of the This refers to the Sotto property (land and building) situated at Tacloban City. My
Civil Code must be understood and applied in the sense that the idea of payment on clients are willing to sell them at a total price of P6,500,000.00.
installments must be in the requisite of a note or memorandum therein contemplated. While there are other parties who are interested to buy the property, I am giving
Same; Same; Same; Under the Statute of Frauds, the contents of a note or you and the other occupants the preference, but such priority has to be exercised
memorandum is considered as the contract itself, except as to the form.—To put it the within a given number of days as I do not want to lose the opportunity if you are
not interested. I am therefore gluing you and the rest of the occupants until July 31, P2,000,000.00 to be paid in full on the date of the execution of the contract;
1978 within it which to decide whether you want to buy the property. If I do not hear and the balance of P4,500,000.00 shall be fully paid within ninety (90) days
from you by July 31, I will offer or close the deal with the other interested buyer. thereafter;
Thank you so much for the hospitality extended to me during my last trip to 9. That on July 27, 1978, defendants sent a telegram to plaintiff- tenants, through
Tacloban, and I hope to hear from you very soon. the latter's representative Mr. Yao King Ong, reiterating their acceptance to the
Very truly yours, agreement referred to in the next preceding paragraph hereof and notifying
Pedro C. Gamboa 1 plaintiffs-tenants to prepare payment by bank drafts; which the latter readily
(Page 9, Record.) complied with; a copy of which telegram is hereto attached as integral part hereof
Reacting to the foregoing letter, the following telegram was sent by "Yao King Ong and marked as Annex "D"; (Pp 49-50, Record.)
& tenants" to Atty. Pedro Gamboa in Cebu City: It was on the basis of the foregoing facts and allegations that herein petitioners filed
Atty. Pedro Gamboa their motion to dismiss alleging as main grounds:
Room 314, Maria Cristina Bldg. I. That plaintiff, TACLOBAN MERCHANTS' REALTY DEVELOPMENT
Osmeña Boulevard, Cebu City CORPORATION, amended complaint, does not state a cause of action and the
Reurlet dated July 12 inform Dra. Yuvienco we agree to buy property proceed claim on which the action is founded is likewise unenforceable under the provisions
Tacloban to negotiate details of the Statute of Frauds.
Yao King Ong & tenants II. That as to the rest of the plaintiffs, their amended complaint does not state a
(Page 10, Record.) cause of action and the claim on which the action is founded is likewise
Likewise uncontroverted is the fact that under date of July 27, 1978, Atty. Gamboa unenforceable under the provisions of the Statute of Frauds. (Page 81, Record.)
wired Yao King Ong in Tacloban City as follows: With commendable knowledgeability and industry, respondent judge ruled negatively
NLT on the motion to dismiss, discoursing at length on the personality as real party-in-
YAO KING ONG interest of respondent corporation, while passing lightly, however, on what to Us are
LIFE BAKERY the more substantial and decisive issues of whether or not the complaint sufficiently
TACLOBAN CITY states a cause of action and whether or not the claim alleged therein is unenforceable
PROPOSAL ACCEPTED ARRIVING TUESDAY MORNING WITH CONTRACT under the Statute of Frauds, by holding thus:
PREPARE PAYMENT BANK DRAFT The second ground of the motion to dismiss is that plaintiffs' claim is unenforceable
ATTY. GAMBOA under the Statute of Frauds. The defendants argued against this motion and asked
(Page 10, Id.) the court to reject the objection for the simple reason that the contract of sale sued
Now, Paragraph 10 of the complaint below of respondents alleges: upon in this case is supported by letters and telegrams annexed to the complaint
10. That on August 1, 1978, defendant Pedro Gamboa arrived Tacloban City and other papers which will be presented during the trial. This contention of the
bringing with him the prepared contract to purchase and to sell referred to in his defendants is not well taken. The plaintiffs having alleged that the contract is
telegram dated July 27, 1978 (Annex 'D' hereof) for the purpose of closing the backed up by letters and telegrams, and the same being a sufficient memorandum,
transactions referred to in paragraphs 8 and 9 hereof, however, to the complete the complaint states a cause of action and they should be given a day in court and
surprise of plaintiffs, the defendant (except def. Tacloban City Ice Plant, Inc.) allowed to substantiate their allegations (Paredes vs. Espino, 22 SCRA 1000).
without giving notice to plaintiffs, changed the mode of payment with respect to the To take a contract for the sale of land out of the Statute of Frauds a mere note or
balance of P4,500,000.00 by imposing upon plaintiffs to pay same amount within memorandum in writing subscribed by the vendor or his agent containing the name
thirty (30) days from execution of the contract instead of the former term of ninety of the parties and a summary statement of the terms of the sale either expressly or
(90) days as stated in paragraph 8 hereof. (Pp. 10-11, Record.) by reference to something else is all that is required. The statute does not require
Additionally and to reenforce their position, respondents alleged further in their a formal contract drawn up with technical exactness for the language of Par. 2 of
complaint: Art. 1403 of the Philippine Civil Code is' ... an agreement ... or some note or
8. That on July 12, 1978, defendants (except defendant Tacloban City Ice Plant, memorandum thereof,' thus recognizing a difference between the contract itself
Inc.) finally sent a telegram letter to plaintiffs- tenants, through same Mr. Yao King and the written evidence which the statute requires (Berg vs. Magdalena Estate,
Ong, notifying them that defendants are willing to sell the properties (lands and Inc., 92 Phil. 110; Ill Moran, Comments on the Rules of Court, 1952 ed. p. 187).
building) at a total price of P6,500,000.00, which herein plaintiffs-tenants have See also Bautista's Monograph on the Statute of Frauds in 21 SCRA p. 250. (Pp.
agreed to buy the said properties for said price; a copy of which letter is hereto 110-111, Record)
attached as integral part hereof and marked as Annex 'C', and plaintiffs accepted Our first task then is to dwell on the issue of whether or not in the light of the foregoing
the offer through a telegram dated July 25, 1978, sent to defendants (through circumstances, the complaint in controversy states sufficiently a cause of action. This
defendant Pedro C. Gamboa), a copy of which telegram is hereto attached as issue necessarily entails the determination of whether or not the plaintiffs have alleged
integral part hereof and marked as Annex C-1 and as a consequence hereof. facts adequately showing the existence of a perfected contract of sale between herein
plaintiffs except plaintiff Tacloban - merchants' Realty Development Corporation) petitioners and the occupant represented by respondent Yao King Ong.
and defendants (except defendant Tacloban City Ice Plant. Inc.) agreed to the In this respect, the governing legal provision is, of course, Article 1319 of the Civil Code
following terms and conditions respecting the payment of said purchase price, to which provides:
wit:
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance any communication of any kind between them during the intervening period, and none
upon the thing and the cause which are constitute the contract. The offer must be such is alleged anyway by respondents. Accordingly, the claim of respondents in
certain the acceptance absolute. A qualified acceptance constitute a counter-offer. paragraph 8 of their complaint below that there was an agreement of a down payment
Acceptance made by letter or telegram does not bind offerer except from the time of P2 M, with the balance of P4.5M to be paid within 90 days afterwards is rather
it came to his knowledge. The contract, in a case, is presumed to have been improbable to imagine to have actually happened.
entered into in the place where the offer was made. Respondents maintain that under existing jurisprudence relative to a motion to dismiss
In the instant case, We can lay aside, for the moment, petitioners' contention that the on the ground of failure of the complaint to state a cause of action, the movant-
letter of July 12, 1978 of Atty. Pedro C. Gamboa to respondents Yao King Ong and his defendant is deemed to admit the factual allegations of the complaint, hence,
companions constitute an offer that is "certain", although the petitioners claim that it petitioners cannot deny, for purposes of their motion, that such terms of payment had
was a mere expression of willingness to sell the subject property and not a direct offer indeed been agreed upon.
of sale to said respondents. What We consider as more important and truly decisive is While such is the rule, those allegations do not detract from the fact that under Article
what is the correct juridical significance of the telegram of respondents instructing Atty. 1319 of the Civil Code above-quoted, and judged in the light of the telegram-reply of
Gamboa to "proceed to Tacloban to negotiate details." We underline the word Yao to Atty. Gamboa's letter of July 12, 1978, there was not an absolute acceptance,
"negotiate" advisedly because to Our mind it is the key word that negates and makes it hence from that point of view, petitioners' contention that the complaint of respondents
legally impossible for Us to hold that respondents' acceptance of petitioners' offer, state no cause of action is correct.
assuming that it was a "certain" offer indeed, was the "absolute" one that Article 1319 Nonetheless, the alleged subsequent agreement about the P2 M down and P4.5 M in
above-quoted requires. 90 days may at best be deemed as a distinct cause of action. And placed against the
Dictionally, the implication of "to negotiate" is practically the opposite of the Idea that insistence of petitioners, as demonstrated in the two deeds of sale taken by Atty.
an agreement has been reached. Webster's Third International Dictionary, Vol. II (G. & Gamboa to Tacloban, Annexes 9 and 10 of the answer of herein respondents, that
C. Merriam Co., 1971 Philippine copyright) gives the meaning of negotiate as "to there was no agreement about 90 days, an issue of fact arose, which could warrant a
communicate or confer with another so as to arrive at the settlement of some matter; trial in order for the trial court to determine whether or not there was such an agreement
meet with another so as to arrive through discussion at some kind of agreement or about the balance being payable in 90 days instead of the 30 days stipulated in
compromise about something; — to arrange for or bring about through conference or Annexes 9 and 10 above-referred to. Our conclusion, therefore, is that although there
discussion; work at or arrive at or settle upon by meetings and agreements or was no perfected contract of sale in the light of the letter of Atty. Gamboa of July 12,
compromises — ". Importantly, it must be borne in mind that Yao King Ong's telegram 1978 and the letter-reply thereto of Yao; it being doubtful whether or not, under Article
simply says "we agree to buy property". It does not necessarily connote acceptance of 1319 of the Civil Code, the said letter may be deemed as an offer to sell that is "certain",
the price but instead suggests that the details were to be subject of negotiation. and more, the Yao telegram is far from being an "absolute" acceptance under said
Respondents now maintain that what the telegram refers to as "details" to be article, still there appears to be a cause of action alleged in Paragraphs 8 to 12 of the
"negotiated" are mere "accidental elements", not the essential elements of the contract. respondents' complaint, considering it is alleged therein that subsequent to the
They even invite attention to the fact that they have alleged in their complaint (Par. 6) telegram of Yao, it was agreed that the petitioners would sell the property to
that it was as early as "in the month of October, 1977 (that) negotiations between respondents for P6.5 M, by paving P2 M down and the balance in 90 days and which
plaintiffs and defendants for the purchase and sale (in question) — were made, thus agreement was allegedly violated when in the deeds prepared by Atty. Gamboa and
resulting to offers of same defendants and counter-offer of plaintiffs". But to Our mind taken to Tacloban, only 30 days were given to respondents.
such alleged facts precisely indicate the failure of any meeting of the minds of the But the foregoing conclusion is not enough to carry the day for respondents. It only
parties, and it is only from the letter and telegrams above-quoted that one can brings Us to the question of whether or not the claim for specific performance of
determine whether or not such meeting of the minds did materialize. As We see it, what respondents is enforceable under the Statute of Frauds. In this respect, We man, view
such allegations bring out in bold relief is that it was precisely because of their past the situation at hand from two angles, namely, (1) that the allegations contained in
failure to arrive at an agreement that petitioners had to put an end to the uncertainty by paragraphs 8 to 12 of respondents' complaint should be taken together with the
writing the letter of July 12, 1978. On the other hand, that respondents were all the time documents already aforementioned and (2) that the said allegations constitute a
agreeable to buy the property may be conceded, but what impresses Us is that instead separate and distinct cause of action. We hold that either way We view the situation,
of "absolutely" accepting the "certain" offer — if there was one — of the petitioners, the conclusion is inescapable e that the claim of respondents that petitioners have
they still insisted on further negotiation of details. For anyone to read in the telegram of unjustifiably refused to proceed with the sale to them of the property v in question is
Yao that they accepted the price of P6,500,000.00 would be an inference not unenforceable under the Statute of Frauds.
necessarily warranted by the words "we agree to buy" and "proceed Tacloban to It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any writing
negotiate details". If indeed the details being left by them for further negotiations were or memorandum, much less a duly signed agreement to the effect that the price of
merely accidental or formal ones, what need was there to say in the telegram that they P6,500,000 fixed by petitioners for the real property herein involved was agreed to be
had still "to negotiate (such) details", when, being unessential per their contention, they paid not in cash but in installments as alleged by respondents. The only documented
could have been just easily clarified and agreed upon when Atty. Gamboa would reach indication of the non-wholly-cash payment extant in the record is that stipulated in
Tacloban? Annexes 9 and 10 above-referred to, the deeds already signed by the petitioners and
Anent the telegram of Atty. Gamboa of July 27, 1978, also quoted earlier above, We taken to Tacloban by Atty. Gamboa for the signatures of the respondents. In other
gather that it was in answer to the telegram of Yao. Considering that Yao was in words, the 90-day term for the balance of P4.5 M insisted upon by respondents choices
Tacloban then while Atty. Gamboa was in Cebu, it is difficult to surmise that there was not appear in any note, writing or memorandum signed by either the petitioners or any
of them, not even by Atty. Gamboa. Hence, looking at the pose of respondents that monograph refers only to the form of the note or memorandum which would comply
there was a perfected agreement of purchase and sale between them and petitioners with the Statute, and no doubt, while such note or memorandum need not be in one
under which they would pay in installments of P2 M down and P4.5 M within ninety 90) single document or writing and it can be in just sufficiently implicit tenor, imperatively
days afterwards it is evident that such oral contract involving the "sale of real property" the separate notes must, when put together', contain all the requisites of a perfected
comes squarely under the Statute of Frauds (Article 1403, No. 2(e), Civil Code.) contract of sale. To put it the other way, under the Statute of Frauds, the contents of
On the other score of considering the supposed agreement of paying installments as the note or memorandum, whether in one writing or in separate ones merely indicative
partly supported by the letter and telegram earlier quoted herein, His Honor declared for an adequate understanding of all the essential elements of the entire agreement,
with well studied ratiocination, albeit legally inaccurate, that: may be said to be the contract itself, except as to the form.
The next issue relate to the State of Frauds. It is contended that plaintiffs' action for Secondly, We are of the considered opinion that under the rules on proper pleading,
specific performance to compel the defendants to execute a good and sufficient the ruling of the trial court that, even if the allegation of the existence of a sale of real
conveyance of the property in question (Sotto land and building) is unenforceable property in a complaint is challenged as barred from enforceability by the Statute of
because there is no other note memorandum or writing except annexes "C", "C-l" Frauds, the plaintiff may simply say there are documents, notes or memoranda without
and "D", which by themselves did not give birth to a contract to sell. The argument either quoting them in or annexing them to the complaint, as if holding an ace in the
is not well founded. The rules of pleading limit the statement of the cause of action sleeves is not correct. To go directly to the point, for Us to sanction such a procedure
only to such operative facts as give rise to the right of action of the plaintiff to obtain is to tolerate and even encourage undue delay in litigation, for the simple reason that
relief against the wrongdoer. The details of probative matter or particulars of to await the stage of trial for the showing or presentation of the requisite documentary
evidence, statements of law, inferences and arguments need not be stated. Thus, proof when it already exists and is asked to be produced by the adverse party would
Sec. 1 of Rule 8 provides that 'every pleading shall contain in a methodical and amount to unnecessarily postponing, with the concomitant waste of time and the
logical form, a plain concise and direct statement of the ultimate facts on which the prolongation of the proceedings, something that can immediately be evidenced and
party pleading relies for his claim or defense, as the case may be, omitting the thereby determinable with decisiveness and precision by the court without further delay.
statement of mere evidentiary facts.' Exhibits need not be attached. The contract of In this connection, Moran observes that unlike when the ground of dismissal alleged is
sale sued upon in this case is supported by letters and telegrams annexed to the failure of the complaint to state a cause of action, a motion to dismiss invoking the
complaint and plaintiffs have announced that they will present additional evidences Statute of Frauds may be filed even if the absence of compliance does not appear an
during the trial to prove their cause of action. The plaintiffs having alleged that the the face of the complaint. Such absence may be the subject of proof in the motion stage
contract is backed up by letters and telegrams, and the same being sufficient of the proceedings. (Moran, Comment on the Rules of Court, Vol. 1, p. 494, 1979 ed.)
memorandum, the complaint states a cause of action and they should be given their It follows then that when such a motion is filed and all the documents available to
day in court and allowed to substantiate their allegations (Parades vs. Espino, 22 movant are before the court, and they are insufficient to comply with the Statute, it
SCRA 1000). (Pp 165-166, Record.) becomes incumbent upon the plaintiff, for the reasons of policy We have just' indicated
The foregoing disquisition of respondent judge misses at least two (2) juridical regarding speedy administration of justice, to bring out what note or memorandum still
substantive aspects of the Statute of Frauds insofar as sale of real property is exists in his possession in order to enable the court to expeditiously determine then
concerned. First, His Honor assumed that the requirement of perfection of such kind of and there the need for further proceedings. In other words, it would be inimical to the
contract under Article 1475 of the Civil Code which provides that "(t)he contract of sale public interests in speedy justice for plaintiff to play hide and seek at his own
is perfected at the moment there is a meeting of the minds upon the thing which is the convenience, particularly, when, as is quite apparent as in the instant case that chances
object of the contract and upon the price", the Statute would no longer apply as long as are that there are no more writings, notes or memoranda of the installment agreement
the total price or consideration is mentioned in some note or memorandum and there alleged by respondents. We cannot divine any reason why any such document would
is no need of any indication of the manner in which such total price is to be paid. be withheld if they existed, except the unpermissible desire of the respondents to force
We cannot agree. In the reality of the economic world and the exacting demands of the petitioners to undergo the ordeals, time, effort and expenses of a futile trial.
business interests monetary in character, payment on installments or staggered In the foregoing premises, We find no alternative than to render judgment in favor of
payment of the total price is entirely a different matter from cash payment, considering petitioners in this certiorari and prohibition case. If at all, appeal could be available if
the unpredictable trends in the sudden fluctuation of the rate of interest. In other words, the petitioners subjected themselves to the trial ruled to be held by the trial court. We
it is indisputable that the value of money - varies from day to day, hence the foresee even at this point, on the basis of what is both extant and implicit in the records,
indispensability of providing in any sale of the terms of payment when not expressly or that no different result can be probable. We consider it as sufficiently a grave abuse of
impliedly intended to be in cash. discretion warranting the special civil actions herein the failure of respondent judge to
Thus, We hold that in any sale of real property on installments, the Statute of Frauds properly apply the laws on perfection of contracts in relation to the Statute of Frauds
read together with the perfection requirements of Article 1475 of the Civil Code must and the pertinent rules of pleading and practice, as We have discussed above.
be understood and applied in the sense that the idea of payment on installments must ACCORDINGLY, the impugned orders of respondent judge of November 2, 1978 and
be in the requisite of a note or memorandum therein contemplated. Stated otherwise, August 29, 1980 are hereby set aside and private respondents' amended complaint,
the inessential elements" mentioned in the case of Parades vs. Espino, 22 SCRA 1000, Annex A of the petition, is hereby ordered dismissed and the restraining order
relied upon by respondent judge must be deemed to include the requirement just heretofore issued by this Court on October 7, 1980 is declared permanent. Costs
discussed when it comes to installment sales. There is nothing in the monograph re — against respondents.
the Statute of Frauds appearing in 21 SCRA 250 also cited by His Honor indicative of Guerrero,* Abad Santos and De Castro, JJ., concur.
any contrary view to this ruling of Ours, for the essence and thrust of the said Mr. Justice Hermogenes Concepcion, Jr. is on leave.
G.R. No. 115849 January 24, 1996 with litigations commenced in the courts while an administrative proceeding is pending,
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the as in this case, in order to defeat administrative processes and in anticipation of an
Philippines) and MERCURIO RIVERA, petitioners, vs. unfavorable administrative ruling and a favorable court ruling. This is specially so, as in
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO this case, where the court in which the second suit was brought, has no jurisdiction.”
DEMETRIA, and JOSE JANOLO,respondents. Same; Same; Same; Test to determine whether a party violated the rule against
Actions; Pleadings and Practice; Forum-Shopping; Conflict of Laws; Principle of forum shopping; Forum shopping exists where the elements of litis pendentia are
Forum Non Conveniens; Forum-shopping originated as a concept in private present or where a final judgment in one case will amount to res judicata in the other.—
international law, where non-resident litigants are given the option to choose the forum The test for determining whether a party violated the rule against forum shopping has
or place wherein to bring their suit for various reasons or excuses, including to secure been laid down in the 1986 case of Buan vs. Lopez, also by Chief Justice Narvasa, and
procedural advantages, to annoy and harass the defendant, to avoid overcrowded that is, forum shopping exists where the elements of litis pendentia are present or
dockets, or to select a more friendly venue.—To begin with, forum-shopping originated where a final judgment in one case will amount to res judicata in the other.
as a concept in private international law, where non-resident litigants are given the Same; Same; Same; Where a litigant (or one representing the same interest or
option to choose the forum or place wherein to bring their suit for various reasons or person) sues the same party against whom another action or actions for the alleged
excuses, including to secure procedural advantages, to annoy and harass the violation of the same right and the enforcement of the same relief is/are still pending,
defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat the defense of litis pendentia in one case is a bar to the others, and a final judgment in
these less than honorable excuses, the principle of forum non conveniens was one would constitute res judicata and thus would cause the dismissal of the rest—in
developed whereby a court, in conflicts of law cases, may refuse impositions on its either case forum shopping could be cited by the other party as a ground to ask for
jurisdiction where it is not the most “convenient” or available forum and the parties are summary dismissal of the two (or more) complaints or petitions.—Consequently, where
not precluded from seeking remedies elsewhere. a litigant (or one representing the same interest or person) sues the same party against
Same; Same; Same; Same; Words and Phrases; Forum Shopping, Explained.— whom another action or actions for the alleged violation of the same right and the
In this light, Black’s Law Dictionary says that forum shopping “occurs when a party enforcement of the same relief is/are still pending, the defense of litis pendentia in one
attempts to have his action tried in a particular court or jurisdiction where he feels he case is a bar to the others; and, a final judgment in one would constitute res
will receive the most favorable judgment or verdict.” Hence, according to Words and judicata and thus would cause the dismissal of the rest. In either case, forum shopping
Phrases, “a litigant is open to the charge of ‘forum shopping’ whenever he chooses a could be cited by the other party as a ground to ask for summary dismissal of the two
forum with slight connection to factual circumstances surrounding his suit, and litigants (or more) complaints or petitions, and for the imposition of the other sanctions, which
should be encouraged to attempt to settle their differences without imposing undue are direct contempt of court, criminal prosecution, and disciplinary action against the
expense and vexatious situations on the courts.” erring lawyer.
Same; Same; Same; Same; In the Philippines, forum shopping has acquired a Same; Same; Same; There is forum shopping where the stockholders, in a
connotation encompassing not only a choice of venues, as it was originally understood second case, and in representation of the Bank, seek to accomplish what the Bank
in conflict of laws, but also to a choice of remedies.—In the Philippines, forum shopping itself failed to do in the original case—the filing by a party of two apparently different
has acquired a connotation encompassing not only a choice of venues, as it was actions, but with the same objective, constitute forum shopping.—Very simply stated,
originally understood in conflicts of laws, but also to a choice of remedies. As to the first the original complaint in the court a quo which gave rise to the instant petition was filed
(choice of venues), the Rules of Court, for example, allow a plaintiff to commence by the buyer (herein private respondent and his predecessors-in-interest) against the
personal actions “where the defendant or any of the defendants resides or may be seller (herein petitioners) to enforce the alleged perfected sale of real estate. On the
found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff” other hand, the complaint in the Second Case seeks to declare such purported sale
(Rule 4, Sec. 2[b]). As to remedies, aggrieved parties, for example, are given a choice involving the same real property “as unenforceable as against the Bank,” which is the
of pursuing civil liabilities independently of the criminal, arising from the same set of petitioner herein. In other words, in the Second Case, the majority stockholders, in
facts. representation of the Bank, are seeking to accomplish what the Bank itself failed to do
Same; Same; Same; To avoid or minimize this unethical practice of subverting in the original case in the trial court. In brief, the objective or the relief being sought,
justice, the Supreme Court promulgated Circular 28-91.—What therefore originally though worded differently, is the same, namely, to enable the petitioner Bank to escape
started both in conflicts of laws and in our domestic law as a legitimate device for solving from the obligation to sell the property to respondent. In Danville Maritime, Inc. vs.
problems has been abused and mis-used to assure scheming litigants of dubious Commission on Audit, this Court ruled that the filing by a party of two apparently
reliefs. To avoid or minimize this unethical practice of subverting justice, the Supreme different actions, but with the same objective, constituted forum shopping.
Court, as already mentioned, promulgated Circular 28-91. And even before that, the Same; Same; Same; Corporations; Words and Phrases; “Derivative Suits,”
Court had proscribed it in the Interim Rules and Guidelines issued on January 11, 1983 Explained.—The allegations of the complaint in the Second Case show that the
and had struck down in several cases the inveterate use of this insidious malpractice. stockholders are bringing a “derivative suit.” In the caption itself, petitioners claim to
Same; Same; Same; Words and Phrases; There is forum-shopping whenever, have brought suit “for and in behalf of the Producers Bank of the Philippines.” Indeed,
as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other this is the very essence of a derivative suit: “An individual stockholder is permitted to
than by appeal or certiorari) in another.—When does forum-shopping take place? institute a derivative suit on behalf of the corporation wherein he holds stock in order to
“There is forum-shopping whenever, as a result of an adverse opinion in one forum, a protect or vindicate corporate rights, whenever the officials of the corporation refuse to
party seeks a favorable opinion (other than by appeal or certiorari) in another. The sue, or are the ones to be sued or hold the control of the corporation. In such actions,
principle applies not only with respect to suits filed in the courts but also in connection
the suing stockholder is regarded as a nominal party, with the corporation as the real there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept.” They
party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979]; italics supplied). disputed the factual basis of the respondent Court’s findings that there was an offer
Same; Same; Same; Same; “Piercing the Veil of Corporate Fiction”; When the made by Janolo for P3.5 million, to which the Bank counter-offered P5.5 million. We
fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for have perused the evidence but cannot find fault with the said Court’s findings of fact.
the evasion of an existing obligation, the circumvention of statutes, the achievement or Verily, in a petition under Rule 45 such as this, errors of fact—if there be any—are, as
perfection of a monopoly or generally the perpetration of knavery or crime, the veil with a rule, not reviewable. The mere fact that respondent Court (and the trial court as well)
which the law covers and isolates the corporation from the members or stockholders chose to believe the evidence presented by respondent more than that presented by
who compose it will be lifted to allow for its consideration merely as an aggregation of petitioners is not by itself a reversible error. In fact, such findings merit serious
individuals.—Petitioner also tried to seek refuge in the corporate fiction that the consideration by this Court, particularly where, as in this case, said courts carefully and
personality of the Bank is separate and distinct from its shareholders. But the rulings of meticulously discussed their findings. This is basic.
this Court are consistent: “When the fiction is urged as a means of perpetrating a fraud Same; Corporations; Banks; Agency; Doctrine of “Apparent Authority”; A
or an illegal act or as a vehicle for the evasion of an existing obligation, the banking corporation is liable to innocent third persons where the representation is made
circumvention of statutes, the achievement or perfection of a monopoly or generally the in the course of its business by an agent acting within the general scope of his authority
perpetration of knavery or crime, the veil with which the law covers and isolates the even though, in the particular case, the agent is secretly abusing his authority and
corporation from the members or stockholders who compose it will be lifted to allow for attempting to perpetrate a fraud upon his principal or some other person, for his own
its consideration merely as an aggregation of individuals.” ultimate benefit.—The authority of a corporate officer in dealing with third persons may
Same; Same; Same; Same; Same; The corporate veil cannot be used to shield be actual or apparent. The doctrine of “apparent authority,” with special reference to
an otherwise blatant violation of the prohibition against forum-shopping—shareholders, banks, was laid out in Prudential Bank vs. Court of Appeals, where it was held that:
whether suing as the majority in direct actions or as the minority in a derivative suit, “Conformably, we have declared in countless decisions that the principal is liable for
cannot be allowed to trifle with court processes.—In addition to the many cases where obligations contracted by the agent. The agent’s apparent representation yields to the
the corporate fiction has been disregarded, we now add the instant case, and declare principal’s true representation and the contract is considered as entered into between
herewith that the corporate veil cannot be used to shield an otherwise blatant violation the principal and the third person (citing National Food Authority vs. Intermediate
of the prohibition against forum-shopping. Shareholders, whether suing as the majority Appellate Court, 184 SCRA 166). “A bank is liable for wrongful acts of its officers done
in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with in the interests of the bank or in the course of dealings of the officers in their
court processes, particularly where, as in this case, the corporation itself has not been representative capacity but not for acts outside the scope of their authority (9 C.J.S., p.
remiss in vigorously prosecuting or defending corporate causes and in using and 417). A bank holding out its officers and agents as worthy of confidence will not be
applying remedies available to it. To rule otherwise would be to encourage corporate permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent
litigants to use their shareholders as fronts to circumvent the stringent rules against scope of their employment; nor will it be permitted to shirk its responsibility for such
forum shopping. frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p.
Same; Same; Same; Ultimately, what is truly important to consider in determining 114). Accordingly, a banking corporation is liable to innocent third persons where the
whether forum-shopping exists or not is the vexation caused the courts and parties- representation is made in the course of its business by an agent acting within the
litigant by a party who asks different courts and/or administrative agencies to rule on general scope of his authority even though, in the particular case, the agent is secretly
the same or related causes and/or to grant the same or substantially the same reliefs, abusing his authority and attempting to perpetrate a fraud upon his principal or some
in the process creating the possibility of conflicting decisions being rendered by the other person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752,
different fora upon the same issue.—Ultimately, what is truly important to consider in 204 NW 818, 40 ALR 1021).
determining whether forum-shopping exists or not is the vexation caused the courts Same; Same; Same; Same; Same; Evidence; Where the issue is apparent
and parties-litigant by a party who asks different courts and/or administrative agencies authority, the existence of which is borne out by the Court of Appeals’ findings, the
to rule on the same or related causes and/or to grant the same or substantially the evidence of actual authority is immaterial insofar as the liability of a corporation is
same reliefs, in the process creating the possibility of conflicting decisions being concerned.—To be sure, petitioners attempted to repudiate Rivera’s apparent authority
rendered by the different fora upon the same issue. In this case, this is exactly the through documents and testimony which seek to establish Rivera’s actual authority.
problem: a decision recognizing the perfection and directing the enforcement of the These pieces of evidence, however, are inherently weak as they consist of Rivera’s
contract of sale will directly conflict with a possible decision in the Second Case barring self-serving testimony and various inter-office memoranda that purport to show
the parties from enforcing or implementing the said sale. Indeed, a final decision in one his limited actual authority, of which private respondent cannot be charged with
would constitute res judicata in the other. knowledge. In any event, since the issue is apparent authority, the existence of which
Contracts; Requisites of a Valid and Perfected Contract.—Article 1318 of the Civil is borne out by the respondent Court’s findings, the evidence of actual authority is
Code enumerates the requisites of a valid and perfected contract as follows: “(1) immaterial insofar as the liability of a corporation is concerned.
Consent of the contracting parties; (2) Object certain which is the subject matter of the Same; There is a meeting of the minds where the acceptance of a revived offer
contract; (3) Cause of the obligation which is established.” is absolute and unqualified.—Hence, assuming arguendo that the counter-offer of
Same; Actions; Appeals; Petition for Review on Certiorari; In a petition under P4.25 million extinguished the offer of P5.5 million, Luis Co’s reiteration of the said P5.5
Rule 45, errors of fact are, as a rule, not reviewable.—Petitioners allege that “there is million price during the September 28, 1987 meeting revived the said offer. And by
no counter-offer made by the Bank, and any supposed counter-offer which Rivera (or virtue of the September 30, 1987 letter accepting this revived offer, there was a meeting
Co) may have made is unauthorized. Since there was no counter-offer by the Bank, of the minds, as the acceptance in said letter was absolute and unqualified.
Same; Pleadings and Practice; Appeals; Points of law, theories, issues of fact nothing to perfected contractual rights nor vested interests of the third parties who had
and arguments not adequately brought to the attention of the trial court need not be, dealt with the Bank.
and ordinarily will not be, considered by a reviewing court, as they cannot be raised for
Actions; Appeals; Petitions for Review on Certiorari; In petitions for review under
the first time on appeal.—It also bears noting that this issue of extinguishment of the
Rule 45, findings of fact by the Court of Appeals are not reviewable by the Supreme
Bank’s offer of P5.5 million was raised for the first time on appeal and should thus be
Court.—Basic is the doctrine that in petitions for review under Rule 45 of the Rules of
disregarded. “This Court in several decisions has repeatedly adhered to the principle
Court, findings of fact by the Court of Appeals are not reviewable by the Supreme Court.
that points of law, theories, issues of fact and arguments not adequately brought to the
Same; Evidence; Witnesses; Presumptions; Failure to present a witness who
attention of the trial court need not be, and ordinarily will not be, considered by a
would have been in the best position to establish a party’s thesis gives rise to the
reviewing court, as they cannot be raised for the first time on appeal (Santos vs. IAC,
presumption that his testimony would have been adverse if produced.—To become
No. 74243, November 14, 1986, 145 SCRA 592).”
credible and unequivocal, petitioners should have presented then Conservator Rodolfo
Same; Same; Statute of Frauds; Evidence; Contracts infringing the Statute of
Romey to testify on their behalf, as he would have been in the best position to establish
Frauds are ratified by the failure to object to the presentation of oral evidence to prove
their thesis. Under the rules on evidence, such suppression gives rise to the
the same.—But let it be assumed arguendo that the counter-offer during the meeting
presumption that his testimony would have been adverse, if produced.
on September 28, 1987 did constitute a “new” offer which was accepted by Janolo on
Same; Same; Conclusions of fact of a trial judge—as affirmed by the Court of
September 30, 1987. Still, the statute of frauds will not apply by reason of the failure of
Appeals—are conclusive upon the Supreme Court, absent any serious abuse or
petitioners to object to oral testimony proving petitioner Bank’s counter-offer of P5.5
evident lack of basis of capriciousness of any kind.—The best that can be said in favor
million. Hence, petitioners—by such utter failure to object—are deemed to have waived
of petitioners on this point is that the factual findings of respondent Court did not
any defects of the contract under the statute of frauds, pursuant to Article 1405 of the
correspond to petitioners’ claims, but were closer to the evidence as presented in the
Civil Code: “Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of
trial court by private respondent. But this alone is no reason to reverse or ignore such
Article 1403, are ratified by the failure to object to the presentation of oral evidence to
factual findings, particularly where, as in this case, the trial court and the appellate court
prove the same, or by the acceptance of benefits under them.”
were in common agreement thereon. Indeed, conclusions of fact of a trial judge—as
Same; Banks; Bank Conservator; Constitutional Law; Non-Impairment
affirmed by the Court of Appeals—are conclusive upon this Court, absent any serious
Clause; The powers granted to the conservator of a bank, enormous and extensive as
abuse or evident lack of basis or capriciousness of any kind, because the trial court is
they are, cannot extend to the post-facto repudiation of perfected transactions,
in a better position to observe the demeanor of the witnesses and their court-room
otherwise they would infringe against the non-impairment clause of the Constitution.—
manner as well as to examine the real evidence presented.
In the third place, while admittedly, the Central Bank law gives vast and farreaching
powers to the conservator of a bank, it must be pointed out that such powers must be PETITION for review on certiorari of a decision of the Court of Appeals.
related to the “(preservation of) the assets of the bank, (the reorganization of) the DECISION
management thereof and (the restoration of) its viability.” Such powers, enormous and PANGANIBAN, J.:
extensive as they are, cannot extend to the post-factorepudiation of perfected
transactions, otherwise they would infringe against the non-impairment clause of the In the absence of a formal deed of sale, may commitments given by bank officers in an
Constitution. If the legislature itself cannot revoke an existing valid contract, how can it exchange of letters and/or in a meeting with the buyers constitute a perfected and
delegate such nonexistent powers to the conservator under Section 28-A of said law? enforceable contract of sale over 101 hectares of land in Sta. Rosa, Laguna? Does the
Same; Same; Same; Central Bank Law (R.A. 265); Section 28-A of R.A. 265 doctrine of "apparent authority" apply in this case? If so, may the Central Bank-
merely gives the conservator power to revoke contracts that are, under existing law, appointed conservator of Producers Bank (now First Philippine International Bank)
deemed to be defective—the conservator merely takes the place of a bank’s board of repudiate such "apparent authority" after said contract has been deemed perfected?
directors, and what the said board cannot do, the conservator cannot do either.— During the pendency of a suit for specific performance, does the filing of a "derivative
Obviously, suit" by the majority shareholders and directors of the distressed bank to prevent the
enforcement or implementation of the sale violate the ban against forum-shopping?
therefore, Section 28-A merely gives the conservator power to revoke contracts that
are, under existing law, deemed to be defective—i.e., void, voidable, unenforceable or Simply stated, these are the major questions brought before this Court in the instant
rescissible. Hence, the conservator merely takes the place of a bank’s board of Petition for review on certiorariunder Rule 45 of the Rules of Court, to set aside the
directors. What the said board cannot do—such as repudiating a contract validly Decision promulgated January 14, 1994 of the respondent Court of Appeals1 in CA-G.R
entered into under the doctrine of implied authority—the conservator cannot do either. CV No. 35756 and the Resolution promulgated June 14, 1994 denying the motion for
Ineluctably, his power is not unilateral and he cannot simply repudiate valid obligations reconsideration. The dispositive portion of the said Decision reads:
of the Bank. His authority would be only to bring court actions to assail such contracts— WHEREFORE, the decision of the lower court is MODIFIED by the elimination
as he has already done so in the instant case. A contrary understanding of the law of the damages awarded under paragraphs 3, 4 and 6 of its dispositive portion
would simply not be permitted by the Constitution. Neither by common sense. To rule and the reduction of the award in paragraph 5 thereof to P75,000.00, to be
otherwise would be to enable a failing bank to become solvent, at the expense of third assessed against defendant bank. In all other aspects, said decision is hereby
parties, by simply getting the conservator to unilaterally revoke all previous dealings AFFIRMED.
which had one way or another come to be considered unfavorable to the Bank, yielding
All references to the original plaintiffs in the decision and its dispositive portion The facts of this case are summarized in the respondent Court's Decision3 as follows:
are deemed, herein and hereafter, to legally refer to the plaintiff-appellee
(1) In the course of its banking operations, the defendant Producer Bank of the
Carlos C. Ejercito.
Philippines acquired six parcels of land with a total area of 101 hectares located at
Costs against appellant bank. Don Jose, Sta. Rose, Laguna, and covered by Transfer Certificates of Title Nos. T-
106932 to T-106937. The property used to be owned by BYME Investment and
The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other
Development Corporation which had them mortgaged with the bank as collateral
hand, is as follows:
for a loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted
WHEREFORE, premises considered, judgment is hereby rendered in favor of to purchase the property and thus initiated negotiations for that purpose.
the plaintiffs and against the defendants as follows: (2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME
1. Declaring the existence of a perfected contract to buy and sell over the six investment's legal counsel, Jose Fajardo, met with defendant Mercurio Rivera,
(6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an area of Manager of the Property Management Department of the defendant bank. The
101 hectares, more or less, covered by and embraced in Transfer Certificates meeting was held pursuant to plaintiffs' plan to buy the property (TSN of Jan. 16,
of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of
between the plaintiffs as buyers and the defendant Producers Bank for an defendant Rivera, made a formal purchase offer to the bank through a letter dated
agreed price of Five and One Half Million (P5,500,000.00) Pesos; August 30, 1987 (Exh. "B"), as follows:
2. Ordering defendant Producers Bank of the Philippines, upon finality of this August 30, 1987
decision and receipt from the plaintiffs the amount of P5.5 Million, to execute
in favor of said plaintiffs a deed of absolute sale over the aforementioned six The Producers Bank of the Philippines
(6) parcels of land, and to immediately deliver to the plaintiffs the owner's Makati, Metro Manila
copies of T.C.T. Nos. T-106932 to T- 106937, inclusive, for purposes of Attn. Mr. Mercurio Q. Rivera
registration of the same deed and transfer of the six (6) titles in the names of Manager, Property Management Dept.
the plaintiffs; Gentleman:
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. I have the honor to submit my formal offer to purchase your properties covered by
Janolo and Demetrio Demetria the sums of P200,000.00 each in moral titles listed hereunder located at Sta. Rosa, Laguna, with a total area of 101
damages; hectares, more or less.
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of TCT NO. AREA
P100,000.00 as exemplary damages ;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the
T-106932 113,580 sq.
amount of P400,000.00 for and by way of attorney's fees;
m.
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual
and moderate damages in the amount of P20,000.00;
T-106933 70,899 sq. m.
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur- T-106934 52,246 sq. m.
rejoinder, the petition was given due course in a Resolution dated January 18, 1995.
Thence, the parties filed their respective memoranda and reply memoranda. The First T-106935 96,768 sq. m.
Division transferred this case to the Third Division per resolution dated October 23,
1995. After carefully deliberating on the aforesaid submissions, the Court assigned the T-106936 187,114 sq.
case to the undersigned ponentefor the writing of this Decision. m.
The Parties
T-106937 481,481 sq.
Petitioner First Philippine International Bank (formerly Producers Bank of the m.
Philippines; petitioner Bank, for brevity) is a banking institution organized and existing
under the laws of the Republic of the Philippines. Petitioner Mercurio Rivera (petitioner My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND
Rivera, for brevity) is of legal age and was, at all times material to this case, Head- (P3,500,000.00) PESOS, in cash.
Manager of the Property Management Department of the petitioner Bank. Kindly contact me at Telephone Number 921-1344.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the (3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal
assignee of original plaintiffs-appellees Demetrio Demetria and Jose Janolo. reply by letter which is hereunder quoted (Exh. "C"):
September 1, 1987
Respondent Court of Appeals is the court which issued the Decision and Resolution
sought to be set aside through this petition.
The Facts
JP M-P GUTIERREZ ENTERPRISES (7) What thereafter transpired was a series of demands by the plaintiffs for
142 Charisma St., Doña Andres II compliance by the bank with what plaintiff considered as a perfected contract of
Rosario, Pasig, Metro Manila sale, which demands were in one form or another refused by the bank. As detailed
Attention: JOSE O. JANOLO by the trial court in its decision, on November 17, 1987, plaintiffs through a letter to
Dear Sir: defendant Rivera (Exhibit "G") tendered payment of the amount of P5.5 million
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. "pursuant to (our) perfected sale agreement." Defendants refused to receive both
Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please be informed the payment and the letter. Instead, the parcels of land involved in the transaction
however that the bank's counter-offer is at P5.5 million for more than 101 hectares were advertised by the bank for sale to any interested buyer (Exh, "H" and "H-1").
on lot basis. Plaintiffs demanded the execution by the bank of the documents on what was
We shall be very glad to hear your position on the on the matter. considered as a "perfected agreement." Thus:
Best regards. Mr. Mercurio Rivera
(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted Manager, Producers Bank
reply, wrote (Exh. "D"): Paseo de Roxas, Makati
September 17, 1987 Metro Manila
Dear Mr. Rivera:
Producers Bank This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase
Paseo de Roxas your 101-hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT
Makati, Metro Manila No. T-106932 to 106937.
Attention: Mr. Mercurio Rivera From the documents at hand, it appears that your counter-offer dated September
Gentlemen: 1, 1987 of this same lot in the amount of P5.5 million was accepted by our client
In reply to your letter regarding my proposal to purchase your 101-hectare lot thru a letter dated September 30, 1987 and was received by you on October 5,
located at Sta. Rosa, Laguna, I would like to amend my previous offer and I now 1987.
propose to buy the said lot at P4.250 million in CASH.. In view of the above circumstances, we believe that an agreement has been
Hoping that this proposal meets your satisfaction. perfected. We were also informed that despite repeated follow-up to consummate
(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What the purchase, you now refuse to honor your commitment. Instead, you have
took place was a meeting on September 28, 1987 between the plaintiffs and Luis advertised for sale the same lot to others.
Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the In behalf of our client, therefore, we are making this formal demand upon you to
BYME lawyer, attended the meeting. Two days later, or on September 30, 1987, consummate and execute the necessary actions/documentation within three (3)
plaintiff Janolo sent to the bank, through Rivera, the following letter (Exh. "E"): days from your receipt hereof. We are ready to remit the agreed amount of P5.5
The Producers Bank of the Philippines million at your advice. Otherwise, we shall be constrained to file the necessary
Paseo de Roxas, Makati court action to protect the interest of our client.
Metro Manila We trust that you will be guided accordingly.
Attention: Mr. Mercurio Rivera (8) Defendant bank, through defendant Rivera, acknowledged receipt of the
Re: 101 Hectares of Land foregoing letter and stated, in its communication of December 2, 1987 (Exh. "I"),
in Sta. Rosa, Laguna that said letter has been "referred . . . to the office of our Conservator for proper
Gentlemen: disposition" However, no response came from the Acting Conservator. On
Pursuant to our discussion last 28 September 1987, we are pleased to inform you December 14, 1987, the plaintiffs made a second tender of payment (Exh. "L" and
that we are accepting your offer for us to purchase the property at Sta. Rosa, "L-1"), this time through the Acting Conservator, defendant Encarnacion. Plaintiffs'
Laguna, formerly owned by Byme Investment, for a total price of PESOS: FIVE letter reads:
MILLION FIVE HUNDRED THOUSAND (P5,500,000.00). PRODUCERS BANK OF
Thank you. THE PHILIPPINES
(6) On October 12, 1987, the conservator of the bank (which has been placed Paseo de Roxas,
under conservatorship by the Central Bank since 1984) was replaced by an Acting Makati, Metro Manila
Conservator in the person of defendant Leonida T. Encarnacion. On November 4, Attn.: Atty. NIDA ENCARNACION
1987, defendant Rivera wrote plaintiff Demetria the following letter (Exh. "F"): Central Bank Conservator
Attention: Atty. Demetrio Demetria We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO,
Dear Sir: MBTC Check No. 258387 in the amount of P5.5 million as our agreed purchase
Your proposal to buy the properties the bank foreclosed from Byme investment price of the 101-hectare lot covered by TCT Nos. 106932, 106933, 106934,
Corp. located at Sta. Rosa, Laguna is under study yet as of this time by the newly 106935, 106936 and 106937 and registered under Producers Bank.
created committee for submission to the newly designated Acting Conservator of This is in connection with the perfected agreement consequent from your offer of
the bank. P5.5 Million as the purchase price of the said lots. Please inform us of the date of
For your information. documentation of the sale immediately.
Kindly acknowledge receipt of our payment. III.
(9) The foregoing letter drew no response for more than four months. Then, on May The Court of Appeals erred in declaring that the conservator does not have
3, 1988, plaintiff, through counsel, made a final demand for compliance by the bank the power to overrule or revoke acts of previous management.
with its obligations under the considered perfected contract of sale (Exhibit "N"). IV.
As recounted by the trial court (Original Record, p. 656), in a reply letter dated May The findings and conclusions of the Court of Appeals do not conform to the
12, 1988 (Annex "4" of defendant's answer to amended complaint), the defendants evidence on record.
through Acting Conservator Encarnacion repudiated the authority of defendant On the other hand, petitioners prayed for dismissal of the instant suit on the
Rivera and claimed that his dealings with the plaintiffs, particularly his counter-offer ground8 that:
of P5.5 Million are unauthorized or illegal. On that basis, the defendants justified I.
the refusal of the tenders of payment and the non-compliance with the obligations Petitioners have engaged in forum shopping.
under what the plaintiffs considered to be a perfected contract of sale. II.
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages The factual findings and conclusions of the Court of Appeals are supported by
against the bank, its Manager Rivers and Acting Conservator Encarnacion. The the evidence on record and may no longer be questioned in this case.
basis of the suit was that the transaction had with the bank resulted in a perfected III.
contract of sale, The defendants took the position that there was no such perfected The Court of Appeals correctly held that there was a perfected contract
sale because the defendant Rivera is not authorized to sell the property, and that between Demetria and Janolo (substituted by; respondent Ejercito) and the
there was no meeting of the minds as to the price. bank.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip IV.
Salazar Hernandez and Gatmaitan, filed a motion to intervene in the trial court, The Court of Appeals has correctly held that the conservator, apart from being
alleging that as owner of 80% of the Bank's outstanding shares of stock, he had a estopped from repudiating the agency and the contract, has no authority to
substantial interest in resisting the complaint. On July 8, 1991, the trial court issued revoke the contract of sale.
an order denying the motion to intervene on the ground that it was filed after trial The Issues
had already been concluded. It also denied a motion for reconsideration filed
From the foregoing positions of the parties, the issues in this case may be summed up
thereafter. From the trial court's decision, the Bank, petitioner Rivera and
as follows:
conservator Encarnacion appealed to the Court of Appeals which subsequently
affirmed with modification the said judgment. Henry Co did not appeal the denial of 1) Was there forum-shopping on the part of petitioner Bank?
his motion for intervention. 2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute
In the course of the proceedings in the respondent Court, Carlos Ejercito was
of frauds?
substituted in place of Demetria and Janolo, in view of the assignment of the latters'
4) Did the bank conservator have the unilateral power to repudiate the
rights in the matter in litigation to said private respondent.
authority of the bank officers and/or to revoke the said contract?
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, 5) Did the respondent Court commit any reversible error in its findings of facts?
Henry Co and several other stockholders of the Bank, through counsel Angara Abello The First Issue: Was There Forum-Shopping?
Concepcion Regala and Cruz, filed an action (hereafter, the "Second Case") —
In order to prevent the vexations of multiple petitions and actions, the Supreme Court
purportedly a "derivative suit" — with the Regional Trial Court of Makati, Branch 134,
promulgated Revised Circular No. 28-91 requiring that a party "must certify under oath
docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and Janolo "to
. . . [that] (a) he has not (t)heretofore commenced any other action or proceeding
declare any perfected sale of the property as unenforceable and to stop Ejercito from
involving the same issues in the Supreme Court, the Court of Appeals, or any other
enforcing or implementing the sale"4 In his answer, Janolo argued that the Second
tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is
Case was barred by litis pendentia by virtue of the case then pending in the Court of
pending" in said courts or agencies. A violation of the said circular entails sanctions that
Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion
include the summary dismissal of the multiple petitions or complaints. To be sure,
for Leave of Court to Dismiss the Case Without Prejudice. "Private respondent opposed
petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating
this motion on the ground, among others, that plaintiff's act of forum shopping justifies
"for the record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial
the dismissal of both cases, with prejudice."5 Private respondent, in his memorandum,
Court of Makati, Branch 134, involving a derivative suit filed by stockholders of
averred that this motion is still pending in the Makati RTC.
petitioner Bank against the conservator and other defendants but which is the subject
In their Petition6 and Memorandum7 , petitioners summarized their position as follows: of a pending Motion to Dismiss Without Prejudice.9
I. Private respondent Ejercito vigorously argues that in spite of this verification, petitioners
The Court of Appeals erred in declaring that a contract of sale was perfected are guilty of actual forum shopping because the instant petition pending before this
between Ejercito (in substitution of Demetria and Janolo) and the bank. Court involves "identical parties or interests represented, rights asserted and reliefs
II. sought (as that) currently pending before the Regional Trial Court, Makati Branch 134
The Court of Appeals erred in declaring the existence of an enforceable in the Second Case. In fact, the issues in the two cases are so interwined that a
contract of sale between the parties. judgement or resolution in either case will constitute res judicata in the other." 10
On the other hand, petitioners explain 11 that there is no forum-shopping because: Thus, "forum shopping" had acquired a different concept — which is unethical
professional legal practice. And this necessitated or had given rise to the
1) In the earlier or "First Case" from which this proceeding arose, the Bank
formulation of rules and canons discouraging or altogether prohibiting the
was impleaded as a defendant, whereas in the "Second Case" (assuming the
practice. 15
Bank is the real party in interest in a derivative suit), it wasplaintiff;
2) "The derivative suit is not properly a suit for and in behalf of the corporation What therefore originally started both in conflicts of laws and in our domestic law as a
under the circumstances"; legitimate device for solving problems has been abused and mis-used to assure
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank scheming litigants of dubious reliefs.
president and attached to the Petition identifies the action as a "derivative
To avoid or minimize this unethical practice of subverting justice, the Supreme Court,
suit," it "does not mean that it is one" and "(t)hat is a legal question for the
as already mentioned, promulgated Circular 28-91. And even before that, the Court had
courts to decide";
prescribed it in the Interim Rules and Guidelines issued on January 11, 1983 and had
4) Petitioners did not hide the Second Case at they mentioned it in the said
struck down in several cases 16 the inveterate use of this insidious malpractice. Forum
VERIFICATION/CERTIFICATION.
shopping as "the filing of repetitious suits in different courts" has been condemned by
We rule for private respondent.
Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al.,
To begin with, forum-shopping originated as a concept in private international law.12 , vs. Heirs of Orval Hughes, et al., "as a reprehensible manipulation of court processes
where non-resident litigants are given the option to choose the forum or place wherein and proceedings . . ." 17 when does forum shopping take place?
to bring their suit for various reasons or excuses, including to secure procedural
There is forum-shopping whenever, as a result of an adverse opinion in one
advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to
forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
select a more friendly venue. To combat these less than honorable excuses, the
another. The principle applies not only with respect to suits filed in the courts
principle of forum non conveniens was developed whereby a court, in conflicts of law
but also in connection with litigations commenced in the courts while an
cases, may refuse impositions on its jurisdiction where it is not the most "convenient"
administrative proceeding is pending, as in this case, in order to defeat
or available forum and the parties are not precluded from seeking remedies elsewhere.
administrative processes and in anticipation of an unfavorable administrative
In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party ruling and a favorable court ruling. This is specially so, as in this case, where
attempts to have his action tried in a particular court or jurisdiction where he feels he the court in which the second suit was brought, has no jurisdiction.18
will receive the most favorable judgment or verdict." Hence, according to Words and
The test for determining whether a party violated the rule against forum shopping has
Phrases14 , "a litigant is open to the charge of "forum shopping" whenever he chooses
been laid dawn in the 1986 case of Buan vs. Lopez 19 , also by Chief Justice Narvasa,
a forum with slight connection to factual circumstances surrounding his suit, and
and that is, forum shopping exists where the elements of litis pendentia are present or
litigants should be encouraged to attempt to settle their differences without imposing
where a final judgment in one case will amount to res judicata in the other, as follows:
undue expenses and vexatious situations on the courts".
There thus exists between the action before this Court and RTC Case No. 86-
In the Philippines, forum shopping has acquired a connotation encompassing not only
36563 identity of parties, or at least such parties as represent the same
a choice of venues, as it was originally understood in conflicts of laws, but also to a
interests in both actions, as well as identity of rights asserted and relief prayed
choice of remedies. As to the first (choice of venues), the Rules of Court, for example,
for, the relief being founded on the same facts, and the identity on the two
allow a plaintiff to commence personal actions "where the defendant or any of the
preceding particulars is such that any judgment rendered in the other action,
defendants resides or may be found, or where the plaintiff or any of the plaintiffs
will, regardless of which party is successful, amount to res adjudicata in the
resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies, aggrieved
action under consideration: all the requisites, in fine, of auter action pendant.
parties, for example, are given a choice of pursuing civil liabilities independently of the
xxx xxx xxx
criminal, arising from the same set of facts. A passenger of a public utility vehicle
As already observed, there is between the action at bar and RTC Case No.
involved in a vehicular accident may sue on culpa contractual, culpa aquiliana or culpa
86-36563, an identity as regards parties, or interests represented, rights
criminal — each remedy being available independently of the others — although he
asserted and relief sought, as well as basis thereof, to a degree sufficient to
cannot recover more than once.
give rise to the ground for dismissal known as auter action pendant or lis
In either of these situations (choice of venue or choice of remedy), the litigant pendens. That same identity puts into operation the sanction of twin dismissals
actually shops for a forum of his action, This was the original concept of the just mentioned. The application of this sanction will prevent any further delay
term forum shopping. in the settlement of the controversy which might ensue from attempts to seek
Eventually, however, instead of actually making a choice of the forum of their reconsideration of or to appeal from the Order of the Regional Trial Court in
actions, litigants, through the encouragement of their lawyers, file their actions Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the
in all available courts, or invoke all relevant remedies simultaneously. This petition upon grounds which appear persuasive.
practice had not only resulted to (sic) conflicting adjudications among different
Consequently, where a litigant (or one representing the same interest or person) sues
courts and consequent confusion enimical (sic) to an orderly administration of
the same party against whom another action or actions for the alleged violation of the
justice. It had created extreme inconvenience to some of the parties to the
same right and the enforcement of the same relief is/are still pending, the defense of litis
action.
pendencia in one case is bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. In either case, same: the prevention of such implementation and/or the restoration of
forum shopping could be cited by the other party as a ground to ask for summary the status quo ante. When the acts sought to be restrained took place anyway
dismissal of the two 20 (or more) complaints or petitions, and for imposition of the other despite the issuance by the Trial Court of a temporary restraining order, the
sanctions, which are direct contempt of court, criminal prosecution, and disciplinary RTC suit did not become functus oficio. It remained an effective vehicle for
action against the erring lawyer. obtention of relief; and petitioners' remedy in the premises was plain and
patent: the filing of an amended and supplemental pleading in the RTC suit,
Applying the foregoing principles in the case before us and comparing it with the
so as to include the PCGG as defendant and seek nullification of the acts
Second Case, it is obvious that there exist identity of parties or interests represented,
sought to be enjoined but nonetheless done. The remedy was certainly not
identity of rights or causes and identity of reliefs sought.
the institution of another action in another forum based on essentially the
Very simply stated, the original complaint in the court a quo which gave rise to the same facts, The adoption of this latter recourse renders the petitioners
instant petition was filed by the buyer (herein private respondent and his predecessors- amenable to disciplinary action and both their actions, in this Court as well as
in-interest) against the seller (herein petitioners) to enforce the alleged perfected sale in the Court a quo, dismissible.
of real estate. On the other hand, the complaint 21 in the Second Case seeks to declare
In the instant case before us, there is also identity of parties, or at least, of interests
such purported sale involving the same real property "as unenforceable as against the
represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not
Bank", which is the petitioner herein. In other words, in the Second Case, the majority
name parties in the First Case, they represent the same interest and entity, namely,
stockholders, in representation of the Bank, are seeking to accomplish what the Bank
petitioner Bank, because:
itself failed to do in the original case in the trial court. In brief, the objective or the relief
being sought, though worded differently, is the same, namely, to enable the petitioner Firstly, they are not suing in their personal capacities, for they have no direct personal
Bank to escape from the obligation to sell the property to respondent. In Danville interest in the matter in controversy. They are not principally or even subsidiarily liable;
Maritime, Inc. vs. Commission on Audit. 22 , this Court ruled that the filing by a party of much less are they direct parties in the assailed contract of sale; and
two apparently different actions, but with the same objective, constituted forum
Secondly, the allegations of the complaint in the Second Case show that the
shopping:
stockholders are bringing a "derivative suit". In the caption itself, petitioners claim to
In the attempt to make the two actions appear to be different, petitioner have brought suit "for and in behalf of the Producers Bank of the Philippines" 24 . Indeed,
impleaded different respondents therein — PNOC in the case before the lower this is the very essence of a derivative suit:
court and the COA in the case before this Court and sought what seems to be
An individual stockholder is permitted to institute a derivative suit on behalf of
different reliefs. Petitioner asks this Court to set aside the questioned letter-
the corporation wherein he holdsstock in order to protect or vindicate
directive of the COA dated October 10, 1988 and to direct said body to
corporate rights, whenever the officials of the corporation refuse to sue, or are
approve the Memorandum of Agreement entered into by and between the
the ones to be sued or hold the control of the corporation. In such actions, the
PNOC and petitioner, while in the complaint before the lower court petitioner
suing stockholder is regarded as a nominal party, with the corporation as the
seeks to enjoin the PNOC from conducting a rebidding and from selling to
real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
other parties the vessel "T/T Andres Bonifacio", and for an extension of time
emphasis supplied).
for it to comply with the paragraph 1 of the memorandum of agreement and
damages. One can see that although the relief prayed for in the two (2) actions In the face of the damaging admissions taken from the complaint in the Second Case,
are ostensibly different, the ultimate objective in both actions is the same, that petitioners, quite strangely, sought to deny that the Second Case was a derivative suit,
is, approval of the sale of vessel in favor of petitioner and to overturn the letter- reasoning that it was brought, not by the minority shareholders, but by Henry Co et al.,
directive of the COA of October 10, 1988 disapproving the sale. (emphasis who not only own, hold or control over 80% of the outstanding capital stock, but also
supplied). constitute the majority in the Board of Directors of petitioner Bank. That being so, then
they really represent the Bank. So, whether they sued "derivatively" or directly, there is
In an earlier case 23 but with the same logic and vigor, we held:
undeniably an identity of interests/entity represented.
In other words, the filing by the petitioners of the instant special civil action
Petitioner also tried to seek refuge in the corporate fiction that the personality Of the
for certiorari and prohibition in this Court despite the pendency of their action
Bank is separate and distinct from its shareholders. But the rulings of this Court are
in the Makati Regional Trial Court, is a species of forum-shopping. Both
consistent: "When the fiction is urged as a means of perpetrating a fraud or an illegal
actions unquestionably involve the same transactions, the same essential
act or as a vehicle for the evasion of an existing obligation, the circumvention of
facts and circumstances. The petitioners' claim of absence of identity simply
statutes, the achievement or perfection of a monopoly or generally the perpetration of
because the PCGG had not been impleaded in the RTC suit, and the suit did
knavery or crime, the veil with which the law covers and isolates the corporation from
not involve certain acts which transpired after its commencement, is specious.
the members or stockholders who compose it will be lifted to allow for its consideration
In the RTC action, as in the action before this Court, the validity of the contract
merely as an aggregation of individuals." 25
to purchase and sell of September 1, 1986, i.e., whether or not it had been
efficaciously rescinded, and the propriety of implementing the same (by In addition to the many cases 26 where the corporate fiction has been disregarded, we
paying the pledgee banks the amount of their loans, obtaining the release of now add the instant case, and declare herewith that the corporate veil cannot be used
the pledged shares, etc.) were the basic issues. So, too, the relief was the to shield an otherwise blatant violation of the prohibition against forum-shopping.
Shareholders, whether suing as the majority in direct actions or as the minority in a proceedings and processes They are warned that a repetition of the same will be dealt
derivative suit, cannot be allowed to trifle with court processes, particularly where, as with more severely.
in this case, the corporation itself has not been remiss in vigorously prosecuting or
Having said that, let it be emphasized that this petition should be dismissed not merely
defending corporate causes and in using and applying remedies available to it. To rule
because of forum-shopping but also because of the substantive issues raised, as will
otherwise would be to encourage corporate litigants to use their shareholders as fronts
be discussed shortly.
to circumvent the stringent rules against forum shopping.
The Second Issue: Was The Contract Perfected?
Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs sought, The respondent Court correctly treated the question of whether or not there was, on
"because it (the Bank) was the defendant in the (first) case while it was the plaintiff in the basis of the facts established, a perfected contract of sale as the ultimate issue.
the other (Second Case)",citing as authority Victronics Computers, Inc., vs. Regional Holding that a valid contract has been established, respondent Court stated:
Trial Court, Branch 63, Makati, etc. et al., 27 where Court held: There is no dispute that the object of the transaction is that property owned by the
The rule has not been extended to a defendant who, for reasons known only defendant bank as acquired assets consisting of six (6) parcels of land specifically
to him, commences a new action against the plaintiff — instead of filing a identified under Transfer Certificates of Title Nos. T-106932 to T-106937. It is
responsive pleading in the other case — setting forth therein, as causes of likewise beyond cavil that the bank intended to sell the property. As testified to by
action, specific denials, special and affirmative defenses or even the Bank's Deputy Conservator, Jose Entereso, the bank was looking for buyers of
counterclaims, Thus, Velhagen's and King's motion to dismiss Civil Case No. the property. It is definite that the plaintiffs wanted to purchase the property and it
91-2069 by no means negates the charge of forum-shopping as such did not was precisely for this purpose that they met with defendant Rivera, Manager of the
exist in the first place. (emphasis supplied) Property Management Department of the defendant bank, in early August 1987.
The procedure in the sale of acquired assets as well as the nature and scope of
Petitioner pointed out that since it was merely the defendant in the original case, it could
the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
not have chosen the forum in said case.
himself, which testimony was relied upon by both the bank and by Rivera in their
Respondent, on the other hand, replied that there is a difference in factual setting appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):
between Victronics and the present suit. In the former, as underscored in the above-
A: The procedure runs this way: Acquired assets was turned over to me and
quoted Court ruling, the defendants did not file any responsive pleading in the first case.
then I published it in the form of an inter-office memorandum distributed to all
In other words, they did not make any denial or raise any defense or counter-claim
branches that these are acquired assets for sale. I was instructed to advertise
therein In the case before us however, petitioners filed a responsive pleading to the
acquired assets for sale so on that basis, I have to entertain offer; to accept
complaint — as a result of which, the issues were joined.
offer, formal offer and upon having been offered, I present it to the Committee.
Indeed, by praying for affirmative reliefs and interposing counter–claims in their I provide the Committee with necessary information about the property such
responsive pleadings, the petitioners became plaintiffs themselves in the original case, as original loan of the borrower, bid price during the foreclosure, total claim of
giving unto themselves the very remedies they repeated in the Second Case. the bank, the appraised value at the time the property is being offered for sale
and then the information which are relative to the evaluation of the bank to buy
Ultimately, what is truly important to consider in determining whether forum-shopping
which the Committee considers and it is the Committee that evaluate as
exists or not is the vexation caused the courts and parties-litigant by a party who asks
against the exposure of the bank and it is also the Committee that submit to
different courts and/or administrative agencies to rule on the same or related causes
the Conservator for final approval and once approved, we have to execute the
and/or to grant the same or substantially the same reliefs, in the process creating the
deed of sale and it is the Conservator that sign the deed of sale, sir.
possibility of conflicting decisions being rendered by the different fora upon the same
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of
issue. In this case, this is exactly the problem: a decision recognizing the perfection
buying the property, dealt with and talked to the right person. Necessarily, the
and directing the enforcement of the contract of sale will directly conflict with a possible
agenda was the price of the property, and plaintiffs were dealing with the bank
decision in the Second Case barring the parties front enforcing or implementing the
official authorized to entertain offers, to accept offers and to present the offer to the
said sale. Indeed, a final decision in one would constitute res judicata in the other 28 .
Committee before which the said official is authorized to discuss information
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the relative to price determination. Necessarily, too, it being inherent in his authority,
only sanction possible now is the dismissal of both cases with prejudice, as the other Rivera is the officer from whom official information regarding the price, as
sanctions cannot be imposed because petitioners' present counsel entered their determined by the Committee and approved by the Conservator, can be had. And
appearance only during the proceedings in this Court, and the Petition's Rivera confirmed his authority when he talked with the plaintiff in August 1987. The
VERIFICATION/CERTIFICATION contained sufficient allegations as to the pendency testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-
of the Second Case to show good faith in observing Circular 28-91. The Lawyers who 28):
filed the Second Case are not before us; thus the rudiments of due process prevent us Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera,
from motu propio imposing disciplinary measures against them in this Decision. did you ask him point-blank his authority to sell any property?
However, petitioners themselves (and particularly Henry Co, et al.) as litigants are A: No, sir. Not point blank although it came from him, (W)hen I asked him how
admonished to strictly follow the rules against forum-shopping and not to trifle with court long it would take because he was saying that the matter of pricing will be
passed upon by the committee. And when I asked him how long it will take for dealt with the corporation through such agent, he estopped from denying his
the committee to decide and he said the committee meets every week. If I am authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v. Court of Appeals, 94
not mistaken Wednesday and in about two week's (sic) time, in effect what he SCRA 357, 369-370; Prudential Bank v. Court of Appeals, G.R. No. 103957, June
was saying he was not the one who was to decide. But he would refer it to the 14, 1993). 29
committee and he would relay the decision of the committee to me.
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected
Q — Please answer the question.
contract as follows: "(1) Consent of the contracting parties; (2) Object certain which is
A — He did not say that he had the authority (.) But he said he would refer the
the subject matter of the contract; (3) Cause of the obligation which is established."
matter to the committee and he would relay the decision to me and he did just
like that. There is no dispute on requisite no. 2. The object of the questioned contract consists
"Parenthetically, the Committee referred to was the Past Due Committee of which of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101
Luis Co was the Head, with Jose Entereso as one of the members. hectares, more or less, and covered by Transfer Certificates of Title Nos. T-106932 to
T-106937. There is, however, a dispute on the first and third requisites.
What transpired after the meeting of early August 1987 are consistent with the
authority and the duties of Rivera and the bank's internal procedure in the matter Petitioners allege that "there is no counter-offer made by the Bank, and any supposed
of the sale of bank's assets. As advised by Rivera, the plaintiffs made a formal offer counter-offer which Rivera (or Co) may have made is unauthorized. Since there was
by a letter dated August 20, 1987 stating that they would buy at the price of P3.5 no counter-offer by the Bank, there was nothing for Ejercito (in substitution of Demetria
Million in cash. The letter was for the attention of Mercurio Rivera who was tasked and Janolo) to accept." 30 They disputed the factual basis of the respondent Court's
to convey and accept such offers. Considering an aspect of the official duty of findings that there was an offer made by Janolo for P3.5 million, to which the Bank
Rivera as some sort of intermediary between the plaintiffs-buyers with their counter-offered P5.5 million. We have perused the evidence but cannot find fault with
proposed buying price on one hand, and the bank Committee, the Conservator and the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors
ultimately the bank itself with the set price on the other, and considering further the of fact — if there be any - are, as a rule, not reviewable. The mere fact that respondent
discussion of price at the meeting of August resulting in a formal offer of P3.5 Million Court (and the trial court as well) chose to believe the evidence presented by
in cash, there can be no other logical conclusion than that when, on September 1, respondent more than that presented by petitioners is not by itself a reversible error. In
1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 fact, such findings merit serious consideration by this Court, particularly where, as in
Million for more than 101 hectares on lot basis," such counter-offer price had been this case, said courts carefully and meticulously discussed their findings. This is basic.
determined by the Past Due Committee and approved by the Conservator after Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals,
Rivera had duly presented plaintiffs' offer for discussion by the Committee of such let us review the question of Rivera's authority to act and petitioner's allegations that
matters as original loan of borrower, bid price during foreclosure, total claim of the the P5.5 million counter-offer was extinguished by the P4.25 million revised offer of
bank, and market value. Tersely put, under the established facts, the price of P5.5 Janolo. Here, there are questions of law which could be drawn from the factual findings
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and definitive of the respondent Court. They also delve into the contractual elements of consent and
price at which the bank was selling the property. cause.
There were averments by defendants below, as well as before this Court, that the The authority of a corporate officer in dealing with third persons may be actual or
P5.5 Million price was not discussed by the Committee and that price. As correctly apparent. The doctrine of "apparent authority", with special reference to banks, was laid
characterized by the trial court, this is not credible. The testimonies of Luis Co and out in Prudential Bank vs. Court of Appeals31 , where it was held that:
Jose Entereso on this point are at best equivocal and considering the gratuitous
and self-serving character of these declarations, the bank's submission on this Conformably, we have declared in countless decisions that the principal is liable
point does not inspire belief. Both Co ad Entereso, as members of the Past Due for obligations contracted by the agent. The agent's apparent representation yields
Committee of the bank, claim that the offer of the plaintiff was never discussed by to the principal's true representation and the contract is considered as entered into
the Committee. In the same vein, both Co and Entereso openly admit that they between the principal and the third person (citing National Food Authority vs.
seldom attend the meetings of the Committee. It is important to note that Intermediate Appellate Court, 184 SCRA 166).
negotiations on the price had started in early August and the plaintiffs had already A bank is liable for wrongful acts of its officers done in the interests of the bank
offered an amount as purchase price, having been made to understand by Rivera, or in the course of dealings of the officers in their representative capacity but
the official in charge of the negotiation, that the price will be submitted for approval not for acts outside the scape of their authority (9 C.J.S., p. 417). A bank
by the bank and that the bank's decision will be relayed to plaintiffs. From the facts, holding out its officers and agents as worthy of confidence will not be permitted
the official bank price. At any rate, the bank placed its official, Rivera, in a position to profit by the frauds they may thus be enabled to perpetrate in the apparent
of authority to accept offers to buy and negotiate the sale by having the offer scope of their employment; nor will it be permitted to shirk its responsibility for
officially acted upon by the bank. The bank cannot turn around and later say, as it such frauds even though no benefit may accrue to the bank therefrom (10 Am
now does, that what Rivera states as the bank's action on the matter is not in fact Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent third
so. It is a familiar doctrine, the doctrine of ostensible authority, that if a corporation persons where the representation is made in the course of its business by an
knowingly permits one of its officers, or any other agent, to do acts within the scope agent acting within the general scope of his authority even though, in the
of an apparent authority, and thus holds him out to the public as possessing power particular case, the agent is secretly abusing his authority and attempting to
to do those acts, the corporation will, as against any one who has in good faith perpetrate a fraud upon his principal or some other person, for his own
ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 Petitioners also argued that since Demetria and Janolo were experienced lawyers and
ALR 1021). their "law firm" had once acted for the Bank in three criminal cases, they should be
Application of these principles is especially necessary because banks have a charged with actual knowledge of Rivera's limited authority. But the Court of Appeals
fiduciary relationship with the public and their stability depends on the confidence in its Decision (p. 12) had already made a factual finding that the buyers had no notice
of the people in their honesty and efficiency. Such faith will be eroded where banks of Rivera's actual authority prior to the sale. In fact, the Bank has not shown that they
do not exercise strict care in the selection and supervision of its employees, acted as its counsel in respect to any acquired assets; on the other hand, respondent
resulting in prejudice to their depositors. has proven that Demetria and Janolo merely associated with a loose aggrupation of
lawyers (not a professional partnership), one of whose members (Atty. Susana Parker)
From the evidence found by respondent Court, it is obvious that petitioner Rivera has
acted in said criminal cases.
apparent or implied authority to act for the Bank in the matter of selling its acquired
assets. This evidence includes the following: Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the
letter dated September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They
(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material
disputed the respondent Court's finding that "there was a meeting of minds when on 30
to this case, Manager of the Property Management Department of the Bank". By
September 1987 Demetria and Janolo through Annex "L" (letter dated September 30,
his own admission, Rivera was already the person in charge of the Bank's acquired
1987) "accepted" Rivera's counter offer of P5.5 million under Annex "J" (letter dated
assets (TSN, August 6, 1990, pp. 8-9);
September 17, 1987)", citingthe late Justice Paras35 , Art. 1319 of the Civil Code 36 and
(b) As observed by respondent Court, the land was definitely being sold by the
related Supreme Court rulings starting with Beaumont vs. Prieto 37 .
Bank. And during the initial meeting between the buyers and Rivera, the latter
suggested that the buyers' offer should be no less than P3.3 million (TSN, April 26, However, the above-cited authorities and precedents cannot apply in the instant case
1990, pp. 16-17); because, as found by the respondent Court which reviewed the testimonies on this
(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million point, what was "accepted" by Janolo in his letter dated September 30, 1987 was the
(TSN, 30 July 1990, p.11); Bank's offer of P5.5 million as confirmed and reiterated to Demetria and Atty. Jose
(d) Rivera signed the letter dated September 1, 1987 offering to sell the property Fajardo by Rivera and Co during their meeting on September 28, 1987. Note that the
for P5.5 million (TSN, July 30, p. 11); said letter of September 30, 1987 begins with"(p)ursuant to our discussion last 28
(e) Rivera received the letter dated September 17, 1987 containing the buyers' September 1987 . . .
proposal to buy the property for P4.25 million (TSN, July 30, 1990, p. 12);
Petitioners insist that the respondent Court should have believed the testimonies of
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final
Rivera and Co that the September 28, 1987 meeting "was meant to have the offerors
price of the Bank (TSN, January 16, 1990, p. 18);
improve on their position of P5.5. million."38 However, both the trial court and the Court
(g) Rivera arranged the meeting between the buyers and Luis Co on September
of Appeals found petitioners' testimonial evidence "not credible", and we find no basis
28, 1994, during which the Bank's offer of P5.5 million was confirmed by Rivera
for changing this finding of fact.
(TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major shareholder and
officer of the Bank, confirmed Rivera's statement as to the finality of the Bank's Indeed, we see no reason to disturb the lower courts' (both the RTC and the CA)
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, common finding that private respondents' evidence is more in keeping with truth and
p. 35); logic — that during the meeting on September 28, 1987, Luis Co and Rivera "confirmed
(h) In its newspaper advertisements and announcements, the Bank referred to that the P5.5 million price has been passed upon by the Committee and could no longer
Rivera as the officer acting for the Bank in relation to parties interested in buying be lowered (TSN of April 27, 1990, pp. 34-35)"39 . Hence, assuming arguendo that the
assets owned/acquired by the Bank. In fact, Rivera was the officer mentioned in counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Co's reiteration
the Bank's advertisements offering for sale the property in question (cf. Exhs. "S" of the said P5.5 million price during the September 28, 1987 meeting revived the said
and "S-1"). offer. And by virtue of the September 30, 1987 letter accepting this revived offer, there
was a meeting of the minds, as the acceptance in said letter was absolute and
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 ,
unqualified.
the Court, through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority
as it held that the apparent authority of the officer of the Bank of P.I. in charge of We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's
acquired assets is borne out by similar circumstances surrounding his dealings with authority and action, particularly the latter's counter-offer of P5.5 million, as being
buyers. "unauthorized and illegal" came only on May 12, 1988 or more than seven (7) months
after Janolo' acceptance. Such delay, and the absence of any circumstance which
To be sure, petitioners attempted to repudiate Rivera's apparent authority through
might have justifiably prevented the Bank from acting earlier, clearly characterizes the
documents and testimony which seek to establish Rivera's actual authority. These
repudiation as nothing more than a last-minute attempt on the Bank's part to get out of
pieces of evidence, however, are inherently weak as they consist of Rivera's self-
a binding contractual obligation.
serving testimony and various inter-office memoranda that purport to show his limited
actual authority, of which private respondent cannot be charged with knowledge. In any Taken together, the factual findings of the respondent Court point to an implied
event, since the issue is apparent authority, the existence of which is borne out by the admission on the part of the petitioners that the written offer made on September 1,
respondent Court's findings, the evidence of actual authority is immaterial insofar as 1987 was carried through during the meeting of September 28, 1987. This is the
the liability of a corporation is concerned 33 . conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million petitioners — by such utter failure to object — are deemed to have waived any defects
was raised for the first time on appeal and should thus be disregarded. of the contract under the statute of frauds, pursuant to Article 1405 of the Civil Code:
This Court in several decisions has repeatedly adhered to the principle that points Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article
of law, theories, issues of fact and arguments not adequately brought to the 1403, are ratified by the failure to object to the presentation of oral evidence to
attention of the trial court need not be, and ordinarily will not be, considered by a prove the same, or by the acceptance of benefits under them.
reviewing court, as they cannot be raised for the first time on appeal (Santos vs.
As private respondent pointed out in his Memorandum, oral testimony on the
IAC, No. 74243, November 14, 1986, 145 SCRA 592).40
reaffirmation of the counter-offer of P5.5 million is a plenty — and the silence of
. . . It is settled jurisprudence that an issue which was neither averred in the
petitioners all throughout the presentation makes the evidence binding on them thus;
complaint nor raised during the trial in the court below cannot be raised for the first
time on appeal as it would be offensive to the basic rules of fair play, justice and A Yes, sir, I think it was September 28, 1987 and I was again present because Atty.
due process (Dihiansan vs. CA, 153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 Demetria told me to accompany him we were able to meet Luis Co at the Bank.
SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 xxx xxx xxx
[1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August
30, 1990).41 Q Now, what transpired during this meeting with Luis Co of the Producers Bank?
A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Since the issue was not raised in the pleadings as an affirmative defense, private Q What price?
respondent was not given an opportunity in the trial court to controvert the same A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio
through opposing evidence. Indeed, this is a matter of due process. But we passed Rivera is the final price and that is the price they intends (sic) to have, sir.
upon the issue anyway, if only to avoid deciding the case on purely procedural grounds, Q What do you mean?.
and we repeat that, on the basis of the evidence already in the record and as A That is the amount they want, sir.
appreciated by the lower courts, the inevitable conclusion is simply that there was a Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the
perfected contract of sale. defendant Rivera's counter-offer of 5.5 million was the defendant's bank (sic) final
The Third Issue: Is the Contract Enforceable? offer?
A He said in a day or two, he will make final acceptance, sir.
The petition alleged42 :
Q What is the response of Mr. Luis Co?.
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million A He said he will wait for the position of Atty. Demetria, sir.
during the meeting of 28 September 1987, and it was this verbal offer that Demetria
[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]
and Janolo accepted with their letter of 30 September 1987, the contract produced
thereby would be unenforceable by action — there being no note, memorandum Q What transpired during that meeting between you and Mr. Luis Co of the
or writing subscribed by the Bank to evidence such contract. (Please see article defendant Bank?
1403[2], Civil Code.) A We went straight to the point because he being a busy person, I told him if the
amount of P5.5 million could still be reduced and he said that was already passed
Upon the other hand, the respondent Court in its Decision (p, 14) stated:
upon by the committee. What the bank expects which was contrary to what Mr.
. . . Of course, the bank's letter of September 1, 1987 on the official price and the Rivera stated. And he told me that is the final offer of the bank P5.5 million and we
plaintiffs' acceptance of the price on September 30, 1987, are not, in themselves, should indicate our position as soon as possible.
formal contracts of sale. They are however clear embodiments of the fact that a Q What was your response to the answer of Mr. Luis Co?
contract of sale was perfected between the parties, such contract being binding in A I said that we are going to give him our answer in a few days and he said that
whatever form it may have been entered into (case citations omitted). Stated was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his
simply, the banks' letter of September 1, 1987, taken together with plaintiffs' letter office.
dated September 30, 1987, constitute in law a sufficient memorandum of a Q For the record, your Honor please, will you tell this Court who was with Mr. Co
perfected contract of sale. in his Office in Producers Bank Building during this meeting?
A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
The respondent Court could have added that the written communications commenced
Q By Mr. Co you are referring to?
not only from September 1, 1987 but from Janolo's August 20, 1987 letter. We agree
A Mr. Luis Co.
that, taken together, these letters constitute sufficient memoranda — since they include
Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the
the names of the parties, the terms and conditions of the contract, the price and a
counter offer by the bank?
description of the property as the object of the contract.
A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which
But let it be assumed arguendo that the counter-offer during the meeting on September offer we accepted, the offer of the bank which is P5.5 million.
28, 1987 did constitute a "new" offer which was accepted by Janolo on September 30,
[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]
1987. Still, the statute of frauds will not apply by reason of the failure of petitioners to
object to oral testimony proving petitioner Bank's counter-offer of P5.5 million. Hence, Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached
by the Committee and it is not within his power to reduce this amount. What can
you say to that statement that the amount of P5.5 million was reached by the This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
Committee? Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
A It was not discussed by the Committee but it was discussed initially by Luis Co We deny that Producers Bank has ever made a legal counter-offer to any of your
and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September clients nor perfected a "contract to sell and buy" with any of them for the following
28, 1987 meeting, sir. reasons.
In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved
[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]
by former Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior
The Fourth Issue: May the Conservator Revoke Manager Perfecto M. Pascua detailed the functions of Property Management
the Perfected and Enforceable Contract. Department (PMD) staff and officers (Annex A.), you will immediately read that
It is not disputed that the petitioner Bank was under a conservator placed by the Central Manager Mr. Mercurio Rivera or any of his subordinates has no authority, power
Bank of the Philippines during the time that the negotiation and perfection of the or right to make any alleged counter-offer. In short, your lawyer-clients did not deal
contract of sale took place. Petitioners energetically contended that the conservator with the authorized officers of the bank.
has the power to revoke or overrule actions of the management or the board of directors Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates
of a bank, under Section 28-A of Republic Act No. 265 (otherwise known as the Central Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as
Bank Act) as follows: amended), only the Board of Directors/Conservator may authorize the sale of any
property of the corportion/bank..
Whenever, on the basis of a report submitted by the appropriate supervising or Our records do not show that Mr. Rivera was authorized by the old board or by any
examining department, the Monetary Board finds that a bank or a non-bank of the bank conservators (starting January, 1984) to sell the aforesaid property to
financial intermediary performing quasi-banking functions is in a state of continuing any of your clients. Apparently, what took place were just preliminary
inability or unwillingness to maintain a state of liquidity deemed adequate to protect discussions/consultations between him and your clients, which everyone
the interest of depositors and creditors, the Monetary Board may appoint a knows cannot bind the Bank's Board or Conservator.
conservator to take charge of the assets, liabilities, and the management of that We are, therefore, constrained to refuse any tender of payment by your clients, as
institution, collect all monies and debts due said institution and exercise all powers the same is patently violative of corporate and banking laws. We believe that this
necessary to preserve the assets of the institution, reorganize the management is more than sufficient legal justification for refusing said alleged tender.
thereof, and restore its viability. He shall have the power to overrule or revoke the Rest assured that we have nothing personal against your clients. All our acts are
actions of the previous management and board of directors of the bank or non- official, legal and in accordance with law. We also have no personal interest in any
bank financial intermediary performing quasi-banking functions, any provision of of the properties of the Bank.
law to the contrary notwithstanding, and such other powers as the Monetary Board Please be advised accordingly.
shall deem necessary. Very truly yours,
In the first place, this issue of the Conservator's alleged authority to revoke or repudiate (Sgd.) Leonida T. Encarnacion
the perfected contract of sale was raised for the first time in this Petition — as this was LEONIDA T. EDCARNACION
not litigated in the trial court or Court of Appeals. As already stated earlier, issues not Acting Conservator
raised and/or ventilated in the trial court, let alone in the Court of Appeals, "cannot be In the third place, while admittedly, the Central Bank law gives vast and far-reaching
raised for the first time on appeal as it would be offensive to the basic rules of fair play, powers to the conservator of a bank, it must be pointed out that such powers must be
justice and due process."43 related to the "(preservation of) the assets of the bank, (the reorganization of) the
In the second place, there is absolutely no evidence that the Conservator, at the time management thereof and (the restoration of) its viability." Such powers, enormous and
the contract was perfected, actually repudiated or overruled said contract of sale. The extensive as they are, cannot extend to the post-facto repudiation of perfected
Bank's acting conservator at the time, Rodolfo Romey, never objected to the sale of the transactions, otherwise they would infringe against the non-impairment clause of the
property to Demetria and Janolo. What petitioners are really referring to is the letter of Constitution 44 . If the legislature itself cannot revoke an existing valid contract, how can
Conservator Encarnacion, who took over from Romey after the sale was perfected on it delegate such non-existent powers to the conservator under Section 28-A of said
September 30, 1987 (Annex V, petition) which unilaterally repudiated — not the law?
contract — but the authority of Rivera to make a binding offer — and which unarguably Obviously, therefore, Section 28-A merely gives the conservator power to revoke
came months after the perfection of the contract. Said letter dated May 12, 1988 is contracts that are, under existing law, deemed to be defective — i.e., void, voidable,
reproduced hereunder: unenforceable or rescissible. Hence, the conservator merely takes the place of a bank's
May 12, 1988 board of directors. What the said board cannot do — such as repudiating a contract
validly entered into under the doctrine of implied authority — the conservator cannot do
Atty. Noe C. Zarate either. Ineluctably, his power is not unilateral and he cannot simply repudiate valid
Zarate Carandang Perlas & Ass. obligations of the Bank. His authority would be only to bring court actions to assail such
Suite 323 Rufino Building contracts — as he has already done so in the instant case. A contrary understanding
Ayala Avenue, Makati, Metro-Manila of the law would simply not be permitted by the Constitution. Neither by common sense.
Dear Atty. Zarate: To rule otherwise would be to enable a failing bank to become solvent, at the expense
of third parties, by simply getting the conservator to unilaterally revoke all previous the case at bench, we find none of the above grounds present to justify the re-
dealings which had one way or another or come to be considered unfavorable to the evaluation of the findings of fact made by the courts below.
Bank, yielding nothing to perfected contractual rights nor vested interests of the third
In the same vein, the ruling of this Court in the recent case of South Sea Surety and
parties who had dealt with the Bank.
Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the
The Fifth Issue: Were There Reversible Errors of Facts? present case:
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, We see no valid reason to discard the factual conclusions of the appellate court, .
findings of fact by the Court of Appeals are not reviewable by the Supreme Court. . . (I)t is not the function of this Court to assess and evaluate all over again the
In Andres vs. Manufacturers Hanover & Trust Corporation, 45 , we held: evidence, testimonial and documentary, adduced by the parties, particularly where,
such as here, the findings of both the trial court and the appellate court on the
. . . The rule regarding questions of fact being raised with this Court in a petition
matter coincide. (emphasis supplied)
for certiorari under Rule 45 of the Revised Rules of Court has been stated in
Remalante vs. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus: Petitioners, however, assailed the respondent Court's Decision as "fraught with findings
The rule in this jurisdiction is that only questions of law may be raised in a petition and conclusions which were not only contrary to the evidence on record but have no
for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the bases at all," specifically the findings that (1) the "Bank's counter-offer price of P5.5
Supreme Court in cases brought to it from the Court of Appeals is limited to million had been determined by the past due committee and approved by conservator
reviewing and revising the errors of law imputed to it, its findings of the fact being Romey, after Rivera presented the same for discussion" and (2) "the meeting with Co
conclusive " [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 was not to scale down the price and start negotiations anew, but a meeting on the
SCRA 737, reiterating a long line of decisions]. This Court has emphatically already determined price of P5.5 million" Hence, citingPhilippine National Bank vs.
declared that "it is not the function of the Supreme Court to analyze or weigh such Court of Appeals 49 , petitioners are asking us to review and reverse such factual
evidence all over again, its jurisdiction being limited to reviewing errors of law that findings.
might have been committed by the lower court" (Tiongco v. De la Merced, G. R.
The first point was clearly passed upon by the Court of Appeals 50 , thus:
No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No.
L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. There can be no other logical conclusion than that when, on September 1, 1987,
L-47531, February 20, 1984, 127 SCRA 596). "Barring, therefore, a showing that Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million
the findings complained of are totally devoid of support in the record, or that they for more than 101 hectares on lot basis, "such counter-offer price had been
are so glaringly erroneous as to constitute serious abuse of discretion, such determined by the Past Due Committee and approved by the Conservator after
findings must stand, for this Court is not expected or required to examine or Rivera had duly presented plaintiffs' offer for discussion by the Committee . . .
contrast the oral and documentary evidence submitted by the parties" [Santa Ana, Tersely put, under the established fact, the price of P5.5 Million was, as clearly
Jr. vs. Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp. worded in Rivera's letter (Exh. "E"), the official and definitive price at which the
144-145.] bank was selling the property. (p. 11, CA Decision)
xxx xxx xxx
Likewise, in Bernardo vs. Court of Appeals 46 , we held:
. . . The argument deserves scant consideration. As pointed out by plaintiff, during
The resolution of this petition invites us to closely scrutinize the facts of the case, the meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the
relating to the sufficiency of evidence and the credibility of witnesses presented. senior vice-president of the bank, where the topic was the possible lowering of the
This Court so held that it is not the function of the Supreme Court to analyze or price, the bank official refused it and confirmed that the P5.5 Million price had been
weigh such evidence all over again. The Supreme Court's jurisdiction is limited to passed upon by the Committee and could no longer be lowered (TSN of April 27,
reviewing errors of law that may have been committed by the lower court. The 1990, pp. 34-35) (p. 15, CA Decision).
Supreme Court is not a trier of facts. . . .
The respondent Court did not believe the evidence of the petitioners on this point,
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock characterizing it as "not credible" and "at best equivocal and considering the gratuitous
Construction and Development Corp. 47 : and self-serving character of these declarations, the bank's submissions on this point
do not inspire belief."
The Court has consistently held that the factual findings of the trial court, as well
as the Court of Appeals, are final and conclusive and may not be reviewed on To become credible and unequivocal, petitioners should have presented then
appeal. Among the exceptional circumstances where a reassessment of facts Conservator Rodolfo Romey to testify on their behalf, as he would have been in the
found by the lower courts is allowed are when the conclusion is a finding grounded best position to establish their thesis. Under the rules on evidence 51 , such suppression
entirely on speculation, surmises or conjectures; when the inference made is gives rise to the presumption that his testimony would have been adverse, if produced.
manifestly absurd, mistaken or impossible; when there is grave abuse of discretion
The second point was squarely raised in the Court of Appeals, but petitioners' evidence
in the appreciation of facts; when the judgment is premised on a misapprehension
was deemed insufficient by both the trial court and the respondent Court, and instead,
of facts; when the findings went beyond the issues of the case and the same are
it was respondent's submissions that were believed and became bases of the
contrary to the admissions of both appellant and appellee. After a careful study of
conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact commitment to sell cannot now be used by it to promote its own advantage, to enable
by the lower courts are valid and correct. But the petitioners are now asking this Court it to escape its binding obligation and to reap the benefits of the increase in land values.
to disturb these findings to fit the conclusion they are espousing, This we cannot do. To rule in favor of the Bank simply because the property in question has algebraically
accelerated in price during the long period of litigation is to reward lawlessness and
To be sure, there are settled exceptions where the Supreme Court may disregard
delays in the fulfillment of binding contracts. Certainly, the Court cannot stamp its
findings of fact by the Court of Appeals 52 . We have studied both the records and the
imprimatur on such outrageous proposition.
CA Decision and we find no such exceptions in this case. On the contrary, the findings
of the said Court are supported by a preponderance of competent and credible WHEREFORE, finding no reversible error in the questioned Decision and Resolution,
evidence. The inferences and conclusions are seasonably based on evidence duly the Court hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover,
identified in the Decision. Indeed, the appellate court patiently traversed and dissected petitioner Bank is REPRIMANDED for engaging in forum-shopping and WARNED that
the issues presented before it, lending credibility and dependability to its findings. The a repetition of the same or similar acts will be dealt with more severely. Costs against
best that can be said in favor of petitioners on this point is that the factual findings of petitioners. SO ORDERED. Narvasa, C.J., Davide Jr., Melo and Francisco, JJ., concur.
respondent Court did not correspond to petitioners' claims, but were closer to the Footnotes
evidence as presented in the trial court by private respondent. But this alone is no 18
Villanueva vs. Adre, 178 SCRA 876, at p. 882 (April 27, 1989). Also cited in Crisostomo vs.
reason to reverse or ignore such factual findings, particularly where, as in this case, the Securities and Exchange Commission, 179 SCRA 146 (November 6, 1989), and Earth Minerals
trial court and the appellate court were in common agreement thereon. Indeed, Exploration, Inc. vs. Macaraig, Jr. 194 SCRA 1 (February 11, 1991).
19
conclusions of fact of a trial judge — as affirmed by the Court of Appeals — are 145 SCRA 34 (October 13, 1986).20 In Buan vs. Lopez, supra, the Court expressly ruled: "That
conclusive upon this Court, absent any serious abuse or evident lack of basis or same identity puts into operation the sanction of twin dismissals just mentioned."
22
capriciousness of any kind, because the trial court is in a better position to observe the 175 SCRA 701 (July 28, 1989). In this case, petitioner filed with the Supreme Court a petition
for certiorariquestioning a letter-directive of the Commission on Audit ordering the re-bidding of a
demeanor of the witnesses and their courtroom manner as well as to examine the real
vessel, the "T/T Andres Bonifacio", being sold by the Philippine National Oil Company (PNOC),
evidence presented. Simultaneously, a separate complaint for injunction and damages was filed by the same petitioner
Epilogue. before the Makati RTC to enjoin PNOC from conducting such a rebidding.
26
This court has pierced the veil of corporate fiction in numerous cases where it was used, among
In summary, there are two procedural issues involved forum-shopping and the raising others, to avoid a judgment credit (Sibagat Timber Corp. vs. Garcia, 216 SCRA 470 [December
of issues for the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5 11, 1992]; Tan Boon Bee & Co., Inc, vs. Jarencio, 163 SCRA 205 [June 30, 1988]); to avoid
million and the conservator's powers to repudiate contracts entered into by the Bank's inclusion of corporate assets as part of the estate of a decedent (Cease vs. CA, 93 SCRA 483
officers] — which per se could justify the dismissal of the present case. We did not limit [October 18, 1979]); to avoid liability arising from debt (Arcilla vs. CA, 215 SCRA 120 [0ctober 23,
ourselves thereto, but delved as well into the substantive issues — the perfection of the 1992]; Philippine Bank of Communications vs. CA, 195 SCRA 567 [March 22, 1991]); or when
made use of as a shield to perpetrate fraud and/or confuse legitimate issues (Jacinto vs. CA, 198
contract of sale and its enforceability, which required the determination of questions of SCRA 211 [June 6, 1991]); or to promote unfair objectives or otherwise to shield them (Villanueva
fact. While the Supreme Court is not a trier of facts and as a rule we are not required vs. Adre, 172 SCRA 876 [April 27, 1989]).
to look into the factual bases of respondent Court's decisions and resolutions, we did 35
IV E. Paras, Civil Code of the Philippines (1971 ed.), pp. 462-463.
so just the same, if only to find out whether there is reason to disturb any of its factual 36
Art. 1319 of Civil Code reads as follows:
findings, for we are only too aware of the depth, magnitude and vigor by which the "Art. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
parties through their respective eloquent counsel, argued their positions before this and the cause which are to constitute the contract. The offer must be certain acid the acceptance
Court. absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to
We are not unmindful of the tenacious plea that the petitioner Bank is operating his knowledge. The contract, in such a case, is presumed to have been entered into in the place
abnormally under a government-appointed conservator and "there is need to where the offer was made".
40
rehabilitate the Bank in order to get it back on its feet . . . as many people depend on Berin vs. Court of Appeals, 194 SCRA 508, 512 (February 27, 1991).
41
(it) for investments, deposits and well as employment. As of June 1987, the Bank's The Reparations Commission vs. The Visayan Packing Corporation, 193 SCRA 531, 539-540
overdraft with the Central Bank had already reached P1.023 billion . . . and there were (February 6, 1991).
43
Dihiansan vs. CA, 153 SCRA 713 (September 14, 1987); Anchuelo vs. IAC, 147 SCRA 434
(other) offers to buy the subject properties for a substantial amount of money." 53 (January 29, 1987); Dulos Realty & Development Corp. vs. CA, 157 SCRA 425 (January 28,
While we do not deny our sympathy for this distressed bank, at the same time, the 1988); Ramos vs. IAC, 175 SCRA 70 (July 5, 1989); Gevero vs. IAC, 189 SCRA 201 (August 30,
Court cannot emotionally close its eyes to overriding considerations of substantive and 1990); The Reparations Commission vs. The Visayan Packing Corporation, 193 SCRA 531, 540
procedural law, like respect for perfected contracts, non-impairment of obligations and (February 6, 1991).
44
Section 10 of Art. III of the Constitution reads as follows:
sanctions against forum-shopping, which must be upheld under the rule of law and blind "Sec. 10. No law impairing the obligation of contracts shall be passed."
justice. 51
Sec. 3(e), Rule 131, Rules of Court.
54
This Court cannot just gloss over private respondent's submission that, while the In his Memorandum, private respondent alleged (and petitioners have not denied) that (a) the
subject properties may currently command a much higher price, it is equally true that property was sold at foreclosure for only P3,033,264.00 and (b) in a suit for deficiency judgment
against the property's former owner and mortgage debtor, the petitioner Bank maintained that the
at the time of the transaction in 1987, the price agreed upon of P5.5 million was value of the property was only P3 million.
reasonable, considering that the Bank acquired these properties at a foreclosure sale
for no more than P3.5 million 54 . That the Bank procrastinated and refused to honor its
G.R. No. 92871 August 2, 1991 sale, the land was still covered by TCT No. 19648 bearing the name of Mariano So and
MARIA P. VDA. DE JOMOC, ET AL., petitioners, vs. was not yet registered in the name of petitioners-heirs of Pantaleon Jomoc (Original
THE COURT OF APPEALS, REGIONAL TRIAL COURT OF MISAMIS ORIENTAL, Records, p. 80), although it had been reconveyed to said heirs. Not having done this,
10th Judicial Region, Br. 25,respondents. petitioners spouses Lim cannot be said to be buyers in good faith. When they registered
G.R. No. 92860 August 2, 1991 the sale on April 27, 1983 after having been charged with notice of lis
SPOUSES LIM LEONG KANG & LIM PUE KING, petitioners, vs. pendens annotated as early as February 28, 1983 (the same date of their purchase),
MAURA SO & HON. COURT OF APPEALS (Eleventh Division), respondents. they did so in bad faith or on the belief that a registration may improve their position
being subsequent buyers of the same lot. Under Article 1544, mere registration is not
Civil Law; Obligations and Contracts; The contract of sale of real property even if
enough to acquire new title. Good faith must concur.
not complete in form, so long as the essential requisites of consent of the contracting
parties, object and cause of obligation concur and they were clearly established to be PETITIONS to review the decision of the Court of Appeals.
present, is valid and effective as between the parties.—Of importance to the Court is
GUTIERREZ, JR., J.:
the fact that the petitioners do not deny the existence of Exhibit “A”, including its terms
The main issue raised in these consolidated petitions is whether or not private
and contents, notwithstanding the incompleteness in form. The meeting of the minds
respondent Maura So abandoned or backed out from the agreement for the purchase
and the delivery of sums as partial payment is clear and this is admitted by both parties
of a lot belonging to the heirs of Pantaleon Jomoc, so that the subsequent sale to
to the agreement. Hence, there was already a valid and existing contract, not merely
petitioner spouses Lim is null and void.
perfected as the trial court saw it, but partly executed. It is of no moment whether or not
The subject lot in Cagayan de Oro City forms part of the estate of the late Pantaleon
it is enforceable under the Statute of Frauds, which rule we do not find to be applicable
Jomoc. Because it was fictitiously sold and transferred to third persons, petitioner Maria
because of partial payment of the vendee’s obligation and its acceptance by the
P. Vda. Jomoc, as administratrix of the estate and in behalf of all the heirs, filed suit to
vendors-heirs. The contract of sale of real property even if not complete in form, so long
recover the property before the trial court of Misamis Oriental in Civil Case No. 4750.
as the essential requisites of consent of the contracting parties, object, and cause of
Mariano So, the last of the transferees and the husband of Maria So, intervened. The
the obligation concur and they were clearly established to be present, is valid and
case was decided in favor of Jomoc and was accordingly appealed by Mariano So and
effective as between the parties. Under Article 1357 of the Civil Code, its enforceability
one Gaw Sur Cheng to the Court of Appeals. In February 1979, pending the appeal,
is recognized as each contracting party is granted the right to compel the other to
Jomoc executed a Deed of Extrajudicial Settlement and Sale of Land (Exhibit "A") with
execute the proper public instrument so that the valid contract of sale of registered land
private respondent for P300,000.00. The document was not yet signed by all the parties
can be duly registered and can bind third persons. The complainant-respondent
nor notarized but in the meantime, Maura So had made partial payments amounting to
correctly exercised such right simultaneously with a prayer for the enforcement of the
P49,000.00.
contract in one complaint.
In 1983, Mariano So, the appellant in the recovery proceeding, agreed to settle the case
Same; Same; Sale; Evidence; The oral evidence offered by defendants-
by executing a Deed of Reconveyance of the land in favor of the heirs of Pantaleon
petitioners to show a subsequent refusal to proceed with the sale cannot be considered
Jomoc. The reconveyance was in compliance with the decision in the recovery case
to reverse the express intention in the contract.—The facts reveal an agreement
and resulted in the dismissal of his appeal. On February 28, 1983, the heirs of Jomoc
between the contracting parties to Exhibit “A” to the effect that “the consideration of
executed another extra-judicial settlement with absolute sale in favor of intervenors Lim
P300,000.00 or whatever balance remains after deducting the advanced payments
Leong Kang and Lim Pue filing. Later, Maura So demanded from the Jomoc family the
thereon, shall be paid upon the termination of (Mariano So’s) appeal in the case
execution of a final deed of conveyance. They ignored the demand.
involving the property in question.” (G.R. No. 92871, Rollo, p. 123). The finding is
Thus, private respondent Maria So sued petitioners-heirs for specific performance to
supported by substantial evidence. As reasoned by both courts, even if the sums paid
compel them to execute and deliver the proper registrable deed of sale over the lot.
by Maura So were allegedly intended to expedite the dismissal of the appeal of Mariano
The case was docketed as Civil Case No. 8983. So then filed a notice of lis
So, such payment only indicates interest in acquiring the subject lot. In addition, the
pendens with the Register of Deeds on February 28, 1983. It was on the same date,
claim by the defendants-petitioners that the payments were for the gathering of the
February 28, 1983, allegedly upon the Jomocs' belief that Maura So had backed out
several heirs from far places to sign Exhibit “A” confirms respondent Maura So’s
from the transaction that the Jomocs executed the other extrajudicial settlement with
continuing interest. The terms of Exhibit “A” and the actual intention of the parties are
sale of registered land in favor of the spouses Lim for a consideration of P200,000.00
clear and no reform requiring parole evidence is being sought to elucidate the intention
part of which amount was allegedly intended to be returned to Maura So as
further. The oral evidence offered by defendants-petitioners to show a subsequent
reimbursement. The spouses Lim, however, registered their settlement and sale only
refusal to proceed with the sale cannot be considered to reverse the express intention
on April 27, 1983.
in the contract. Moreover, the two courts below had definite findings on this factual
The Jomocs as defendants, and the spouses Lim as intervenors alleged that
issue and we see no reason to reject and reverse their conclusion.
complainant Maura so backed out as evidenced by an oral testimony that she did so in
Same; Same; Same; Under Art. 1544, mere registration is not enough to acquire
a conference with the Jomocs' lawyers where she expressed frustration in evicting
new title; Good faith must concur.—In view of this provision, the two courts below
squatters who demanded large sums as a condition for vacating. They alleged the lack
correctly ruled that the spouses Lim do not have a better right. They purchased the land
of signatures of four of the heirs of Jomoc and Maura So herself as well as the lack of
with full knowledge of a previous sale to private respondent and without requiring from
notarization.
the vendors-heirs any proof of the prior vendee’s revocation of her purchase. They
The lower court, finding that there was no sufficient evidence to show complainant-
should have exercised extra caution in their purchase especially if at the time of the
respondents' withdrawal from the sale, concluded that: (1) the case is one of double
sale; (2) the spouses-intervenors are registrants in bad faith who registered their between petitioners-heirs and Maura So had been cut-off. Yet, petitioners-heirs sold
questioned deed of sale long after the notice of lis pendens of Civil Case No. 8983 was the same lot to spouses Lim. The case therefore requires us to discern who has the
recorded. better right to the property.
On appeal, the trial court decision was affirmed except for the award of moral and Article 1544 of the Civil Code provides:
exemplary damages and attorney's fees and expenses for litigation. Hence, these xxx xxx xxx
petitions. Should it be immovable property, the ownership shall belong to the person
The petitioners' allegation that the contract of sale by Maria P. Jomoc with private acquiring it who in good faith first recorded it in the Registry of Property.
respondent is unenforceable under the Statute of Frauds, is without merit. The xxx xxx xxx
petitioners-heirs, in their brief before the appellate court, admitted that the extrajudicial In view of this provision, the two courts below correctly ruled that the spouses Lim do
settlement with sale in favor of Maura So is valid and enforceable under the Statute of not have a better right. They purchased the land with full knowledge of a previous sale
Frauds. to private respondent and without requiring from the vendors-heirs any proof' of the
Of importance to the Court is the fact that the petitioners do not deny the existence of prior vendee's revocation of her purchase. They should have exercised extra caution
Exhibit "A"; including its terms and contents, notwithstanding the incompleteness in in their purchase especially if at the time of the sale, the land was still covered by TCT
form. The meeting of the minds and the delivery of sums as partial payment is clear No. 19648 bearing the name of Mariano So and was not yet registered in the name of
and this is admitted by both parties to the agreement. Hence, there was already a valid petitioners- heirs of Pantaleon Jomoc (Original Records, p. 80), although it had been
and existing contract, not merely perfected as the trial court saw it, but partly executed. reconveyed to said heirs. Not having done this, petitioners spouses Lim cannot be said
It is of no moment whether or not it is enforceable under the Statute of Frauds, which to be buyers in good faith. When they registered the sale on April 27, 1983 after having
rule we do not find to be applicable because of partial payment of the vendee's been charged with notice of lis pendens annotated as early as February 28, 1983 (the
obligation and its acceptance by the vendors-heirs. The contract of sale of real property same date of their purchase), they did so in bad faith or on the belief that a registration
even if not complete in form, so long as the essential requisites of consent of the may improve their position being subsequent buyers of the same lot. Under Article
contracting parties, object, and cause of the obligation concur and they were clearly 1544, mere registration is not enough to acquire new title. Good faith must concur. (
established to be present, is valid and effective as between the parties. Under Article Bergado v. Court of Appeals, 173 SCRA 497 [1989]; Concepcion V. Court of Appeals,
1357 of the Civil Code, its enforceability is recognized as each contracting party is G.R. No. 83208, February 6,1991)
granted the right to compel the other to execute the proper public instrument so that Considering the failure of the petitioners to show that the findings of the two courts
the valid contract of sale of registered land can be duly registered and can bind third below are not supported by substantial trial evidence or that their conclusions are
persons. The complainant respondent correctly exercised such right simultaneously contrary to law and jurisprudence, we find no reversible error in the questioned
with a prayer for the enforcement of the contract in one complaint. decision.
The Court finds no cogent reason to reverse the factual finding of the Regional Trial WHEREFORE, the petitions are hereby DISMISSED for lack of merit. The decision of
Court and the Court of Appeals that private respondent did not subsequently abandon the Court of Appeals dated September 13, 1989 and its resolution dated April 2, 1990
her intention of purchasing the subject lot.1âwphi1 are AFFIRMED.
The facts reveal an agreement between the contracting parties to Exhibit "A" to the SO ORDERED.
effect that "the consideration of P300,000.00 or whatever balance remains after Fernan, C.J., Feliciano, Bidin and Davide, Jr., JJ., concur.
deducting the advanced payments thereon, shall be paid upon the termination of
(Mariano So's) appeal in the case involving the property in question." (G.R. No. 92871,
Rollo, p. 123). The finding is supported by substantial evidence. As reasoned by both
courts, even if the sums paid by Maura So were allegedly intended to expedite the
dismissal of the appeal of Mariano So, such payment only indicates interest in acquiring
the subject lot. In addition, the claim by the defendants-petitioners that the payments
were for the gathering of the several heirs from far places to sign Exhibit "A" confirms
respondent Maura So's continuing interest. The terms of Exhibit "A" and the actual
intention of the parties are clear and no reform requiring parole evidence is being
sought to elucidate the intention further. The oral evidence offered by defendants-
petitioners to show a subsequent refusal to proceed with the sale cannot be considered
to reverse the express intention in the contract. Moreover, the two courts below had
definite findings on this factual issue and we see no reason to reject and reverse their
conclusion.
The petitioners contend that the trial court and the appellate court erred in declaring as
void the subsequent deed of extra-judicial settlement with spouses Lim since specific
performance and not annulment of contract due to existence of double sale, was the
thrust of the complaint. This argument is untenable. The issue of double sale had to be
resolved to determine whether or not complainant Maura So was entitled to the reliefs
prayed for There was no hard evidence to show that the vinculum or contractual relation
G.R. No. L-10265 March 3, 1916 other to comply with such formalities" from the moment the valid personal
EUTIQUIANO CUYUGAN, plaintiff-appellant, vs. ISIDORO SANTOS, defendant- obligation has been entered into.
appellee. 1. 7.ID.; EVIDENCE.—In this jurisdiction, as in the United States, the existence of an
Ramon Diokno for appellant. oral agreement or understanding such as that alleged in the complaint in the case
William A. Kincaid and Thomas L. Hartigan for appellee. at bar cannot be maintained on vague, uncertain, and indefinitetestimony, against
the reasonable presumption that prudent men who enter into such contracts will
1. 1.PAROL EVIDENCE AFFECTING WRITINGS; ALLEGED "PACTO DE
execute them in writing, and comply with the f ormalities prescribed by law for the
RETRO".—Parol evidence is competent and admissible in support of allegations
creation of a valid mortgage. But where the evidence as to the existence of such
that an instrument in writing, purporting on its face to transfer the absolute title to
an understanding or agreement is clear, convincing, and satisfactory, the same
property, or to transfer the title with a mere right to repurchase under specified
broad principles of equity operate in this jurisdiction as in the United States to
conditions reserved to the vendor, was in truth and in fact given merely as a
compel the parties to live up to the terms of their contract.
security for the repayment of a loan; and upon proof of the truth of such allegations,
1. 8."PACTO DE RETRO;" ACCEPTANCE OF PARTIAL PAYMENTS; EFFECT.—
the courts in this jurisdiction have power to enforce the agreement or
Where a sale of lands has been made reserving to the vendor a right to repurchase
understanding in this regard, in accord with the true intent of the parties at the time
under stipulated conditions, and one. or more partial payments have been made
when it was executed.
by the vendor and accepted by the purchaser, the acceptance of such partial
1. 2.ID.; UNITED STATES DOCTRINE.—The doctrine which must be applied in such
payments is absolutely incompatible "with the idea of irrevocability of the title of
cases in this jurisdiction "does not differ materially" from the equitable doctrine
ownership of the purchaser" at 'the expiration of the term stipulated in the, original
frequently announced and applied by the Supreme Court of the United States in
contract for the exercise of the right of repurchase.
the numerous cases in which similar questions have come to it from the various
APPEAL from an order of the Court of First Instance of Pampanga. Llorente, J.
States and Territories within its jurisdiction.
1. 3.MORTGAGE CLAIMED TO BE A SALE.—That court has held that: ."To insist on
what was really a mortgage, as a sale, is in equity a fraud, which cannot be CARSON, J.:
successfully practised, under the shelter of any written papers, however precise The complaint in this case alleges that the plaintiff is the sole heir of his mother,
and complete they may appear to be." Guillerma Cuyugan y Candia, deceased; that in the year 1895 she borrowed the sum
1. 4.CONTRACT OF LOAN ON SECURITY; LOAN ALLEGED TO BE PURCHASE of P3,500 from the defendant and executed, at the same time, the document, Exhibit
MONEY.—Also that: "When it is alleged and proved that a loan on security was C, attached to the complaint, which purports on its face to be a deed of sale of the land
really intended, and the defendant sets up the loan as a payment of purchase described therein, with a reservation in favor of the vendor of the right to repurchase
money, and the conveyance as a sale, both f raud and" a vice in the consideration for the sum of P3,500; that although the instrument purports on its face to be a deed of
are sufficiently averred to require a court of equity to hold the transaction to be a sale, it was intended by the parties merely to evidence the loan of the nominal purchase
mortgage." price and to serve as a security for the repayment of the amount of the loan; that under
1. 5."PACTO DE RETRO;" AGREEMENT TO CONSIDER IT AS SECURITY FOR the terms of the instrument plaintiff's mother was left in possession of the land as a
LOAN.—If the parties actually enter into such an agreement, the lender of the nominal tenant of the defendant at an annual rental of P420, an amount equal to the
money is legally and morally bound to fulfill it. Of course, such an oral contract agreed upon annual interest on the loan at the rate of 12 per cent per annum; that in
does not give the borrower a real right in the lands unless it is executed in the year 1897 the borrower paid P1,000 on the loan, whereupon the nominal rent on
compliance with the formalities prescribed by law. If entered into orally it creates a the land was reduced from P420 to P300 per annum, that being the amount of the
mere personal obligation which in no wise affects the lands, and if the lender interest on the unpaid balance of the loan at the rate of 12 per cent per annum; that
conveys the lands to innocent third persons, the borrower must content himself plaintiff and his mother continued in the peaceable possession of the land until the
with a mere right of action for damages against the lender, for failure to comply defendant, in the year prior to the institution of this action, served notice on the plaintiff
with his agreement. But so long as the land remains in the hands of the lender, the that an annual payment of P420 would be required of him thereafter, that is to say, the
borrower may demand the fulfillment of the agree original amount of the annual payments as agreed upon prior to the payment of P1,000
1. ment, and a mere lack of any of the formalities prescribed under the Spanish Code on the debt in the year 1897; that upon plaintiff's refusal to meet this demand, defendant
for the execution of contracts affecting real estate will not defeat his right to have set up a claim of ownership in himself and threatened to eject the plaintiff from the land;
the contract fulfilled, as the lender may be compelled in appropriate proceedings that thereupon plaintiff offered to pay, and still stands ready to pay the balance due on
to execute the contract with the necessary prescribed formalities. the original indebtedness and the unpaid interest thereon for one year, but that
1. 6.ORAL CONTRACTS AFFECTING LANDS; REQUISITES UNDER SPANISH defendant declined and continues to decline to accept the amount tendered and to
CODES.—Under the Spanish Codes an oral contract affecting lands, even an oral cancel the formal deed of sale to the land.
contract for the sale of lands, was valid and enforceable, provided none of the The prayer of the complaint is that the defendant be required to accept the amount thus
essential requisites of all valid contracts are lacking, that is to say, (1) consent, (2) tendered, and to cancel the formal deed of conveyance.
definite object, and (3) cause or consideration. The lack of the formal requisites A demurrer to the complaint was sustained by the court below on the ground that it
prescribed by the Code in order that such contracts may become effective to bind does not set forth facts constituting a cause of action — it appearing on the face of the
or convey the property, such as their execution in public instruments and the like, deed of conveyance attached to the complaint that it was a deed of sale of land with a
does not invalidate them as personal obligations, as "either party may compel the reserved right in the vendor to repurchase; and the allegations of the complaint
disclosing that the deed of conveyance was executed by plaintiff's mother, that the relied upon, the court examined and weighed the evidence before rejecting it as
stipulated price of repurchase has not been paid in full, and that the time allowed in the insufficient affords reasonable ground for an inference that had the court been of the
deed for repurchase has long since expired. opinion that the parol evidence submitted in any of these cases was clear, satisfactory
This is an appeal from the order sustaining the demurrer and dismissing the complaint. and convincing, it might, and doubtless would have arrived at a different conclusion.
We are of opinion that the demurrer should have been overruled on two separate and But however this may be, and without entering upon an extend review of the reported
distinct grounds, either one of which is sufficient to sustain the ruling. opinions of this court to ascertain whether language has been used in any of them
1. Since the demurrer to the complaint admits all the material facts well pleaded therein, which might be construed as an intimation by this court of its views on the question now
it follows that, for the purposes of the demurrer, the defendant admits that the true under consideration, we are of the opinion that the issues raised on this appeal are
nature and intent of the transaction mentioned in the complaint was a mere loan of such as to impose on us the duty of reexamining the whole question as to the power of
money secured by a formal conveyance of the land of the vendor; that the written the courts in this jurisdiction to admit extraneous parol evidence in support of
instrument, purporting to be a deed of sale of the land, with a right of repurchase allegations that an instrument in writing, purporting on its face to transfer the absolute
reserved by the vendor, did not set forth the real nature of the agreement between the title to property, or to transfer the title with a mere right of repurchase under specified
parties thereto; and that the true intention and understanding of the parties at the time conditions reserved to the vendor, was in truth and in fact given merely as a security;
when the deed was executed and delivered was that it should be held by the defendant, and upon proof of the truth of such allegations to enforce such an agreement or
not as a deed of sale of the land, but rather as an instrument in the nature of a mortgage, understanding in accord with the true intend of the parties at the time when it was
evidencing a loan secured by the lands of the borrower. The demurrer further admits executed. The question having been brought here on an appeal from a ruling on a
that the borrower's successor in interest had tendered the full amount of the demurrer, the issue of law is squarely presented, without being obscured or befogged
indebtedness together with the interest due and payable thereon at the time of the by the intervention of any doubtful question of fact, or of the relevancy, materiality,
tender, and that he stands ready at any time to pay the full amount due on the loan with competence or probative value of specific questions and answers in a particular case.
interest, upon the cancellation by the defendant of the formal deed of conveyance of We are of opinion, and so hold, that on both principle and authority, this question must
the land. be answered in the affirmative.
But proof of these facts would clearly entitle the plaintiff to the relief prayed for. The The Supreme Court of Porto Rico in the case of Monagas vs. Albertucci (17 Porto Rico,
demurrer should therefore have been overruled and the plaintiff should have been given 684, cited and in effect affirmed as to this ruling by the Supreme Court of the United
an opportunity to submit his evidence in support of the allegation of his complaint. States, 235 U. S., 81) observed in the course of a discussion of a similar question that
It is contended, however, that even if all these allegations in the complaint were true in — "The American doctrine on this subject does not differ materially from the principles
fact, nevertheless, the demurrer should be sustained, because, as it is said, these set forth in our Civil Code," a code which is substantially identical with the Civil Code of
allegations of fact can not be sustained at the trial by the introduction of competent the Philippines in all its provisions with relation to the question under consideration; and
testimony, since the court will be compelled to exclude any evidence offered by the we are satisfied on a full review of the whole question that, under our Codes, both
plaintiff which would tend to alter, vary, or defeat the terms of the written deed of substantive and adjective, the doctrine which must be applied in this jurisdiction "does
conveyance which is attached to the complaint as an exhibit, and the execution of which not differ materially" from the equitable doctrine frequently announced and applied by
the plaintiff's mother is expressly alleged and admitted in the complaint. the Supreme Court of the United States in the numerous cases in which similar
In support of this contention we are cited to various decisions of this court wherein we questions have come to it from the various states and territories within its jurisdiction.
have held that the intent of the parties executing instruments purporting to evidence We shall consider first, whether the provisions of the new Code of Civil Procedure
sales of lands with the right of repurchase reserved to the vendors was sufficiently and should be so construed as to deny the right to the borrower in such cases, to introduce
satisfactorily disclosed by the terms of the instruments themselves; and that the intent extraneous and parol evidence to support his allegations as to the existence of a parol
of the parties as disclosed by the terms of these instruments should be given full force agreement, whereby the lender obligated himself to hold the title to the lands merely as
and effect in accordance therewith, despite the contentions of the vendors that the security for the repayment of the debt; and further whether there is anything in that
original transactions between the parties were had in contemplation of, and to give Code which would deny the right of the borrower in such cases, upon proof of such
effect to contracts or agreements for the loan of money, the repayment of which was to allegations, to enforce the agreement in accordance with its terms. The authors of the
be secured by the lands of the borrower. new Code of Civil Procedure (Act No. 190 of the Civil Commission) were American
It is true that in a number of cases submitted to this court in which such a contention lawyers, and the avowed purpose and object of its enactment was to introduce in these
has been advanced, and in which the language of the instrument evidencing the Islands a system of procedure of civil cases modelled upon precedents in general use
transaction under investigation clearly and without ambiguity set forth a contract of sale in the United States. Most of its provisions are borrowed directly from the statute books
with a reserved right to repurchase, we have uniformly declined to maintain such of one or other of the States of the Union, and many of its more important provisions
contentions, and have enforced the contract in accord with the terms of the instrument have been construed and applied by both state and federal courts of last resort. We
by which it was evidence. But it does not necessarily follow that such a contention can have, therefore, in the Supreme Court Reports of the various States from which these
never be successfully asserted and maintained in the courts in this jurisdiction. provisions were borrowed, numerous precedents of strong and persuasive, if not
An examination of these cases will disclose that the true ground upon which they are conclusive authority; and, except in so far as they are affected by the substantive law
based was the lack of evidence sufficiently clear, satisfactory and convincing to sustain in force in this jurisdiction or necessarily modified by local conditions, we have always
a holding that the true nature of the transaction between the parties was any other than felt ourselves bound by the rulings of the Supreme Court of the United States in
that set forth in written instruments executed by them and purporting to evidence sales construing and applying statutory enactments modelled upon or borrowed from English
of land with a right of repurchase reserved to the vendors. And the fact that, in the cases or American originals.
The various provisions of the new Code of Civil Procedure which have any bearing on this view of the case that the evidence is admitted to ascertain the truth of the
the question now under consideration, or statutory provisions of like tenor and effect, transaction, though the deed be absolute on its face.'
have been construed and applied by all or nearly all the courts of last resorts in England These views are supported by many authorities. (Maxwell vs. Montacute, Pr.
and the United States; and while these courts are not wholly in accord as to the in Ch., 526; Dixon vs. Parker, 2 Ves., Sen., 225; Prince vs. Bearden, 1 A. K.
reasoning upon which their conclusions are based, it may safely be asserted that with Marsh. [Ky.], 170; Oldham vs. Halley, 2 J. J. March. [Ky.], 114; Whittick vs.
substantial, if not absolute unanimity, they have arrived a substantially similar results. Kane, 1 Paige [N. Y.], 202; Taylor vs. Luther, 2 Sumn, 232; Flagg vs. Mann,
But we shall not shop at this time to review all the questions which have been raised in Id., 538; Overton vs. Bigelow, 3 Yerg. [Tenn.] 513; Brainerd vs. Brainerd, 15
connection with the subject now under consideration. It will be sufficient for our Conn., 575; Wright vs. Bates, 13 Vt., 341; McIntyre vs. Humphries, 1 Hoffm.
purposes to examine the obligations which have been advanced against the admission [N. Y.] Ch., 331; 4 Kent, 143, note A., and 2 Green. Cruise, 86, n.)
of parol evidence to sustain allegations similar in effect to those set forth in the case at It is suggested that a different rule is held by the highest court of equity in
bar, based either on the ground that such evidence should be excluded under the Kentucky. If it were, with great respect for that learned court, this court would
"Statute of Frauds," the alleged agreement not having been reduced to writing, or on not feel bound thereby. This being a suit in equity, and oral evidence being
the ground that its admission would violate the rule that parol evidence will not be admitted, or rejected, not by the mere force of any state statute, but upon the
admitted to vary or contradict the terms of a written instrument. principles of general equity jurisprudence, this court must be governed by its
For this purpose we can do no better than to insert here a few citations from the books, own views of those principles. (Robinson vs. Campbell, 3 Wheat., 212; United
which set forth quite fully the doctrine in this regard that has been announced by the States vs. Howland, 4 Id., 108; Boyle vs. Zacharie et al., 6 Pet., 658; Swift vs.
great weight of authority, and which in our opinion should prevail in this jurisdiction in Tyson, 16 Id., 1; Foxcroft vs. Mallett, 4 How., 379.) But we do not perceive
applying and construing the pertinent provisions of the new Code of Civil Procedure. that the rule held in Kentucky differs from that above laid down. The rule, as
But, before doing so, it may be well to indicate that we do not adopt every proposition stated in Thomas vs. McCormack (9 Dana [Ky.], 109), is that oral evidence is
advanced in these somewhat extended citations from text-book and judicial authority, not admissible in opposition to the legal import of the deed, and the positive
and that, at this time, we make the doctrine our own only to the extent of declaring that denial in the answer, unless a foundation for such evidence had been first laid
the provisions of the new Code of Civil Procedure do not have the effect of excluding by an allegation, and some proof of fraud or mistake in the execution of the
parol evidence in support of allegations such as those set forth in the complaint in the conveyance, or some vice in the consideration.
case at bar, or of denying the right of the borrower in cases of this kind to enforce the But the inquiry still remains, what amounts to an allegation of fraud, or of some
alleged agreement in accordance with its terms. Supported by numerous citations the vice in the consideration — and it is the doctrine of this court, that when it is
doctrine summarily stated in 27 Cyclopedia, page 1023, is as follows: alleged and proved that a loan on security was really intended, and the
Effect of statute of frauds. — The statute of frauds does not stand in the way defendant sets up the loan as a payment of purchase money, and the
of treating an absolute deed as a mortgage, when such was the intention of conveyance as a sale, both fraud and a vice in the consideration are
the parties, although the agreement for redemption or defeasance rests wholly sufficiently averred and proved to require a court of equity to hold the
in parol, or is proved by parol evidence. The courts will not permit the statute transaction to be a mortgage; and we know of no court which has stated this
to be used as a shield for fraud, or as a means for perpetrating fraud. doctrine with more distinctness, than the Court of Appeals of the State of
Rule prohibiting contradiction of written documents. — The admission of parol Kentucky. In Edrington vs. Harper (3 J. J. Marsh. [Ky.], 355), that court
testimony to prove that a deed absolute in form was in fact given and accepted declared: `The fact that the real transaction between the parties was a
as a mortgage does not violate the rule against the admission of oral evidence borrowing and lending, will, whenever, or however it may appear, show that a
to vary or contradict the terms of a written instrument. deed absolute on its face was intended as a security for money; and whenever
In the case of Russell vs. Southard (53 U. S., 139, 147), the Supreme Court of the it can be ascertained to be a security for money, it is only a mortgage, however
United States dealt with these objections in part as follows: artfully it may be disguised.'
The first question is, whether this transaction was a mortgage, or a sale. xxx xxx xxx
It is insisted, on behalf of the defendants, that this question is to be determined In respect to the written memorandum, it was clearly intended to manifest a
by inspection of the written papers alone, oral evidence not being admissible conditional sale. Very uncommon pains are taken to do this. Indeed, so much
to contradict, vary, or add to, their contents. But we have no doubt extraneous anxiety is manifested on this point, as to make it apparent that the draftsman
evidence is admissible to inform the court of every material fact known to the considered he had a somewhat difficult task to perform. But it is not to be
parties when the deed and memorandum were executed. This is clear, both forgotten, that the same language which truly describes a real sale, may also
upon principle and authority. To insist on what was really a mortgage, as a be employed to cut off the right of redemption, in case of a loan on security;
sale, is in equity a fraud, which cannot be successfully practiced, under the that it is the duty of the court to watch vigilantly these exercises of skill, lest
shelter of any written papers, however precise and complete they may appear they should be effectual to accomplish what equity forbids; and that, in
to be. In Conway vs. Alexander(7 Cranch, 238), Ch. J. Marshall says: `Having doubtful cases, the court leans to the conclusion that the reality was a
made these observations on the deed itself, the court will proceed to examine mortgage, and not a sale. (Conway vs. Alexander, 7 Cranch, 218; Flagg vs.
those extrinsic circumstances, which are to determine whether it was a sale Mann, 2 Sumn., 533; Secrest vs. Turner, 2 J. J. March. [Ky.], 471; Edrington
or a mortgage;' and in Morris vs. Nixon (1 How., 126), it is stated; 'The charge vs. Harper, 3 Id., 354; Crane vs. Bonnell, 1 Green [N. J.] Ch., 264; Robertson
against Nixon is, substantially, a fraudulent attempt to convert that into an vs. Campbell, 2 Call. [Va.], 421; Poindexter vs. McCannon, 1 Dev. [N. C.] Eq.,
absolute sale, which was originally meant to be a security for a loan. It is in 373.)
It is true Russell must have given his assent to this form of the memorandum; grantor still remaining in possession of the land conveyed, and any negotiation
but the distress for money under which he then was, places him in the same or application for a loan made preceding or during the transaction resulting in
condition as other borrowers, in numerous cases reported in the books, who the conveyance. The American doctrine on this subject does not differ
have submitted to the dictation of the lender under the pressure of their wants; materially from the principles set forth in our Civil Code.
and a court of equity does not consider a consent, thus obtained, to be We insert here an extract of some length from the discussion of the subject (supported
sufficient to fix the rights of the parties. `Necessitous men,' says the Lord by numerous citations of authority) found in Jones' Commentaries on Evidence, (1913)
Chancellor, in Vernon vs. Bethell (2 Eden, 113), `are not, truly speaking, free volume 3, paragraphs 446, 447:
men; but, to answer a present emergency, will submit to any terms that the 446. To show that instruments apparently absolute are only securities. — It
crafty may impose upon them.' has long been the settled rule that in courts exercising equitable jurisdiction it
The memorandum does not contain any promise by Russell to repay the is admissible to prove by parol that instruments in writing apparently
money, and no personal security was taken; but it is settled that this transferring the absolute title are in fact only given as security. The doctrine is
circumstance does not make the conveyance less effectual as a mortgage. thus stated by Mr. Field: `It is an established doctrine that a court of equity will
(Floyer vs. Lavington, 1 P. Wms., 268; Lawly vs. Hooper, 3 Atk., 278; Scott treat a deed, absolute in form, as a mortgage, when it is executed as security
vs. Fields, 7 Watts. [Pa.], 360; Flagg vs. Mann, 2 Sumn., 533; Ancaster vs. for loan of money. That court looks beyond the terms of the instrument to the
Mayer, 1 Bro. C. C., 464.) And consequently it is not only entirely consistent real transaction; and when that is shown to be one of security and not of sale,
with the conclusion that a mortgage was intended, but in a case where it was it will give effect to the actual contract of the parties. As the equity, upon which
the design of one of the parties to clothe the transaction with the forms of a the court acts in such cases, arises from the real character of the transaction,
sale, in order to cut off the right of redemption, it is not to be expected that the any evidence, written or oral, tending to show this is admissible. The rule
party would, by taking personal security, effectually defeat his own attempt to which excludes parol testimony to contradict or vary a written instrument has
avoid the appearance of a loan. reference to the language used by the parties. That cannot be qualified or
Citing and relying upon this case Mr. Justice Field speaking for the Supreme Court of varied from its natural import, but must speak for itself. The rule does not forbid
the United States (Brick vs. Brick, 98 U. S., 514) announced the doctrine with relation an inquiry into the object of the parties in executing and receiving the
to transactions in personal property, which is summarized as follows in the head notes: instrument.' Although in some of the earlier cases this evidence was received
Parol evidence is admissible in equity to show that a certificate of stock issued only on the grounds of fraud or mistake, yet in later cases it was deemed
to a party as owner was delivered to him as security for a loan of money. A sufficient evidence of fraud for the grantee to treat the conveyance as
court of equity will look beyond the terms of an instrument to the real absolute, when in fact it was not, and the tendency of the modern decisions is
transaction, and when that is shown to be one of security and not of sale, it that such evidence may be received to show the real nature and object of the
will give effect to the actual contract of the parties. transaction, although no fraud or mistake of any kind is alleged or proved. It is
The rule which excludes such evidence to contradict or vary a written held that "the agreement for the defeasance, whether written or unwritten, is
instrument does not forbid an inquiry into the object of the parties in execution no more than one of the conditions upon which the deed was given, and
and receiving it. therefore constitutes a part of the consideration for the conveyance . . . .
In the case of Monagas vs. Albertucci (235 U. S., 81, 83) the Supreme Court of the Where the deed does not contain the defeasance, the presumption arises that
United States inserts the following excerpt from the opinion of the Supreme Court of the conveyance is absolute, and, in making proof that a defeasance was
Porto Rico (17 Porto Rico, 684, 686): intended by the parties, and was in fact a part of the consideration upon which
The whole case really turns on the question of whether the written instrument the conveyance was made, this presumption must be removed by testimony
in controversy was a mortgage or a conditional sale. If it is the latter, it must before the debtor can use the evidence showing his right to defeat the
be complied with according to its terms; if the former, the plaintiff must be absolute character of the conveyance . . . . It comes finally to a question of
allowed to repay the money received and take a reconveyance of the land. what was the understanding and the intention of the parties at the time the
The real intention of the parties at the time the written instrument was made instrument was made; and this, like any other fact, depends for its support
must govern in the interpretation given to it by the courts. This must be upon what was said and done by the parties at the time, together with all the
ascertained from the circumstances surrounding the transaction and from the other circumstances bearing upon the question.'
language of the document itself. The correct test, where it can be applied, is 447. Same — Real intention of the parties to be ascertained. — In applying
the continued existence of a debt or liability between the parties. If such exists, the exception under discussion, the extrinsic evidence will not be received
the conveyance may be held to be merely a security for the debt or an because of any particular form of language which the parties may have
indemnity against the liability. On the contrary, if no debt or liability is found to adopted. As we have shown in the preceding section, the intention of the
exist, then the transaction is not a mortgage, but merely a sale with a contract parties must govern; and it matters not what peculiar form the transaction may
of repurchase within a fixed time. While every case depends on its own special have taken. The inquiry always is, Was a security for the loan of money or
facts, certain circumstances are considered as important, and the courts other property intended? But where the deed and accompanying papers on
regard them as throwing much light upon the real intent of the parties and their face constitute a mortgage, parol evidence is not competent to show the
upon the nature of such transactions: such are the existence of a collateral contrary. In solving the question upon the facts, a few things are absolutely
agreement made by the grantor for the payment of money to the grantee, his necessary to be found to exist before the deed can be construed a mortgage.
liability to pay interest, inadequacy of price paid for the conveyance, the A debt owing to the mortgagee, or a liability incurred for the grantor, either
preexisting or created at the time the deed is made, is essential to give the As deeply embedded at the very foundation of all the provisions of the Spanish Code
deed the character of a mortgage. The relation of debtor and creditor must touching the nature and effect of all contractual obligations is the maxim that the will of
appear. The existence of the debt is one of the tests. The amount of the debt, the contracting parties is the law of their contract — a maxim which is amplified in the
as well as its continuance, should also be made to appear where a foreclosure elementary propositions that "contracts are perfected by mere consent" (article 1258);
is asked in the same suit wherein it is sought to establish the character of the that "the contracting parties may make any agreement and establish any clauses and
instrument. It is also of importance to know precisely when the character conditions which they may deem advisable, provided they are not in contravention of
claimed for the instrument was fixed. In construing the deed to be a mortgage, law, morals, or public order" (article 1255); that "the validity and fulfillment of contracts
its character as such must have existed from its very inception, — created at cannot be left to the will of one of the contracting parties" (article 1256); and that
the time the conveyance was made. The character of the transaction is "contracts shall be binding, whatever be the form in which they may have been
precisely what the intention of the parties at the time made it. It will therefore executed, provided the essential conditions required for their validity exist" (article
be discovered that the testimony of those who were present at the time the 1278).
instrument was made, and especially of those who participated in the In the light of these elementary and basic principles of the Code there can be no
transaction, becomes most important. In arriving at the real intent of the question, in the absence of express statutory prohibition, as to the validity of an
parties, their statements and acts at the time of the transaction, the agreement or understanding whereby the lender of money, who as security for the
inadequacy of the consideration named in the deed, the prior existence of a repayment of the loan has taken a deed to land, absolute on its face or in the form of a
debt, and the recognition of its continuance, as by the payment of interest or deed reserving a mere right of repurchase to the vendor, obligates himself to hold such
other acts, are all facts to be considered, and are relevant to the issue. But deed, not as evidence of a contract of sale but by way of security for the repayment of
although parol evidence is received in such cases to show the real nature of the debt; and that unless the rights of innocent third persons have intervened the lender
the transaction, the presumption is that the instrument is what it purports to of the money may be compelled to comply specifically with the terms of such an
be; and before a deed absolute in form can be shown to be a mortgage, agreement, whether it be oral or written; and further, that he will not be permitted, in
the proof should be clear and convincing. The burden rests upon the moving violation of its terms, to set up title in himself or to assert a claim or absolute ownership.
party of overcoming the strong presumption arising from the terms of a written If the parties actually enter into such an agreement, the lender of the money is legally
instrument. If the proofs are doubtful and unsatisfactory, if there is a failure to and morally bound to fulfill it. Of course such an oral contract does not give the borrower
overcome this presumption by testimony entirely plain and convincing beyond a real right in the lands unless it is executed in compliance with the formalities
reasonable controversy, the writing will be held to express correctly the prescribed by law. If entered into orally, it creates a mere personal obligation which in
intention of the parties. A judgment of the court, a deliberate deed or writing, no wise effects the lands, and if the lender conveys the lands to innocent third persons,
are of too much solemnity to be brushed away by loose and inconclusive the borrower must content himself with a mere right of action for damages against the
evidence. Proof tending to show that no transfer of title was contemplated lender, for failure to comply with his agreement. But so long as the land remains in the
does not fall within the condemnation of the rule prohibiting oral evidence to hands of the lender, the borrower may demand the fulfillment of the agreement, and a
vary the terms of a written instrument. As the rule has often been stated, `to mere lack of any of the formalities prescribed under the Spanish Code for the execution
convert a deed absolute into a mortgage, the evidence should be so clear as of contracts affecting real estate will not defeat his right to have the contract fulfilled, as
to leave no substantial doubt that the real intention of the parties was to the lender may be compelled in appropriate proceedings to execute the contract with
execute a mortgage.'" the necessary prescribed formalities.
Having disposed of the contention that the provisions of the new Code of Civil We have frequently held that under the Spanish Codes an oral contract affecting lands,
Procedure, enacted under American sovereignty, forbid the introduction of parol even an oral contract for the sale of lands, was valid and enforceable, provided none
evidence to establish the true nature of transactions such as that under consideration of the essential requisites of all valid contracts is lacking, that is to say, (1) consent, (2)
in the case at bar, we come now to consider whether there is anything in the Spanish definite object, and (3) causa or consideration. The lack of the formal requisites
Codes which denies the power of the courts to enforce the equitable doctrine prescribed by the Code in order that such contracts may become effective to bind or
announced by the Supreme Court of the United States with reference to agreements convey the property, such as their execution in public instruments and the like, does
and understandings of this nature. not invalidate them as personal obligations, as "either party may compel the other to
But first, it may be well at this time to emphasize the fact that the courts of these Islands comply with such formalities" from the moment the valid personal obligation has been
are not organized with reference to the old English and American classification into entered into. (Article 1279 of the Civil Code.)
courts of law and equity; and that our Codes recognize no distinction between actions In like manner an agreement such as we have just described, entered into by a lender
at law and suits in equity, as these terms are understood in English and American of money, who has taken lands and security for its repayment, is a valid contract, and
jurisdictions, wherein a distinction is made between law and equity in the enforcement we know of no provision in the Codes which denies the right of the borrower to demand
of private rights and the redress of private wrongs. its fulfillment. On the contrary, provided the rights of innocent purchasers for valuable
Deeply embedded among the fundamental principles on which the authors of the Civil consideration have not intervened, and provided of course that the borrower can
Code of Spain erected that monument to their genuis as codifiers, is the broad equitable establish satisfactorily the fact that such a contract was actually entered into, the
rule that "No man may wrongfully (tortiously) enrich himself at the expense of (to the principle that no man may wrongfully enrich himself at the expense of another imposes
injury of) another." ("E aun dixeron, que ninguno non deue enriqueszer tortizeramente an imperative obligation on the lender to carry out his contract, and secures the right to
con daño de otro"). (Regla 17, Title 34, Setena Partida, sentencias Tribunal de España, the borrower to have it enforced by the courts. And on the other hand, the same
May 1, 1875; December 16, 1880; May 24, 1882, April 24, 1896.) principle secures to the lender the right to enforce the contract upon the failure of the
borrower to comply with its terms, that is to say, to have the lands held as security sold was reduced from P420 to P300 per annum, the real purpose and object of this
and the proceeds applied to the payment of the debt. arrangement being to reduce the amount of the annual interest on the original loan
But this conclusion is in substance and in effect identical with that arrived at by the made to the nominal vendor of the land, proportionately to the reduction of the amount
courts in England and the United States, when they declare that the transaction in such of the loan itself by the payment of P1,000. If it be true that two years after the
cases will be treated as in the nature of an equitable mortgage and enforced as such. transaction evidenced by the instrument attached to the complaint, the defendant
That is merely to say that the parties will be compelled to comply with the terms of the accepted from the plaintiff's mother the sum of P1,000, and thereafter reduced the
agreement that the lands should be held as security for the debt, provided of course amount of the annual payments to be made by her, it cannot be doubted that the plaintiff
the agreement can be established by competent evidence and the rights of innocent has a good cause of action against the defendant.
third parties have not intervened. The acceptance by the defendant of this large sum of money, under the circumstances
Under neither system will the contract be given the effect of a duly recorded or a valid as they appear from the complaint, can only be accounted for on one of two
mortgage, so as to bind the lands in the hands of innocent third persons; but the result hypotheses. Either the original transaction was in truth and in fact an arrangement or
under both systems is substantially identical in that as long as the property remains in agreement by virtue of which a loan of money was made and secured by a formal deed
the hands of the lender he cannot deny the right of the borrower to recover the lands of sale of land with a reserved right of repurchase; or, if the original transaction was in
by the payment of the debt, nor can he set up a claim of absolute ownership on the truth and in fact one of purchase and sale of real estate, with a reserved right of
lands which will defeat the right of the borrower in this regard until and unless the repurchase in the vendor, then the purchaser, by the acceptance from the vendor of
borrower's right of action has prescribed. the sum of P1,000, waived and surrendered his rights under the original contract, and
The real difficulty which has confronted the borrowers in attempting to enforce alleged entered into a new contract with the vendor, under which he obligated himself to cancel
contracts of this nature has not lain in the failure of the law to recognize their rights in the deed, or resell the land to the original vendor on the payment of the balance of the
the premises, but rather in the inherent difficulties confronting them in their attempts to original purchase price, and bound himself not to exercise his right, under the original
prove the existence of such a contract. deed of sale, to refuse to allow the original vendor to repurchase after the expiration of
In the very nature of things the disqualification of those directly interested in an action the period stipulated in the original contract for that purpose.
to testify as witnesses, prescribed in article 1247 of the Spanish Code, must have Upon either hypothesis, plaintiff would clearly be entitled to the relief prayed for in his
enormously increased the difficulties confronting a borrower in an attempt to establish complaint. Of course the defendant is not entitled to keep both the land and the
the existence of such an oral contract, prior to the enactment of the new Code of Civil payment of a thousand pesos. The acceptance and retention of such a payment is
Procedure prescribing new rules in this regard. This because, as a rule, the existence wholly inconsistent with a claim of a right of absolute ownership in the land, without any
of such contracts is made known to few persons other than the contracting parties obligation to resell it to the original vendor. Defendant can not eat his cake and have it
themselves. too.
And while the new rules of evidence have removed this difficulty from the path of the In the case of Lichauco vs. Berenguer (20 Phil. Rep., 12), we found the fact that various
lender seeking to establish the existence of such an agreement, they by no means relief partial payments had been made by the vendor, and accepted by the purchaser, for the
him of the necessity of establishing his allegations by clear, convincing and satisfactory purpose of repaying the original purchase price, absolutely incompatible "with the idea
evidence. The principle on which the codifiers rested the rule laid down in article 1248 of the irrevocability of the title of ownership of the purchaser" at the expiration of the
of the Civil Code is not less imperative under the new rules of evidence than under term stipulated in the original contract for the exercise of the right of repurchase.
those found in the Spanish Code. That article is as follows: Speaking through the Chief Justice, we said in that case:
The probative force of the testimony of the witnesses shall be valued by the The vendee, who has been reimbursed by the vendor for a part of the
courts in accordance with the provisions of the Law of Civil Procedure, taking repurchase price, is bound to fulfill the obligation to sell back, derived from the
care to avoid that, by the simple coincidence of some testimony, unless its sale with right to repurchase, or must show reason why he may keep this part
truthfulness be evident, the affairs may be finally decided in which are usually of the price and, notwithstanding his so doing, be considered released from
employed public deeds, private documents, or any commencement of written effecting the resale. He may be entitled to require the completion of the price,
evidence. or that he be paid other expenses before he returns the thing which he had
In this jurisdiction, as in the United States, the existence of an oral agreement or purchased under such a condition subsequent; but the exercise of the right of
understanding such as that alleged in the complaint in the case at bar cannot be redemption having been begun and admitted, the irrevocability of the
maintained on vague, uncertain and indefinite testimony, against the reasonable ownership in such manner acquired is in all respects incompatible with these
presumption that prudent men who enter into such contracts will execute them in acts so performed.
writing, and comply with the formalities prescribed by law for the creation of a valid The order entered in the court below, sustaining the demurrer to the complaint must be
mortgage. But where the evidence as to the existence of such an understanding or reversed, and the record remanded for further proceedings, without costs in this
agreement is clear, convincing and satisfactory, the same broad principles of equity instance.
operate in this jurisdiction as in the United States to compel the parties to live up to the Let judgment be entered in accordance herewith. So ordered.
terms of their contract.
2. The second ground upon which the demurrer should have been overruled is that it
admits the truth of the allegation of the complaint that in the year 1897, two years after
the date of the execution of the instrument purporting to be a deed of sale, the nominal
vendor paid the nominal purchaser P1,000, whereupon the nominal rent of the land
G.R. No. L-12342 August 3, 1918 1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and
A. A. ADDISON, plaintiff-appellant, vs. MARCIANA FELIX and BALBINO accompanied by him, in order to survey the land sold to the defendant; but he surveyed
TIOCO, defendants-appellees. only two parcels, which are those occupied mainly by the brothers Leon and Julio
Thos. D. Aitken for appellant. Modesto Reyes and Eliseo Ymzon for appellees. Villafuerte. He did not survey the other parcels, as they were not designated to him by
1. 1.VENDOR AND PURCHASER; DELIVERY; EXECUTION OF PUBLIC the plaintiff. In order to make this survey it was necessary to obtain from the Land Court
INSTRUMENT.—It is the duty of the vendor to deliver the thing sold. a writ of injunction against the occupants, and for the purpose of the issuance of this
Symbolic delivery by the execution of a public instrument is equivalent to writ the defendant, in June, 1914, filed an application with the Land Court for the
actual delivery only when the thing sold is subject to the control of the vendor. registration in her name of four parcels of land described in the deed of sale executed
1. 2.ID.; ID.; RESCISSION.—If the vendor fails to deliver the thing sold the in her favor by the plaintiff. The proceedings in the matter of this application were
vendee may elect to rescind the contract. subsequently dismissed, for failure to present the required plans within the period of
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J. the time allowed for the purpose.
The trial court rendered judgment in behalf of the defendant, holding the contract of
FISHER, J.: sale to be rescinded and ordering the return to the plaintiff the P3,000 paid on account
By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana of the price, together with interest thereon at the rate of 10 per cent per annum. From
Felix, with the consent of her husband, the defendant Balbino Tioco, four parcels of this judgment the plaintiff appealed.
land, described in the instrument. The defendant Felix paid, at the time of the execution In decreeing the rescission of the contract, the trial judge rested his conclusion solely
of the deed, the sum of P3,000 on account of the purchase price, and bound herself to on the indisputable fact that up to that time the lands sold had not been registered in
pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second accordance with the Torrens system, and on the terms of the second paragraph of
of P5,000 thirty days after the issuance to her of a certificate of title under the Land clause (h) of the contract, whereby it is stipulated that ". . . within one year from the
Registration Act, and further, within ten years from the date of such title P10, for each date of the certificate of title in favor of Marciana Felix, this latter may rescind the
coconut tree in bearing and P5 for each such tree not in bearing, that might be growing present contract of purchase and sale . . . ."
on said four parcels of land on the date of the issuance of title to her, with the condition The appellant objects, and rightly, that the cross-complaint is not founded on the
that the total price should not exceed P85,000. It was further stipulated that the hypothesis of the conventional rescission relied upon by the court, but on the failure to
purchaser was to deliver to the vendor 25 per centum of the value of the products that deliver the land sold. He argues that the right to rescind the contract by virtue of the
she might obtain from the four parcels "from the moment she takes possession of them special agreement not only did not exist from the moment of the execution of the
until the Torrens certificate of title be issued in her favor." contract up to one year after the registration of the land, but does not accrue until the
It was also covenanted that "within one year from the date of the certificate of title in land is registered. The wording of the clause, in fact, substantiates the contention. The
favor of Marciana Felix, this latter may rescind the present contract of purchase and one year's deliberation granted to the purchaser was to be counted "from the date of
sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the the certificate of title ... ." Therefore the right to elect to rescind the contract was subject
net value of all the products of the four parcels sold, and I shall obliged to return to her, to a condition, namely, the issuance of the title. The record show that up to the present
Marciana Felix, all the sums that she may have paid me, together with interest at the time that condition has not been fulfilled; consequently the defendant cannot be heard
rate of 10 per cent per annum." to invoke a right which depends on the existence of that condition. If in the cross-
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of Manila complaint it had been alleged that the fulfillment of the condition was impossible for
to compel Marciana Felix to make payment of the first installment of P2,000, reasons imputable to the plaintiff, and if this allegation had been proven, perhaps the
demandable in accordance with the terms of the contract of sale aforementioned, on condition would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ.
July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per Code); but this issue was not presented in the defendant's answer.
annum. The defendant, jointly with her husband, answered the complaint and alleged However, although we are not in agreement with the reasoning found in the decision
by way of special defense that the plaintiff had absolutely failed to deliver to the appealed from, we consider it to be correct in its result. The record shows that the
defendant the lands that were the subject matter of the sale, notwithstanding the plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was
demands made upon him for this purpose. She therefore asked that she be absolved not even able to show them to the purchaser; and as regards the other two, more than
from the complaint, and that, after a declaration of the rescission of the contract of the two-thirds of their area was in the hostile and adverse possession of a third person.
purchase and sale of said lands, the plaintiff be ordered to refund the P3,000 that had The Code imposes upon the vendor the obligation to deliver the thing sold. The thing
been paid to him on account, together with the interest agreed upon, and to pay an is considered to be delivered when it is placed "in the hands and possession of the
indemnity for the losses and damages which the defendant alleged she had suffered vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the
through the plaintiff's non-fulfillment of the contract. execution of a public instruments is equivalent to the delivery of the thing which is the
The evidence adduced shows that after the execution of the deed of the sale the object of the contract, but, in order that this symbolic delivery may produce the effect of
plaintiff, at the request of the purchaser, went to Lucena, accompanied by a tradition, it is necessary that the vendor shall have had such control over the thing sold
representative of the latter, for the purpose of designating and delivering the lands sold. that, at the moment of the sale, its material delivery could have been made. It is not
He was able to designate only two of the four parcels, and more than two-thirds of these enough to confer upon the purchaser the ownership and the right of possession. The
two were found to be in the possession of one Juan Villafuerte, who claimed to be the thing sold must be placed in his control. When there is no impediment whatever to
owner of the parts so occupied by him. The plaintiff admitted that the purchaser would prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August, vendor, symbolic delivery through the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the purchaser cannot have the Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality — the delivery has not been
effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604
of the French Civil code, "the word "delivery" expresses a complex idea . . . the
abandonment of the thing by the person who makes the delivery and the taking control
of it by the person to whom the delivery is made."
The execution of a public instrument is sufficient for the purposes of the abandonment
made by the vendor; but it is not always sufficient to permit of the apprehension of the
thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its
decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely
declares that when the sale is made through the means of a public instrument, the
execution of this latter is equivalent to the delivery of the thing sold: which does not and
cannot mean that this fictitious tradition necessarily implies the real tradition of the thing
sold, for it is incontrovertible that, while its ownership still pertains to the vendor (and
with greater reason if it does not), a third person may be in possession of the same
thing; wherefore, though, as a general rule, he who purchases by means of a public
instrument should be deemed . . . to be the possessor in fact, yet this presumption gives
way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument was not
a fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-
fulfillment arises the purchaser's right to demand, as she has demanded, the rescission
of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing upon
the purchaser the obligation to take the necessary steps to obtain the material
possession of the thing sold, and it were proven that she knew that the thing was in the
possession of a third person claiming to have property rights therein, such agreement
would be perfectly valid. But there is nothing in the instrument which would indicate,
even implicitly, that such was the agreement. It is true, as the appellant argues, that the
obligation was incumbent upon the defendant Marciana Felix to apply for and obtain
the registration of the land in the new registry of property; but from this it cannot be
concluded that she had to await the final decision of the Court of Land Registration, in
order to be able to enjoy the property sold. On the contrary, it was expressly stipulated
in the contract that the purchaser should deliver to the vendor one-fourth "of the
products ... of the aforesaid four parcels from the moment when she takes possession
of them until the Torrens certificate of title be issued in her favor." This obviously shows
that it was not forseen that the purchaser might be deprived of her possession during
the course of the registration proceedings, but that the transaction rested on the
assumption that she was to have, during said period, the material possession and
enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by
contractual agreement, it is not the conventional but the legal interest that is
demandable.
It is therefore held that the contract of purchase and sale entered into by and between
the plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff is
ordered to make restitution of the sum of P3,000 received by him on account of the
price of the sale, together with interest thereon at the legal rate of 6 per annum from
the date of the filing of the complaint until payment, with the costs of both instances
against the appellant. So ordered.
G.R. No. L-69970 November 28, 1988 out to another lot belonging to her step-brother. Her claim that the petitioner was her
FELIX DANGUILAN, petitioner, vs. INTERMEDIATE APPELLATE COURT, tenant (later changed to administrator) was disbelieved by the trial court, and properly
APOLONIA MELAD, assisted by her husband, JOSE TAGACAY, respondents. so, for its inconsistency. In short, she failed to show that she consummated the contract
Civil Law; Donations; The conveyances in the case at bar being onerous of sale by actual delivery of the properties to her and her actual possession thereof in
donations are not covered by the rule in Article 749 of the Civil Code requiring donations concept of purchaser-owner.
of real properties to be effected through a public instrument.—It is our view, considering Same; Same; Same; Same; It is a fundamental and elementary principle that
the language of the two instruments, that Domingo Melad did intend to donate the ownership does not pass by mere stipulation but only by delivery.—“Since in this
properties to the petitioner, as the private respondent contends. We do not think, jurisdiction it is a fundamental and elementary principle that ownership does not pass
however, that the donee was moved by pure liberality. While truly donations, the by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co.
conveyances were onerous donations as the properties were given to the petitioner in v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute
exchange for his obligation to take care of the donee for the rest of his life and provide sufficient delivery where the property involved is in the actual and adverse possession
for his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code of third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it
requiring donations of real properties to be effected through a public instrument. becomes incontestable that even if included in the contract, the ownership of the
Same; Same; Same; Contrary to the arguments of private respondent, there was property in dispute did not pass thereby to Mariano Garchitorena. Not having become
a fair exchange between the donor and the donee that made the transaction an onerous the owner for lack of delivery, Mariano Garchitorena cannot presume to recover the
donation.—The private respondent argues that as there was no equivalence between property from its present possessors. His action, therefore, is not one of revindicacion,
the value of the lands donated and the services for which they were being exchanged, but one against his vendor for specific performance of the sale to him.”
the two transactions should be considered pure or gratuitous donations of real rights, Same; Same; Same; Same; Same; In order that symbolic delivery may produce
hence, they should have been effected through a public instrument and not mere the effect of tradition, it is necessary that the vendor shall have control over the thing
private writings. However, no evidence has been adduced to support her contention sold that, at the moment of the sale, its material delivery could have been made.—As
that the values exchanged were disproportionate or unequal. On the other hand, both for the argument that symbolic delivery was affected through the deed of sale, which
the trial court and the respondent court have affirmed the factual allegation that the was a public instrument, the Court has held: “The Code imposes upon the vendor the
petitioner did take care of Domingo Melad and later arranged for his burial in obligation to deliver the thing sold. The thing is considered to be delivered when it is
accordance with the condition imposed by the donor. It is alleged and not denied that placed ‘in the hands and possession of the vendee.’ (Civil Code, art. 1462). It is true
he died when he was almost one hundred years old, which would mean that the that the same article declares that the execution of a public instrument is equivalent to
petitioner farmed the land practically by himself and so provided for the donee (and his the delivery of the thing which is the object of the contract, but, in order that this
wife) during the latter part of Domingo Melad’s life. We may assume that there was a symbolic delivery may produce the effect of tradition, it is necessary that the vendor
fair exchange between the donor and the donee that made the transaction an onerous shall have had such control over the thing sold that, at the moment of the sale, its
donation. material delivery could have been made. It is not enough to confer upon the purchaser
Same; Sale; Presumption of due execution of a public instrument is disputable the ownership and the right of possession. The thing sold must be placed in his control.
and will yield to contrary evidence.—The deed of sale was allegedly executed when When there is no impediment whatever to prevent the thing sold passing into the
the respondent was only three years old and the consideration was supposedly paid by tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
her mother, Maria Yedan, from her earnings as a wage worker in a factory. This was execution of a public instrument is sufficient. But if, notwithstanding the execution of
itself a suspicious circumstance one may well wonder why the transfer was not made the instrument, the purchaser cannot have the enjoyment and material tenancy of the
to the mother herself, who was after all the one paying for the lands. The sale was thing and make use of it himself or through another in his name, because such tenancy
made out in favor of Apolonia Melad although she had been using the surname Yedan, and enjoyment are opposed by the interposition of another will, then fiction yields to
her mother’s surname, before that instrument was signed and in fact even after she got reality—the delivery has not been effected.”
married. The averment was also made that the contract was simulated and prepared Same; Possession; Rule where respective claims of the parties were both to be
after Domingo Melad’s death in 1945. It was also alleged that even after the supposed discarded as being inherently weak.—There is no dispute that it is the petitioner and
execution of the said contract, the respondent considered Domingo Melad the owner not the private respondent who is in actual possession of the litigated properties. Even
of the properties and that she had never occupied the same. Considering these serious if the respective claims of the parties were both to be discarded as being inherently
challenges, the appellate court could have devoted a little more time to examining weak, the decision should still incline in favor of the petitioner pursuant to the doctrine
Exhibit “E” and the circumstances surrounding its execution before pronouncing its announced in Santos & Espinosa v. Estejada, where the Court announced: “If the claim
validity in the manner described above. While it is true that the due execution of a public of both the plaintiff and the defendant are weak, judgment must be for the defendant,
instrument is presumed, the presumption is disputable and will yield to contradictory for the latter being in possession is presumed to be the owner, and cannot be obliged
evidence, which in this case was not refuted. to show or prove a better right.”
Same; Same; Delivery; Private respondent failed to show that she consummated PETITION to review the decision of the then Intermediate Appellate Court.
the contract of sale by actual delivery of the properties to her.—At any rate, even CRUZ, J.:
assuming the validity of the deed of sale, the record shows that the private respondent The subject of this dispute is the two lots owned by Domingo Melad which is claimed
did not take possession of the disputed properties and indeed waited until 1962 to file by both the petitioner and the respondent. The trial court believed the petitioner but the
this action for recovery of the lands from the petitioner. If she did have possession, she respondent court, on appeal, upheld the respondent. The case is now before us for a
transferred the same to the petitioner in 1946, by her own sworn admission, and moved resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the
Court of First Instance of Cagayan for recovery of a farm lot and a residential lot which truth of my giving to Felix Danguilan, my agricultural land located at Barrio Fugu-
she claimed she had purchased from Domingo Melad in 1943 and were now being Macusi, Penablanca, Province of Cagayan, Philippine Islands; that this land is
unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the registered under my name; that I hereby declare and bind myself that there is no
allegation and averred that he was the owner of the said lots of which he had been in one to whom I will deliver this land except to him as he will be the one responsible
open, continuous and adverse possession, having acquired them from Domingo Melad for me in the event that I will die and also for all other things needed and necessary
in 1941 and 1943. 2 The case was dismissed for failure to prosecute but was refiled in for me, he will be responsible because of this land I am giving to him; that it is true
1967. 3 that I have nieces and nephews but they are not living with us and there is no one
At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly to whom I will give my land except to Felix Danguilan for he lives with me and this
signed by Domingo Melad and duly notarized, which conveyed the said properties to is the length—175 m. and the width is 150 m.
her for the sum of P80.00. 4 She said the amount was earned by her mother as a worker IN WITNESS WHEREOF, I hereby sign my name below and also those present in
at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo the execution of this receipt this 14th day of September 1941.
Melad, with whom she and her mother were living when he died in 1945. She moved Penablanca Cagayan, September 14, 1941.
out of the farm only when in 1946 Felix Danguilan approached her and asked (SGD.) DOMINGO MELAD
permission to cultivate the land and to stay therein. She had agreed on condition that WITNESSES:
he would deliver part of the harvest from the farm to her, which he did from that year to 1. (T.M.) ISIDRO MELAD
1958. The deliveries having stopped, she then consulted the municipal judge who 2. (SGD.) FELIX DANGUILAN
advised her to file the complaint against Danguilan. The plaintiff 's mother, her only 3. (T.M.) ILLEGIBLE
other witness, corroborated this testimony. 5 EXHIBIT 3-a is quoted as follows: 13
For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do
niece, whom he and his wife Juana Malupang had taken into their home as their ward hereby swear and declare the truth that I have delivered my residential lot at
as they had no children of their own. He and his wife lived with the couple in their house Centro, Penablanca, Cagayan, to Felix Danguilan, my son-in-law because I have
on the residential lot and helped Domingo with the cultivation of the farm. Domingo no child; that I have thought of giving him my land because he will be the one to
Melad signed in 1941 a private instrument in which he gave the defendant the farm and take care of SHELTERING me or bury me when I die and this is why I have thought
in 1943 another private instrument in which he also gave him the residential lot, on the of executing this document; that the boundaries of this lot is—on the east,
understanding that the latter would take care of the grantor and would bury him upon Cresencio Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi
his death. 6 Danguilan presented three other witnesses 7 to corroborate his statements and on the west, Pablo Pelagio and the area of this lot is 35 meters going south;
and to prove that he had been living in the land since his marriage to Isidra and had width and length beginning west to east is 40 meters.
remained in possession thereof after Domingo Melad's death in 1945. Two of said IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.
witnesses declared that neither the plaintiff nor her mother lived in the land with (SGD.) DOMINGO MELAD
Domingo Melad. 8 WITNESSES:
The decision of the trial court was based mainly on the issue of possession. Weighing (SGD.) ILLEGIBLE
the evidence presented by the parties, the judge 9 held that the defendant was more (SGD.) DANIEL ARAO
believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It was It is our view, considering the language of the two instruments, that Domingo Melad did
held that the plaintiff's own declaration that she moved out of the property in 1946 and intend to donate the properties to the petitioner, as the private respondent contends.
left it in the possession of the defendant was contradictory to her claim of ownership. We do not think, however, that the donee was moved by pure liberality. While truly
She was also inconsistent when she testified first that the defendant was her tenant donations, the conveyances were onerous donations as the properties were given to
and later in rebuttal that he was her administrator. The decision concluded that where the petitioner in exchange for his obligation to take care of the donee for the rest of his
there was doubt as to the ownership of the property, the presumption was in favor of life and provide for his burial. Hence, it was not covered by the rule in Article 749 of the
the one actually occupying the same, which in this case was the defendant. 10 Civil Code requiring donations of real properties to be effected through a public
The review by the respondent court 11 of this decision was manifestly less than instrument. The case at bar comes squarely under the doctrine laid down in Manalo v.
thorough. For the most part it merely affirmed the factual findings of the trial court except De Mesa, 14 where the Court held:
for an irrelevant modification, and it was only toward the end that it went to and resolved There can be no doubt that the donation in question was made for a valuable
what it considered the lone decisive issue. consideration, since the donors made it conditional upon the donees' bearing the
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad expenses that might be occasioned by the death and burial of the donor Placida
had conveyed the two parcels of land to the petitioner, were null and void. The reason Manalo, a condition and obligation which the donee Gregorio de Mesa carried out
was that they were donations of real property and as such should have been effected in his own behalf and for his wife Leoncia Manalo; therefore, in order to determine
through a public instrument. It then set aside the appealed decision and declared the whether or not said donation is valid and effective it should be sufficient to
respondents the true and lawful owners of the disputed property. demonstrate that, as a contract, it embraces the conditions the law requires and is
The said exhibits read as follows: valid and effective, although not recorded in a public instrument.
EXHIBIT 2-b is quoted as follows: 12 The private respondent argues that as there was no equivalence between the value of
the lands donated and the services for which they were being exchanged, the two
transactions should be considered pure or gratuitous donations of real rights, hence, His action, therefore, is not one of revindicacion, but one against his vendor for
they should have been effected through a public instrument and not mere private specific performance of the sale to him.
writings. However, no evidence has been adduced to support her contention that the In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared
values exchanged were disproportionate or unequal. for the Court:
On the other hand, both the trial court and the respondent court have affirmed the Therefore, in our Civil Code it is a fundamental principle in all matters of
factual allegation that the petitioner did take care of Domingo Melad and later arranged contracts and a well- known doctrine of law that "non mudis pactis sed
for his burial in accordance with the condition imposed by the donor. It is alleged and traditione dominia rerum transferuntur". In conformity with said doctrine as
not denied that he died when he was almost one hundred years old, 15 which would established in paragraph 2 of article 609 of said code, that "the ownership and
mean that the petitioner farmed the land practically by himself and so provided for the other property rights are acquired and transmitted by law, by gift, by testate or
donee (and his wife) during the latter part of Domingo Melad's life. We may assume intestate succession, and, in consequence of certain contracts, by tradition".
that there was a fair exchange between the donor and the donee that made the And as the logical application of this disposition article 1095 prescribes the
transaction an onerous donation. following: "A creditor has the rights to the fruits of a thing from the time the
Regarding the private respondent's claim that she had purchased the properties by obligation to deliver it arises. However, he shall not acquire a real right" (and
virtue of a deed of sale, the respondent court had only the following to say: "Exhibit 'E' the ownership is surely such) "until the property has been delivered to him."
taken together with the documentary and oral evidence shows that the preponderance In accordance with such disposition and provisions the delivery of a thing
of evidence is in favor of the appellants." This was, we think, a rather superficial way of constitutes a necessary and indispensable requisite for the purpose of
resolving such a basic and important issue. acquiring the ownership of the same by virtue of a contract. As Manresa states
The deed of sale was allegedly executed when the respondent was only three years in his Commentaries on the Civil Code, volume 10, pages 339 and 340: "Our
old and the consideration was supposedly paid by her mother, Maria Yedan from her law does not admit the doctrine of the transfer of property by mere consent
earnings as a wage worker in a factory. 16 This was itself a suspicious circumstance, but limits the effect of the agreement to the due execution of the contract. ...
one may well wonder why the transfer was not made to the mother herself, who was The ownership, the property right, is only derived from the delivery of a thing
after all the one paying for the lands. The sale was made out in favor of Apolonia Melad ... "
although she had been using the surname Yedan her mother's surname, before that As for the argument that symbolic delivery was effected through the deed of sale, which
instrument was signed and in fact even after she got married. 17The averment was also was a public instrument, the Court has held:
made that the contract was simulated and prepared after Domingo Melad's death in The Code imposes upon the vendor the obligation to deliver the thing sold.
1945. 18It was also alleged that even after the supposed execution of the said contract, The thing is considered to be delivered when it is placed "in the hands and
the respondent considered Domingo Melad the owner of the properties and that she possession of the vendee." (Civil Code, art. 1462). It is true that the same
had never occupied the same. 19 article declares that the execution of a public instrument is equivalent to the
Considering these serious challenges, the appellate court could have devoted a little delivery of the thing which is the object of the contract, but, in order that this
more time to examining Exhibit "E" and the circumstances surrounding its execution symbolic delivery may produce the effect of tradition, it is necessary that the
before pronouncing its validity in the manner described above. While it is true that the vendor shall have had such control over the thing sold that, at the moment of
due execution of a public instrument is presumed, the presumption is disputable and the sale, its material delivery could have been made. It is not enough to confer
will yield to contradictory evidence, which in this case was not refuted. upon the purchaser the ownership and the right of possession. The thing sold
At any rate, even assuming the validity of the deed of sale, the record shows that the must be placed in his control.When there is no impediment whatever to
private respondent did not take possession of the disputed properties and indeed prevent the thing sold passing into the tenancy of the purchaser by the sole
waited until 1962 to file this action for recovery of the lands from the petitioner. If she will of the vendor, symbolic delivery through the execution of a public
did have possession, she transferred the same to the petitioner in 1946, by her own instrument is sufficient. But if, notwithstanding the execution of the instrument,
sworn admission, and moved out to another lot belonging to her step-brother. 20 Her the purchaser cannot have the enjoyment and material tenancy of the thing
claim that the petitioner was her tenant (later changed to administrator) was disbelieved and make use of it himself or through another in his name, because such
by the trial court, and properly so, for its inconsistency. In short, she failed to show that tenancy and enjoyment are opposed by the interposition of another will, then
she consummated the contract of sale by actual delivery of the properties to her and fiction yields to reality—the delivery has not been effected. 23
her actual possession thereof in concept of purchaser-owner. There is no dispute that it is the petitioner and not the private respondent who is in
As was held in Garchitorena v. Almeda: 21 actual possession of the litigated properties. Even if the respective claims of the parties
Since in this jurisdiction it is a fundamental and elementary principle that ownership were both to be discarded as being inherently weak, the decision should still incline in
does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; favor of the petitioner pursuant to the doctrine announced in Santos & Espinosa v.
Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public Estejada 24 where the Court announced:
document does not constitute sufficient delivery where the property involved is in If the claim of both the plaintiff and the defendant are weak, judgment must be
the actual and adverse possession of third persons (Addison vs. Felix, 38 Phil. 404; for the defendant, for the latter being in possession is presumed to be the
Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in owner, and cannot be obliged to show or prove a better right.
the contract, the ownership of the property in dispute did not pass thereby to WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial
Mariano Garchitorena. Not having become the owner for lack of delivery, Mariano court REINSTATED, with costs against the private respondent. It is so ordered.
Garchitorena cannot presume to recover the property from its present possessors. Narvasa (Chairman), Gancayco, Griño-Aquino and Medialdea, JJ., concur.
G.R. No. L-21998 November 10, 1975 its possession" the latter failed or refused to return said parcel of land to the former,
CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants, vs. ESTER T. causing them damage; and that Eustaquia and Catalina Bocar, vendors of the property,
VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA BOCAR and CATALINA are included defendants in the complaint by virtue of the warranty clause contained in
BOCAR defendants-appellees. the document of sale. Plaintiffs prayed for a decision ordering defendants to surrender
Julio Siayngco for plaintiffs-appellants. the possession of the parcel of land above-described to them and to pay damages in
Filomeno Arteche, Jr. for defendants-appellees. . the amounts specified. .
Civil law; Sales; Presumptive delivery by execution of public instrument can be On February 21, 1963, appellees moved to dismiss the complaint on the ground that
negated by failure of vendee to take actual possession, of land sold.—It is true that the the Court of First Instance had no jurisdiction over the subject matter, the action being
execution of the deed of absolute sale in a public instrument is equivalent to delivery of one of forcible entry. Appellants opposed the Motion to Dismiss asserting that the action
the land subject of the sale. This presumptive delivery only holds true when there is no is not one for forcible entry inasmuch as in the complaint, there is no allegation that the
impediment that may prevent the passing of the property from the hands of the vendor deprivation of possession was effected through "force, intimidation, threat, strategy or
into those of the vendee. It can be negated by the reality that the vendees actually failed stealth." .
to obtain material possession of the land subject of the sale. On May 13, 1963, the trial court issued an order dismissing the complaint for lack of
Same; Forcible entry and detainer; To constitute an action for forcible entry, jurisdiction, it appearing from the allegations in the complaint that the case is one for
complaint must allege not only plaintiff’s prior physical possession, but also his forcible entry which belongs to the exclusive jurisdiction of the Justice of the Peace
deprivation thereof by any of the means provided in Section 1, Rule 70.—In order that (now Municipal Court) of Pastrana, Leyte. The first Motion for Reconsideration was
an action may be considered as one for forcible entry, it is not only necessary that the denied on May 27, 1963 and the second was likewise denied on July 5, 1963. From the
plaintiff should allege his prior physical possession of the property but also that he was aforementioned orders, appeal on a pure question of law was interposed to this Court.
deprived of his possession by any of the means provided in Section 1, Rule 70 of the .
Revised Rules of Court, namely: force, intimidation, threats, strategy and stealth. For, It is well-settled that what determines the jurisdiction of the municipal court in a forcible
if the dispossession did not take place by any of these means, the courts of first entry case is the nature of the action pleaded as appears from the allegations in the
instance, not the municipal courts, have jurisdiction. complaint. In ascertaining whether or not the action is one of forcible entry within the
Same: Bare allegation that plaintiff was “deprived” of which he is and has been original exclusive jurisdiction of the municipal court, the averments of the complaint and
the legal owner is insufficient to make the action one for forcible entry.—The bare the character of the relief sought are the ones to be consulted.. 1 .
allegation in the complaint that the plaintiff has been “deprived” of the land of which he In the case at bar, the complaint does not allege that the plaintiffs were in physical
is and has been the legal owner for a long period has been held to be insufficient. It is possession of the land and have been deprived of that possession through force,
true that the mere act of a trespasser in unlawfully entering the land, intimidation, threat, strategy, or stealth. It simply avers that plaintiffs-appellants bought
x x x would imply the use of force. In the case at bar, no such inference could be on November 12, 1962 from defendants-appellees Eustaquia Bocar and Catalina Bocar
made as plaintiffs-appellants had not claimed that they were in actual physical the parcel of land in question for the amount of P2,800.00; that a deed of sale was
possession of the property prior to the entry of the Villablancas. Moreover, it is evident executed, notarized and registered;that "during this first week of February, 1963,
that plaintiffs-appellants are not only seeking to get the possession of the property, but defendants Ester T. Villablanca and her husband, Zosimo Villablanca, illegally and
as an alternative cause of action, they seek the return of the price and payment of without any right whatsoever, took possession of the above described property,
damages by the vendors “in case of eviction or loss of ownership” of the property. It is, harvesting coconuts from the coconut plantation therein, thus depriving of its
therefore, not the summary action of forcible entry within the context of the Rules. possession herein plaintiffs, and causing them damages for the amount of EIGHT
APPEAL from an order of the Court of First Instance of Leyte. Elias B. Asuncion, J. HUNDRED PESOS (P800.00)"; that for the purpose of enforcing the vendors' warranty
in case of eviction, Eustaquia Bocar and Catalina Bocar were also included as
ANTONIO, J.: defendants; and, therefore, plaintiffs-appellants pray that a decision be rendered,
The only issue posed by this appeal is whether or not, from the nature of the action ordering (a) defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to
pleaded as appears in the allegations of the complaint, the aforesaid action is one of surrender the possession of the above described property to said plaintiffs"; (b)
forcible entry, within the exclusive jurisdiction of the municipal court. . defendants Ester T. Villablanca and her husband, Zosimo Villablanca, "to pay to said
On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a complaint plaintiffs the amount of EIGHT HUNDRED PESOS (P800.00) as damages for the
with the Court of First Instance at Tacloban City, alleging that onNovember 15, 1962, usurpation by them of said property"; and (c) defendants Eustaquia Bocar and Catalina
for and in consideration of Two Thousand Eight Hundred Pesos (P2,800.00), they Bocar "to pay the plaintiffs the amount of P2,800.00, plus incidental expenses, as
bought from appellees Eustaquia Bocar and Catalina Bocar a parcel of agricultural land provided for by Art. 1555 of the Civil Code, in case of eviction or loss of ownership to
with an area of 2.6814 hectares, situated in Hamindangon, Pastrana, Leyte; that the said above described property on the part of plaintiffs." .
corresponding document of sale was executed, notarized on the same date, and It is true that the execution of the deed of absolute sale in a public instrument is
recorded in the Registry of Deeds of Tacloban, Leyte on November 16, 1962; that equivalent to delivery of the land subject of the sale.2 This presumptive delivery only
during the first week of February, 1963, defendant spouses Ester T. Villablanca and holds true when there is no impediment that may prevent the passing of the property
Zosimo Villablanca, "illegally and without any right, whatsoever, took possession of the from the hands of the vendor into those of the vendee. It can be negated by the reality
above property harvesting coconuts from the coconut plantation thereon, thus depriving that the vendees actually failed to obtain material possession of the land subject of the
plaintiffs" of its possession; that despite demands made by the plaintiffs upon the sale.. 3 It appears from the records of the case at bar that plaintiffs-appellants had not
above-mentioned defendants "to surrender to them the above-described property and acquired physical possession of the land since its purchase on November 12, 1962. As
a matter of fact, their purpose in filing the complaint in Civil Case No. 3285 is precisely before a justice of the peace is given only for the special circumstances mentioned in
to "get the possession of the property."4 In order that an action may be considered as said section (80). In all other cases Courts of First Instance have jurisdiction, even
one for forcible entry, it is not only necessary that the plaintiff should allege his prior though the twelve months have not elapsed. (Alonzo vs. Municipality of Placer, 5 Phil.
physical possession of the property but also that he was deprived of his possession by Rep., 71; Roman Catholic Church vs. Familiar, 11 Phil. Rep., 310; Gutierrez vs.
any of the means provided in section 1, Rule 70 of the Revised Rules of Court, namely: Rosario, 15 Phil. Rep., 116.)." (Gumiran v. Gumiran, 21 Phil. 174, 178-179.)
force, intimidation, threats, strategy and stealth. For, if the dispossession did not take 6 Gumiran v. Gumiran, Ibid.
place by any of these means, the courts of first instance, not the municipal courts, have
jurisdictions.. 5 The bare allegation in the complaint that the plaintiff has been
"deprived" of the land of which he is and has been the legal owner for a long period has
been held to be insufficient.6 It is true that the mere act of a trespasser in unlawfully
entering the land, planting himself on the ground and excluding therefrom the prior
possessor would imply the use of force. In the case at bar, no such inference could be
made as plaintiffs-appellants had not claimed that they were in actual physical
possession of the property prior to the entry of the Villablancas. Moreover, it is evident
that plaintiffs-appellants are not only seeking to get the possession of the property, but
as an alternative cause of action, they seek the return of the price and payment of
damages by the vendors "in case of eviction or loss of ownership" of the said property.
It is, therefore, not the summary action of forcible entry within the context of the Rules.
.
WHEREFORE, the order of dismissal is hereby set aside, and the case remanded to
the court a quo for further proceedings. Costs against defendants-appellees. .
Barredo, Actg. (Chairman), Aquino, Concepcion, Jr. and Martin. JJ., concur. .
Fernando (Chairman), J, is on leave. .
Footnotes
1 Cananay v. Sarmiento, 79 Phil. 36.
2 Article 1498, Civil Code of the Philippines.
3 Montenegro v. Roxas de Gomez, 58 Phil. 723; Masallo v. Cesar. 39 Phil. 134;
Addison v. Felix and Tioco, 38 Phil. 404.
4 p. 21, Record on Appeal; p. 9, Brief of Appellants.
5 Valderama Lumber Manufacturer's Co., Inc. v. L. S. Sarmiento, 5 SCRA 287, 291.
"In the present case the allegation in the complaint is simply that the plaintiff has been
"deprived" of the land of which he is and has been the legal owner for a long period.
This allegation is not sufficient to show that the action is based upon the provisions of
said section 80. Moreover, upon an examination of the prayer of the complaint, it is
seen that the plaintiff is not only seeking to be repossessed of the land but desires also
a declaration that he is the owner of the same. It is quite clear, from an examination of
the complaint, that, had the same been presented in the court of the justice of the
peace, it would have been demurrable, for the reason that the facts alleged fail to show
that the plaintiff had been dispossessed by any of the methods mentioned in said
section 80.
"It is a general rule of pleading and practice that in all pleadings filed in courts of special
jurisdiction, the special facts giving the court jurisdiction must be specially alleged and
set out. Unless these special jurisdictional facts are alleged, the complaint is
demurrable. The complaint in the present case not containing allegations showing the
special jurisdiction of the justice of the peace, the same would have been demurrable
had it been filed in the court of justice of the peace.
"Said section 80 does not cover all of the cases of dispossession of lands. Whenever
the owner is dispossessed by any other means than those mentioned in said section,
he may maintain his action in a Court of First Instance, and it is not necessary for him
to wait until the expiration of twelve months before commencing an action to be
repossessed and to be declared to be the owner of said land. The summary action
THIRD DIVISION Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a
G.R. No. 92989 July 8, 1991 collection case to recover the sum of P12,269.80 was pending in another court in Cebu.
PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC., On the strength of an alias writ of execution issued on December 27, 1979, the
and ANTONIO V. GONZALES, respondents. provincial sheriff was able to seize and levy on the tractor which was in the premises of
Zosa & Quijano Law Offices for petitioner. Expedito P. Bugarin for respondent GELAC Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where
Trading, Inc. Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its
Chattel Mortgage: Mortgagor retains ownership over the property given as stockholders, Antonio Gonzales.
security, and has the right to sell it with the obligation to secure written consent of the It was only when the check was cleared on January 17, 1980 that the petitioner learned
mortgagee; Validity of the sale not affected if no consent was obtained from the about GELAC having already taken custody of the subject tractor. Consequently, the
mortgagee.—The mortgagor who gave the property as security under a chattel petitioner filed an action to recover the subject tractor against GELAC Trading with the
mortgage did not part with the ownership over the same. He had the right to sell it Regional Trial Court of Cebu City.
although he was under the obligation to secure the written consent of the mortgagee or On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive
he lays himself open to criminal prosecution under the provision of Article 319 par. 2 of portion of the decision reads as follows:
the Revised Penal Code. And even if no consent was obtained from the mortgagee, WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
the validity of the sale would still not be affected. against the defendant, pronouncing that the plaintiff is the owner of the tractor,
Civil Law; Constructive delivery; There is constructive delivery upon the thing subject matter of this case, and directing the defendants Gelac Trading
sold; Case at bar.—In the instant case, actual delivery of the subject tractor could not Corporation and Antonio Gonzales to return the same to the plaintiff herein;
be made. However, there was constructive delivery already upon the execution of the directing the defendants jointly and severally to pay to the plaintiff the amount
public instrument pursuant to Article 1498 and upon the consent or agreement of the of P1,541.00 as expenses for hiring a tractor; P50,000 for moral damages;
parties when the thing sold cannot be immediately transferred to the possession of the P50,000 for exemplary damages; and to pay the cost. (Rollo, pp. 35-36)
vendee. On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
PETITION for certiorari to review the decision of the Court of Appeals. complaint with costs against the petitioner. The Court of Appeals held that the tractor
in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by
GUTIERREZ, JR., J.: virtue of the alias writ of execution issued in Civil Case No. R-16646.
This is a petition for review on certiorari seeking the reversal of the March 23, 1990 The petitioner now comes to the Court raising the following questions:
decision of the Court of Appeals which ruled that the petitioner's purchase of a farm A.
tractor was not validly consummated and ordered a complaint for its recovery WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED
dismissed. THE FACTS AND ERRED IN NOT AFFIRMING THE TRIAL COURT'S FINDING THAT
The facts as established by the records are as follows: OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSED TO HEREIN
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo PETITIONER WHEN SAID TRACTOR WAS LEVIED ON BY THE SHERIFF
Dy purchased a truck and a farm tractor through financing extended by Libra Finance PURSUANT TO AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN
and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as FAVOR OF RESPONDENT GELAC TRADING INC.
security for the loan. B.
The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED ON
wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the MERE CONJECTURE AND SURMISE IN HOLDING THAT THE SALE OF THE
said tractor and assume the mortgage debt of the latter. AFORESAID TRACTOR TO PETITIONER WAS DONE IN FRAUD OF WILFREDO
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the DY'S CREDITORS, THERE BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY
petitioner's request. THE TRIAL COURT.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of C.
the petitioner over the tractor in question. WHETHER OR NOT THE HONORABLE COURT OF APPEALS MISAPPREHENDED
At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo THE FACTS AND ERRED IN NOT SUSTAINING THE FINDING OF THE TRIAL
Dy's failure to pay the amortizations. COURT THAT THE SALE OF THE TRACTOR BY RESPONDENT GELAC TRADING
Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate TO ITS CO-RESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT
release could not be effected because Wilfredo Dy had obtained financing not only for WHICH TIME BOTH RESPONDENTS ALREADY KNEW OF THE FILING OF THE
said tractor but also for a truck and Libra insisted on full payment for both. INSTANT CASE WAS VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so THE CIVIL CODE AND RENDERED THEM LIABLE FOR THE MORAL AND
that full payment could be made for both. On November 22, 1979, a PNB check was EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo,
issued in the amount of P22,000.00 in favor of Libra, thus settling in full the p. 13)
indebtedness of Wilfredo Dy with the financing firm. Payment having been effected The respondents claim that at the time of the execution of the deed of sale, no
through an out-of-town check, Libra insisted that it be cleared first before Libra could constructive delivery was effected since the consummation of the sale depended upon
release the chattels in question. the clearance and encashment of the check which was issued in payment of the subject
tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA Finance which was in possession of the subject tractor due to Wilfredo's failure to pay
80 [1989]), we stated that: the amortization as a preliminary step to foreclosure. As mortgagee, he has the right of
xxx xxx xxx foreclosure upon default by the mortgagor in the performance of the conditions
The rule is settled that the chattel mortgagor continues to be the owner of the mentioned in the contract of mortgage. The law implies that the mortgagee is entitled
property, and therefore, has the power to alienate the same; however, he is to possess the mortgaged property because possession is necessary in order to enable
obliged under pain of penal liability, to secure the written consent of the him to have the property sold.
mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, While it is true that Wilfredo Dy was not in actual possession and control of the subject
(1972), Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage are tractor, his right of ownership was not divested from him upon his default. Neither could
binding, while they subsist, not only upon the parties executing them but also it be said that Libra was the owner of the subject tractor because the mortgagee can
upon those who later, by purchase or otherwise, acquire the properties not become the owner of or convert and appropriate to himself the property mortgaged.
referred to therein. (Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only
The absence of the written consent of the mortgagee to the sale of the remedy given to the mortgagee is to have said property sold at public auction and the
mortgaged property in favor of a third person, therefore, affects not the validity proceeds of the sale applied to the payment of the obligation secured by the mortgagee.
of the sale but only the penal liability of the mortgagor under the Revised Penal (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that Libra Finance
Code and the binding effect of such sale on the mortgagee under the Deed of has already foreclosed the mortgage and that it was the new owner of the subject
Chattel Mortgage. tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the
xxx xxx xxx petitioner. It was aware of the transfer of rights to the petitioner.
The mortgagor who gave the property as security under a chattel mortgage did not part Where a third person purchases the mortgaged property, he automatically steps into
with the ownership over the same. He had the right to sell it although he was under the the shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177
obligation to secure the written consent of the mortgagee or he lays himself open to SCRA 521 [1989]). His right of ownership shall be subject to the mortgage of the thing
criminal prosecution under the provision of Article 319 par. 2 of the Revised Penal sold to him. In the case at bar, the petitioner was fully aware of the existing mortgage
Code. And even if no consent was obtained from the mortgagee, the validity of the sale of the subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale,
would still not be affected. he volunteered to assume the remaining balance of the mortgage debt of Wilfredo Dy
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the which Libra undeniably agreed to.
subject tractor. There is no dispute that the consent of Libra Finance was obtained in The payment of the check was actually intended to extinguish the mortgage obligation
the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to so that the tractor could be released to the petitioner. It was never intended nor could
purchase the tractor and assume the mortgage debt of his brother. The sale between it be considered as payment of the purchase price because the relationship between
the brothers was therefore valid and binding as between them and to the mortgagee, Libra and the petitioner is not one of sale but still a mortgage. The clearing or
as well. encashment of the check which produced the effect of payment determined the full
Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by payment of the money obligation and the release of the chattel mortgage. It was not
the vendee from the moment it is delivered to him in any of the ways specified in Articles determinative of the consummation of the sale. The transaction between the brothers
1497 to 1501 or in any other manner signing an agreement that the possession is is distinct and apart from the transaction between Libra and the petitioner. The
transferred from the vendor to the vendee. We agree with the petitioner that Articles contention, therefore, that the consummation of the sale depended upon the
1498 and 1499 are applicable in the case at bar. encashment of the check is untenable.
Article 1498 states: The sale of the subject tractor was consummated upon the execution of the public
Art. 1498. When the sale is made through a public instrument, the execution instrument on September 4, 1979. At this time constructive delivery was already
thereof shall be equivalent to the delivery of the thing which is the object of effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
the contract, if from the deed the contrary does not appear or cannot clearly levied upon by the sheriff in December, 1979. Well settled is the rule that only properties
be inferred. unquestionably owned by the judgment debtor and which are not exempt by law from
xxx xxx xxx execution should be levied upon or sought to be levied upon. For the power of the court
Article 1499 provides: in the execution of its judgment extends only over properties belonging to the judgment
Article 1499. The delivery of movable property may likewise be made by the debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771,
mere consent or agreement of the contracting parties, if the thing sold cannot January 23, 1991).
be transferred to the possession of the vendee at the time of the sale, or if the The respondents further claim that at that time the sheriff levied on the tractor and took
latter already had it in his possession for any other reason. (1463a) legal custody thereof no one ever protested or filed a third party claim.
In the instant case, actual delivery of the subject tractor could not be made. However, It is inconsequential whether a third party claim has been filed or not by the petitioner
there was constructive delivery already upon the execution of the public instrument during the time the sheriff levied on the subject tractor. A person other than the
pursuant to Article 1498 and upon the consent or agreement of the parties when the judgment debtor who claims ownership or right over levied properties is not precluded,
thing sold cannot be immediately transferred to the possession of the vendee. (Art. however, from taking other legal remedies to prosecute his claim. (Consolidated Bank
1499) and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did
The respondent court avers that the vendor must first have control and possession of when he filed the action for replevin with the RTC.
the thing before he could transfer ownership by constructive delivery. Here, it was Libra
Anent the second and third issues raised, the Court accords great respect and weight
to the findings of fact of the trial court.1âwphi1 There is no sufficient evidence to show
that the sale of the tractor was in fraud of Wilfredo and creditors. While it is true that
Wilfredo and Perfecto are brothers, this fact alone does not give rise to the presumption
that the sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip,
9 SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be established by
clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were
indeed violative of the provisions on human relations. As found by the trial court,
GELAC knew very well of the transfer of the property to the petitioners on July 14, 1980
when it received summons based on the complaint for replevin filed with the RTC by
the petitioner. Notwithstanding said summons, it continued to sell the subject tractor to
one of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals
promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial
Court dated April 8, 1988 is REINSTATED.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin, JJ., concur.
Davide, Jr., J., took no part.
G.R. No. 119745 June 20, 1997 THIRD DIVISION made. It is not enough to confer upon the purchaser the ownership and the right of
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner, vs. possession. The thing sold must be placed in his control. When there is no impediment
COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole
PHILIPPINE NATIONAL BANK, respondents. will of the vendor, symbolic delivery through the execution of a public instrument is
Civil Law; Obligations and Contracts; Sales; Any obscurity in a contract must be sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot
construed against the party who caused it.—By his own admission, Anthony Powers, have the enjoyment and material tenancy of the thing and make use of it himself or
General Manager of petitioner-corporation, did not ask the corporation’s lawyers to through another in his name, because such tenancy and enjoyment are opposed by
stipulate in the contract that Respondent Reynaldo was guaranteeing the ejectment of the interposition of another will, then fiction yields to reality—the delivery has not been
the occupants, because there was already a proviso in said deed of sale that the sellers effected.”
were guaranteeing the peaceful possession by the buyer of the land in question. Any Same; Same; Same; Prior physical delivery or possession is not legally required
obscurity in a contract, if the above-quoted provision can be so described, must be and the execution of the deed of sale is deemed equivalent to delivery. This deed
construed against the party who caused it. Petitioner itself caused the obscurity operates as a formal or symbolic delivery of the property sold and authorizes the buyer
because it omitted this alleged condition when its lawyer drafted said contract. to use the document as proof of ownership.—Considering that the deed of sale between
Same; Same; Same; If the parties intended to impose on respondent spouses the parties did not stipulate or infer otherwise, delivery was effected through the
the obligation to eject the tenants from the lot sold, it should have included such execution of said deed. The lot sold had been placed under the control of petitioner;
provision in the contract.—If the parties intended to impose on respondent spouses the thus, the filing of the ejectment suit was subsequently done. It signified that its new
obligation to eject the tenants from the lot sold, it should have included in the contract owner intended to obtain for itself and to terminate said occupants’ actual possession
a provision similar to that referred to in Romero vs. Court of Appeals, where the thereof. Prior physical delivery or possession is not legally required and the execution
ejectment of the occupants of the lot sold by private respondent was the operative act of the deed of sale is deemed equivalent to delivery. This deed operates as a formal or
which set into motion the period of petitioner’s compliance with his own obligation, i.e., symbolic delivery of the property sold and authorizes the buyer to use the document as
to pay the balance of the purchase price. Failure to remove the squatters within the proof of ownership. Nothing more is required.
stipulated period gave the other party the right to either refuse to proceed with the Same; Same; Same; Breach of Warranty; Requirements.—Obvious to us in the
agreement or to waive that condition of ejectment in consonance with Article 1545 of ambivalent stance of petitioner is its failure to establish any breach of the warranty
the Civil Code. In the case cited, the contract specifically stipulated that the ejectment against eviction. Despite its protestation that its acquisition of the lot was to enable it to
was a condition to be fulfilled; otherwise, the obligation to pay the balance would not set up a warehouse for its asbestos products and that failure to deliver actual
arise. This is not so in the case at bar. possession thereof defeated this purpose, still no breach of warranty against eviction
Same; Same; Same; Rescission; Rescission was not allowed as the breach was can be appreciated because the facts of the case do not show that the requisites for
not substantial and fundamental to the fulfillment by the petitioners of the obligation to such breach have been satisfied. A breach of this warranty requires the concurrence of
sell.—Absent a stipulation therefor, we cannot say that the parties intended to make its the following circumstances: (1) The purchaser has been deprived of the whole or part
nonfulfillment a ground for rescission. If they did intend this, their contract should have of the thing sold; (2) This eviction is by a final judgment; (3) The basis thereof is by
expressly stipulated so. In Ang vs. C.A., rescission was sought on the ground that the virtue of a right prior to the sale made by the vendor; and (4) The vendor has been
petitioners had failed to fulfill their obligation “to remove and clear” the lot sold, the summoned and made co-defendant in the suit for eviction at the instance of the vendee.
performance of which would have given rise to the payment of the consideration by In the absence of these requisites, a breach of the warranty against eviction under
private respondent. Rescission was not allowed, however, because the breach was not Article 1547 cannot be declared.
substantial and fundamental to the fulfillment by the petitioners of the obligation to sell. Same; Same; Same; Same; As petitioner failed to impugn the integrity of the
Same; Same; Same; Symbolic delivery, as a species of constructive delivery, contract, it is presumed, under the law to be valid and subsisting.—We note, however,
effects the transfer of ownership through the execution of a public document. Its efficacy that petitioner’s deprivation of ownership and control finally occurred when it failed
can be prevented if the vendor does not possess control over the thing sold.—Although and/or discontinued paying the amortizations on the mortgage, causing the lot to be
most authorities consider transfer of ownership as the primary purpose of sale, delivery foreclosed and sold at public auction. But this deprivation is due to petitioner’s fault,
remains an indispensable requisite as our law does not admit the doctrine of transfer and not to any act attributable to the vendor-spouses. Because petitioner failed to
of property by mere consent. The Civil Code provides that delivery can either be (1) impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.
actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery (Article Same; Same; Solutio Indebiti; Solutio indebiti applies where: [1] a payment is
1498), as a species of constructive delivery, effects the transfer of ownership through made when there exists no binding relation between the payor, who has no duty to pay,
the execution of a public document. Its efficacy can, however, be prevented if the and the person who received the payment, and [2] the payment is made through
vendor does not possess control over the thing sold, in which case this legal fiction mistake, and not through liberality or some other cause.—Contrary to the contention of
must yield to reality. petitioner that a return of the payments it made to PNB is warranted under Article 2154
Same; Same; Same; In order that this symbolic delivery may produce the effect of the Code, solutio indebiti does not apply in this case. This doctrine applies where:
of tradition, it is necessary that the vendor shall have had such control over the thing (1) a payment is made when there exists no binding relation between the payor, who
sold.—The key word is control, not possession, of the land as petitioner would like us has no duty to pay, and the person who received the payment, and (2) the payment is
to believe. The Court has consistently held that: “xxx (I)n order that this symbolic made through mistake, and not through liberality or some other cause.
delivery may produce the effect of tradition, it is necessary that the vendor shall have Same; Same; Same; Quasi-contract of solutio indebiti is one of the concrete
had such control over the thing sold that xxx its material delivery could have been manifestations of the ancient principle that no one shall enrich himself unjustly at the
expense of another.—The quasicontract of solutio indebiti is one of the concrete That the above described property is mortgaged to the Philippine National Bank,
manifestations of the ancient principle that no one shall enrich himself unjustly at the Cubao, Branch, Quezon City for the amount of one hundred forty-five thousand
expense of another. But as shown earlier, the payment of the mortgage was an pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book
obligation petitioner assumed under the contract of sale. There is no unjust enrichment No. XV, Series of 1979 of Notary Public Herita
where the transaction, as in this case, is quid pro quo, value for value. L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ;
PETITION for review on certiorari of a decision of the Court of Appeals. That the said Power Commercial and Industrial Development Corporation assumes
PANGANIBAN, J.: to pay in full the entire amount of the said mortgage above described plus interest
Is the seller's failure to eject the lessees from a lot that is the subject of a contract of and bank charges, to the said mortgagee bank, thus holding the herein vendor free
sale with assumption of mortgage a ground (1) for rescission of such contract and (2) from all claims by the said bank;
for a return by the mortgagee of the amortization payments made by the buyer who That both parties herein agree to seek and secure the agreement and approval of
assumed such mortgage? the said Philippine National Bank to the herein sale of this property, hereby
Petitioner posits an affirmative answer to such question in this petition for review agreeing to abide by any and all requirements of the said bank, agreeing that failure
on certiorari of the March 27, 1995 Decision1 of the Court of Appeals, Eighth Division, to do so shall give to the bank first lieu (sic) over the herein described property.
in CA-G.R. CV Case No. 32298 upholding the validity of the contract of sale with On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-
assumption of mortgage and absolving the mortgagee from the liability of returning the corporation, submitted to PNB said deed with a formal application for assumption of
mortgage payments already made.2 mortgage.4
The Facts On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure
Petitioner Power Commercial & Industrial Development Corporation, an industrial to submit the papers necessary for approval pursuant to the former's letter dated
asbestos manufacturer, needed a bigger office space and warehouse for its products. January 15, 1980, the application for assumption of mortgage was considered
For this purpose, on January 31, 1979, it entered into a contract of sale with the spouses withdrawn; that the outstanding balance of P145,000.00 was deemed fully due and
Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved demandable; and that said loan was to be paid in full within fifteen (15) days from
a 612-sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686 located notice.5
at the corner of Bagtican and St. Paul Streets, San Antonio Village, Makati City. The Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23,
parties agreed that petitioner would pay private respondents P108,000.00 as down 1980, payments which were to be applied to the outstanding loan. On December 23,
payment, and the balance of P295,000.00 upon the execution of the deed of transfer 1980, PNB received a letter from petitioner which reads:6
of the title over the property. Further, petitioner assumed, as part of the purchase price, With regard to the presence of the people who are currently in physical occupancy
the existing mortgage on the land. In full satisfaction thereof, he paid P79,145.77 to of the (l)ot . . . it is our desire as buyers and new owners of this lot to make use of
Respondent Philippine National Bank ("PNB" for brevity). this lot for our own purpose, which is why it is our desire and intention that all the
On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee people who are currently physically present and in occupation of said lot should be
a loan of P145,000.00, P80,000.00 of which was paid to respondent spouses. Petitioner removed immediately.
agreed to assume payment of the loan. For this purpose we respectfully request that . . . our assumption of mortgage be
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of given favorable consideration, and that the mortgage and title be transferred to our
Mortgage which contained the following terms and conditions:3 name so that we may undertake the necessary procedures to make use of this lot
That for and in consideration of the sum of Two Hundred Ninety-Five Thousand ourselves.
Pesos (P295,000.00) Philippine Currency, to us in hand paid in cash, and which It was our understanding that this lot was free and clear of problems of this nature,
we hereby acknowledge to be payment in full and received to our entire and that the previous owner would be responsible for the removal of the people
satisfaction, by POWER COMMERCIAL AND INDUSTRIAL DEVELOPMENT who were there. Inasmuch as the previous owner has not been able to keep his
CORPORATION, a 100% Filipino Corporation, organized and existing under and commitment, it will be necessary for us to take legal possession of this lot inorder
by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension, we (sic) to take physical possession.
hereby by these presents SELL, TRANSFER and CONVEY by way of absolute On February 19, 1982, PNB sent petitioner a letter as follows:7
sale the above described property with all the improvements existing thereon unto (T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed
the said Power Commercial and Industrial Development Corporation, its by you on June 4, 1979 for P101,500.00. It was last renewed on December 24,
successors and assigns, free from all liens and encumbrances. 1980 to mature on June 4, 1981.
We hereby certify that the aforesaid property is not subject to nor covered by the A review of our records show that it has been past due from last maturity with
provisions of the Land Reform Code — the same having no agricultural lessee interest arrearages amounting to P25,826.08 as of February 19, 1982. The last
and/or tenant. payment received by us was on December 24, 1980 for P20,283. 14. In order to
We hereby also warrant that we are the lawful and absolute owners of the above place your account in current form, we request you to remit payments to cover
described property, free from any lien and/or encumbrance, and we hereby agree interest, charges, and at least part of the principal.
and warrant to defend its title and peaceful possession thereof in favor of the said On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses
Power Commercial and Industrial Development Corporation, its successors and for rescission and damages before the Regional Trial Court of Pasig, Branch 159. Then,
assigns, against any claims whatsoever of any and all third persons; subject, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return of the
however, to the provisions hereunder provided to wit: payments it made on the ground that its assumption of mortgage was never approved.
On May 31, 1983,8 while this case was pending, the mortgage was foreclosed. The Conspicuous Absence of an Imposed Condition
property was subsequently bought by PNB during the public auction. Thus, an The alleged "failure" of respondent spouses to eject the lessees from the lot in question
amended complaint was filed impleading PNB as party defendant. and to deliver actual and physical possession thereof cannot be considered a
On July 12, 1990, the trial court9 ruled that the failure of respondent spouses to deliver substantial breach of a condition for two reasons: first, such "failure" was not stipulated
actual possession to petitioner entitled the latter to rescind the sale, and in view of such as a condition — whether resolutory or suspensive — in the contract; and second, its
failure and of the denial of the latter's assumption of mortgage, PNB was obliged to effects and consequences were not specified either. 13
return the payments made by the latter. The dispositive portion of said decision The provision adverted to by petitioner does not impose a condition or an obligation to
states: 10 eject the lessees from the lot. The deed of sale provides in part: 14
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor We hereby also warrant that we are the lawful and absolute owners of the above
of plaintiff and against defendants: described property, free from any lien and/or encumbrance, and we hereby agree
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage and warrant to defend its title and peaceful possession thereof in favor of the said
executed between plaintiff and defendants Spouses Quiambao, dated June 26, Power Commercial and Industrial Development Corporation, its successors and
1979; assigns, against any claims whatsoever of any and all third persons; subject,
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of however, to the provisions hereunder provided to wit:
P187,144.77 (P108,000.00 plus P79,145.77) with legal interest of 12% per By his own admission, Anthony Powers, General Manager of petitioner-corporation, did
annum from date of filing of herein complaint, that is, March 17, 1982 until the same not ask the corporation's lawyers to stipulate in the contract that Respondent Reynaldo
is fully paid; was guaranteeing the ejectment of the occupants, because there was already a proviso
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 in said deed of sale that the sellers were guaranteeing the peaceful possession by the
(P41,880.45 and P20,283.14) with 12% interest thereon from date of herein buyer of the land in question. 15 Any obscurity in a contract, if the above-quoted
judgment until the same is fully paid. provision can be so described, must be construed against the party who caused
No award of other damages and attorney's fees, the same not being warranted it. 16 Petitioner itself caused the obscurity because it omitted this alleged condition when
under the facts and circumstances of the case. its lawyer drafted said contract.
The counterclaim of both defendants spouses Quiambao and PNB are dismissed If the parties intended to impose on respondent spouses the obligation to eject the
for lack of merit. tenants from the lot sold, it should have included in the contract a provision similar to
No pronouncement as to costs. that referred to in Romero vs. Court of Appeals, 17 where the ejectment of the
SO ORDERED. occupants of the lot sold by private respondent was the operative act which set into
On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed motion the period of petitioner's compliance with his own obligation, i.e., to pay the
the trial court. In the assailed Decision, it held that the deed of sale between respondent balance of the purchase price. Failure to remove the squatters within the stipulated
spouses and petitioner did not obligate the former to eject the lessees from the land in period gave the other party the right to either refuse to proceed with the agreement or
question as a condition of the sale, nor was the occupation thereof by said lessees a to waive that condition of ejectment in consonance with Article 1545 of the Civil Code.
violation of the warranty against eviction. Hence, there was no substantial breach to In the case cited, the contract specifically stipulated that the ejectment was a condition
justify the rescission of said contract or the return of the payments made. The to be fulfilled; otherwise, the obligation to pay the balance would not arise. This is not
dispositive portion of said Decision reads: 11 so in the case at bar.
WHEREFORE, the Decision appealed from is hereby REVERSED and the Absent a stipulation therefor, we cannot say that the parties intended to make its
complaint filed by Power Commercial and Industrial Development Corporation nonfulfillment a ground for rescission. If they did intend this, their contract should have
against the spouses Reynaldo and Angelita Quiambao and the Philippine National expressly stipulated so. In Ang vs. C.A.,18 rescission was sought on the ground that the
Bank is DISMISSED. No costs. petitioners had failed to fulfill their obligation "to remove and clear" the lot sold, the
Hence, the recourse to this Court. performance of which would have given rise to the payment of the consideration by
Issues private respondent. Rescission was not allowed, however, because the breach was not
Petitioner contends that: (1) there was a substantial breach of the contract between the substantial and fundamental to the fulfillment by the petitioners of the obligation to sell.
parties warranting rescission; and (2) there was a "mistake in payment" made by As stated, the provision adverted to in the contract pertains to the usual warranty
petitioner, obligating PNB to return such payments. In its Memorandum, it specifically against eviction, and not to a condition that was not met.
assigns the following errors of law on the part of Respondent Court: 12 The terms of the contract are so clear as to leave no room for any other interpretation. 19
A. Respondent Court of Appeals gravely erred in failing to consider in its decision Furthermore, petitioner was well aware of the presence of the tenants at the time it
that a breach of implied warranty under Article 1547 in relation to Article 1545 of entered into the sales transaction. As testified to by Reynaldo, 20 petitioner's counsel
the Civil Code applies in the case-at-bar. during the sales negotiation even undertook the job of ejecting the squatters. In fact,
B. Respondent Court of Appeals gravely erred in failing to consider in its decision petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to PNB
that a mistake in payment giving rise to a situation where the principle of solutio of December 23, 1980 admitted that it was the "buyer(s) and new owner(s) of this lot."
indebiti applies is obtaining in the case-at-bar. Effective Symbolic Delivery
The Court's Ruling The Court disagrees with petitioner's allegation that the respondent spouses failed to
The petition is devoid of merit. It fails to appreciate the difference between a condition deliver the lot sold. Petitioner asserts that the legal fiction of symbolic delivery yielded
and a warranty and the consequences of such distinction. to the truth that, at the execution of the deed of sale, transfer of possession of said lot
was impossible due to the presence of occupants on the lot sold. We find this We note, however, that petitioner's deprivation of ownership and control finally occurred
misleading. when it failed and/or discontinued paying the amortizations on the mortgage, causing
Although most authorities consider transfer of ownership as the primary purpose of the lot to be foreclosed and sold at public auction. But this deprivation is due to
sale, delivery remains an indispensable requisite as our law does not admit the doctrine petitioner's fault, and not to any act attributable to the vendor-spouses.
of transfer of property by mere consent. 21 The Civil Code provides that delivery can Because petitioner failed to impugn its integrity, the contract is presumed, under the
either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic law, to be valid and subsisting.
delivery (Article 1498), as a species of constructive delivery, effects the transfer of Absence of Mistake In Payment
ownership through the execution of a public document. Its efficacy can, however, be Contrary to the contention of petitioner that a return of the payments it made to PNB is
prevented if the vendor does not possess control over the thing sold, 22 in which case warranted under Article 2154 of the Code, solutio indebiti does not apply in this case.
this legal fiction must yield to reality. This doctrine applies where: (1) a payment is made when there exists no binding
The key word is control, not possession, of the land as petitioner would like us to relation between the payor, who has no duty to pay, and the person who received the
believe. The Court has consistently held that: 23 payment, and (2) the payment is made through mistake, and not through liberality or
. . . (I)n order that this symbolic delivery may produce the effect of tradition, it is some other cause. 27
necessary that the vendor shall have had such control over the thing sold that . . . In this case, petitioner was under obligation to pay the amortizations on the mortgage
its material delivery could have been made. It is not enough to confer upon the under the contract of sale and the deed of real estate mortgage. Under the deed of sale
purchaser the ownership and the right of possession. The thing sold must be (Exh. "2"), 28 both parties agreed to abide by any and all the requirements of PNB in
placed in his control. When there is no impediment whatever to prevent the thing connection with the real estate mortgage. Petitioner was aware that the deed of
sold passing into the tenancy of the purchaser by the sole will of the vendor, mortgage (Exh. "C") made it solidarily and, therefore, primarily 29 liable for the mortgage
symbolic delivery through the execution of a public instrument is sufficient. But if, obligation: 30
notwithstanding the execution of the instrument, the purchaser cannot have the (e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose
enjoyment and material tenancy of the thing and make use of it himself or through of the same in any manner, without the written consent of the Mortgagee. However,
another in his name, because such tenancy and enjoyment are opposed by the if not withstanding this stipulation and during the existence of this mortgage, the
interposition of another will, then fiction yields to reality — the delivery has not been property herein mortgaged, or any portion thereof, is . . . sold, it shall be the
effected. obligation of the Mortgagor to impose as a condition of the sale, alienation or
Considering that the deed of sale between the parties did not stipulate or infer encumbrance that the vendee, or the party in whose favor the alienation or
otherwise, delivery was effected through the execution of said deed. The lot sold had encumbrance is to be made, should take the property subject to the obligation of
been placed under the control of petitioner; thus, the filing of the ejectment suit was this mortgage in the same terms and condition under which it is constituted, it being
subsequently done. It signified that its new owner intended to obtain for itself and to understood that the Mortgagor is not in any manner relieved of his obligation to the
terminate said occupants' actual possession thereof. Prior physical delivery or Mortgagee under this mortgage by such sale, alienation or encumbrance; on the
possession is not legally required and the execution of the deed of sale is deemed contrary both the vendor and the vendee, or the party in whose favor the alienation
equivalent to delivery. 24 This deed operates as a formal or symbolic delivery of the or encumbrance is made shall be jointly and severally liable for said mortgage
property sold and authorizes the buyer to use the document as proof of ownership. obligations. . . .
Nothing more is required. Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization
Requisites of Breach of Warranty Against Eviction on the mortgage.
Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach Also, petitioner insists that its payment of the amortization was a mistake because PNB
of the warranty against eviction. Despite its protestation that its acquisition of the lot disapproved its assumption of mortgage after it failed to submit the necessary papers
was to enable it to set up a warehouse for its asbestos products and that failure to for the approval of such assumption.
deliver actual possession thereof defeated this purpose, still no breach of warranty But even if petitioner was a third party in regard to the mortgage of the land purchased,
against eviction can be appreciated because the facts of the case do not show that the the payment of the loan by petitioner was a condition clearly imposed by the contract
requisites for such breach have been satisfied. A breach of this warranty requires the of sale. This fact alone disproves petitioner's insistence that there was a "mistake" in
concurrence of the following circumstances: payment. On the contrary, such payments were necessary to protect its interest as a
(1) The purchaser has been deprived of the whole or part of the thing sold; "the buyer(s) and new owner(s) of the lot."
(2) This eviction is by a final judgment; The quasi-contract of solutio indebiti is one of the concrete manifestations of the
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and ancient principle that no one shall enrich himself unjustly at the expense of
(4) The vendor has been summoned and made co-defendant in the suit for eviction at another. 31 But as shown earlier, the payment of the mortgage was an obligation
the instance of the vendee. 25 petitioner assumed under the contract of sale. There is no unjust enrichment where the
In the absence of these requisites, a breach of the warranty against eviction under transaction, as in this case, is quid pro quo, value for value.
Article 1547 cannot be declared. All told, respondent Court did not commit any reversible error which would warrant the
Petitioner argues in its memorandum that it has not yet ejected the occupants of said reversal of the assailed Decision.
lot, and not that it has been evicted therefrom. As correctly pointed out by Respondent WHEREFORE, the petition is hereby DENIED, and the assailed Decision is
Court, the presence of lessees does not constitute an encumbrance of the land, 26 nor AFFIRMED. SO ORDERED. Narvasa, C.J., Davide, Jr. and Melo, JJ., concur.
does it deprive petitioner of its control thereof. Francisco, J., is on leave.
EN BANC days from notice of dishonor created the prima facie presumption under the amendatory
G.R. No. L-40195 May 29, 1987 law.—Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did
VICTORIA R. VALLARTA, petitioner, vs. THE HONORABLE COURT OF APPEALS she do so because of the check issued to her? As the trial court and the Court of
and THE HONORABLE JUDGE FRANCISCO LLAMAS, Pasay City Appeals found, petitioner was able to obtain the jewelry because she issued the check.
Court, respondents. Her failure to deposit the necessary amount to cover it within three days from notice of
Francisco G.H. Salva for petitioner. dishonor created the prima facie presumption established by the amendatory law, Rep.
Civil Law; Estafa; Requirements to constitute estafa under Republic Act 4885.— Act No. 4885, which she failed to rebut.
To constitute estafa under this provision the act of postdating or issuing a check in Same; Same; Same; Same; Same; Presumption of deceit under RA 4885, not
payment of an obligation must be the efficient cause of defraudation, and as such it conclusive but rebuttable; Good faith is a defense to a charge of estafa by postdating
should be either prior to, or simultaneous with the act of fraud. The offender must be a check.—Contrary to petitioner's assertion, the presumption of deceit under Rep. Act
able to obtain money or property from the off ended party because of the issuance of a No. 4885 is not conclusive. It is rebuttable. For instance, We ruled in the case of People
check whether postdated or not. That is, the latter would not have parted with his money v. Villapando (56 Phil. 31 [1931]) that good faith is a defense to a charge of estafa by
or other property were it not for the issuance of the check. Likewise, the check should postdating a check, as when the drawer, foreseeing his inability to pay the check at
not be issued in payment of a pre-existing obligation (People v. Lilius, 59 Phil. 339 maturity, made an arrangement with his creditor as to the manner of payment of the
[1933]). debt.
Same; Same; Transaction entered into by the parties not a "sale on return" but a Same; Same; Constitutional Law; No constitutional objection to the passage of a
"sale on approval"; Effects of "sale on approval" transaction.—Properly, then, the law providing that the presumption of innocence may be overcome by a contrary
transaction entered into by Cruz and Vallarta was not a "sale or return." Rather, it was presumption founded upon the experience of human conduct—Moreover, it is now well
a "sale on approval" (also called "sale on acceptance," ' sale on trial," or "sale on settled that "there is no constitutional objection to the passage of a law providing that
satisfaction" [CIVIL CODE, art. 1502]). In a Sale or return," the ownership passes to the the presumption of innocence may be overcome by a contrary presumption founded
buyer on delivery (CIVIL CODE, art. 1502). (The subsequent return of the goods reverts upon the experience of human conduct, and enacting what evidence shall be sufficient
ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition, as a mode of to overcome such presumption of innocence" (People v. Mingoa, 92 Phil. 856 [1953] at
acquiring ownership must be in consequence of a contract (CIVIL CODE, art. 712], e.g. 858-59, citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS,
sale. 639-641). And the "legislature may enact that when certain facts have been proved
Same; Same; Same; Same; Since ownership over the jewelries passed to the they shall be prima facie evidence of the existence of the guilt of the accused and shif
buyer, it was a "sale on approval" transaction.—lf there was no meeting of the minds t the burden of proof provided there be a rational connection between the facts proved
on November 20,1968, then, as of that date, there was yet no contract of sale which and the ultimate fact presumed so that the inference of the one from proof of the others
could be the basis of delivery or tradition. Thus, the delivery made on November 20, is not unreasonable and arbitrary because of lack of connection between the two in
1968 was not a delivery for purposes of transferring ownership—the prestation common experience" (People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725
incumbent on the vendor. If ownership over the jewelry was not transmitted on that [1916]).
date, then it could have been transmitted only in December 1968, the date when the Same; Same; Same; Postdating or issuing a check in payment of obligation
check was issued. In which case, it was a "sale on approval" since ownership passed when the offender had no funds in the bank or his funds deposited therein were not
to the buyer, Vallarta, only when she signified her approval or acceptance to the seller, sufficient to cover the amount of the check is a false pretense or a fraudulent act—
Cruz, and the price was agreed upon. There can be no doubt that the "postdating or issuing of a check in payment of an
Same; Same; Same; Same; When the check which later bounced was issued, it obligation when the offender had no funds in the bank, or his funds deposited therein
was not in payment of a pre-existing obligation.—Thus, when the check which later were not sufficient to cover the amount of the check," is a false pretense or a fraudulent
bounced was issued, it was not in payment of a pre-existing obligation. Instead the act. It is so characterized by Art. 315 (2) (d), Revised Penal Code. Republic Act No.
issuance of the check was simultaneous with the transfer of ownership over the jewelry. 4885 does nothing more than limit the period within which the drawer/issuer must pay
But was the check issued simultaneously with the fraud? the creditor.
Same; Same; Same; Same; Republic Act 4885 amending Art. 315 (2) (d), Same; Same; Same; Constitutional injunction against imprisonment for non-
Revised Penal Code, establishes a prima facie evidence of deceit; How deceit payment of debt; RA 4885 merely established the prima facie evidence of deceit and
established—Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, eliminated the requirement of notice to the payee that he had no funds in the bank; With
establishes a prima facieevidence of deceit upon proof that the drawer of the check the amendment introduced by RA 4885 it is still criminal fraud or deceit in the issuance
failed to deposit the amount necessary to cover his check within three (3) days from of a check which is made punishable under the Revised Penal Code and not the non-
receipt of notice of dishonor for lack or insufficiency of funds. payment of the debt.—ln People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA
Same; Same; Same; Same; Same; Deceit presumed in case at bar.— 568), this Court ruled that Rep. Act No. 4885 has not changed the rule established in
Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; Art. 315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely established
(2) she was notified by Cruz of the dishonor; and, (3) Vallarta failed to make it good the prima facie evidence of deceit, and eliminated the requirement that the drawer
within three days. Deceit is therefore presumed. inform the payee that he had no funds in the bank or the funds deposited by him were
Same; Same; Same; Same; Same; Complainant parted with the jewelries to the not sufficient to cover the amount of the check. Thus, even with the amendment
accused not because she is rich but because of the check issued by the accused which introduced by Rep. Act No. 4885 it is still criminal fraud or deceit in the issuance of a
later bounced; Accused's failure to deposit the necessary amount to cover it within 3
check which is made punishable under the Revised Penal Code, and not the non- In order to arrive at the proper characterization of the transaction between Vallarta and
payment of the debt. Cruz, that is, whether it was a "sale or return" or some other transaction, it is necessary
PETITION to review the decision of the Court of Appeals. to determine the intention of the parties.
The facts are stated in the opinion of the Court. The following excerpts from the transcript of stenographic notes are significant:
I. Direct Examination of Rosalinda Cruz
CORTES, J.: Q: Now, what happened with that business transaction of yours with Mrs.
The petitioner seeks a reversal of the Court of Appeals decision dated December 13, Vallarta?
1974 affirming the Trial Court's judgment convicting her of estafa. We denied the A: After that and after she finally agreed to buy two sets and changed the ruby
petition initially but granted a motion for reconsideration and gave the petition due ring with another ring, she gave me postdated check; I waited for January 30,
course. 1969. 1 deposited the check in the Security Bank. And after that I knew
As found by the trial court and the Court of Appeals, Rosalinda Cruz, the private (learned) that it was closed account (TSN, June 29, 1972, p. 9) (Emphasis
offended party, and accused Victoria Vallarta are long time friends and business supplied).
acquaintances. On November 20, 1968, Cruz entrusted to Victoria Vallarta seven II. Cross-Examination of Rosalinda Cruz
pieces of jewelry. In December of the same year, Vallarta decided to buy some items, Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell under
exchanged one item with another, and issued a post-dated check in the amount of your oath whether all the jewelries listed here (Exh. "A") were taken by Mrs.
P5,000 dated January 30, 1969. Rosalinda Cruz deposited said check with the bank. Vallarta at one single instance?
However, upon presentment, the check was dishonored and Cruz was informed that A: Yes, Sir. It was on one (1) day when I entrusted them to her so she
Vallarta's account had been closed. Cruz apprised Vallarta of the dishonor and the can select what she wants (Id at p. 22) (Emphasis supplied).
latter promised to give another check. Later, Vallarta pleaded for more time. Still later, III. Cross-Examination of Rosalinda Cruz
she started avoiding Cruz. Hence, this criminal action was instituted. COURT: But could you still recall or you cannot recall whether you agreed to
Based on the foregoing facts, both the trial court and the Court of Appeals found reduce the cost to Five Thousand Eight Hundred ( P5,800.00) Pesos?
Vallarta guilty beyond reasonable doubt of the crime of estafa. A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00)
WE affirm. Pesos, Sir, when I went to see her in her house to finalize what jewelries she
Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No. 4885, of the wanted (Id. at p. 26).
Revised Penal Code, which penalizes any person who shall defraud another "(b)y Note that Vallarta changed the ruby ring because it was not acceptable to her, and
postdating a check, or issuing a check in payment of an obligation when the offender chose another ring. Likewise, the price to be paid for the jewelry was finally agreed
had no funds in the bank, or his funds deposited therein were not sufficient to cover the upon only in December 1968. Thus, there was a meeting of the minds between the
amount of the check." parties as to the object of the contract and the consideration therefore only in December
By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to deposit the 1968, the same time that the check was issued. The delivery made on November 20,
amount necessary to cover his check within three (3) days from receipt of notice from 1968 was only for the purpose of enabling Vallarta to select what jewelry she wanted.
the bank and/or the payee or holder that said check has been dishonored for lack or Properly, then, the transaction entered into by Cruz and Vallarta was not a "sale or
insufficiency of funds" is deemed prima facie evidence of deceit constituting false return." Rather, it was a "sale on approval " (also called " sale on acceptance, " "sale
pretense or fraudulent act. on trial." or "sale on satisfaction" [CIVIL CODE, art. 1502]). In a "sale or return," the
To constitute estafa under this provision the act of post-dating or issuing a check in ownership passes to the buyer on delivery (CIVIL CODE, art. 1502). (The subsequent
payment of an obligation must be the efficient cause of defraudation, and as such it return of the goods reverts ownership in the seller [CIVIL CODE, art. 1502]). Delivery,
should be either prior to, or simultaneous with the act of fraud. The offender must be or tradition. as a mode of acquiring ownership must be in consequence of a contract
able to obtain money or property from the offended party because of the issuance of a (CIVIL CODE, art. 712), e.g. sale.
check whether post-dated or not. That is, the latter would not have parted with his If there was no meeting of the minds on November 20, 1968, then, as of that date, there
money or other property were it not for the issuance of the check. likewise, the check was yet no contract of sale which could be the basis of delivery or tradition. Thus, the
should not be, issued in payment of a pre-existing obligation (People v. Lilius, 59 Phil. delivery made on November 20, 1968 was not a delivery for purposes of transferring
339 [1933]). ownership — the prestation incumbent on the vendor. If ownership over the jewelry was
In seeking acquittal, petitioner stresses that the transaction between her and Cruz was not transmitted on that date, then it could have been transmitted only in December
a "sale or return," perfected and consummated on November 20, 1968 when the seven 1968, the date when the check was issued. In which case, it was a "sale on approval"
pieces of jewelry were delivered. The check issued in December 1968 was therefore in since ownership passed to the buyer. Vallarta, only when she signified her approval or
payment of a pre-existing obligation. Thus, even if it was dishonored, petitioner claims acceptance to the seller, Cruz, and the price was agreed upon.
that she can only be held civilly liable, but not criminally liable under Art. 315 (2) (d), Thus, when the check which later bounced was issued, it was not in payment of a pre-
Revised Penal Code. She also argues that at any rate, what prompted Cruz to deliver existing obligation. Instead the issuance of the check was simultaneous with the
the jewelry was the social standing of petitioner Vallarta and not the postdated check. transfer of ownership over the jewelry. But was the check issued simultaneously with
She thus assigns as errors the finding of that Court a quo that the jewelries the fraud?
were entrusted on November 20, 1968, but the sale was perfected in December 1968, Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code, establishes
and the finding that there was deceit in the issuance of the postdated check. 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 constitutionality of Art. 315 (2) (d), Revised Penal Code, which defines the crime she is
notice of dishonor for lack or insufficiency of funds. being accused of, and provides for its punishment. In fact, she concedes the
Admittedly, (1) the check was dishonored as Vallarta's account had been earlier closed; constitutionality of the latter statute. She further concedes that a person may be
(2) she was notified by Cruz of the dishonor: and, (3) Vallarta failed to make it good imprisoned for "criminal fraud" covered by Art. 315 (2) of the Revised Penal Code.
within three days. Deceit is therefore presumed. In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this Court ruled
Petitioner lays stress on her being an alumna of a reputable school, on her having a that Rep. Act No. 4885 has not changed the rule established in Art. 315 (2) (d) prior to
husband who is a bank manager, and on the big land-holdings of her father, and argues the amendment; that Republic Act No. 4885 merely established the prima facie
that it was these qualifications and not the post-dated check which prompted Cruz to evidence of deceit, and eliminated the requirement that the drawer inform the payee
deliver the jewelry (Rollo, pp. 78-79: Motion for Reconsideration, pp. 10-11). Hence, that he had no funds in the bank or the funds deposited by him were not sufficient to
there was no deceit. It is thus suggested that a person of petitioner's social standing cover the amount of the check. Thus, even with the amendment introduced by Rep. Act
cannot be guilty of deceit, at least in so far as issuing bouncing checks is concerned. No. 4885 it is still criminal fraud or deceit in the issuance of a check which is made
This reasoning does not merit serious consideration. If accepted, it could result in a law punishable under the Revised Penal Code, and not the non-payment of the debt.
that falls unequally on persons depending on their social position. Petitioner also assigns as error the denial by the trial court of her motion for
Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or did she reconsideration. Her motion was directed at the finding of the trial court that no
do so because of the check issued to her? As the trial court and the Court of Appeals payments were made. Alleging that a check drawn by one Sison was given by petitioner
found, petitioner was able to obtain the jewelry because she issued the check. Her to Cruz in payment of the rubber check, petitioner claims that had her motion for
failure to deposit the necessary amount to cover it within three days from notice of reconsideration been granted, she would have called to the witness stand the Branch
dishonor created the prima facie presumption established by the amendatory law, Rep. Manager of Security Bank and Trust Company, Pasay City, where the check was
Act No. 4885, which she failed to rebut. allegedly deposited by Cruz, for said bank manager to Identify the owner-holder of the
Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She claims savings account to which the amount in Sison's check had been credited (Brief for
that even as the presumption of deceit established by Rep. Act No. 4885 is stated under Petitioner, p. 46).
the guise of being prima facie. It is in effect a conclusive presumption, because after Granting that the bank manager's testimony would have been as alleged by petitioner,
the prosecution has proved that: (1) the check has been dishonored; (2) notice has Our decision would remain. As correctly observed by both the trial court and the Court
been given to the drawer; and, (3) three days from notice, the check is not funded or of Appeals (Court of Appeals Decision, pp. 2-3), the payments petitioner allegedly made
the obligation is not paid, the accused is held guilty. Thus, it is alleged, the constitutional were not shown to have any relevance to the obligation in question.
presumption of innocence is violated. WHEREFORE, finding no error in the assailed decision of the Court of Appeals, the
Contrary to petitioner's assertion, the presumption of deceit under Rep. Act No. 4885 same is AFFIRMED. Costs against the petitioner.
is not conclusive. It is rebuttable. For instance, We ruled in the case of People v. SO ORDERED.
Villapando (56 Phil. 31 [1931]) that good faith is a defense to a charge of estafa by Teehankee, C.J., Yap, Fernando, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,
postdating a check, as when the drawer, foreseeing his inability to pay the check at Paras, Gancayco, Padilla, Bidin and Sarmiento, JJ., concur.
maturity, made an arrangement with his creditor as to the manner of payment of the Feliciano, J., is on leave.
debt.*
Moreover, it is now well settled that "there is no constitutional objection to the passage Footnotes
of a law providing that the presumption of innocence may be overcome by a contrary * See also People v. Lilius, supra, where the drawer, upon issuing the check, stated
presumption founded upon the experience of human conduct, and enacting what that he was not sure whether he had sufficient funds in the drawee bank, and that if he
evidence shall be sufficient to overcome such presumption of innocence" (People v. did not have, he would cable to have sufficient funds placed to his credit.
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
EN BANC (2) separate portions of the land for P11,000.00 to the herein respondent Rosa
G.R. No. L-16394 December 17, 1966 Hernandez. These portions were described in the deed of sale as follows:
JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners, vs. Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez,
ROSA HERNANDEZ, respondent. at Aurelio Perez; sa Timugan, sa lupang kasanib; sa Silanganan, kay Mariano
Manuel J. Serapio for petitioners.. Flores at Emilio Ignacio; sa Kanluran, kay Cornelio Ignacio; Mayroong
J. T. de los Santos for respondent. (12,500), m.c. humigit kumulang.
Supreme Court; Court of Appeals; Appeals; Factual findings of the Court of Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa
Appeals are binding on Supreme Court.— The credibility of witnesses and the weighing Hernandez; sa Silanganan, kay Domingo Hernandez at Antonio Hernandez;
of conflicting evidence are matters within the exclusive authority of the Court of sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa lupang kasanib
Appeals, and it is not necessarily bound by the conclusions of the trial court. Both the (Jose Sta. Ana, Jr.), mayroong (26,500) metros cuadrados, humigit kumulang.
Judiciary Act (Rep. Act No. 296, Sec. 29) and the Rules of Court (Rule 45, Sec. 2) only After the sale (there were two other previous sales to different vendees of other portions
allow a review of decisions of the Court of Appeals on questions of law. The findings of of the land), the petitioners-spouses caused the preparation of a subdivision plan, Psd-
fact of the Court of Appeals are conclusive and not reviewable by the Supreme Court. 43187, was approved on 13 January 1955 by the Director of Lands. Rosa Hernandez,
Barring, therefore, a showing that the findings complained of are totally devoid of however, unlike the previous vendees, did not conform to the plan and refused to
support in the record, or that they are so glaringly erroneous as to constitute a serious execute an agreement of subdivision and partition for registration with the Register of
abuse of discretion, such findings must stand, for the Supreme Court is not expected Deeds of Bulacan; and she, likewise, refused to vacate the areas that she had
or required to examine and contrast the oral and documentary evidence submitted by occupied. Instead, she caused the preparation of a different subdivision plan, which
the parties. The law creating the Court of Appeals was intended mainly to take away was approved by the Director of Lands on 24 February 1955. This plan, Psd-42844,
from the Supreme Court the work of examining the evidence, and confine its task for tallied with the areas that the defendant, Rosa Hernandez, had actually occupied.
the determination of questions which do not call for the reading and study of transcripts On 28 February 1955, herein petitioners-spouses filed suit against respondent Rosa
containing the testimony of witnesses. Hernandez in the Court of First Instance of Bulacan, claiming that said defendant was
Sale; Sale of land for a lump sum.—Where the two parcels of land sold for a lump occupying an excess of 17,000 square meters in area of what she had bought from
sum were identified by the conspicious boundaries consisting of a long and them. Defendant Rosa Hernandez, on the other hand, claimed that the alleged excess,
continuous pilapil or dike that separated them from the other lands, the sale made was was part of the areas that she bought.
of a definite and identified" tract, a corpus certum, that obligated the vendors to deliver The trial court observed:
to the buyer all the land within the boundaries, irrespective of whether the real area The only question, therefore, to be determined by the Court is whether or not
should be greater or smaller than what is recited in the deed. This is particularly true the plaintiffs had sold two portions without clear boundaries but with exact
where the area given is qualified to be approximate only i.e., "more or less." areas (12,500 sq. m. and 26,000 sq. m.) at the rate of P.29 per square meter
Same; When buyer must accept only the area recited in deed of sale.—To hold or, as defendant Rosa Hernandez claimed, two portions, the areas of which
the buyer to no more than the area recited in the deed, it must be made clear that the were not definite but which were well defined on the land and with definite
sale was made by unit of measure at a definite price for each unit. As between the boundaries and sold for the lump sum of P11,000.00.
absence of a recital of a given price per unit of measurement and the specif ication of Finding for the plaintiffs, the said court ordered the defendant, among other things, to
the total area sold, the former must prevail and it determines the applicability of vacate "the excess portions actually occupied by her and to confine her occupation only
the.norms concerning sales for ? lump sum. to Lots 4-a and 4-b as shown in the plan, Exhibit E, of the plaintiffs . . .," referring to
Same; Rule as to sale of land as a cuerpo cierto was not modified by Act 496.— Psd-43187.
The rule as to sales "a cuerpo cierto" was not modified by Act 496, Section 58, Not satisfied with the judgment, defendant Hernandez appealed to the Court of
prohibiting the issuance of a certificate of title to a grantee of part of a registered tract Appeals.
until a subdivision plan and technical description are duly approved by the Director of The Court of Appeals dismissed the complaint and declared Rosa Hernandez the
Lands, and authorizing only the entry of a memorandum on the grantor's certif icate of owner of lots 4-a and 4-b in her plan, Psd-42844, upon the following findings:
title in default of such plan. The latter provision is purely a procedural directive to The contract between appellees and appellant (Exhibit D) provided for the sale
Registers of Deeds that does not attempt to govern the rights of vendor and of two separate portions of the same land for the single consideration of
vendee inter se, which are subject to New Civil Code. It does not even bar the P11,000.00. Appellee Jose Santa Ana, Jr. said the transaction was by a unit
registration of the contract itself in order to bind the land. of measure or per square meter, and that although the actual total purchase
PETITION for review by certiorari of a decision of the Court of Appeals. price of the two parcels of land was P11,300.00 at P0.29 per square meter the
parties agreed to the sale at the reduced price of P11,000.00. The appellant
REYES, J.B.L., J.: denied this claim of appellees. Gonzalo V. Ignacio, the notarial officer before
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No. 20582-R, in the contract of sale was executed, failed to corroborate Sta. Ana upon this
effect reversing the decision of the Court of First Instance of Bulacan in its Civil Case point. Upon the contrary, Ignacio testified that appellant complained to him
No. 1036. and the appellees to the effect that the areas stated in the contract were less
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto. Domingo, owned than the actual areas of the parcels of land being sold and here we quote the
a 115,850-square meter parcel of land situated in barrio Balasing, Sta. Maria, Bulacan, notarial officer's own words:
and covered by Transfer Certificate of Title No. T-3598. On 28 May 1954, they sold two
"That the area stated in the document will not be the one to prevail The Court of Appeals committed a grave error of law when it held that the
but the one to prevail is the boundary of the land which you already deed of sale, Exhibit D, was for a lump sum, despite the fact that the
know." (p. 74, Innocencio). boundaries given therein were not sufficiently certain and the boundaries
Sta. Ana is the nephew of the appellant, and the former's assurance probably indicated did not clearly identify the land, thereby erroneously deciding a
appeased the latter against insisting in the correction of the areas stated in question of substance in a way not in accord with law and the applicable
the contract of sale. decisions of this Honorable Court.
Two witnesses testified for the appellant. Jesus Policarpio divulged that the On the face of the foregoing assignments of error and the petitioners' discussions
same parcels of land involved in this case were previously offered to him by thereabout, their position can be summarized as follows: that the Court of Appeals erred
the appellees for the single purchase price of P12,000.00. Julio Hernandez in substituting its own findings of fact for that of the trial court's, without strong and
stated that his sister, the herein appellant, had offered P10,000.00 as against cogent reasons for the substitution, contrary to the rule that appellate courts shall not
the appellees' price of P12,000.00, and that he was able to persuade the disturb the findings of fact of trial courts in the absence of such strong and cogent
parties to meet halfway on the price. Furthermore the previous conveyances reasons; and that Article 1542 of the Civil Code of the Philippines does not apply,
made by the appellees for other portions of the same property (Exhibits B and allegedly because the boundaries, as shown in the deed of sale, are not definite.
C) are also for lump sums. In the first assignment of error, the petitioner spouses complain against the failure of
The difference in area of 17,000 square meters is about one-half of the total the Court of Appeals to accept the findings of fact made by the Court of First Instance.
area of the two parcels of land stated in the document, but not for this alone The credibility of witnesses and the weighing of conflicting evidence are matters within
may we infer gross mistake on the part of appellees. The appellees admit the the exclusive authority of the Court of Appeals, and it is not necessarily bound by the
lands in question were separated from the rest of their property by a long and conclusions of the trial court. Both the Judiciary Act (R.A. 296, section 29) and the Rules
continuous "pilapil" or dike, and there is convincing proof to show that the of Court (Rule 45, section 2) only allow a review of decisions of the Court of Appeals
bigger lot (Lot 4-a) was wholly tenanted for appellees by Ciriaco Nicolas and on questions of law; and numerous decisions of this Court have invariably and
Santiago Castillo and the smaller lot (Lot 4-b) was wholly tenanted for said repeatedly held that findings of fact by the Court of Appeals are conclusive and not
appellees by Gregorio Gatchalian. These facts support the theory that the two reviewable by the Supreme Court (Galang vs. Court of Appeals, L-17248, 29 January
parcels of land sold to the appellant were identified by the conspicuous 1962; Fonacier vs. Court of Appeals, 96 Phil. 418, 421; and cases therein cited;
boundaries and the extent or area each tenant used to till for the vendors. Onglengco vs. Ozaeta, 70 Phil. 43; Nazareno vs. Magwagi, 71 Phil. 101). Barring,
Again, appellees should not be heard to complain about the deficiency in the therefore, a showing that the findings complained of are totally devoid of support in the
area because as registered owners and possessors of the entire land since record, or that they are so glaringly erroneous as to constitute serious abuse of
1949 they can rightly be presumed to have acquired a good estimate of the discretion, such findings must stand, for this Court is not expected or required to
value and areas of the portions they subsequently sold. examine and contrast the oral and documentary evidence submitted by the parties. As
The Court of Appeals concluded by applying to the case Article 1542 of the new Civil pointed out by former Chief Justice Moran in his Comments on the Rules of Court (1963
Code: Ed., Vol. 2, p. 412), the law creating the Court of Appeals was intended mainly to take
In the sale of real estate, made for a lump sum and not at the rate of a certain away from the Supreme Court the work of examining the evidence, and confine its task
sum for a unit of measure or number, there shall be no increase or decrease for the determination of questions which do not call for the reading and study of
of the price, although there be greater or less area or number than that stated transcripts containing the testimony of witnesses.
in the contract. The first assignment of error must, therefore, be overruled. We now turn to the second.
The same rule shall be applied when two or more immovables are sold for a Despite the incontestable fact that the deed of sale in favor of Rosa Hernandez recites
single price; but if, besides mentioning the boundaries, which is indispensable a price in a lump sum (P11,000.00) for both lots (Annex "C", Complaint, Rec. on App.,
in every conveyance of real estate, its area or number should be designated p. 21), appellants insist that the recited area should be taken as controlling. They
in the contract, the vendor shall be bound to deliver all that is included within combat the application of Article 1542 of the Civil Code, on the ground that the
said boundaries, even when it exceeds the area or number specified in the boundaries given in the deed are indefinite. They point out that the southern boundary
contract; and, should he not be able to do so, he shall suffer a reduction in the of the small parcel is merely given as "lupang kasanib" and that the same occurs with
price, in proportion to what is lacking in the area or number, unless the contract the western boundary of the bigger lot, which is recited as "lupang kasanib (Jose Sta.
is rescinded because the vendee does not accede to the failure to deliver what Ana, Jr.)". The Court of Appeals, however, found as a fact that —
has been stipulated. the two parcels of land sold to appellant (i.e., appellee herein, Rosa
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of her own Hernandez) were identified by the conspicuous boundaries. (Emphasis
subdivision Plan Psd-42844, notwithstanding their increased area as compared to that supplied)
specified in the deed of sale. consisting in a long and continuous pilapil or dike that separated the lands in question
In turn, the Sta. Ana spouses appealed to this Court, assigning the following errors: from the rest of the property. On the basis of such findings, that can not be questioned
The Court of Appeals committed a grave error of law when it departed from at this stage, for reasons already shown, it is unquestionable that the sale made was
the accepted and usual course of judicial proceedings, by disturbing the of a definite and identified tract, a corpus certum, that obligated the vendors to deliver
findings of fact of the trial court, made upon conflicting testimonies of the to the buyer all the land within the boundaries, irrespective of whether its real area
witnesses for the plaintiffs, now in the petitioners, and the defendant, now the should be greater or smaller than what is recited in the deed (Goyena vs. Tambunting,
respondent, Rosa Hernandez. 1 Phil. 490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599;
Mondragon vs. Santos, 87 Phil. 471). And this is particularly true where, as in the case
now before this Court, the area given is qualified to be approximate only ("humigit
kumulang", i.e., more or less Rec. on App., p. 22).
To hold the buyer to no more than the area recited on the deed, it must be made clear
therein that the sale was made by unit of measure at a definite price for each unit.
If the defendant intended to buy by the meter be should have so stated in the
contract (Goyena vs. Tambunting, supra).
The ruling of the Supreme Court of Spain, in construing Article 1471 of the Spanish
Civil Code (copied verbatim in our Article 1542) is highly persuasive that as between
the absence of a recital of a given price per unit of measurement, and the specification
of the total area sold, the former must prevail and determines the applicability of the
norms concerning sales for a lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no
solo no es precisado el precio singular por unidad de medida, sino que
tampoco son indicadas los dimensiones globales bales del inmueble, pero
tambien se verifica cuando aun ng habiendo sido indicado un precio singular
por unidad de medida, sin embargo es especificada la dimension total del
inmueble, en cuyo ultimo caso entre los dos indices en contraste, constituido
uno por la falta de un precio singular por unidad de medida, y otro por la
concrecion de las dimensiones globales del unmueble, la Ley da prevalencia
al mero y presume que aquella individualizacion no habia tenido para las
partes valor esencial, que solo constituia una superabundancia, y no significa
que las partes hayan convenido aquel precio global solo en cuanto el
inmueble tuviese efectivamente aquellas dimensiones totales, siendo de
estimar que esta es una presuncion absoluta, contra la cual ni el comprador
ni el vendedor pueden articular prueba contraria.
Por tanto, ni el comprador ni el vendedor pueden pretender una disminucicion
o, respectivamente un suplemento de precio, cuando las dimensiones
globales del unmueble resulten despues mayores o menores de las indicadas
en el contrato, aunque aduzcan que solo en tanto han convenido el aquel
precio en cuanto creian que las dimensiones de la cosa fueran las precisadas
en el contrato. (Tribunal Supreme de España, Sent. de 26 Junio 1956; Rep.
Jurisp. Aranzadi, 2.729) (Emphasis supplied)
The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act 496, section
58, prohibiting the issuance of a certificate of title to a grantee of part of a registered
tract until a subdivision plan and technical description are duly approved by the Director
of Lands, and authorizing only the entry of a memorandum on the grantor's certificate
of title in default of such plan. The latter provision is purely a procedural directive to
Registers of Deeds that does not attempt to govern the rights of vendor and
vendee inter se, that remain controlled by the Civil Code of the Philippines. It does not
even bar the registration of the contract itself to bind the land.
WHEREFORE, the decision of the Court of Appeals, in its case No. 20582-R, is hereby
affirmed. Costs against the appellants, Jose Santa Ana, Jr. and Lourdes Sto. Domingo.
Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar and
Sanchez, JJ., concur.
Castro, J., took no part.
FIRST DIVISION her deed of sale executed on February 2, 1955. Here she was again on notice on the
G.R. No. L-29972 January 26, 1976 prior sale to Carbonell.
ROSARIO CARBONELL, petitioner, vs. HONORABLE COURT OF APPEALS, JOSE Same: Sales: Right given to vendor to continue staying on land sold for one year
PONCIO, EMMA INFANTE and RAMON INFANTE, respondents. without paying and rent is adequate part of consideration of the sale.—Poncio was
Civil Code; Property; Possession; Sale; In case of double sale of an immovable given the right to continue staying on the land without paying any rental for one year,
property, second paragraph of Article 1544 directs that ownership should be recognized after which he should pay rent if he could not still find a place to transfer his house. All
in favor of one who in good faith first recorded his right. If there is no inscription, what these terms are part of the consideration of the sale to Carbonell. It is evident therefore
is decisive is prior possession in good faith.—Unlike the first and third paragraphs of that there was ample consideration, and not merely the sum of P200.00 for the sale of
said Article 1544, which accord preference to the one who first takes possession in Poncio to Carbonell of the lot in question.
good faith of personal or real property, the second paragraph directs that ownership of Same; Same; A private deed of sale is valid contract between the parties.—The
immovable property should be recognized in favor of one “who in good faith first private document, in the Batanes dialect, is a valid contract of sale between the parties,
recorded” his right. Under the first and third paragraphs, good faith must characterize since sale is a consensual contract and is perfected by mere consent. x x x Being a
the prior possession. Under the second paragraph, good faith must characterize the valid consensual contract, Exhibit A effectively transferred possession of the lot to the
act of anterior registration. If there is no inscription, what is decisive is prior possession vendee Carbonell by constitutum possessorium (Art. 1500, NCC); because thereunder
in good faith. If there is inscription, as in the case at bar, prior registration in good faith the vendor Poncio continued to retain physical possession of the lot as tenant of the
is a pre-condition to superior title. vendee and no longer as owner thereof.
Same; Same; Same; Same; Circumstances which indicate prior possession in Same; Same; Contracts; Sufficiency of description of land subject of sale when
good faith in case of double sale of immovable property.—When Carbonell bought the same is mentioned only as “one-half lot”.—“The defendant argues that there is even no
lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of description of the lot referred to in the note especially when the note refers to only one-
Poncio was still in his name solely encumbered by bank mortgage duly annotated half lot. With respect to the latter argument of the defendant, plaintiff points out that
thereon. Carbonell was not aware—and she could not have been aware—of any sale one-half lot was mentioned in Exhibit ‘A’ because the original description carried in the
to Infante as there was no such sale to Infante then. Hence, Carbonell’s prior purchase title states that it was formerly part of a bigger lot and only segregated later. The
of the land was made in good faith. Her good faith subsisted and continued to exist explanation is tenable, in (sic) considering the time value of the contents of Exh. ‘A’ the
when she recorded her adverse claim four days prior to the registration of Infantes’s court has arrived at the conclusion that there is sufficient description of the lot referred
deed of sale. Carbonell’s good faith did not cease after Poncio told her on January 31, to in Exh. ‘A’ as none other than the parcel of lot occupied by the defendant Poncio and
1955 of his second sale of the same lot to Infante. Because of that information, where he has his improvements erected, x x x” Moreover, it is not shown that Poncio
Carbonell wanted an audience with Infante, which desire underscores Carbonell’s good owns another parcel of land with the same area, adjacent to the lot of his cousin
faith. With an aristocratic disdain unworthy of the good breeding of a good Christian Carbonell and likewise mortgaged by him to the Republic Savings Bank. The
and good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So transaction therefore between Poncio and Carbonell can only refer and does refer to
Carbonell did the next best thing to protect her right—she registered her adverse claim the lot involved herein.
on February 8, 1955. Under the circumstances, this recording of her adverse claim Same; Property; Sale; Where immovable was sold twice, the one with superior
should be deemed to have been done in good faith and should emphasize Infante’s title should refund the sum paid by other vendee to redeem mortgage on the land.—
bad faith when she registered her deed of sale four days later on February 12, 1955. While petitioner Carbonell has the superior title to the lot, she must however refund to
Same; Same; Same; Same; Circumstances which show bad faith in case of respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic
double sale of immovable property.—Bad faith arising from previous knowledge by Savings Bank to redeem the mortgage.
Infante of the prior sale to Carbonell is shown by the following facts, the vital Same; Same; Same; As a matter of equity, possessor in bad faith is entitled to
significance and evidentiary effect of which the respondent Court of Appeals either remove one useful expenditures made by him, such as drainage construction, walled
overlooked or failed to appreciate: (1) Mrs. Infante refused to see Carbonell, who fence and bungalow, if lawful possessor fails to refund the same.—It appearing that the
wanted to see Infante after she was informed by Poncio that he sold the lot to Infante Infantes are possessors in bad faith, their rights to the improvements they introduced
but several days before Infante registered her deed of sale, This indicates that Infante on the disputed lot are governed by Articles 546 and 547 of the New Civil Code. Their
knew—from Poncio and from the bank—of the prior sale of the lot by Poncio to expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic
Carbonell. x x x (2) Carbonell was already in possession of the mortgage passbook and meters of garden soil, building a wall around it and installing a gate and P11,929.00 for
Poncio’s copy of the mortgage contract, when Poncio sold the lot to Infante. This also erecting a bungalow thereon, are useful expenditures, for they add to the value of the
shows that the lot was already sold to Carbonell who, after paying the arrearages of property. x x x If the lawful possessor can retain the improvements introduced by the
Poncio, assumed the balance of his mortgage indebtedness to the bank, which in the possessor in bad faith for pure luxury or mere pleasure only by paying the value thereof
normal course of business must have necessarily informed Infante about the said at the time he enters into possession (Art. 549 NCC), as a matter of equity,the Infantes,
assumption by Carbonell of the mortgage indebtedness of Poncio. x x x (3) The fact although possessors in bad faith, should be allowed to remove the aforesaid
that Poncio was no longer in possession of his mortgage passbook should have improvements, unless petitioner Carbonell chooses to pay for their value at the time
compelled Infante to inquire from Poncio why he was no longer in possession of the the Infantes introduced said useful improvements in 1955 and 1959. The Infantes
mortgage passbook and from Carbonell why she was in possession of the same, x x x cannot claim reimbursement for the current value of the said useful improvements;
(4) Carbonell registered on February 8, 1955 her adverse claim which was accordingly because they have been enjoying such improvements for about two decades without
annotated on Poncio’s title, four days before Infante registered on February 12, 1955
paying any rent on the land and during which period herein petitioner Carbonell was Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to
deprived of its possession and use. prepare the formal deed of sale, which she brought to respondent Poncio together with
PETITION for review of the resolution of the Court of Appeals. the amount of some P400.00, the balance she still had to pay in addition to her
assuming the mortgaged obligation to Republic Savings Bank.
MAKASIAR, J. Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of that he could not proceed any more with the sale, because he had already given the lot
Five) dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth to respondent Emma Infants; and that he could not withdraw from his deal with
Division), and its resolution of December 6, 1968 denying petitioner's motion for respondent Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact
reconsideration. respondent Mrs. Infante but the latter refused to see her.
The dispositive part of the challenged resolution reads: On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a
Wherefore, the motion for reconsideration filed on behalf of appellee Emma gate.
Infante, is hereby granted and the decision of November 2, 1967, is hereby Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse
annulled and set aside. Another judgement shall be entered affirming in claim over the land in question with the Office of the Register of Deeds of Rizal. Atty.
toto that of the court a quo, dated January 20, 1965, which dismisses the Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to
plaintiff's complaint and defendant's counterclaim. private respondents Jose Poncio and Emma Infante.
Without costs. In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante
The facts of the case as follows: improved her offer and he agreed to sell the land and its improvements to her for
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, P3,535.00" (pp. 38-40, ROA).
was the owner of the parcel of land herein involve with improvements situated at 179 In a private memorandum agreement dated January 31, 1955, respondent Poncio
V. Agan St., San Juan, Rizal, having an area of some one hundred ninety-five (195) indeed bound himself to sell to his corespondent Emma Infante, the property for the
square meters, more or less, covered by TCT No. 5040 and subject to mortgage in sum of P2,357.52, with respondent Emma Infante still assuming the existing mortgage
favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario debt in favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives
Carbonell, a cousin and adjacent neighbor of respondent Poncio, and also from the just behind the houses of Poncio and Rosario Carbonell.
Batanes Islands, lived in the adjoining lot at 177 V. Agan Street. On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the of respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the
said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal). latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The
Respondent Poncio, unable to keep up with the installments due on the mortgage, mortgage on the lot was eventually discharged.
approached petitioner one day and offered to sell to the latter the said lot, excluding the Informed that the sale in favor of respondent Emma Infante had not yet been registered,
house wherein respondent lived. Petitioner accepted the offer and proposed the price Atty. Garcia prepared an adverse claim for petitioner, who signed and swore to an
of P9.50 per square meter. Respondent Poncio, after having secured the consent of registered the same on February 8, 1955.
his wife and parents, accepted the price proposed by petitioner, on the condition that The deed of sale in favor of respondent Mrs. Infante was registered only on February
from the purchase price would come the money to be paid to the bank. 12, 1955. As a consequence thereof, a Transfer Certificate of Title was issued to her
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and but with the annotation of the adverse claim of petitioner Rosario Carbonell.
secured the consent of the President thereof for her to pay the arrears on the mortgage Respondent Emma Infante took immediate possession of the lot involved, covered the
and to continue the payment of the installments as they fall due. The amount in arrears same with 500 cubic meters of garden soil and built therein a wall and gate, spending
reached a total sum of P247.26. But because respondent Poncio had previously told the sum of P1,500.00. She further contracted the services of an architect to build a
her that the money, needed was only P200.00, only the latter amount was brought by house; but the construction of the same started only in 1959 — years after the litigation
petitioner constraining respondent Jose Poncio to withdraw the sum of P47.00 from his actually began and during its pendency. Respondent Mrs. Infante spent for the house
bank deposit with Republic Savings Bank. But the next day, petitioner refunded to the total amount of P11,929.00.
Poncio the sum of P47.00. On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended
On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, complaint against private respondents, praying that she be declared the lawful owner
made and executed a document in the Batanes dialect, which, translated into English, of the questioned parcel of land; that the subsequent sale to respondents Ramon R.
reads: Infante and Emma L. Infante be declared null and void, and that respondent Jose
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM Poncio be ordered to execute the corresponding deed of conveyance of said land in
JOSE PONCIO her favor and for damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).
Beginning today January 27, 1955, Jose Poncio can start living on the lot sold Respondents first moved to dismiss the complaint on the ground, among others, that
by him to me, Rosario Carbonell, until after one year during which time he will petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her
not pa anything. Then if after said one can he could not find an place where favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.);
to move his house, he could still continue occupying the site but he should pay and when said motion was denied without prejudice to passing on the question raised
a rent that man, be agreed. ss therein when the case would be tried on the merits (p. 17, ROA in the C.A.),
(Pp. 6-7 rec. on appeal). respondents filed separate answers, reiterating the grounds of their motion to dismiss
(pp. 18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the land in Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division
question to her by respondent Poncio, part of which evidence was the agreement of Five, which motion was denied by Minute Resolution of December 6, 1968 (but with
written in the Batanes dialect aforementioned, respondent Infantes objected to the Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of
presentation by petitioner of parole evidence to prove the alleged sale between her and Petition].
respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection Hence, this appeal by certiorari.
and dismissed the complaint on the ground that the memorandum presented by Article 1544, New Civil Code, which is decisive of this case, recites:
petitioner to prove said sale does not satisfy the requirements of the law (pp. 31-35, If the same thing should have been sold to different vendees, the ownership
ROA in the C.A.). shall be transferred to the person who may have first taken possession thereof
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. in good faith, if it should movable property.
L-11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, Should it be immovable property, the ownership shall belong to the person
being applicable only to executory contracts, does not apply to the alleged sale between acquiring it who in good faith first recorded it in the Registry of Property.
petitioner and respondent Poncio, which petitioner claimed to have been partially Should there be no inscription, the ownership shall pertain to the person who
performed, so that petitioner is entitled to establish by parole evidence "the truth of this in good faith was first in the possession; and, in the absence thereof, to the
allegation, as well as the contract itself." The order appealed from was thus reversed, person who presents the oldest title, provided there is good faith (emphasis
and the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in supplied).
the C.A.). It is essential that the buyer of realty must act in good faith in registering his deed of
After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring sale to merit the protection of the second paragraph of said Article 1544.
the second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Unlike the first and third paragraphs of said Article 1544, which accord preference to
Emma Infante of the land in question null and void and ordering respondent Poncio to the one who first takes possession in good faith of personal or real property, the second
execute the proper deed of conveyance of said land in favor of petitioner after paragraph directs that ownership of immovable property should be recognized in favor
compliance by the latter of her covenants under her agreement with respondent Poncio of one "who in good faith first recorded" his right. Under the first and third
(pp. 5056, ROA in the C.A.). paragraph, good faith must characterize the act of anterior registration (DBP vs.
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
re-trial to adduce evidence for the proper implementation of the court's decision in case If there is no inscription, what is decisive is prior possession in good faith. If there is
it would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed inscription, as in the case at bar, prior registration in good faith is a pre-condition to
by petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion for superior title.
re-trial could be resolved, respondent Infantes, this time through their former counsel, When Carbonell bought the lot from Poncio on January 27, 1955, she was the only
filed another motion for new trial, claiming that the decision of the trial court is contrary buyer thereof and the title of Poncio was still in his name solely encumbered by bank
to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also mortgage duly annotated thereon. Carbonell was not aware — and she could not have
opposed by petitioner (pp. 78-89, ROA in the C.A.). been aware — of any sale of Infante as there was no such sale to Infante then. Hence,
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted
the respondents introduced additional evidence consisting principally of the cost of and continued to exist when she recorded her adverse claim four (4) days prior to the
improvements they introduced on the land in question (p. 9, ROA in the C.A.). registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio
After the re-hearing, the trial court rendered a decision, reversing its decision of told her on January 31, 1955 of his second sale of the same lot to Infante. Because of
December 5, 1962 on the ground that the claim of the respondents was superior to the that information, Carbonell wanted an audience with Infante, which desire underscores
claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.), From Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a
this decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused
(p. 96, ROA in the C.A.). to see her. So Carbonell did the next best thing to protect her right — she registered
On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices her adversed claim on February 8, 1955. Under the circumstances, this recording of
Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through her adverse claim should be deemed to have been done in good faith and should
Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, emphasize Infante's bad faith when she registered her deed of sale four (4) days later
declaring petitioner therein, to have a superior right to the land in question, and on February 12, 1955.
condemning the defendant Infantes to reconvey to petitioner after her reimbursement Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is
to them of the sum of P3,000.00 plus legal interest, the land in question and all its shown by the following facts, the vital significance and evidenciary effect of which the
improvements (Appendix "A" of Petition). respondent Court of Appeals either overlooked of failed to appreciate:
Respondent Infantes sought reconsideration of said decision and acting on the motion (1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was
for reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and informed by Poncio that he sold the lot to Infante but several days before Infante
Nolasco) of Special Division of Five, granted said motion, annulled and set aside its registered her deed of sale. This indicates that Infante knew — from Poncio and from
decision of November 2, 1967, and entered another judgment affirming in toto the the bank — of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not
decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting refuse to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal
(Appendix "B" of Petition). to talk to Carbonell could only mean that she did not want to listen to Carbonell's story
that she (Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the
deposit passbook — Exhibit "1" — Infantes] and Poncio's copy of the mortgage preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma
contract, when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, Infante (1-11231, May 12, 1958), Poncio alleged in his answer:
assumed the balance of his mortgaged indebtedness to the bank, which in the normal ... that he had consistently turned down several offers, made by plaintiff, to
course of business must have necessarily informed Infante about the said assumption buy the land in question, at P15 a square meter, for he believes that it is worth
by Carbonell of the mortgage indebtedness of Poncio. Before or upon paying in full the not less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the
mortgage indebtedness of Poncio to the Bank. Infante naturally must have demanded land at P15 a square meter; that, on or about January 27, 1955, Poncio was
from Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage advised by plaintiff that should she decide to buy the property at P20 a square
contract so that the fact of full payment of his bank mortgage will be entered therein; meter, she would allow him to remain in the property for one year; that plaintiff
and Poncio, as well as the bank, must have inevitably informed her that said mortgage then induced Poncio to sign a document, copy of which if probably the one
passbook could not be given to her because it was already delivered to Carbonell. appended to the second amended complaint; that Poncio signed it 'relying
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage upon the statement of the plaintiff that the document was a permit for him to
contract at the time he executed a deed of sale in favor of the Infantes and when the remain in the premises in the event defendant decided to sell the property to
Infantes redeemed his mortgage indebtedness from the bank, Poncio would have the plaintiff at P20.00 a square meter'; that on January 30, 1955, Mrs. Infante
surrendered his mortgage passbook and his copy of the mortgage contract to the improved her offer and agreed to sell the land and its improvement to her for
Infantes, who could have presented the same as exhibits during the trial, in much the P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at
same way that the Infantes were able to present as evidence Exhibit "1" — Infantes, least P4,000, for the paltry sum P1,177.48, the amount of his obligation to the
Poncio's savings deposit passbook, of which Poncio necessarily remained in Republic Saving s Bank; and that plaintiff's action is barred by the Statute of
possession as the said deposit passbook was never involved in the contract of sale Frauds. ... (pp. 38-40, ROA, emphasis supplied).
with assumption of mortgage. Said savings deposit passbook merely proves that II
Poncio had to withdraw P47.26, which amount was tided to the sum of P200.00 paid EXISTENCE OF THE PRIOR SALE TO CARBONELL DULY ESTABLISHED
by Carbonell for Poncio's amortization arrearages in favor of the bank on January 27, (1) In his order dated April 26, 1956 dismissing the complaint on the ground that the
1955; because Carbonell on that day brought with her only P200.00, as Poncio told her private document Exhibit "A" executed by Poncio and Carbonell and witnessed by
that was the amount of his arrearages to the bank. But the next day Carbonell refunded Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose
to Poncio the sum of P47.26. Poncio," was not such a memorandum in writing within the purview of the Statute of
(3) The fact that Poncio was no longer in possession of his mortgage passbook and Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when
that the said mortgage passbook was already in possession of Carbonell, should have he stated that "the memorandum in question merely states that Poncio is allowed to
compelled Infante to inquire from Poncio why he was no longer in possession of the stay in the property which he had sold to the plaintiff. There is no mention of the
mortgage passbook and from Carbonell why she was in possession of the same reconsideration, a description of the property and such other essential elements of the
(Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical contract of sale. There is nothing in the memorandum which would tend to show even
reason why Infante did not bother anymore to make such injury , w because in the in the slightest manner that it was intended to be an evidence of contract sale. On the
ordinary course of business the bank must have told her that Poncio already sold the contrary, from the terms of the memorandum, it tends to show that the sale of the
lot to Carbonell who thereby assumed the mortgage indebtedness of Poncio and to property in favor of the plaintiff is already an accomplished act. By the very contents of
whom Poncio delivered his mortgage passbook. Hoping to give a semblance of truth to the memorandum itself, it cannot therefore, be considered to be the memorandum
her pretended good faith, Infante snubbed Carbonell's request to talk to her about the which would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33,
prior sale to her b Poncio of the lot. As aforestated, this is not the attitude expected of ROA, emphasis supplied). As found by the trial court, to repeat the said memorandum
a good neighbor imbued with Christian charity and good will as well as a clear states "that Poncio is allowed to stay in the property which he had sold to the plaintiff
conscience. ..., it tends to show that the sale of the property in favor of the plaintiff is already an
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly accomplished act..."
annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955 (2) When the said order was appealed to the Supreme Court by Carbonell in the
her deed of sale executed on February 2, 1955. Here she was again on notice of the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
prior sale to Carbonell. Such registration of adverse claim is valid and effective (L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking
(Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51). for a unanimous Court, reversed the aforesaid order of the trial court dismissing the
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First complaint, holding that because the complaint alleges and the plaintiff claims that the
Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at contract of sale was partly performed, the same is removed from the application of the
P15.00 per square meter, which offers he rejected as he believed that his lot is worth Statute of Frauds and Carbonell should be allowed to establish by parol evidence the
at least P20.00 per square meter. It is therefore logical to presume that Infante was told truth of her allegation of partial performance of the contract of sale, and further stated:
by Poncio and consequently knew of the offer of Carbonell which fact likewise should Apart from the foregoing, there are in the case at bar several circumstances
have put her on her guard and should have compelled her to inquire from Poncio indicating that plaintiff's claim might not be entirely devoid of factual basis.
whether or not he had already sold the property to Carbonell. Thus, for instance, Poncio admitted in his answer that plaintiff had offered
several times to purchase his land.
Again, there is Exhibit A, a document signed by the defendant. It is in the me' and having been written originally in a dialect well understood by the
Batanes dialect, which, according to plaintiff's uncontradicted evidence, is the defendant Poncio, he signed the said Exh. 'A' with a full knowledge and
one spoken by Poncio, he being a native of said region. Exhibit A states that consciousness of the terms and consequences thereof. This therefore,
Poncio would stay in the land sold by him to plaintiff for one year, from January corroborates the testimony of the plaintiff Carbonell that the sale of the land
27, 1955, free of charge, and that, if he cannot find a place where to transfer was made by Poncio. It is further pointed out that there was a partial
his house thereon, he may remain upon. Incidentally, the allegation in performance of the verbal sale executed by Poncio in favor of the plaintiff,
Poncio's answer to the effect that he signed Exhibit A under the belief that it when the latter paid P247.26 to the Republic Savings Bank on account of
"was a permit for him to remain in the premises in the" that "he decided to sell Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of the
the property" to the plaintiff at P20 a sq. m." is, on its face, somewhat difficult defendant Poncio's passbook of the Republic Savings Bank also adds
to believe. Indeed, if he had not decided as yet to sell the land to plaintiff, who credibility to her testimony. The defendant contends on the other hand that
had never increased her offer of P15 a square meter, there was no reason for the testimony of the plaintiff, as well as her witnesses, regarding the sale of
Poncio to get said permit from her. Upon the other hand, if plaintiff intended to the land made by Poncio in favor of the plaintiff is inadmissible under the
mislead Poncio, she would have caused Exhibit A to be drafted, probably, in provision of the Statute of Fraud based on the argument that the note Exh. "A"
English , instead of taking the trouble of seeing to it that it was written precisely is not the note or memorandum referred to in the to in the Statute of Fraud.
in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A The defendants argue that Exh. "A" fails to comply with the requirements of
suggests that he is neither illiterate nor so ignorant as to sign document the Statute of Fraud to qualify it as the note or memorandum referred to therein
without reading its contents, apart from the fact that Meonada had read Exhibit and open the way for the presentation of parole evidence to prove the fact
A to him and given him a copy thereof, before he signed thereon, according contained in the note or memorandum. The defendant argues that there is
to Meonada's uncontradicted testimony. even no description of the lot referred to in the note, especially when the note
Then, also, defendants say in their brief: refers to only one half lot. With respect to the latter argument of the Exhibit 'A',
The only allegation in plaintiff's complaint that bears any relation to the court has arrived at the conclusion that there is a sufficient description of
her claim that there has been partial performance of the supposed the lot referred to in Exh. 'A' as none other than the parcel of land occupied by
contract of sale, is the notation of the sum of P247.26 in the bank the defendant Poncio and where he has his improvements erected. The
book of defendant Jose Poncio. The noting or jotting down of the sum Identity of the parcel of land involved herein is sufficiently established by the
of P247.26 in the bank book of Jose Poncio does not prove the fact contents of the note Exh. "A". For a while, this court had that similar
that the said amount was the purchase price of the property in impression but after a more and thorough consideration of the context in Exh.
question. For all we knew, the sum of P247.26 which plaintiff claims 'A' and for the reasons stated above, the Court has arrived at the conclusion
to have paid to the Republic Savings Bank for the account of the stated earlier (pp. 52-54, ROA, emphasis supplied).
defendant, assuming that the money paid to the Republic Savings (4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
Bank came from the plaintiff, was the result of some usurious loan or another decision dismissing the complaint, although he found
accomodation, rather than earnest money or part payment of the 1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio
land. Neither is it competent or satisfactory evidence to prove the a parcel of land with an area of 195 square meters, more or less, covered by
conveyance of the land in question the fact that the bank book TCT No. 5040 of the Province of Rizal, located at San Juan del Monte,
account of Jose Poncio happens to be in the possession of the Rizal, for the price of P6.50 per square meter;
plaintiff. (Defendants-Appellees' brief, pp. 25-26). 2. That the purchase made by the plaintiff was not reduced to writing except
How shall We know why Poncio's bank deposit book is in plaintiffs possession, for a short note or memorandum Exh. A, which also recited that the defendant
or whether there is any relation between the P247.26 entry therein and the Poncio would be allowed to continue his stay in the premises, among other
partial payment of P247.26 allegedly made by plaintiff to Poncio on account things, ... (pp. 91-92, ROA, emphasis supplied).
of the price of his land, if we do not allow the plaintiff to explain it on the witness From such factual findings, the trial Judge confirms the due execution of Exhibit "A",
stand? Without expressing any opinion on the merits of plaintiff's claim, it is only that his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94,
clear, therefore, that she is entitled , legally as well as from the viewpoint of ROA).
equity, to an opportunity to introduce parol evidence in support of the (5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
allegations of her second amended complaint. (pp. 46-49, ROA, emphasis composed of Justices Esguerra (now Associate Justice of the Supreme Court),
supplied). Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of ... the testimony of Rosario Carbonell not having at all been attempted to be
the Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell, disproved by defendants, particularly Jose Poncio, and corroborated as it is
the trial judge found: by the private document in Batanes dialect, Exhibit A, the testimony being to
... A careful consideration of the contents of Exh. 'A' show to the satisfaction the effect that between herself and Jose there had been celebrated a sale of
of the court that the sale of the parcel of land in question by the defendant the property excluding the house for the price of P9.50 per square meter, so
Poncio in favor of the plaintiff was covered therein and that the said Exh. "a' much so that on faith of that, Rosario had advanced the sum of P247.26 and
was also executed to allow the defendant to continue staying in the premises binding herself to pay unto Jose the balance of the purchase price after
for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to deducting the indebtedness to the Bank and since the wording of Exhibit A, the
private document goes so far as to describe their transaction as one of sale, Carbonell [1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in
already consummated between them, note the part tense used in the phrase, the amount of P247.26 to the bank; and [2] should assume his mortgage indebtedness.
"the lot sold by him to me" and going so far even as to state that from that day The bank president agreed to the said sale with assumption of mortgage in favor of
onwards, vendor would continue to live therein, for one year, 'during which Carbonell an Carbonell accordingly paid the arrears of P247.26. On January 27, 1955,
time he will not pay anything' this can only mean that between Rosario and she paid the amount of P200.00 to the bank because that was the amount that Poncio
Jose, there had been a true contract of sale, consummated by delivery told her as his arrearages and Poncio advanced the sum of P47.26, which amount was
constitutum possession, Art. 1500, New Civil Code;vendor's possession refunded to him by Carbonell the following day. This conveyance was confirmed that
having become converted from then on, as a mere tenant of vendee, with the same day, January 27, 1955, by the private document, Exhibit "A", which was prepared
special privilege of not paying rental for one year, — it is true that the sale by in the Batanes dialect by the witness Constancio Meonada, who is also from Batanes
Jose Poncio to Rosario Carbonell corroborated documentarily only by Exhibit like Poncio and Carbonell.
A could not have been registered at all, but it was a valid contract nonetheless, The sale did not include Poncio's house on the lot. And Poncio was given the right to
since under our law, a contract sale is consensual, perfected by mere continue staying on the land without paying any rental for one year, after which he
consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil should pay rent if he could not still find a place to transfer his house. All these terms
Code, while a sale of an immovable is ordered to be reduced to a public are part of the consideration of the sale to Carbonell.
document, Art. 1358, that mandate does not render an oral sale of realty It is evident therefore that there was ample consideration, and not merely the sum of
invalid, but merely incapable of proof, where still executory and action is P200.00, for the sale of Poncio to Carbonell of the lot in question.
brought and resisted for its performance, 1403, par. 2, 3; but where already But Poncio, induced by the higher price offered to him by Infante, reneged on his
wholly or partly executed or where even if not yet, it is evidenced by a commitment to Carbonell and told Carbonell, who confronted him about it, that he would
memorandum, in any case where evidence to further demonstrate is not withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of
presented and admitted as the case was here, then the oral sale becomes injustice and outrage is the widow Carbonell and not the Infantes, who without moral
perfectly good, and becomes a good cause of action not only to reduce it to compunction exploited the greed and treacherous nature of Poncio, who, for love of
the form of a public document, but even to enforce the contract in its money and without remorse of conscience, dishonored his own plighted word to
entirety, Art. 1357; and thus it is that what we now have is a case wherein on Carbonell, his own cousin.
the one hand Rosario Carbonell has proved that she had an anterior sale, Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma
celebrated in her favor on 27 January, 1955, Exhibit A, annotated as an Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and
adverse claim on 8 February, 1955, and on other, a sale is due form in favor instead to sell the lot to her (Infante) by offering Poncio a much higher price than the
of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and registered in price for which he sold the same to Carbonell. Being guilty of bad faith, both in taking
due form with title unto her issued on 12 February, 1955; the vital question physical possession of the lot and in recording their deed of sale, the Infantes cannot
must now come on which of these two sales should prevail; ... (pp. 74-76, rec., recover the value of the improvements they introduced in the lot. And after the filing by
emphasis supplied). Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice building thereon since their title to said lot is seriously disputed by Carbonell on the
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco, basis of a prior sale to her.
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion With respect to the claim of Poncio that he signed the document Exhibit "A" under the
of the Infantes, while reversing the decision of November 2, 1967 and affirming the belief that it was a permit for him to remain in the premises in ease he decides to sell
decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the property to Carbonell at P20.00 per square meter, the observation of the Supreme
the existence and genuineness of Exhibit "A", the private memorandum dated January Court through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears
27, 1955, although it did not consider the same as satisfying "the essential elements of repeating:
a contract of sale," because it "neither specifically describes the property and its ... Incidentally, the allegation in Poncio's answer to the effect that he signed
boundaries, nor mention its certificate of title number, nor states the price certain to be Exhibit A under the belief that it 'was a permit for him to remain in the premises
paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code. in the event that 'he decided to sell the property' to the plaintiff at P20.00 a sq.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his m is, on its face, somewhat difficult to believe. Indeed, if he had not decided
decision of November 2, 1967 as well as his findings of facts therein, and reiterated as yet to sell that land to plaintiff, who had never increased her offer of P15 a
that the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual square meter, there as no reason for Poncio to get said permit from her. Upon
and consummated by mere consent, and is binding on and effective between the the they if plaintiff intended to mislead Poncio, she would have Exhibit A to be
parties. This statement of the principle is correct [pp. 89-92, rec.]. drafted, probably, in English, instead of taking the trouble of seeing to it that it
III was written precisely in his native dialect, the Batanes. Moreover, Poncio's
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE IN FAVOR OF signature on Exhibit A suggests that he is neither illiterate nor so ignorant as
CARBONELL to sign a document without reading its contents, apart from the fact that
It should be emphasized that the mortgage on the lot was about to be foreclosed by the Meonada had read Exhibit A to him-and given him a copy thereof, before he
bank for failure on the part of Poncio to pay the amortizations thereon. To forestall the signed thereon, according to Meonada's uncontradicted testimony. (pp. 46-
foreclosure and at the same time to realize some money from his mortgaged lot, Poncio 47, ROA).
agreed to sell the same to Carbonell at P9.50 per square meter, on condition that
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he expenditures, for they add to the value of the property (Aringo vs. Arenas, 14 Phil. 263;
reiterated in his dissent from the resolution of the majority of the Special Division. of Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).
Five on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a Under the second paragraph of Article 546, the possessor in good faith can retain the
valid contract of sale between the parties, since sale is a consensual contract and is useful improvements unless the person who defeated him in his possession refunds
perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of him the amount of such useful expenses or pay him the increased value the land may
realty is all between the parties and accords to the vendee the right to compel the have acquired by reason thereof. Under Article 547, the possessor in good faith has
vendor to execute the proper public document As a matter of fact, Exhibit A, while also the right to remove the useful improvements if such removal can be done without
merely a private document, can be fully or partially performed, to it from the operation damage to the land, unless the person with the superior right elects to pay for the useful
of the statute of frauds. Being a all consensual contract, Exhibit A effectively transferred improvements or reimburse the expenses therefor under paragraph 2 of Article 546.
the possession of the lot to the vendee Carbonell by constitutum possessorium (Article These provisions seem to imply that the possessor in bad faith has neither the right of
1500, New Civil Code); because thereunder the vendor Poncio continued to retain retention of useful improvements nor the right to a refund for useful expenses.
physical possession of the lot as tenant of the vendee and no longer as knew thereof. But, if the lawful possessor can retain the improvements introduced by the possessor
More than just the signing of Exhibit A by Poncio and Carbonell with Constancio in bad faith for pure luxury or mere pleasure only by paying the value thereof at the time
Meonada as witness to fact the contract of sale, the transition was further confirmed he enters into possession (Article 549 NCC), as a matter of equity, the Infantes,
when Poncio agreed to the actual payment by at Carbonell of his mortgage arrearages although possessors in bad faith, should be allowed to remove the aforesaid
to the bank on January 27, 1955 and by his consequent delivery of his own mortgage improvements, unless petitioner Carbonell chooses to pay for their value at the time
passbook to Carbonell. If he remained owner and mortgagor, Poncio would not have the Infantes introduced said useful improvements in 1955 and 1959. The Infantes
surrendered his mortgage passbook to' Carbonell. cannot claim reimbursement for the current value of the said useful improvements;
IV because they have been enjoying such improvements for about two decades without
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE paying any rent on the land and during which period herein petitioner Carbonell was
MEMORANDUM EXHIBIT "A" deprived of its possession and use.
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE
lot as the subject matter of the sale, was correctly disposed of in the first decision of COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED;
the trial court of December 5, 1962, thus: "The defendant argues that there is even no PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE
description of the lot referred to in the note (or memorandum), especially when the note SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY DIRECTED TO
refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE
points out that one- half lot was mentioned in Exhibit 'A' because the original description THOUSAND FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS
carried in the title states that it was formerly part of a bigger lot and only segregated FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF
later. The explanation is tenable, in (sic) considering the time value of the contents of RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE
Exh. 'A', the court has arrived at the conclusion that there is sufficient description of the NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES
lot referred to in Exh. As none other than the parcel of lot occupied by the defendant COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER CERTIFICATE
Poncio and where he has his improvements erected. The Identity of the parcel of land OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW
involved herein is sufficiently established by the contents of the note Exh. 'A'. For a TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO
while, this court had that similar impression but after a more and through consideration CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE
of the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic) INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED
the conclusion stated earlier" (pp. 53-54, ROA). PESOS (P1,500.00).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED
to the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM
Bank. The transaction therefore between Poncio and Carbonell can only refer and does THE FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO
refer to the lot involved herein. If Poncio had another lot to remove his house, Exhibit A CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE
would not have stipulated to allow him to stay in the sold lot without paying any rent for AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS
one year and thereafter to pay rental in case he cannot find another place to transfer (P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
his house. DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT
While petitioner Carbonell has the superior title to the lot, she must however refund to WITHIN THE AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN
Savings Bank to redeem the mortgage. WHICH THE RESPONDENTS INFANTES MAY REMOVE THEIR
It appearing that the Infantes are possessors in bad faith, their rights to the AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE
improvements they introduced op the disputed lot are governed by Articles 546 and EXPIRATION OF THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO
547 of the New Civil Code. Their expenses consisting of P1,500.00 for draining the PAY FOR THE SAID USEFUL IMPROVEMENTS.
property, filling it with 500 cubic meters of garden soil, building a wall around it and WITH COSTS AGAINST PRIVATE RESPONDENTS.
installing a gate and P11,929.00 for erecting a b ' bungalow thereon, are useful Castro, C.J, Aquino and Martin, JJ., concur.
EN BANC ART. 1473. If the same thing should have been sold to different vendees, the
G.R. No. L-2397 August 9, 1950 ownership shall be transferred to the person who may have first taken
TOMASA QUIMSON and MARCOS SANTOS, petitioners, vs.FRANCISCO possession thereof in good faith, if it should be movable property.
ROSETE, respondent. Should it be immovable property, the ownership shall belong to the person
Marcelino Lontok for petitioners. Ignacio Mangosing for respondent. acquiring it who first recorded it in the registry.
Should there be no inscription, the ownership shall belong to the person who
PURCHASE AND SALE; PREFERENCE IN CASE OF DOUBLE SALE; MATERIAL in good faith was first in the possession; and, in the absence of this, to the
AND SYMBOLIC POSSESSION.—The possession mentioned in article 1473 (for person who represents the oldest title, provided there is good faith.
determining who has better right when the same piece of land has been sold several In the case of Buencamino vs. Viceo (13 Phil., 97), Mr. Justice Willard, speaking for the
times by the same vendor) includes not only the material but also the symbolic court and citing article 1462 says: "Upon a sale of real estate the execution of a notarial
possession, which is acquired by the execution of a public instrument. The doctrine laid document of sale is a sufficient delivery of the property sold.".
down in Sanchez vs. Ramos (40 Phil., 614), reiterated. In the case of Florendo vs. Foz (20 Phil., 388), the court, through Mr. Chief Justice
PETITION to review by certiorari a decision of the Court of Appeals. Arellano, rules that "When the sale is made by menas of a public instrument, the
execution thereof is tantamount to conveyance of the subject matter, unless the
TUASON, J.: contrary clearly follows or be deduced from such instrument itself, and in the absence
This is an appeal by certiorari from a decision of the Court of Appeals reversing the of this condition such execution by the vendor is per se a formal or symbolical
judgment of the Court of First Instance of Zambales. The case involves s dispute over conveyance of the property sold, that is, the vedor in the instrument itself authorizes
a parcel of land sold to two different persons. the purchaser to used the title of ownership as proof that latter is thenceforth the owner
The Facts as found by the Court of Appeals are these: of the property."
Esta finca pertenecia originalmente al hoy difunto Dionisio Quimson, quien, More decisive of the case at the bar, being almost on all fours with it, is the case
en 7 de junio de 1932, otorgo la escritura Exhibit A de trespaso de la misma of Sanchez vs. Ramon (40 Phil., 614). There. appeared that one Fernandez sold a
a favor de su hija Tomasa Quimson, pero continuo en su posesion y goce. La piece of land to Marcelino Gomez and Narcisa Sanchez underpacto de retro in a public
vendio a los esposos Magno Agustin y Paulina Manzano en 3 de Mayo de instrument. The purchasers neither recorded the deed in the registry of property nor
1935, con pacto de recomprar dentro del plazo de seis años; y dos años ever took materials possession of the land. Later, Fernandez sold the same property
escasos despues, en 5 de abril de 1937, la volvio a vender a Francisco by means of a private document to Ramos who immediately entered upon the
Rosete, tambien con pacto de retro por el termino de cinco años, despues de possession of it. It was held that, according to article 1473 of the Civil Code, Gomez
haber verificado su recompra de Agustin y Manzano, con dinero que le habla and Sanchez were the first in possession and. consequently, that the sale in their favor
facilitado Rosete, otorgandose a este facto la escritura de venta Exhibit 1. was superior. Says the court, through Mr. Justice Avanceña, later chief justice:
Desde entoces Rosete es el que esta en su posesion y disfrute, de una To what kind of possession is acquired by the materials occupancy of the thing
manera pacifica y quieta, aun despues de la muerte de Dionisio Quimson, or right possessed, or by the fact that the latter is subjected to the action of
ocurrida en 6 de junio de 1939, hasta el enero de 1943, en que Tomasa our will, or by the appropriate acts and legal formalities established for
Quimson acudio al Juez de Paz de San Marcelino , Zambales, para que este acquiring possession (art. 438, Civil Code). by a simple reasoning, it appears
interviniera en un arreglo con Rosete sobre dicha finca, cuyo fracaso motivo that, because the law does not mention to which of these kinds of the
una carrera hacia Iba, la capital de Zambales, para ganar la prioridad del possession the article refers, it must be understood that it refers to all of these
registro e inscripcion de las escrituras de venta Exhibits A y 1 que Dionisio kinds. The proposition that this article, according to its letter, refers to the
Quimson otorgara a favor de Tomasa Quimson y Francisco Rosete, materials possession and excludes the symbolic does not seem to be founded
respectivamente, carreraque aquella gano por haber llegado a la meta una upon a solid ground. It is said that the law, in the first possession and then the
hora antes, a las 9:30 a.m. del 17 de febrero de 1943, en tanto que este la date of the date of the title and as a public instruments is a title, it is claimed
alcanzo a las 10:30 a.m. de ese mismo dia. that the inference is that the law has deliberately intented to place the symbolic
Two questions are raised: (1) What were the effects of the registration of plaintiff's possession, which the execution of the public document implies, after the
document? and (2) Who was prior in possession? The Court of Appeals' answer to the materials possession. This argument, however, would only be forceful if the
question is , None, and to the second, the defendant or second purchaser. title, mentioned by this article, includes public instruments, and this would only
We do not deem it necessary to pass upon the first issue in the light of the view we take be true if public instruments are not included in the idea of the possession
of the last, to which we will address ourselves presently. spoken of in said article. In other words the strength of the arguments rests in
Articles 1462 and 1473 of the Civil Code provide: that this possession is precisely the materials and does not include the
ART. 1462. The thing sold shall be deemed delivered, when it is placed in the symbolic. Consequently, the argument is deficient for it is begging the same
control and possession of the vendee. question, because if this possession includes the symbolic, which is acquired
When the sale is made by means of a public instrument, the execution thereof by the execution of a public instruments, it should be understood that the title,
shall be equivalent to the delivery of the thing which is the object of the mentioned by the law as the next cause of preference, does not include
contract, if from the said instrument the contrary does not appear or may not instruments.
be clearly inferred. Furthermore, our interpretation of this article 1473 is more in consonance with
the principles of the justice. The execution of the public instrument is
equivalent to the delivery of the realty sold (art. 1462, Civil Code ) and its before the notary public the notary public having executed the instruments of his own
possession by the vedee (art. 438).Under these conditions the sale is free will.
considered consummated and completely transfers to the vendee all of the The expression in the court's decision in the case of Cruzado vs. Escaler (34 Phil., 17),
thing. the vendee by virtue of this sale has acquired everything and nothing, cited by the Court of Appeals, Apparently to the effect that physical possession by the
absolutely nothing, is left to the vendor. Form this moment the vendor is a purchaser is essential to the consummation of a sale of real of estate, is at best obiter
stranger to the thing sold like any other who has never been its owner. As the dictum; for the court distinctly found that the sale to plaintiff's Cruzado's father was a
obligation of even delivering it. If he continues taking materials possession of sham, execution with the sole purpose of enabling the senior Cruzado to mortgage the
it, is simply on account of the vendee's tolerance and, in this sense, his property and becomeprocurador. And with reference to the failure of the second
possession is vendor's possession. And if the latter should have to ask him vendee, Escaler, to register his purchase, the court disregarded the omission as well
for the delivery of this materials possession it would not be by virtue of the as the entry of the first sale in the registry because that entry was made by the plaintiff,
sale, because this has been already consummated and has produced all its son and heir of the first supposed vendee, more than a score years after the alleged
effects, but by virtue of the vendee's ownership, in the same were not the transaction, when the plaintiff was no longer or had any right therein (in the land).
vendor. This means that after the sale of the realty by means of a public Because it already belonged to the defendant Escaler, its lawful owner." When Escaler,
instruments, the vendor, who resells it to another, does not transmitted the second purchase was sued he had become the owner of the land by prescription.
anything to this second sale, takes materials possession of the thing, he does The defendant's possession in the present case fell far short of having ripened into title
it as mere detainer, and it would be unjust to protect this detention against the by prescription when the plaintiff commenced her action.
rights to the thing lawfully acquired by the first vendee. For the reasons above stated, we are constrained to set aside the decision of the Court
We are of the opinion that the possession mentioned in the article 1473 (for of Appeals. Because the Appellate Court found for the defendant, it made no findings
determining who has better right when the same piece of land has been sold on damages for the latter's used of the property in controversy. Not being authorized in
several times by the vendor ) includes not the materials but also the symbolic this appeal to examine the evidence we have to accept the trials court's appraisal of
possession, which is acquired by the execution of a public instrument. the damages. Judge Llanes assessed the damages of P 180 for the occupation of the
The Supreme Court of Spain and Mr. Manresa are of the same opinion. On pp. 157 agricultural years 143-44,1944-45 and 1945-46, and P 60 a year thereafter until the
,158 Vol. X, of his treatise on the Spanish Civil Code. Manresa comments: possession of the property was restituted to the plaintiffs.
II. Observacion comun a la venta de muebles y a la de inmuebles. — Hemos Let judgment be entered in accordance with the tenor of this decision, with costs against
interpretado el precepto de articulo 1.473, en sus parrafos 1. y 3. en el sentido the defendant.
mas racional mas racional, aunque no tal vez en el mas adecuado a las Moran, C.J., Ozaeta, Pablo, Bengzon and Montemayor, JJ., concur.
palabras que se emplean. Las palabras tomar posesion, y primero en la
posesion las hemos considerado como equivalentes a la de la tradicion real
o fingida a que se refieren los articulos 1.462 al 1. 464 porque si la posesion
materials del objeto puede otorgar preferencia e cuestiones de possesion y
asi lo re-conoe el articulo 445. no debe darla nunca en cuestiones de
propiedad y de la propiedad habla expresamente el articulo 1.473. Asi en
nuestra opinion, robustecida por la doctrine que rectamente se deriva de la
sentencia de 24 de Novembre de 1894, vendida una finca A. en escritura
publica despues a B., aunque se incate materialmente este del inmueble, la
etrega de la cosa elvendedor carecia ya de la facultad de disponer de ella .
The statement of Sr. Manresa which is said to sustain the theory of the Court of
Appeals, expresses, as we under stand that statement, the literal meaning of article
1473, for the decision of November 24, 1894 reflects, according to the learned author,
the intention of the lawmaker and is in the conformity with the principles of justice. now
under both the a Spanish and Philippine rules of interpretation, the spirit, the intent, the
law prevails over its letter.
Counsel for defendant denies that the land was sold to plaintiff's Tomasa Quimson or
that the Court of Appeals so founds. All that latter court declared, he says, was that a
deed of the land was executed by the original owner on June 7, 1932.
The findings that a deed of conveyance was made by Dionisio Quimson in favor of his
daughter could have no other meaning, in the absence of any qualifying statement ,
that the land was sold by the father to his daughter. Furthermore, this was the trial
court's explicit finding which was not reversed by the Court of Appeals and stand as the
fact of the case. Looking into the documents itself Exhibits A states categorically that
the vendor received form the vendee the consideration of sale, P 250, acknowledge
SECOND DIVISION did not acquire any obligatory force since it was subject to the suspensive condition
G.R. No. 129760 December 29, 1998 that the earlier contract to sell between Genato and the Da Jose spouses should first
RICARDO CHENG, petitioner, vs. RAMON B. GENATO and ERNESTO R. DA JOSE be cancelled or rescinded—a condition never met, as Genato, to his credit, upon
& SOCORRO DA JOSE, respondents. realizing his error, redeemed himself by respecting and maintaining his earlier contract
Civil Law; Sales; Obligations; The breach contemplated in Article 1191 of the with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. “D,” alone would
New Civil Code is the obligor’s failure to comply with an obligation already extant, not not even show that a conditional contract of sale has been entered by Genato and
a failure of a condition to render binding that obligation.—In a Contract to Sell, the Cheng. When the requisites of a valid contract of sale are lacking in said receipt,
payment of the purchase price is a positive suspensive condition, the failure of which therefore the “sale” is neither valid nor enforceable.
is not a breach, casual or serious, but a situation that prevents the obligation of the Same; Same; Same; The contract to be binding upon the obligee or the vendor
vendor to convey title from acquiring an obligatory force. It is one where the happening depends upon the fulfillment or non-fulfillment of an event.—To our mind, the trial court
of the event gives rise to an obligation. Thus, for its non-fulfillment there will be no and the appellate court correctly held that the agreement between Genato and Cheng
contract to speak of, the obligor having failed to perform the suspensive condition which is a contract to sell, which was, in fact, petitioner’s contention in his pleadings before
enforces a juridical relation. In fact with this circumstance, there can be no rescission the said courts. Consequently, both agreements, between Genato and the Da Jose
of an obligation that is still nonexistent, the suspensive condition not having occurred spouses, on the one hand, and that of Genato and Cheng, on the other hand, actually,
as yet. Emphasis should be made that the breach contemplated in Article 1191 of the involve two contracts to sell. The provisions of Art. 1544 of the Civil Code on double
New Civil Code is the obligor’s failure to comply with an obligation already extant, not sales come to mind, which read: “Article 1544. If the same thing should have been sold
a failure of a condition to render binding that obligation. to different vendees, the ownership shall be transferred to the person who may have
Same; Same; Contracts; When a contract is subject to a suspensive condition, first taken possession thereof in good faith, if it should be movable property. Should it
its birth or effectivity can take place only if and when the event which constitutes the be immovable property, the ownership shall belong to the person acquiring it who in
condition happens or is fulfilled. If the suspensive condition does not take place, the good faith first recorded it in the Registry of Property. Should there be no inscription, the
parties would stand as if the conditional obligation had never existed.—Even ownership shall pertain to the person who in good faith was first in possession; and in
assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by the absence thereof, to the person who presents the oldest title, provided there is good
Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the faith.” However, a meticulous reading of the aforequoted provision shows that said law
contract is not even called for. For with or without the aforesaid affidavit their non- is not apropos to the instant case. This provision connotes that the following
payment to complete the full downpayment of the purchase price ipso facto avoids their circumstances must concur: “(a) The two (or more) sales transactions in issue must
contract to sell, it being subjected to a suspensive condition. When a contract is subject pertain to exactly the same subject matter, and must be valid sales transactions; (b)
to a suspensive condition, its birth or effectivity can take place only if and when the The two (or more) buyers at odds over the rightful ownership of the subject matter must
event which constitutes the condition happens or is fulfilled. If the suspensive condition each represent conflicting interests; and (c) The two (or more) buyers at odds over the
does not take place, the parties would stand as if the conditional obligation had never rightful ownership of the subject matter must each have bought from the very same
existed. seller.” These situations obviously are lacking in a contract to sell for neither a transfer
Same; Same; Same; The act of a party in treating a contract as cancelled should of ownership nor a sales transaction has been consummated. The contract to be
be made known to the other.—Nevertheless, this being so Genato is not relieved from binding upon the obligee or the vendor depends upon the fulfillment or non-fulfillment
the giving of a notice, verbal or written, to the Da Jose spouses for his decision to of an event.
rescind their contract. In many cases, even though we upheld the validity of a stipulation Same; Same; Same; Land Registration; Words and Phrases;“Registration,” as
in a contract to sell authorizing automatic rescission for a violation of its terms and defined by Soler and Castillo, means any entry made in the books of the registry,
conditions, at least a written notice must be sent to the defaulter informing him of the including both registration in its ordinary and strict sense, and cancellation, annotation,
same. The act of a party in treating a contract as cancelled should be made known to and even marginal notes. In its strict acceptation, it is the entry made in the registry
the other. For such act is always provisional. It is always subject to scrutiny and review which records solemnly and permanently the right of ownership and other real rights.—
by the courts in case the alleged defaulter brings the matter to the proper courts. “Registration,” as defined by Soler and Castillo, means any entry made in the books of
Same; Same; Same; Appeals; An issue which was not raised during the trial in the registry, including both registration in its ordinary and strict sense, and
the court below cannot be raised for the first time on appeal.—Settled is the rule that cancellation, annotation, and even marginal notes. In its strict acceptation, it is the entry
an issue which was not raised during the trial in the court below cannot be raised for made in the registry which records solemnly and permanently the right of ownership
the first time on appeal. Issues of fact and arguments not adequately brought to the and other real rights. We have ruled before that when a Deed of Sale is inscribed in the
attention of the trial court need not be and ordinarily will not be considered by a registry of property on the original document itself, what was done with respect to said
reviewing court as they cannot be raised for the first time on appeal. In fact, both courts entries or annotations and marginal notes amounted to a registration of the sale. In this
below correctly held that the receipt which was the result of their agreement, is a light, we see no reason why we should not give priority in right to the annotation made
contract to sell. This was, in fact Cheng’s contention in his pleadings before said courts. by the Da Jose spouses with respect to their Contract to Sell dated September 6, 1989.
This patent twist only operates against Cheng’s posture which is indicative of the Same; Same; Damages; Damages were awarded by the appellate court on the
weakness of his claim. basis of its finding that petitioner “was in bad faith when he filed the suit for specific
Same; Same; Same; When the requisites of a valid contract of sale are lacking performance knowing fully well that his agreement with Genato did not push through.”—
in said receipt, therefore the “sale” is neither valid nor enforceable.—But even if we are Damages were awarded by the appellate court on the basis of its finding that petitioner
to assume that the receipt, Exh.“D,” is to be treated as a conditional contract of sale, it “was in bad faith when he filed the suit for specific performance knowing fully well that
his agreement with Genato did not push through.” Such bad faith, coupled with his (P50,000.00) PESOS shall be paid by the VENDEE to the VENDOR as partial
wrongful interference with the contractual relations between Genato and the Da Jose down payment at the time of execution of this Contract to Sell.
spouses, which culminated in his filing of the present suit and thereby creating what the xxx xxx xxx
counsel for the respondents describes as “a prolonged and economically unhealthy 3. That the VENDEE, Thirty (30) DAYS after the execution of this contract,
gridlock” on both the land itself and the respondents’ rights provides ample basis for and only after having satisfactorily verified and confirmed the truth and
the damages awarded. Based on these overwhelming evidence of bad faith on the part authenticity of documents, and that no restrictions, limitations, and
of herein petitioner Ricardo Cheng, we find that the award of damages made by the developments imposed on and/or affecting the property subject of this contract
appellate court is in order. shall be detrimental to his interest, the VENDEE shall pay to the VENDOR,
PETITION for review on certiorari of a decision of the Court of Appeals. NINE HUNDRED FIFTY THOUSAND (P950,00.00) PESOS. Philippine
Currency, representing the full payment of the agreed Down Payment, after
MARTINEZ, J.: which complete possession of the property shall be given to the VENDEE to
This petition for review on certiorari seeks to annul and set aside the Decision of the enable him to prepare the premises and any development therein.
Court of Appeals (CA) 1 dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled On October 4, 1989, the Da Jose spouses, not having finished verifying the titles
"Ricardo Cheng, plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto mentioned in clause 3 as aforequoted, asked for and was granted by respondent
R. Da Jose & Socorro B. Da Jose, Intervenors-Appellants" which reversed the ruling of Genato an extension of another 30 days — or until November 5, 1989. However,
the Regional Trial Court, Branch 96 of Quezon City dated January 18, 1994. The according to Genato, the extension was granted on condition that a new set of
dispositive portion of the CA Decision reads: documents is made seven (7) days from October 4, 1989. 6 This was denied by the Da
WHEREFORE, based on the foregoing, appealed decision is hereby Jose spouses.
REVERSED and SET ASIDE and judgment is rendered ordering; Pending the effectivity of the aforesaid extension period, and without due notice to the
1. The dismissal of the complaint; Da Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell, 7 on
2. The cancellation of the annotations of the defendant-appellant's Affidavit to October 13, 1989. Moreover, no annotation of the said affidavit at the back of his titles
Annul Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the was made right away. The affidavit contained, inter alia, the following paragraphs;
subject TCT's, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M); xxx xxx xxx
3. Payment by the intervenors-appellants of the remaining balance of the That it was agreed between the parties that the agreed downpayment of
purchase price pursuant to their agreement with the defendant-appellant to P950,000.00 shall be paid thirty (30) days after the execution of the Contract,
suspend encashment of the three post-dated checks issued since 1989. that is on or before October 6, 1989;
4. Ordering the execution by the defendant-appellant Genato of the Deed of The supposed VENDEES failed to pay the said full downpayment even up to
Absolute Sale over the subject two lots covered by TCT No. T-76.196 (M) and this writing, a breach of contract;
TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da Jose; That this affidavit is being executed to Annul the aforesaid Contract to Sell for
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the vendee having committed a breach of contract for not having complied
the plaintiff-appellee Cheng, and with the obligation as provided in the Contract to Sell; 8
6. Payment by plaintiff-appellee Cheng of moral damages to herein On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's
intervenors-appellants Da Jose of P100,000.00, exemplary damages of residence and expressed interest in buying the subject properties. On that occasion,
P50,000.00, attorney's fees of P50,000.00, and costs of suit; and to Genato showed to Ricardo Cheng copies of his transfer certificates of title and the
defendant-appellant, of P100,000.00 in exemplary damages, P50,000.00 in annotations at the back thereof of his contract to sell with the Da Jose spouses. Genato
attorney's fees. The amounts payable to the defendant-appellant may be also showed him the aforementioned Affidavit to Annul the Contract to Sell which has
compensated by plaintiff appellee with the amount ordered under the not been annotated at the back of the titles.
immediately foregoing paragraph which defendant-appellant has to pay the Despite these, Cheng went ahead and issued a check for P50,000.00 upon the
plaintiff-appellee. assurance by Genato that the previous contract with the Da Jose spouses will be
SO ORDERED. 2 annulled for which Genato issued a handwritten receipt (Exh. "D"), written in this wise:
The antecedents of the case are as follows: 10/24/89
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at Received from Ricardo Cheng
Paradise Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M) 3 and the Sum of Fifty Thousand Only (P50.000-)
TCT No. T-76.197 (M) 4 with an aggregate area of 35,821square meters, more or less. as partial for T-76196 (M)
On September 6, 1989, respondent Genato entered into an agreement with T-76197 (M) area 35.821 Sq.m.
respondent-spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) Paradise Farm, Gaya-Gaya, San Jose Del Monte
over the above-mentioned two parcels of land. The agreement culminated in the P70/m2 Bulacan
execution of a contract to sell for which the purchase price was P80.00 per square plus C. G. T. etc.
meter. The contract was in a public instrument and was duly annotated at the back of Check # 470393 (SGD.) Ramon B. Genato
the two certificates of title on the same day. Clauses 1and 3 thereof provide: 10/24/89 9
1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng
Currency per square meter, of which the amount of FIFTY THOUSAND called up Genato reminding him to register the affidavit to annul the contract to sell. 10
The following day, or on October 26, 1989, acting on Cheng's request, Genato caused of the Da Jose spouses as first buyer because, if it were otherwise, the receipt would
the registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds, have provided such material condition or reservation, especially as it was Genato
Meycauayan, Bulacan as primary entry No. 262702. 11 himself who had made the receipt in his own hand. It also opined that there was a valid
While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan, rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell.
Bulacan on October 27, 1989, they met Genato by coincidence. It was only then that Time was of the essence in the execution of the agreement between Genato and
the Da Jose spouses discovered about the affidavit to annul their contract. The latter Cheng, under this circumstance demand, extrajudicial or judicial, is not necessary. It
were shocked at the disclosure and protested against the rescission of their contract. falls under the exception to the rule provided in Article 1169 19 of the Civil Code. The
After being reminded that he (Genato) had given them (Da Jose spouses) an additional right of Genato to unilaterally rescind the contract is said to be under Article 1191 20 of
30-day period to finish their verification of his titles, that the period was still in effect, the Civil Code. Additionally, after reference was made to the substance of the
and that they were willing and able to pay the balance of the agreed down payment, agreement between Genato and the Da Jose spouses, the lower court also concluded
later on in the day, Genato decided to continue the Contract he had with them. The that Cheng should be preferred over the intervenors-Da Jose spouses in the purchase
agreement to continue with their contract was formalized in a conforme letter dated of the subject properties. Thus, on January 18, 1994 the trial court rendered its decision
October 27, 1989. the decretal portion of which reads:
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his WHEREFORE, judgment is hereby rendered:
contract with the Da Jose spouses and the return of Cheng's P50,000.00 check. 1. Declaring the contract to sell dated September 6, 1989 executed between
Consequently, on October 30, 1989, Cheng's lawyer sent a letter 12 to Genato defendant Ramon Genato, as vendor, and intervenors Spouses Ernesto and
demanding compliance with their agreement to sell the property to him stating that the Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art.
contract to sell between him and Genato was already perfected and threatening legal 1191, Civil Code, by virtue of defendant's affidavit to annul contract to sell
action. dated October 13, 1989 and as the consequence of intervenors' failure to
On November 2, 1989, Genato sent a letter 13 to Cheng (Exh. "6") enclosing a BPI execute within seven (7) days from October 4, 1989 another contract to sell
Cashier's Check for P50,000.00 and expressed regret for his inability to "consummate pursuant to their mutual agreement with defendant;
his transaction" with him. After having received the letter of Genato on November 4, 2. Ordering defendant to return to the intervenors the sum of P1,000,000.00,
1989, Cheng, however, returned the said check to the former via RCPI plus interest at the legal rate from November 2, 1989 until full payment;
telegram 14 dated November 6, 1989, reiterating that "our contract to sell your property 3. Directing defendant to return to the intervenors the three (3) postdated
had already been perfected." checks immediately upon finality of this judgment;
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse 4. Commanding defendant to execute with and in favor of the plaintiff Ricardo
claim 15 and had it annotated on the subject TCT's. Cheng, as vendee, a deed of conveyance and sale of the real properties
On the same day, consistent with the decision of Genato and the Da Jose spouses to described and covered in Transfer Certificates of Title No. T-76-196 (M) and
continue with their Contract to Sell of September 6, 1989, the Da Jose spouses paid T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauayan Branch, at the
Genato the complete down payment of P950,000.00 and delivered to him three (3) rate of P70.000/square meter, less the amount of P50,000.00 alreaddy paid
postdated checks (all dated May 6, 1990, the stipulated due date) in the total amount to defendant, which is considered as part of the purchase price, with the
of P1,865,680.00 to cover full payment of the balance of the agreed purchase price. plaintiff being liable for payment of the capital gains taxes and other expenses
However, due to the filing of the pendency of this case, the three (3) postdated checks of the transfer pursuant to the agreement to sell dated October 24, 1989; and
have not been encashed. 5 Ordering defendant to pay the plaintiff and the intervenors as follows:
On December 8, 1989, Cheng instituted a complaint 16 for specific performance to a/ P50,000.00, as nominal damages, to plaintiff;
compel Genato to execute a deed of sale to him of the subject properties plus damages b/ P50,000.00, as nominal damages, to intervenors;
and prayer for preliminary attachment. In his complaint, Cheng averred that the c/ P20,000.00, as and for attorney's fees, to plaintiff;
P50,000.00 check he gave was a partial payment to the total agreed purchase price of d/ P20,000.00, as and for attorney's fees, to intervenors; and
the subject properties and considered as an earnest money for which Genato acceded. e/ Cost of the suit.
Thus, their contract was already perfected. xxx xxx xxx
In Answer 17 thereto, Genato alleged that the agreement was only a simple receipt of Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da
an option-bid deposit, and never stated that it was a partial payment, nor is it an earnest Jose spouses appealed to the court a quo which reversed such judgment and ruled
money and that it was subject to condition that the prior contract with the Da Jose that the prior contract to sell in favor of the Da Jose spouses was not validly rescinded;
spouses be first cancelled. that the subsequent contract to sell between Genato and Cheng, embodied in the
The Da Jose spouses, in their Answer in Intervention, 18 asserted that they have a handwritten receipt, was without force and effect due to the failure to rescind the prior
superior right to the property as first buyers. They alleged that the unilateral cancellation contract; and that Cheng should pay damages to the respondents herein being found
of the Contract to Sell was without effect and void. They also cited Cheng's bad faith to be in bad faith.
as a buyer being duly informed by Genato of the existing annotated Contract to Sell on Hence this petition.21
the titles. This petition for review, assails the Court of Appeals' Decision on the following grounds:
After trial on the merits, the lower court ruled that the receipt issued by Genato to Cheng (1) that the Da Jose spouses' Contract to Sell has been validly rescinded or resolved;
unerringly meant a sale and not just a priority or an option to buy. It cannot be true that (2) that Ricardo Cheng's own contract with Genato was not just a contract to sell but
the transaction was subjected to some condition or reservation, like the priority in favor one of conditional contract of sale which gave him better rights, thus precluding the
application of the rule on double sales under Article 1544, Civil Code; and (3) that, in case the alleged defaulter brings the matter to the proper courts. In University of the
any case, it was error to hold him liable for damages. Philippines vs. De Los Angeles,29 this Court stressed and we quote:
The petition must be denied for failure to show that the Court of Appeals committed a In other words, the party who deems the contract violated may consider it
reversible error which would warrant a contrary ruling. resolved or rescinded, and act accordingly, without previous court action, but
No reversible error can be ascribed to the ruling of the Court of Appeals that there was it proceeds at its own risk. For it is only the final judgment of the corresponding
no valid and effective rescission or resolution of the Da Jose spouses Contract to Sell, court that will conclusively and finally settle whether the action taken was or
contrary to petitioner's contentions and the trial court's erroneous ruling. was not correct in law. But the law definitely does not require that the
In a Contract to Sell, the payment of the purchase price is a positive suspensive contracting party who believes itself injured must first file suit and wait for a
condition, the failure of which is not a breach, casual or serious, but a situation that judgment before taking extrajudicial steps to protect its interest. Otherwise,
prevents the obligation of the vendor to convey title from acquiring an obligatory the party injured by the other's breach will have to passively sit and watch its
force.22 It is one where the happening of the event gives rise to an obligation. Thus, for damages accumulate during the pendency of the suit until the final judgment
its non-fulfillment there will be no contract to speak of, the obligor having failed to of rescission is rendered when the law itself requires that he should exercise
perform the suspensive condition which enforces a juridical relation. In fact with this due diligence to minimize its own damages (Civil Code, Article 2203).
circumstance, there can be no rescission of an obligation that is still non-existent, the This rule validates, both in equity and justice, contracts such as the one at bat, in order
suspensive condition not having occurred as yet.23 Emphasis should be made that the to avoid and prevent the defaulting party from assuming the offer as still in effect due
breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to to the obligee's tolerance for such non-fulfillment. Resultantly, litigations of this sort
comply with an obligation already extant, not a failure of a condition to render binding shall be prevented and the relations among would-be parties may be preserved. Thus,
that obligation.24 Ricardo Cheng's contention that the Contract to Sell between Genato and the Da Jose
Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the spouses was rescinded or resolved due to Genato's unilateral rescission finds no
instant case because no default can be ascribed to the Da Jose spouses since the 30- support in this case.
day extension period has not yet expired. The Da Jose spouses' contention that no Anent the issue on the nature of the agreement between Cheng and Genato, the
further condition was agreed when they were granted the 30-days extension period records of this case are replete with admissions30 that Cheng believed it to be one of a
from October 7, 1989 in connection with clause 3 of their contract to sell dated Contract to Sell and not one of Conditional Contract of Sale which he, in a transparent
September 6, 1989 should be upheld for the following reason, to wit; firstly, If this were turn-around, now pleads in this Petition. This ambivalent stance of Cheng is even noted
not true, Genato could not have been persuaded to continue his contract with them and by the appellate court, thus:
later on agree to accept the full settlement of the purchase price knowing fully well that At the outset, this Court notes that plaintiff-appellee was inconsistent in
he himself imposed such sine qua non condition in order for the extension to be characterizing the contract he allegedly entered into. In his complaint.31 Cheng
valid; secondly, Genato could have immediately annotated his affidavit to annul the alleged that the P50,000.00 down payment was earnest money. And next, his
contract to sell on his title when it was executed on October 13, 1989 and not only on testimony32 was offered to prove that the transaction between him and Genato
October 26, 1989 after Cheng reminded him of the annotation; thirdly, Genato could on October 24, 1989 was actually a perfected contract to sell.33
have sent at least a notice of such fact, there being no stipulation authorizing him for Settled is the rule that an issue which was not raised during the trial in the court below
automatic rescission, so as to finally clear the encumbrance on his titles and make it cannot be raised for the first time on appeal.34 Issues of fact and arguments not
available to other would be buyers. It likewise settles the holding of the trial court that adequately brought to the attention of the trial court need not be and ordinarily will not
Genato "needed money urgently." be considered by a reviewing court as they cannot be raised for the first time on
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by appeal.35 In fact, both courts below correctly held that the receipt which was the result
Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the of their agreement, is a contract to sell. This was, in fact Cheng's contention in his
contract is not even called for. For with or without the aforesaid affidavit their non- pleadings before said courts. This patent twist only operates against Cheng's posture
payment to complete the full downpayment of the purchase price ipso facto avoids their which is indicative of the weakness of his claim.
contract to sell, it being subjected to a suspensive condition. When a contract is subject But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional
to a suspensive condition, its birth or effectivity can take place only if and when the contract of sale, it did not acquire any obligatory force since it was subject to suspensive
event which constitutes the condition happens or is fulfilled.25 If the suspensive condition that the earlier contract to sell between Genato and the Da Jose spouses
condition does not take place, the parties would stand as if the conditional obligation should first be cancelled or rescinded — a condition never met, as Genato, to his credit,
had never upon realizing his error, redeemed himself by respecting and maintaining his earlier
existed. 26 contract with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. "D,"
Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or alone would not even show that a conditional contract of sale has been entered by
written, to the Da Jose spouses for his decision to rescind their contract. In many Genato and Cheng. When the requisites of a valid contract of sale are lacking in said
cases,27 even though we upheld the validity of a stipulation in a contract to sell receipt, therefore the "sale" is neither valid or enfoceable.36
authorizing automatic rescission for a violation of its terms and conditions, at least a To support his now new theory that the transaction was a conditional contract of sale,
written notice must be sent to the defaulter informing him of the same. The act of a petitioner invokes the case of Coronel vs. Court of Appeals 37 as the law that should
party in treating a contract as cancelled should be made known to the other.28 For such govern their Petition. We do not agree. Apparently, the factual milieu in Coronel is not
act is always provisional. It is always subject to scrutiny and review by the courts in on all fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title buyers except where Cheng, as second buyer, registers or annotates his transaction
to the buyer which petitioner themselves admitted in their pleading. The agreement of or agreement on the title of the subject properties in good faith ahead of the Da Jose
the parties therein was definitively outlined in the "Receipt of Down Payment" both as spouses. Moreover, although the Da Jose spouses, as first buyers, knew of the second
to property, the purchase price, the delivery of the seller of the property and the manner transaction it will not bar them from availing of their rights granted by law, among them,
of the transfer of title subject to the specific condition that upon the transfer in their to register first their agreement as against the second buyer.
names of the subject property the Coronels will execute the deed of absolute sale. In contrast, knowledge gained by Cheng of the first transaction between the Da Jose
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone spouses and Genato defeats his rights even if he is first to register the second
such kind of circumstances cannot be ascertained without however resorting to the transaction, since such knowledge taints his prior registration with bad faith.
exceptions of the Rule on Parol Evidence. "Registration", as defined by Soler and Castillo, means any entry made in the books of
To our mind, the trial court and the appellate court correctly held that the agreement the registry, including both registration in its ordinary and strict sense, and cancellation,
between Genato and Cheng is a contract to sell, which was, in fact, petitioner annotation, and even marginal notes.41 In its strict acceptation, it is the entry made in
connection in his pleadings before the said courts. Consequently, both to mind, which the registry which records solemnly and permanently the right of ownership and other
read: real rights.42 We have ruled43 before that when a Deed of Sale is inscribed in the
Art. 1544. If the same thing should have been sold to different vendees, the registry of property on the original document itself, what was done with respect to said
ownership shall be transferred to the person who may have first taken entries or annotations and marginal notes amounted to a registration of the sale. In this
possession thereof in good faith, if it should be movable property. light, we see no reason why we should not give priority in right the annotation made by
Should it be immovable property, the ownership shall belong to the person the Da Jose spouses with respect to their Contract to Sell dated September 6, 1989.
acquiring it who in good faith first recorded it in the Registry of Property. Moreover, registration alone in such cases without good faith is not sufficient. Good
Should there be no inscription, the ownership shall pertain to the person who faith must concur with registration for such prior right to be enforceable. In the instant
in good faith was first in possession; and in the absence thereof, to the person case, the annotation made by the Da Jose spouses on the titles of Genato of their
who presents he oldest title, provided there is good faith. "Contract To Sell" more than satisfies this requirement. Whereas in the case of
However, a meticulous reading of the aforequoted provision shows that said law is not Genato's agreement with Cheng such is unavailing. For even before the receipt, Exh.
apropos to the instant case. This provision connotes that the following circumstances "D," was issued to Cheng information of such pre-existing agreement has been brought
must concur: to his knowledge which did not deter him from pursuing his agreement with Genato.
(a) The two (or more) sales transactions in issue must pertain to exactly the We give credence to the factual finding of the appellate court that "Cheng himself
same subject matter, and must be valid sales transactions. admitted that it was he who sought Genato in order to inquire about the property and
(b) The two (or more) buyers at odds over the rightful ownership of the subject offered to buy the same.44 And since Cheng was fully aware, or could have been if he
matter must each represent conflicting interests; and had chosen to inquire, of the rights of the Da Jose spouses under the Contract to Sell
(c) The two (or more) buyers at odds over the rightful ownership of the subject duly annotated on the transfer certificates of titles of Genato, it now becomes
matter must each have bought from the very same seller. unnecessary to further elaborate in detail the fact that he is indeed in bad faith in
These situations obviously are lacking in a contract to sell for neither a transfer of entering into such agreement. As we have held in Leung Yee vs. F.L. Strong Machinery
ownership nor a sales transaction has been consummated. The contract to be binding Co.:45
upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an One who purchases real estate with knowledge of a defect . . . of title in his
event. vendor cannot claim that he has acquired title thereto in good faith as against
Notwithstanding this contrary finding with the appellate court, we are of the view that . . . . an interest therein; and the same rule must be applied to one who has
the governing principle of Article 1544, Civil Code, should apply in this situation. knowledge of facts which should have put him upon such inquiry and
Jurisprudence38 teaches us that the governing principle is PRIMUS TEMPORE, investigation as might be necessary to acquaint him with the defects in the
PORTIOR JURE (first in time, stronger in right). For not only was the contract between title of his vendor. A purchaser cannot close his eyes to facts which should put
herein respondents first in time; it was also registered long before petitioner's intrusion a reasonable man upon his guard, and then claim that he acted in good faith
as a second buyer. This principle only applies when the special rules provided in the under the belief that there was no defect in the title of the vendor. His mere
aforcited article of the Civil Code do not apply or fit the specific circumstances refusal to believe that such defect exists, or his willful closing of his eyes to
mandated under said law or by jurisprudence interpreting the article. the possibility of the existence of a defect in his vendor's title, will not make
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to him an innocent purchaser for value, if it afterwards develops that the title was
displace the first buyer are: in fact defective, and it appears that he had such notice of the defect as would
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the have led to its discovery had he acted with that measure of precaution which
first sale and of the first buyer's rights) from the time of acquisition until title is may reasonably be required of a prudent man in a like situation. Good faith,
transferred to him by registration or failing registration, by delivery of possession;39 or lack of it, is in its last analysis a question of intention; but in ascertaining the
(2) the second buyer must show continuing good faith and innocence or lack of intention by which one is actuated on a given occasion, we are necessarily
knowledge of the first sale until his contract ripens into full ownership through prior controlled by the evidence as to the conduct and outward acts by which alone
registration as provided by law.40 the inward motive may with safety, be determined. So it is that "the honesty of
Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, intention," "the honest lawful intent," which constitutes good faith implies a
of the new agreement between Cheng and Genato will not defeat their rights as first "freedom from knowledge and circumstances which ought to put a person on
inquiry," and so it is that proof of such knowledge overcomes the presumption (3) . . . .
of good faith in which the courts always indulge in the absence of the proof to 20 Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one
the contrary. "Good faith, or the want of it, is not a visible, tangible fact that of the obligators should not comply with what is incumbent upon him.
can be seen or touched, but rather a state or condition of mind which can only The injured party may choose between the fulfillment and the rescission of the
be judge of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt. obligation, with the payment of damages in either case. He may also seek rescission,
504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress even after he has chosen fulfillment, if the latter should become impossible.
Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. The court shall decree the rescission claimed, unless there be just cause authorizing
Bromely, 119 Mich., 8, 10, 17.) (Emphasis ours) the fixing of a period.
Damages were awarded by the appellate court on the basis of its finding that petitioner This is understood to be without prejudice to the rights of third persons who have
"was in bad faith when he filed the suit for specific performance knowing fully well that acquired the thing in accordance with articles 1385 and 1388 and the Mortgage Law.
his agreement with Genato did not push through.46 Such bad faith, coupled with his (1124)
wrongful interference with the contractual relations between Genato and the Da Jose 21 Filed on September 4, 1997.
spouses, which culminated in his filing of the present suit and thereby creating what the 22 Odyssey Park, Inc. vs. CA, 280 SCRA 253.
counsel for the respondents describes as "a prolonged and economically unhealthy 23 Rillo vs. CA, 274 SCRA 461.
gridlock47 on both the land itself and the respondents' rights provides ample basis for 24 Odyssey Park, Inc. vs. CA, supra.
the damages awarded. Based on these overwhelming evidence of bad faith on the part 25 Javier vs. CA, 183 SCRA 171 citing Article 1181, Civil Code and Araneta vs. Rural
of herein petitioner Ricardo Cheng, we find that the award of damages made by the Progress Administration, 92 Phil. 98.
appellate court is in order. 26 Javier vs. CA, supra. also citing Gaite vs. Fonacier, et al., 2 SCRA 830.
WHEREFORE, premises considered, the instant petition for review is DENIED and the 27 Palay, Inc. vs. Clave, 124 SCRA 638 citing Torralba vs. De Los Angeles, 96 SCRA
assailed decision is hereby AFFIRMED EN TOTO. 69; Luzon Brokerage Co., Inc. vs. Maritime Building Co., 43 SCRA 93 and 86 SCRA
SO ORDERED. 305; Lopez vs. Commissioner of Customs, 37 SCRA 327; U.P. vs. De Los Angeles, 35
Belosillo, Puno and Mendoza, JJ., concur. SCRA 102; Ponce Enrile vs. CA, 29 SCRA 504; Froilan vs. Pan Oriental Shipping Co.,
Footnotes 12 SCRA 276; Taylor vs. Uy Tieng Piao, 43 Phil. 873.
1 Thirteenth Division. 28 Palay, Inc. vs. Clave, supra.
2 Penned by Justice Demetrio G. Demetria and concurred by Justices Jainal Rasul and 29 35 SCRA 102.
Godardo A. Jacinto. 30 Rollo, p. 111; Annex "D" at pp. 1 & 2, Petition, Rollo, pp. 116 & 117; RCPI Telegram
3 Annex "A," Rollo, p. 105-106. dated November 06, 1989, Rollo, p. 120; CA Brief for Plaintiff-Appellee at p. 6, Rollo,
4 Annex "B," Rollo, p. 107-108. p. 257.
5 Annex "I," Petition; Rollo, p. 142-143. 31 Annex "A" at par. 5. p. 15, Petition; Rollo, p. 87.
6 TSN, June 26, 1992, p. 16; Rollo, p. 77. 32 Ibid.
7 Annex "D," Petition; Rollo, p. 110. 33 CA Decision at par. p. 5, p. 15, Annex "A," Petition; Rollo, p. 87.
8 Ibid. 34 Pangilinan vs. CA, 279 SCRA 590 citing Reparations Commission vs. Visayan
9 Annex "C," Petition; Rollo, p. 109. Packing Corporation, 193 SCRA 531.
10 Annex "I," Petition p. 7; Rollo, p. 145. 35 Pangilinan vs. CA, supra, citing Berin vs. CA, 194 SCRA 508.
11 Annex "B," Petition; Rollo, p. 106 & 108. 36 Jovan Land, Inc. vs. CA, 268 SCRA 160.
12 Annex "E," Petition; Rollo, p. 111. 37 263 SCRA 15.
13 Rollo, p. 115. 38 Uraca vs. CA, 278 SCRA 702; Cruz vs. Cabana , 129 SCRA 656; Carbonell vs. CA,
14 Rollo, p. 120. 69 SCRA 99, concurring Separate Opinion of then Associate Justice Claudio
15 Rollo, pp. 106 & 108. Teehankee, later to be the Chief Justice.
16 Rollo, pp. 99-104. 39 See Uraca vs. CA, supra.
17 Rollo, pp. 112-114. 40 Ibid.
18 Rollo, pp. 124-132. 41 Tolentino, Arturo M. , "Commentaries and Jurisprudence on the Civil Code, Vol. V,"
19 Art. 1169. Those obliged to deliver or to do something incur in delay from the time 1992, pp. 97-98.
the obligee judicially or extrajudicially demands from them the fulfillment of their 42 Ibid.
obligation. 43 Veguillas vs. Jaucian, 25 Phil. 315.
However the demand by the creditor shall not be necessary in order that the 44 Annex "A," Petition; Rollo, par. 2, p. 95.
delay may exist: 45 37 Phil. 644.
(1) . . . ; or 46 Annex "A," Petition; Rollo, p. 95.
(2) When from the nature and the circumstances of the obligation it appears 47 Comment of Da Jose spouses, p. 3; Rollo, p. 315.
that the designation of the time when the thing is to be delivered or the service
is to be rendered was a controlling motive for the establishment of the contract,
or
THIRD DIVISION prospective seller still has to convey title to the prospective buyer by entering into a
G.R. No. 103577 October 7, 1996 contract of absolute sale.—In a contract to sell, upon the fulfillment of the suspensive
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, condition which is the full payment of the purchase price, ownership will not
ANNABELLE C. GONZALES (for herself and on behalf of Florida C. Tupper, as automatically transfer to the buyer although the property may have been previously
attorney-in-fact), CIELITO A. CORONEL, FLORAIDA A. ALMONTE, and delivered to him. The prospective seller still has to convey title to the prospective buyer
CATALINA BALAIS MABANAG, petitioners, vs. THE COURT OF APPEALS, by entering into a contract of absolute sale.
CONCEPCION D. ALCARAZ, and RAMONA PATRICIA ALCARAZ, assisted by Same; Same; Same; Same; In a contract to sell, there being no previous sale of
GLORIA F. NOEL as attorney-in-fact, respondents. the property, a third person buying such property despite the fulfillment of the
suspensive condition such as the full payment of the purchase price cannot be deemed
Contracts; Sales; Essential Elements of a Contract of Sale.—Sale, by its very nature, a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance
is a consensual contract because it is perfected by mere consent. The essential of the property — there is no double sale in such case.—It is essential to distinguish
elements of a contract of sale are the following: a) Consent or meeting of the minds, between a contract to sell and a conditional contract of sale specially in cases where
that is, consent to transfer ownership in exchange for the price; b) Determinate subject the subject property is sold by the owner not to the party the seller contracted with, but
matter; and c) Price certain in money or its equivalent. to a third person, as in the case at bench. In a contract to sell, there being no previous
Same; Same; Words and Phrases; “Contract to Sell” and “Contract of Sale,” sale of the property, a third person buying such property despite the fulfillment of the
Distinguished; In a contract to sell, the prospective seller explicitly reserves the transfer suspensive condition such as the full payment of the purchase price, for instance,
of title to the prospective buyer, meaning, the prospective seller does not as yet agree cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief
or consent to transfer ownership of the property subject of the contract to sell until the of reconveyance of the property. There is no double sale in such case. Title to the
happening of an event.—Under this definition, a Contract to Sell may not be considered property will transfer to the buyer after registration because there is no defect in the
as a Contract ofSale because the first essential element is lacking. In a contract to sell, owner-seller’s title per se, but the latter, of course, may be sued for damages by the
the prospective seller explicitly reserves the transfer of title to the prospective buyer, intending buyer.
meaning, the prospective seller does not as yet agree or consent to transfer ownership Same; Same; Same; Same; In a conditional contract of sale, upon the fulfillment
of the property subject of the contract to sell until the happening of an event, which for of the suspensive condition, the sale becomes absolute and this will definitely affect the
present purposes we shall take as the full payment of the purchase price. What the seller’s title thereto.—In a conditional contract of sale, however, upon the fulfillment of
seller agrees or obliges himself to do is to fulfill his promise to sell the subject property the suspensive condition, the sale becomes absolute and this will definitely affect the
when the entire amount of the purchase price is delivered to him. In other words the full seller’s title thereto. In fact, if there had been
payment of the purchase price partakes of a suspensive condition, the non-fulfillment previous delivery of the subject property, the seller’s ownership or title to the property
of which prevents the obligation to sell from arising and thus, ownership is retained by is automatically transferred to the buyer such that, the seller will no longer have any
the prospective seller without further remedies by the prospective buyer. title to transfer to any third person. Applying Article 1544 of the Civil Code, such second
Same; Same; Same; Same; “Contract to Sell,” Defined.—A contract to sell may buyer of the property who may have had actual or constructive knowledge of such
thus be defined as a bilateral contract whereby the prospective seller, while expressly defect in the seller’s title, or at least was charged with the obligation to discover such
reserving the ownership of the subject property despite delivery thereof to the defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first
prospective buyer, binds himself to sell the said property exclusively to the prospective buyer’s title. In case a title is issued to the second buyer, the first buyer may seek
buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase reconveyance of the property subject of the sale.
price. Same; Same; Same; Same; When the sellers declared in the “Receipt of Down
Same; Same; Same; Same; A contract to sell may not even be considered as a Payment” that they received an amount as purchase price for their house and lot
conditional contract of sale because in a conditional contract of sale, the first element without any reservation of title until full payment of the entire purchase price, the natural
of consent is present, although it is conditioned upon the happening of a contingent and ordinary idea conveyed is that they sold their property.—It is a canon in the
event which may or may not occur.—A contract to sell as defined hereinabove, may interpretation of contracts that the words used therein should be given their natural and
not even be considered as a conditional contract of sale where the seller may likewise ordinary meaning unless a technical meaning was intended (Tan vs. Court of
reserve title to the property subject of the sale until the fulfillment of a suspensive Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the said “Receipt
condition, because in a conditional contract of sale, the first element of consent is of Down Payment” that they — Received from Miss Ramona Patricia Alcaraz of 146
present, although it is conditioned upon the happening of a contingent event which may Timog, Quezon City, the sum of Fifty Thousand Pesos purchase price of our inherited
or may not occur. If the suspensive condition is not fulfilled, the perfection of the house and lot, covered by TCT No. 1199627 of the Registry of Deeds of Quezon City,
contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of in the total amount of P1,240,000.00. Without any reservation of title until full payment
Appeals, 133 SCRA 777 [1984]). of the entire purchase price, the natural and ordinary idea conveyed is that they sold
However, if the suspensive condition is fulfilled, the contract of sale is thereby their property.
perfected, such that if there had already been previous delivery of the property subject Sale; Ownership; Succession; Rights to the succession are transmitted from the
of the sale to the buyer, ownership thereto automatically transfers to the buyer by moment of death of the decedent.—Article 774 of the Civil Code defines Succession
operation of law without any further act having to be performed by the seller. as a mode of transferring ownership as follows: Art. 774. Succession is a mode of
Same; Same; Same; Same; In a contract to sell, upon the fulfillment of the acquisition by virtue of which the property, rights and obligations to the extent and value
suspensive condition, ownership will not automatically transfer to the buyer — the of the inheritance of a person are transmitted through his death to another or others by
his will or by operation of law. Petitioners-sellers in the case at bar being the sons and Petitioner Mabanag cannot close her eyes to the defect in petitioners’ title to the
daughters of the decedent Constancio P. Coronel are compulsory heirs who were property at the time of the registration of the property.
called to succession by operation of law. Thus, at the point their father drew his last PETITION for review on certiorari of a decision of the Court of Appeals.
breath, petitioners stepped into his shoes insofar as the subject property is concerned,
such that any rights or obligations pertaining thereto became binding and enforceable MELO, J.:p
upon them. It is expressly provided that rights to the succession are The petition before us has its roots in a complaint for specific performance to compel
transmitted from the moment of death of the decedent (Article 777, Civil Code; Cuison herein petitioners (except the last named, Catalina Balais Mabanag) to consummate
vs. Villanueva, 90 Phil. 850 [1952]). the sale of a parcel of land with its improvements located along Roosevelt Avenue in
Same; Same; Estoppel; Having represented themselves as the true owners of Quezon City entered into by the parties sometime in January 1985 for the price of
the subject property at the time of sale, the sellers cannot claim later that they were not P1,240,000.00.
yet the absolute owners thereof at that time.—Aside from this, petitioners are precluded The undisputed facts of the case were summarized by respondent court in this wise:
from raising their supposed lack of capacity to enter into an agreement at that time and On January 19, 1985, defendants-appellants Romulo Coronel, et al.
they cannot be allowed to now take a posture contrary to that which they took when (hereinafter referred to as Coronels) executed a document entitled "Receipt of
they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Down Payment" (Exh. "A") in favor of plaintiff Ramona Patricia Alcaraz
Code expressly states that: Art. 1431. Through estoppel an admission or representation (hereinafter referred to as Ramona) which is reproduced hereunder:
is rendered conclusive upon the person making it, and cannot be denied or disproved RECEIPT OF DOWN PAYMENT
as against the person relying thereon. Having represented themselves as the true P1,240,000.00 — Total amount
owners of the subject property at the time of sale, petitioners cannot claim now that 50,000 — Down payment
they were not yet the absolute owners thereof at that time. ———————————
Same; Rescission; Pleadings and Practice; Evidence; Allegations must be P1,190,000.00 — Balance
proven by sufficient evidence — mere allegation is not an evidence.—We do not agree Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
with petitioners that there was a valid rescission of the contract of sale in the instant sum of Fifty Thousand Pesos purchase price of our inherited house and lot,
case. We note that these supposed grounds for petitioners’ rescission, are mere covered by TCT No. 119627 of the Registry of Deeds of Quezon City, in the
allegations found only in their responsive pleadings, which by express provision of the total amount of P1,240,000.00.
rules, are deemed controverted even if no reply is filed by the plaintiffs (Sec. 11, Rule We bind ourselves to effect the transfer in our names from our deceased
6, Revised Rules of Court). The records are absolutely bereft of any supporting father, Constancio P. Coronel, the transfer certificate of title immediately upon
evidence to substantiate petitioners’ allegations. We have stressed time and again that receipt of the down payment above-stated.
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. On our presentation of the TCT already in or name, We will immediately
882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an execute the deed of absolute sale of said property and Miss Ramona Patricia
evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]). Alcaraz shall immediately pay the balance of the P1,190,000.00.
Same; Same; A seller cannot unilaterally and extrajudicially rescind a contract of Clearly, the conditions appurtenant to the sale are the following:
sale where there is no express stipulation authorizing him to extrajudicially rescind.— 1. Ramona will make a down payment of Fifty Thousand (P50,000.00) Pesos
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America upon execution of the document aforestated;
on February 6, 1985, we cannot justify petitioners-sellers’ act of unilaterally and 2. The Coronels will cause the transfer in their names of the title of the property
extrajudicially rescinding the contract of sale, there being no express stipulation registered in the name of their deceased father upon receipt of the Fifty
authorizing the sellers to extrajudicially rescind the contract of sale. (cf. Dignos vs. Thousand (P50,000.00) Pesos down payment;
CA, 158 SCRA 375 [1988]; Taguba vs. Vda. de De Leon, 132 SCRA 722 [1984]) 3. Upon the transfer in their names of the subject property, the Coronels will
Same; In case of double sale, what finds relevance and materiality is not whether execute the deed of absolute sale in favor of Ramona and the latter will pay
or not the second buyer was a buyer in good faith but whether or not said second buyer the former the whole balance of One Million One Hundred Ninety Thousand
registers such second sale in good faith, that is, without knowledge of any defect in the (P1,190,000.00) Pesos.
title of the property sold.—In a case of double sale, what finds relevance and materiality On the same date (January 15, 1985), plaintiff-appellee Concepcion D.
is not whether or not the second buyer was a buyer in good faith but whether or not Alcaraz (hereinafter referred to as Concepcion), mother of Ramona, paid the
said second buyer registers such second sale in good faith, that is, without knowledge down payment of Fifty Thousand (P50,000.00) Pesos (Exh. "B", Exh. "2").
of any defect in the title of the property sold. As clearly borne out by the evidence in On February 6, 1985, the property originally registered in the name of the
this case, petitioner Mabanag could not have in good faith, registered the sale entered Coronels' father was transferred in their names under TCT
into on February 18, 1985 because as early as February 22, 1985, a notice of lis No. 327043 (Exh. "D"; Exh. "4")
pendens had been annotated on the transfer certificate of title in the names of On February 18, 1985, the Coronels sold the property covered by TCT No.
petitioners, whereas petitioner Mabanag registered the said sale sometime in April, 327043 to intervenor-appellant Catalina B. Mabanag (hereinafter referred to
1985. At the time of registration, therefore, petitioner Mabanag knew that the same as Catalina) for One Million Five Hundred Eighty Thousand (P1,580,000.00)
property had already been previously sold to private respondents, or, at least, she was Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos
charged with knowledge that a previous buyer is claiming title to the same property. (Exhs. "F-3"; Exh. "6-C")
For this reason, Coronels canceled and rescinded the contract (Exh. "A") with The prayer contained in the instant motion, i.e., to annul the decision and to
Ramona by depositing the down payment paid by Concepcion in the bank in render anew decision by the undersigned Presiding Judge should be denied
trust for Ramona Patricia Alcaraz. for the following reasons: (1) The instant case became submitted for decision
On February 22, 1985, Concepcion, et al., filed a complaint for specific as of April 14, 1988 when the parties terminated the presentation of their
performance against the Coronels and caused the annotation of a notice of lis respective documentary evidence and when the Presiding Judge at that time
pendens at the back of TCT No. 327403 (Exh. "E"; Exh. "5"). was Judge Reynaldo Roura. The fact that they were allowed to file
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim memoranda at some future date did not change the fact that the hearing of
covering the same property with the Registry of Deeds of Quezon City (Exh. the case was terminated before Judge Roura and therefore the same should
"F"; Exh. "6"). be submitted to him for decision; (2) When the defendants and intervenor did
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the not object to the authority of Judge Reynaldo Roura to decide the case prior
subject property in favor of Catalina (Exh. "G"; Exh. "7"). to the rendition of the decision, when they met for the first time before the
On June 5, 1985, a new title over the subject property was issued in the name undersigned Presiding Judge at the hearing of a pending incident in Civil Case
of Catalina under TCT No. 351582 (Exh. "H"; Exh. "8"). No. Q-46145 on November 11, 1988, they were deemed to have acquiesced
(Rollo, pp. 134-136) thereto and they are now estopped from questioning said authority of Judge
In the course of the proceedings before the trial court (Branch 83, RTC, Quezon City) Roura after they received the decision in question which happens to be
the parties agreed to submit the case for decision solely on the basis of documentary adverse to them; (3) While it is true that Judge Reynaldo Roura was merely a
exhibits. Thus, plaintiffs therein (now private respondents) proffered their documentary Judge-on-detail at this Branch of the Court, he was in all respects the
evidence accordingly marked as Exhibits "A" through "J", inclusive of their Presiding Judge with full authority to act on any pending incident submitted
corresponding submarkings. Adopting these same exhibits as their own, then before this Court during his incumbency. When he returned to his Official
defendants (now petitioners) accordingly offered and marked them as Exhibits "1" Station at Macabebe, Pampanga, he did not lose his authority to decide or
through "10", likewise inclusive of their corresponding submarkings. Upon motion of the resolve such cases submitted to him for decision or resolution because he
parties, the trial court gave them thirty (30) days within which to simultaneously submit continued as Judge of the Regional Trial Court and is of co-equal rank with
their respective memoranda, and an additional 15 days within which to submit their the undersigned Presiding Judge. The standing rule and supported by
corresponding comment or reply thereof, after which, the case would be deemed jurisprudence is that a Judge to whom a case is submitted for decision has
submitted for resolution. the authority to decide the case notwithstanding his transfer to another branch
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, or region of the same court (Sec. 9, Rule 135, Rule of Court).
who was then temporarily detailed to preside over Branch 82 of the RTC of Quezon Coming now to the twin prayer for reconsideration of the Decision dated March
City. On March 1, 1989, judgment was handed down by Judge Roura from his regular 1, 1989 rendered in the instant case, resolution of which now pertains to the
bench at Macabebe, Pampanga for the Quezon City branch, disposing as follows: undersigned Presiding Judge, after a meticulous examination of the
WHEREFORE, judgment for specific performance is hereby rendered documentary evidence presented by the parties, she is convinced that the
ordering defendant to execute in favor of plaintiffs a deed of absolute sale Decision of March 1, 1989 is supported by evidence and, therefore, should
covering that parcel of land embraced in and covered by Transfer Certificate not be disturbed.
of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for IN VIEW OF THE FOREGOING, the "Motion for Reconsideration and/or to
Quezon City, together with all the improvements existing thereon free from all Annul Decision and Render Anew Decision by the Incumbent Presiding
liens and encumbrances, and once accomplished, to immediately deliver the Judge" dated March 20, 1989 is hereby DENIED.
said document of sale to plaintiffs and upon receipt thereof, the said document SO ORDERED.
of sale to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pay Quezon City, Philippines, July 12, 1989.
defendants the whole balance of the purchase price amounting to (Rollo, pp. 108-109)
P1,190,000.00 in cash. Transfer Certificate of Title No. 331582 of the Registry Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of
of Deeds for Quezon City in the name of intervenor is hereby canceled and Appeals (Buena, Gonzaga-Reyes, Abad Santos (P), JJ.) rendered its decision fully
declared to be without force and effect. Defendants and intervenor and all agreeing with the trial court.
other persons claiming under them are hereby ordered to vacate the subject Hence, the instant petition which was filed on March 5, 1992. The last pleading, private
property and deliver possession thereof to plaintiffs. Plaintiffs' claim for respondents' Reply Memorandum, was filed on September 15, 1993. The case was,
damages and attorney's fees, as well as the counterclaims of defendants and however, re-raffled to undersigned ponente only on August 28, 1996, due to the
intervenors are hereby dismissed. voluntary inhibition of the Justice to whom the case was last assigned.
No pronouncement as to costs. While we deem it necessary to introduce certain refinements in the disquisition of
So Ordered. respondent court in the affirmance of the trial court's decision, we definitely find the
Macabebe, Pampanga for Quezon City, March 1, 1989. instant petition bereft of merit.
(Rollo, p. 106) The heart of the controversy which is the ultimate key in the resolution of the other
A motion for reconsideration was filed by petitioner before the new presiding judge of issues in the case at bar is the precise determination of the legal significance of the
the Quezon City RTC but the same was denied by Judge Estrella T. Estrada, thusly: document entitled "Receipt of Down Payment" which was offered in evidence by both
parties. There is no dispute as to the fact that said document embodied the binding
contract between Ramona Patricia Alcaraz on the one hand, and the heirs of An accepted unilateral promise to buy or to sell a determinate thing for a price
Constancio P. Coronel on the other, pertaining to a particular house and lot covered by certain is binding upon the promissor if the promise is supported by a
TCT No. 119627, as defined in Article 1305 of the Civil Code of the Philippines which consideration distinct from the price.
reads as follows: A contract to sell may thus be defined as a bilateral contract whereby the prospective
Art. 1305. A contract is a meeting of minds between two persons whereby one seller, while expressly reserving the ownership of the subject property despite delivery
binds himself, with respect to the other, to give something or to render some thereof to the prospective buyer, binds himself to sell the said property exclusively to
service. the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment
While, it is the position of private respondents that the "Receipt of Down Payment" of the purchase price.
embodied a perfected contract of sale, which perforce, they seek to enforce by means A contract to sell as defined hereinabove, may not even be considered as a conditional
of an action for specific performance, petitioners on their part insist that what the contract of sale where the seller may likewise reserve title to the property subject of the
document signified was a mere executory contract to sell, subject to certain suspensive sale until the fulfillment of a suspensive condition, because in a conditional contract of
conditions, and because of the absence of Ramona P. Alcaraz, who left for the United sale, the first element of consent is present, although it is conditioned upon the
States of America, said contract could not possibly ripen into a contract absolute sale. happening of a contingent event which may or may not occur. If the suspensive
Plainly, such variance in the contending parties' contentions is brought about by the condition is not fulfilled, the perfection of the contract of sale is completely abated
way each interprets the terms and/or conditions set forth in said private instrument. (cf. Homesite and housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]).
Withal, based on whatever relevant and admissible evidence may be available on However, if the suspensive condition is fulfilled, the contract of sale is thereby
record, this, Court, as were the courts below, is now called upon to adjudge what the perfected, such that if there had already been previous delivery of the property subject
real intent of the parties was at the time the said document was executed. of the sale to the buyer, ownership thereto automatically transfers to the buyer by
The Civil Code defines a contract of sale, thus: operation of law without any further act having to be performed by the seller.
Art. 1458. By the contract of sale one of the contracting parties obligates In a contract to sell, upon the fulfillment of the suspensive condition which is the full
himself to transfer the ownership of and to deliver a determinate thing, and the payment of the purchase price, ownership will not automatically transfer to the buyer
other to pay therefor a price certain in money or its equivalent. although the property may have been previously delivered to him. The prospective
Sale, by its very nature, is a consensual contract because it is perfected by mere seller still has to convey title to the prospective buyer by entering into a contract of
consent. The essential elements of a contract of sale are the following: absolute sale.
a) Consent or meeting of the minds, that is, consent to transfer ownership in It is essential to distinguish between a contract to sell and a conditional contract of sale
exchange for the price; specially in cases where the subject property is sold by the owner not to the party the
b) Determinate subject matter; and seller contracted with, but to a third person, as in the case at bench. In a contract to
c) Price certain in money or its equivalent. sell, there being no previous sale of the property, a third person buying such property
Under this definition, a Contract to Sell may not be considered as a Contract of Sale despite the fulfillment of the suspensive condition such as the full payment of the
because the first essential element is lacking. In a contract to sell, the prospective seller purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
explicity reserves the transfer of title to the prospective buyer, meaning, the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale
seller does not as yet agree or consent to transfer ownership of the property subject of in such case. Title to the property will transfer to the buyer after registration because
the contract to sell until the happening of an event, which for present purposes we shall there is no defect in the owner-seller's title per se, but the latter, of course, may be used
take as the full payment of the purchase price. What the seller agrees or obliges himself for damages by the intending buyer.
to do is to fulfill is promise to sell the subject property when the entire amount of the In a conditional contract of sale, however, upon the fulfillment of the suspensive
purchase price is delivered to him. In other words the full payment of the purchase price condition, the sale becomes absolute and this will definitely affect the seller's title
partakes of a suspensive condition, the non-fulfillment of which prevents the obligation thereto. In fact, if there had been previous delivery of the subject property, the seller's
to sell from arising and thus, ownership is retained by the prospective seller without ownership or title to the property is automatically transferred to the buyer such that, the
further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), seller will no longer have any title to transfer to any third person. Applying Article 1544
this Court had occasion to rule: of the Civil Code, such second buyer of the property who may have had actual or
Hence, We hold that the contract between the petitioner and the respondent constructive knowledge of such defect in the seller's title, or at least was charged with
was a contract to sell where the ownership or title is retained by the seller and the obligation to discover such defect, cannot be a registrant in good faith. Such second
is not to pass until the full payment of the price, such payment being a positive buyer cannot defeat the first buyer's title. In case a title is issued to the second buyer,
suspensive condition and failure of which is not a breach, casual or serious, the first buyer may seek reconveyance of the property subject of the sale.
but simply an event that prevented the obligation of the vendor to convey title With the above postulates as guidelines, we now proceed to the task of deciphering the
from acquiring binding force. real nature of the contract entered into by petitioners and private respondents.
Stated positively, upon the fulfillment of the suspensive condition which is the full It is a canon in the interpretation of contracts that the words used therein should be
payment of the purchase price, the prospective seller's obligation to sell the subject given their natural and ordinary meaning unless a technical meaning was intended (Tan
property by entering into a contract of sale with the prospective buyer becomes vs. Court of Appeals, 212 SCRA 586 [1992]). Thus, when petitioners declared in the
demandable as provided in Article 1479 of the Civil Code which states: said "Receipt of Down Payment" that they —
Art. 1479. A promise to buy and sell a determinate thing for a price certain is Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the
reciprocally demandable. sum of Fifty Thousand Pesos purchase price of our inherited house and lot,
covered by TCT No. 1199627 of the Registry of Deeds of Quezon City, in the consummation of which is subject only to the successful transfer of the certificate of
total amount of P1,240,000.00. title from the name of petitioners' father, Constancio P. Coronel, to their names.
without any reservation of title until full payment of the entire purchase price, the natural The Court significantly notes this suspensive condition was, in fact, fulfilled on February
and ordinary idea conveyed is that they sold their property. 6, 1985 (Exh. "D"; Exh. "4"). Thus, on said date, the conditional contract of sale between
When the "Receipt of Down Payment" is considered in its entirety, it becomes more petitioners and private respondent Ramona P. Alcaraz became obligatory, the only act
manifest that there was a clear intent on the part of petitioners to transfer title to the required for the consummation thereof being the delivery of the property by means of
buyer, but since the transfer certificate of title was still in the name of petitioner's father, the execution of the deed of absolute sale in a public instrument, which petitioners
they could not fully effect such transfer although the buyer was then willing and able to unequivocally committed themselves to do as evidenced by the "Receipt of Down
immediately pay the purchase price. Therefore, petitioners-sellers undertook upon Payment."
receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to
issuance of a new certificate of title in their names from that of their father, after which, the case at bench. Thus,
they promised to present said title, now in their names, to the latter and to execute the Art. 1475. The contract of sale is perfected at the moment there is a meeting
deed of absolute sale whereupon, the latter shall, in turn, pay the entire balance of the of minds upon the thing which is the object of the contract and upon the price.
purchase price. From the moment, the parties may reciprocally demand performance, subject
The agreement could not have been a contract to sell because the sellers herein to the provisions of the law governing the form of contracts.
made no express reservation of ownership or title to the subject parcel of land. Art. 1181. In conditional obligations, the acquisition of rights, as well as the
Furthermore, the circumstance which prevented the parties from entering into an extinguishment or loss of those already acquired, shall depend upon the
absolute contract of sale pertained to the sellers themselves (the certificate of title was happening of the event which constitutes the condition.
not in their names) and not the full payment of the purchase price. Under the Since the condition contemplated by the parties which is the issuance of a certificate of
established facts and circumstances of the case, the Court may safely presume that, title in petitioners' names was fulfilled on February 6, 1985, the respective obligations
had the certificate of title been in the names of petitioners-sellers at that time, there of the parties under the contract of sale became mutually demandable, that is,
would have been no reason why an absolute contract of sale could not have been petitioners, as sellers, were obliged to present the transfer certificate of title already in
executed and consummated right there and then. their names to private respondent Ramona P. Alcaraz, the buyer, and to immediately
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith
promise to sell the properly to private respondent upon the fulfillment of the suspensive pay the balance of the purchase price amounting to P1,190,000.00.
condition. On the contrary, having already agreed to sell the subject property, they It is also significant to note that in the first paragraph in page 9 of their petition,
undertook to have the certificate of title changed to their names and immediately petitioners conclusively admitted that:
thereafter, to execute the written deed of absolute sale. 3. The petitioners-sellers Coronel bound themselves "to effect the transfer in
Thus, the parties did not merely enter into a contract to sell where the sellers, after our names from our deceased father Constancio P. Coronel, the transfer
compliance by the buyer with certain terms and conditions, promised to sell the property certificate of title immediately upon receipt of the downpayment above-
to the latter. What may be perceived from the respective undertakings of the parties to stated". The sale was still subject to this suspensive condition. (Emphasis
the contract is that petitioners had already agreed to sell the house and lot they supplied.)
inherited from their father, completely willing to transfer full ownership of the subject (Rollo, p. 16)
house and lot to the buyer if the documents were then in order. It just happened, Petitioners themselves recognized that they entered into a contract of sale subject to a
however, that the transfer certificate of title was then still in the name of their father. It suspensive condition. Only, they contend, continuing in the same paragraph, that:
was more expedient to first effect the change in the certificate of title so as to bear their . . . Had petitioners-sellers not complied with this condition of first
names. That is why they undertook to cause the issuance of a new transfer of the transferring the title to the property under their names, there could be
certificate of title in their names upon receipt of the down payment in the amount of no perfected contract of sale. (Emphasis supplied.)
P50,000.00. As soon as the new certificate of title is issued in their names, petitioners (Ibid.)
were committed to immediately execute the deed of absolute sale. Only then will the not aware that they set their own trap for themselves, for Article 1186 of the
obligation of the buyer to pay the remainder of the purchase price arise. Civil Code expressly provides that:
There is no doubt that unlike in a contract to sell which is most commonly entered into Art. 1186. The condition shall be deemed fulfilled when the obligor
so as to protect the seller against a buyer who intends to buy the property in installment voluntarily prevents its fulfillment.
by withholding ownership over the property until the buyer effects full payment therefor, Besides, it should be stressed and emphasized that what is more controlling than these
in the contract entered into in the case at bar, the sellers were the one who were unable mere hypothetical arguments is the fact that the condition herein referred to was
to enter into a contract of absolute sale by reason of the fact that the certificate of title actually and indisputably fulfilled on February 6, 1985, when a new title was issued in
to the property was still in the name of their father. It was the sellers in this case who, the names of petitioners as evidenced by TCT No. 327403 (Exh. "D"; Exh. "4").
as it were, had the impediment which prevented, so to speak, the execution of an The inevitable conclusion is that on January 19, 1985, as evidenced by the document
contract of absolute sale. denominated as "Receipt of Down Payment" (Exh. "A"; Exh. "1"), the parties entered
What is clearly established by the plain language of the subject document is that when into a contract of sale subject only to the suspensive condition that the sellers shall
the said "Receipt of Down Payment" was prepared and signed by petitioners Romeo effect the issuance of new certificate title from that of their father's name to their names
A. Coronel, et al., the parties had agreed to a conditional contract of sale, and that, on February 6, 1985, this condition was fulfilled (Exh. "D"; Exh. "4").
We, therefore, hold that, in accordance with Article 1187 which pertinently provides — provision of the rules, are deemed controverted even if no reply is filed by the plaintiffs
Art. 1187. The effects of conditional obligation to give, once the (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of any
condition has been fulfilled, shall retroact to the day of the supporting evidence to substantiate petitioners' allegations. We have stressed time and
constitution of the obligation . . . again that allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong,
In obligation to do or not to do, the courts shall determine, in each 110 Phil. 882 [1961]; Recaro vs. Embisan, 2 SCRA 598 [1961]. Mere allegation is not
case, the retroactive effect of the condition that has been complied an evidence (Lagasca vs. De Vera, 79 Phil. 376 [1947]).
with. Even assuming arguendo that Ramona P. Alcaraz was in the United States of America
the rights and obligations of the parties with respect to the perfected contract on February 6, 1985, we cannot justify petitioner-sellers' act of unilaterally and
of sale became mutually due and demandable as of the time of fulfillment or extradicially rescinding the contract of sale, there being no express stipulation
occurrence of the suspensive condition on February 6, 1985. As of that point authorizing the sellers to extarjudicially rescind the contract of sale. (cf. Dignos vs. CA,
in time, reciprocal obligations of both seller and buyer arose. 158 SCRA 375 [1988]; Taguba vs. Vda. de Leon, 132 SCRA 722 [1984])
Petitioners also argue there could been no perfected contract on January 19, 1985 Moreover, petitioners are estopped from raising the alleged absence of Ramona P.
because they were then not yet the absolute owners of the inherited property. Alcaraz because although the evidence on record shows that the sale was in the name
We cannot sustain this argument. of Ramona P. Alcaraz as the buyer, the sellers had been dealing with Concepcion D.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership Alcaraz, Ramona's mother, who had acted for and in behalf of her daughter, if not also
as follows: in her own behalf. Indeed, the down payment was made by Concepcion D. Alcaraz with
Art. 774. Succession is a mode of acquisition by virtue of which the her own personal check (Exh. "B"; Exh. "2") for and in behalf of Ramona P. Alcaraz.
property, rights and obligations to be extent and value of the There is no evidence showing that petitioners ever questioned Concepcion's authority
inheritance of a person are transmitted through his death to another to represent Ramona P. Alcaraz when they accepted her personal check. Neither did
or others by his will or by operation of law. they raise any objection as regards payment being effected by a third person.
Petitioners-sellers in the case at bar being the sons and daughters of the Accordingly, as far as petitioners are concerned, the physical absence of Ramona P.
decedent Constancio P. Coronel are compulsory heirs who were called to Alcaraz is not a ground to rescind the contract of sale.
succession by operation of law. Thus, at the point their father drew his last Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her
breath, petitioners stepped into his shoes insofar as the subject property is obligation to pay the full purchase price is concerned. Petitioners who are precluded
concerned, such that any rights or obligations pertaining thereto became from setting up the defense of the physical absence of Ramona P. Alcaraz as above-
binding and enforceable upon them. It is expressly provided that rights to the explained offered no proof whatsoever to show that they actually presented the new
succession are transmitted from the moment of death of the decedent (Article transfer certificate of title in their names and signified their willingness and readiness to
777, Civil Code; Cuison vs. Villanueva, 90 Phil. 850 [1952]). execute the deed of absolute sale in accordance with their agreement. Ramona's
Be it also noted that petitioners' claim that succession may not be declared unless the corresponding obligation to pay the balance of the purchase price in the amount of
creditors have been paid is rendered moot by the fact that they were able to effect the P1,190,000.00 (as buyer) never became due and demandable and, therefore, she
transfer of the title to the property from the decedent's name to their names on February cannot be deemed to have been in default.
6, 1985. Article 1169 of the Civil Code defines when a party in a contract involving reciprocal
Aside from this, petitioners are precluded from raising their supposed lack of capacity obligations may be considered in default, to wit:
to enter into an agreement at that time and they cannot be allowed to now take a Art. 1169. Those obliged to deliver or to do something, incur in delay from the
posture contrary to that which they took when they entered into the agreement with time the obligee judicially or extrajudicially demands from them the fulfillment
private respondent Ramona P. Alcaraz. The Civil Code expressly states that: of their obligation.
Art. 1431. Through estoppel an admission or representation is xxx xxx xxx
rendered conclusive upon the person making it, and cannot be In reciprocal obligations, neither party incurs in delay if the other does not
denied or disproved as against the person relying thereon. comply or is not ready to comply in a proper manner with what is incumbent
Having represented themselves as the true owners of the subject property at upon him. From the moment one of the parties fulfill his obligation, delay by
the time of sale, petitioners cannot claim now that they were not yet the the other begins. (Emphasis supplied.)
absolute owners thereof at that time. There is thus neither factual nor legal basis to rescind the contract of sale between
Petitioners also contend that although there was in fact a perfected contract of sale petitioners and respondents.
between them and Ramona P. Alcaraz, the latter breached her reciprocal obligation With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag,
when she rendered impossible the consummation thereof by going to the United States gave rise to a case of double sale where Article 1544 of the Civil Code will apply, to wit:
of America, without leaving her address, telephone number, and Special Power of Art. 1544. If the same thing should have been sold to different vendees, the
Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to the ownership shall be transferred to the person who may have first taken
Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they possession thereof in good faith, if it should be movable property.
were correct in unilaterally rescinding rescinding the contract of sale. Should if be immovable property, the ownership shall belong to the person
We do not agree with petitioners that there was a valid rescission of the contract of sale acquiring it who in good faith first recorded it in Registry of Property.
in the instant case. We note that these supposed grounds for petitioners' rescission,
are mere allegations found only in their responsive pleadings, which by express
Should there be no inscription, the ownership shall pertain to the person who or that another person claims said property in a pervious sale, the registration
in good faith was first in the possession; and, in the absence thereof to the will constitute a registration in bad faith and will not confer upon him any right.
person who presents the oldest title, provided there is good faith. (Salvoro vs. Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land,
The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as 43 Phil. 146; Cagaoan vs. Cagaoan, 43 Phil. 554; Fernandez vs. Mercader,
proof of the second contract of sale was registered with the Registry of Deeds of 43 Phil. 581.)
Quezon City giving rise to the issuance of a new certificate of title in the name of Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz,
Catalina B. Mabanag on June 5, 1985. Thus, the second paragraph of Article 1544 perfected on February 6, 1985, prior to that between petitioners and Catalina B.
shall apply. Mabanag on February 18, 1985, was correctly upheld by both the courts below.
The above-cited provision on double sale presumes title or ownership to pass to the Although there may be ample indications that there was in fact an agency between
first buyer, the exceptions being: (a) when the second buyer, in good faith, registers the Ramona as principal and Concepcion, her mother, as agent insofar as the subject
sale ahead of the first buyer, and (b) should there be no inscription by either of the two contract of sale is concerned, the issue of whether or not Concepcion was also acting
buyers, when the second buyer, in good faith, acquires possession of the property in her own behalf as a co-buyer is not squarely raised in the instant petition, nor in such
ahead of the first buyer. Unless, the second buyer satisfies these requirements, title or assumption disputed between mother and daughter. Thus, We will not touch this issue
ownership will not transfer to him to the prejudice of the first buyer. and no longer disturb the lower courts' ruling on this point.
In his commentaries on the Civil Code, an accepted authority on the subject, now a WHEREFORE, premises considered, the instant petition is hereby DISMISSED and
distinguished member of the Court, Justice Jose C. Vitug, explains: the appealed judgment AFFIRMED.
The governing principle is prius tempore, potior jure (first in time, stronger in SO ORDERED.
right). Knowledge by the first buyer of the second sale cannot defeat the first Narvasa, C.J., Davide, Jr. and Francisco, JJ., concur.
buyer's rights except when the second buyer first registers in good faith the Panganiban, J., took no part.
second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights even if he is first
to register, since knowledge taints his registration with bad faith (see also
Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz
vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it has held that
it is essential, to merit the protection of Art. 1544, second paragraph, that the
second realty buyer must act in good faith in registering his deed of sale (citing
Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. No.
95843, 02 September 1992). (J. Vitug Compendium of Civil Law and
Jurisprudence, 1993 Edition, p. 604).
Petitioner point out that the notice of lis pendens in the case at bar was annoted on the
title of the subject property only on February 22, 1985, whereas, the second sale
between petitioners Coronels and petitioner Mabanag was supposedly perfected prior
thereto or on February 18, 1985. The idea conveyed is that at the time petitioner
Mabanag, the second buyer, bought the property under a clean title, she was unaware
of any adverse claim or previous sale, for which reason she is buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the
second buyer was a buyer in good faith but whether or not said second buyer registers
such second sale in good faith, that is, without knowledge of any defect in the title of
the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in
good faith, registered the sale entered into on February 18, 1985 because as early as
February 22, 1985, a notice of lis pendens had been annotated on the transfer
certificate of title in the names of petitioners, whereas petitioner Mabanag registered
the said sale sometime in April, 1985. At the time of registration, therefore, petitioner
Mabanag knew that the same property had already been previously sold to private
respondents, or, at least, she was charged with knowledge that a previous buyer is
claiming title to the same property. Petitioner Mabanag cannot close her eyes to the
defect in petitioners' title to the property at the time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers that sale after he has acquired
knowledge that there was a previous sale of the same property to a third party
EN BANC (3) That on the 12th day of November, 1919, Agripino Mendoza entered upon,
G.R. No. L-16420 October 12, 1921 and took actual possession of, said parcel of land, enclosed it with a fence,
AGRIPINO MENDOZA, petitioner-appellee, vs. PRIMITIVO KALAW, objector- and began to clean the same;
appellant. (4) That after the petitioner had fenced and cleaned said lot, as above
Guillermo M. Katigbak for appellant. indicated, a representative of the oppositor claimed and attempted to obtain
Felipe A. Jose for appellee. possession of said lot, but the petitioner, who was then in possession, refused
to deliver the possession, upon the ground that the was the owner;
1.Land Registration; Facts of this Case.—C sold a parcel of land to K under "pacto de
(5) That on the 17th day of November (18th day of November), 1919, the
retro." About two weeks later C sold the same parcel of land, by an absolute deed of
oppositor attempted to have his title registered in the registry of deeds of the
sale, to M, who, four days thereafter, took possession of said land and enclosed it with
City of Manila, but such registration was denied by the register of deeds for
a fence. A representative of K then tried to obtain possession of the land from M but
the reason that there existed some defect in the description of the property,
the latter refused to deliver it. Then Z tried to have his "pacto de retro" registered in the
and for the reason that the title of the vendor had not therefore been
registry of deeds; but, for some valid reasons, the register of deeds declined to register
registered. The register of deeds, however, did make an "anotacion
the same and only made a "preventative precautionary notice" (anotacion preventiva)
preventiva."
of K's "pacto de retro." Later, M applied for the registration of said parcel of land under
It will be noted from the foregoing that Federico Cañet made two sales of the same
the Torrens system, and K opposed the same upon the ground that he was the owner
property — one of the oppositor and the other to the petitioner. The first was but a
thereof by virtue of his "pacto de retro." Held: M was entitled to have said land
conditional sale while the latter was an absolute sale. It will also be noted that while the
registered in his name. He has a better title to said land than K because he (M) had
absolute sale to the petitioner was subsequent to the conditional sale to the oppositor,
acquired it by an absolute deed of sale and had taken possession thereof prior to K.
the former obtained the actual possession of the property first. It will further be noted
from a reading of Exhibits 1 and B that the petitioner actually paid to his vendor the
2.Id.; Effect of an "Anotacion Preventiva."—The preventative precautionary notice
purchase price of the property in question, while the payment by the oppositor
obtained by K created no advantage in his favor, for the reason that such a notice on
depended upon the performance of certain conditions mentioned in the contract of
the records of the registry of deeds only protects the rights of the person securing it for
sale. 1awph!l.net
a period of thirty days. (Par. 2, art. 17, Mortgage Law; see also cases cited in the
While was have stated that there were two sales of the parcel of land in question, that
opinion.)
is hardly the fact, because a conditional sale, before the performance of the condition,
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J.
can hardly be said to be a sale of property, especially where the condition has not been
JOHNSON, J.: performed or complied with. That being true, article 1473 of the Civil Code can hardly
From the record it appears that on the 26th day of November, 1919, the petitioner be said to be applicable.
presented a petition in the Court of First instance of the City of Manila for the Neither can the "anotacion preventiva" obtained by the oppositor be said to have
registration, under the Torrens system, of a piece or parcel of land, particularly created any advance in his favor, for the reason that a preventative precautionary notice
described in paragraph A of the petition. The said lot is alleged to have an area of 371.6 on the records of the registry of deeds only protects the rights of the person securing it
square meters. The petitioner alleged that he was the owner in fee simple of said parcel for a period of thirty days. (Par. 2, art. 17, Mortgage Law.) A preventative precautionary
of land for the reason that he had purchased the same of Federico Cañet on the 8th notice only protects the interests and rights of the person who secures it against those
day of November, 1919. Accompanying the petition, there was united a plan (marked who acquire an interest in the property subsequent thereto, and then, only for a period
Exhibit A) containing a technical description of the metes and bounds of said parcel of of thirty days. It cannot affect the rights or interests of persons who acquired an interest
land. in the property theretofore. (Veguillas vs. Jaucian, 25 Phil., 315; Samson vs.Garcia and
To the registration of said parcel of land the oppositor, Primitivo Kalaw, presented his Ycalina, 34 Phil., 805.) In the present case the petitioner had acquired an absolute deed
opposition, alleging that he was the owner of the same and that he had acquired it from to the land in question, and had actually entered into the possession of the same, before
the said Federico Cañet. the preventative precautionary notice was noted in the office of the registry of deeds.
Upon the issue thus presented by the petitioner and opposition, the Honorable James Therefore, under the provisions of the Mortgage Law above cited, it could in no way
A. Ostrand, on the 23d day of January, 1920, in a carefully prepared opinion, reached affect the rights or interests of persons, acquired theretofore.
the conclusion that the petitioner was the owner in fee simple of said parcel of land, For all of the foregoing reasons, we are fully persuaded that the judgment ordering the
and ordered it registered in his name in accordance with the provisions of the Land registration of the parcel of land in question in the name of the petitioner should be and
registration Act. From that decree the oppositor appealed to this court. is hereby affirmed, with costs. So ordered.
From an examination of the record the following facts seem to be proved by a large Araullo, Street, Avanceña and Villamor, JJ., concur.
preponderance of the evidence:
(1) That on the 24th day of September, 1919, the said Federico Cañet sold,
under a conditional sale, the parcel of land in question to the appellant (Exhibit
1);
(2) That on the 8th day of November, 1919, the said Federico Cañet made
an absolute sale of said parcel of land to the petitioner Agripino Mendoza
(Exhibit B);
FIRST DIVISION in full awareness of the August and September negotiations between Bautista and
G.R. No. 120191 October 10, 1997 Palanca, on the one hand, and Loreto Adalin, Faustino Yu and Antonio Lim, on the
LORETO ADALIN, CARLOS CALINGASAN, DEMETRIO ADAYA and MAGNO other, for the sale of the one-storey building. It cannot be denied, thus, that Palanca
ADALIN, petitioners, vs. THE HON. COURT OF APPEALS, FAUSTINO L. YU, and the said tenants entered into the subsequent or second sale notwithstanding their
ANTONIO T. LIM, ELENA K. PALANCA, JOSE PALANCA, EDUARDA K. VARGAS, full knowledge of the subsistence of the earlier sale over the same property to private
JOSE VARGAS, MERCEDES K. CABALLERO, EBERHARDO CABALLERO, respondents Yu and Lim. It goes without saying, thus, that though the second sale to
ISABEL K. VILLAMOR, FEDERICO VILLAMOR, JOSE KADO, URSULA KADO, the said tenants was registered, such prior registration cannot erase the gross bad faith
MARIA K. CALONZO, BAYANI L. CALONZO, TEOFILA KADO, NESTOR KADO and that characterized such second sale, and consequently, there is no legal basis to rule
LILIA KADO, respondents. that such second sale prevails over the first sale of the said property to private
Civil Law; Sales; Sale made by Palanca to private respondents was definitive and respondents Yu and Lim.
absolute.—Undisputedly, Palanca, in behalf of the Kado siblings who had already
PETITION for review on certiorari of a decision of the Court of Appeals.
committed to sell the property to private respondents Yu and Lim and Loreto Adalin,
understood her obligation to eject the tenants on the subject property. Having gone to HERMOSISIMA, JR., J.:
the extent of filing an ejectment case before the Barangay Captain, Palanca clearly Before us is a petition for review seeking the reversal of the Decision1 of the Court of
showed an intelligent appreciation of the nature of the transaction that she had entered Appeals2 and in lieu thereof, the reinstatement of the Decision3 of the Regional Trial
into: that she, in behalf of the Kado siblings, had already sold the subject property to Court4 in an action for specific performance filed by private respondents Faustino L. Yu
private respondents Yu and Lim and Loreto Adalin, and that only the payment of the and Antonio T. Lim against the Kado siblings, namely, private respondents Elena K.
balance of the purchase price was subject to the condition that she would successfully Palanca, Eduarda K. Vargas, Mercedes K. Caballero, Isabel K. Villamor, Jose Kado,
secure the eviction of their tenants. In the sense that the payment of the balance of the Maria K. Calonzo, Teofila Kado and Nestor Kado, and their respective spouses.
purchase price was subject to a condition, the sale transaction was not yet completed, In essence, the petition poses a challenge against the respondent appellate court's
and both sellers and buyers have their respective obligations yet to be fulfilled: the legal conclusion that the transaction entered into by private respondents Yu and Lim
former, the ejectment of their tenants; and the latter, the payment of the balance of the with private respondents Kado siblings, is one of an absolute sale and not merely a
purchase price. In this sense, the Deed of Conditional Sale may be an accurate conditional sale as denominated in the document signed by said parties. As such, there
denomination of the transaction. But the sale was conditional only inasmuch as there is no dispute as to the following facts:
remained yet to be fulfilled, the obligation of the sellers to eject their tenants and the . . . [F]rom the welter of evidence and the record, it has been established that Elena
obligation of the buyers to pay the balance of the purchase price. The choice of who to Kado Palanca, and her brothers and sisters, namely, Eduarda K. Vargas,
sell the property to, however, had already been made by the sellers and is thus no Mercedes K. Caballero, Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila
longer subject to any condition nor open to any change. In that sense, therefore, the Kado and Nestor Kado, hereinafter referred to, for brevity's sake, as the Appellees-
sale made by Palanca to private respondents was definitive and absolute. Vendors, were the owners of a parcel of land, with an area of 1,343 square meters,
Same; Same; Court cannot countenance the double dealing perpetrated by with a five-door, one storey commercial building constructed thereon, fronting the
Palanca in behalf of the Kado siblings.—Certainly, we cannot countenance the double Imperial Hotel, located along Magallanes Street, Cotabato City, described in and
dealing perpetrated by Palanca in behalf of the Kado siblings. No amount of legal covered by Transfer Certificate of Title No. T-12963 of the Registry of Deeds of
rationalizing can sanction the arbitrary breach of contract that Palanca committed in Cotabato City . . . . One of the five (5) doors was leased to Loreto Adalin, hereinafter
accepting the offer of Magno Adalin, Adaya and Calingasan to purchase a property referred to as the Appellee Adalin, two (2) doors were leased to Carlos Calingasan
already earlier sold to private respondents Yu and Lim. and Demetrio Adaya respectively, and two (2) doors were leased to Magno Adalin,
all of whom are hereinafter referred to, for brevity's sake, as the Appellees-
Same; Same; Though the second sale to the tenants was registered, such prior
Vendees. The Appellees-Vendees and Appellee Adalin paid a monthly rental of
registration cannot erase the gross bad faith that characterized such second sale, and
P1,500.00 for each door. The Appellees-Vendors commissioned Ester Bautista to
consequently, there is no legal basis to rule that such second sale prevails over the first
look for and negotiate with prospective buyers for the sale of their property for the
sale of the said property to private respondents Yu and Lim.—Petitioners claim that
price of P3,000,000.00. Sometime in August, 1987, Ester Bautista offered the
they were given a 30-day option to purchase the subject property as contained in the
property, for sale, to the Appellants and the latter agreed to buy the property. A
September 2, 1987 letter of Palanca. In the first place, such option is not valid for utter
conference was held in the office of the Appellant Faustino Yu, at the Imperial
lack of consideration. Secondly, private respondents twice asked Palanca and the
Hotel, where he was the President-Manager, with both Appellants, the Appellee
tenants concerned as to whether or not the latter were interested to buy the subject
Adalin, the Appellees-Vendors Elena Palanca and Teofilo Kado, in their behalf and
property, and twice, too, the answer given to private respondents was that the said
in behalf of the Appellees-Vendors, in attendance, to discuss the terms and
tenants were not interested to buy the subject property because they could not afford
conditions of the sale. The Appellants and Appellee Adalin, the Appellees-Vendors
it. Clearly, said tenants and Palanca, who represented the former in the initial
agreed that the Appellants will each buy two (2) doors while Appellee Adalin will
negotiations with private respondents, are estopped from denying their earlier
buy the fifth door which he was leasing from the Appellees-Vendors, all for the price
statement to the effect that the said tenants Magno Adalin, Adaya and Calingasan had
of P2,600,000.00. During the conference, the Appellants inquired from the
no intention of buying the four doors that they were leasing from the Kado siblings.
Appellee-Vendor Elena Palanca whether the Appellees-Vendees were interested
More significantly, the subsequent sale of the subject property by Palanca to the said
to buy the property but the Appellee-Vendor Elena Palanca replied that the property
tenants, smacks of gross bad faith, considering that Palanca and the said tenants were
had been offered to the Appellees-Vendees for sale but that the latter were not
interested to buy the same. The conferees then agreed to meet, on September 2, and the Appellee-Vendee Carlos Calingasan likewise wrote separate letters to the
1987, in the house of the Appellee-Vendor Palanca, with Atty. Bayani Calonzo, her Appellees-Vendors informing the latter of their decision to purchase the premises
brother-in-law, in attendance, to finalize the sale. However, unknown to the occupied by them respectively for the amount of P600,000.00 each . . . . Inspite of
Appellants, the Appellee-Vendor Elena Palanca, in her behalf and in behalf of the the prior sale of the property to the Appellants and Appellee Adalin, the Appellees-
other Appelles-Vendors, sent, on September 2, 1987, separate letters to each of Vendors decided to back out from said sale to the Appellants and to sell the
the Appellees-Vendees informing them that someone was interested to buy the property to the Appellees-Vendees and to return the downpayments of the
property and requested them to vacate the property within thirty (30) days "unless Appellants for the property in the total amount of P200,000.00 with interests
all of you could buy the property at the same price" . . . . During the conference in thereon. The Appellees-Vendees procured TCBT Check No. 195031 in the amount
the house of the Appellee-Vendor Elena Palanca, on September 2, 1987, the of P101,416.66 payable to the Appellant Faustino Yu and TCBT Check No. 195032
Appellants, the Appellee Adalin and the Appellees-Vendors Elena Palanca and in the amount of P101,416.66 payable to the Appellant Antonio Lim and transmitted
Teofilo Kado in their behalf and in behalf of the other Appellees-Vendors, Atty. the same to the Appellants with a covering letter . . . . The Appellants were
Bayani Calonzo, the husband of the Appellee Maria Kado, Atty. Eugenio Soyao, flabbergasted. Both the Appellants refused to receive the said letter and checks
the counsel of the Appellants and the Appellee-Vendee Magno Adalin who and insisted, instead, that the Appellees-Vendors comply with the "Deed of
attended in his behalf and in behalf of the Appellees-Vendees, were present. When Conditional Sale" . . . . On November 16, 1987, the Appellants, through their
asked by the Appellants if the Appellees-Vendees were interested to buy the counsel, wrote a letter to the Appellees-Vendors, copies of which were furnished
property, the Appellee-Vendee Magno Adalin forthrightly replied that the the Appellees-Vendees, inquiring if the appropriate action has been undertaken
Appellees-Vendees were not interested to buy the property because they cannot towards the eviction of the Appellees-Vendees
afford the purchase price thereof. However, he claimed that the Appellees' . . . . The Appellees-Vendors ignored the said letter. Instead, the Appellees-
Vendees were entitled to P50,000.00 each as disturbance money, in consideration Vendors signed, in December, 1987, a "Deed of Sale of Registered Land" under
for their vacating the property, to be borne by the Appellees-Vendors. The which they sold the said property to the Appellees-Vendees, including the Appellee
Appellants, the Appellee Adalin and the Appelles-Vendors forthwith agreed that Adalin for the price of only P1,000,000.00 . . . much lower than the price of the
each Appellant will buy two (2) doors while the fifth door leased by Appellee Adalin Appellant under the "Deed of Conditional Sale"
will be purchased by him, all for the purchase price of P2,600,000.00 and that the . . . . Although it appears that the deed was notarized by Atty. Bayani Calonzo,
Appellants and Appellee Adalin will pay, P300,000.00 as downpayment for the however, the deed does not bear any number in the notarial register of the lawyer.
property, the balance to be payable upon the eviction of the Appellees-Vendees In the same month, the Appellees-Vendors signed another "Deed of Sale of
from the property and the execution of a "Deed of Absolute Sale". Atty. Bayani Registered Land" under which they sold to the Appellees-Vendees including
Calonzo forthwith assured the Appellants that he could secure the eviction of the Appellee Adalin the aforesaid property for the considerably increased price of
Appellees-Vendees from the property within a month because the latter were his P3,000,000.00 . . . . The deed was notarized by Atty. Bayani Calonzo. Interestingly,
close friends and compadres. Atty. Bayani Calonzo then gave Atty. Eugenio both deeds were not filed with the Register of Deeds of Cotabato City. Not content
Soyao, the counsel of the Appellants, the go-signal to prepare the deed for the with the two (2) Deeds of Sale of Registered Land . . . the Appellees-Vendors,
signatures of the parties. On September 8, 1987, the Appellants and Appellee signed a third "Deed of Sale of Registered Land" which appears dated February 5,
Adalin, as buyers of the property, and the Appellees-Vendors, met in the office of 1988 under which they purportedly sold to the Appellees-Vendees, including
the Appellant Faustino Yu at the Imperial Hotel and executed the "Deed of Appellee Adalin, the aforesaid property for the much reduced price of only
Conditional Sale" prepared by Atty. Eugenio Soyao P860,000.00 . . . . However, the aforesaid deed was not immediately filed with the
. . . . The Appellants and Appellee Adalin each contributed P100,000.00 and gave Register of Deeds of Cotabato City. On February 26, 1988, the Appellees-Vendors,
the total amount of P300,000.00 to the Appellee-Vendor Elena Palanca as the through Atty. Bayani Calonzo, filed a Petition against the Appellants for the
downpayment for the property. The Appellees-Vendors Elena Palanca and consignation of their downpayment of P200,000.00, with the Regional Trial Court
Eduarda Vargas signed an "Acknowledgment Receipt" for the downpayment . . . in of General Santos City entitled "Maria K. Calonzo, et al. versus Faustino Yu,
their behalf and in behalf of the other Appellees-Vendors. In the meantime, the Special Civil Case No. 259". . . .
Appellants deferred registration of the deed until after the eviction of the Appellees- Undaunted, the Appellants filed a complaint with the Barangay Captain for Breach
Vendees from the property and the payment of the balance of the purchase price of Contract against the Appellees-Vendors entitled "Faustino Yu, et al. versus
of the property to the Appellees-Vendors as agreed upon under the "Deed of Elena K. Palanca, et al., Barangay Case No. 9,014-88". The Barangay Captain
Conditional Sale". issued, on April 7, 1988, summons to the Appellees-Vendors for them to appear
In the interim, on October 14, 1987, the Appellees-Vendors, through the Appellee- for a conference on April 22, 1988 at 9:00 o'clock in the morning . . . . Invitations
Vendor Elena Palanca, wrote, conformably with the terms of the "Deed of were also sent to the Appellees-Vendees . . . . During the conference attended by
Conditional Sale" . . . a letter complaint against the Appellees-Vendees with the Appellee-Vendees, the Appellants, if only to accommodate the Appellee-Vendee
Barangay Captain for unlawful detainer . . . . The case was docketed as Barangay Magno Adalin and settle the case amicably, agreed to buy only one door each so
Case No. 7,052-87 . . . . On October 16, 1987, the Appellee-Vendee Magno Adalin that the Appellee-Vendee Magno Adalin could purchase the two doors he was
wrote a letter to the Appellees-Vendors, through the Appellee-Vendor Elena occupying. However, the Appellee-Vendee Magno Adalin adamantly refused,
Palanca, informing them that he had decided to purchase the two doors he was claiming that he was already the owner of the two (2) doors. When the Appellant
leasing for the purchase price of P600,000.00 per door and was ready to tender Antonio Lim asked the Appellee Vendee Magno Adalin to show the "Deed of Sale"
the amount by the end of the month . . . . The Appellee-Vendee Demetrio Adaya for the two doors, the latter insouciantly walked out. Atty. Bayani Calonzo likewise
stated that there was no need to show the deed of sale. No settlement was forged . . . [In] the letters of Elena Palanca to the defendants-vendees dated September
and, on May 16, 1988, the Barangay Captain issued the Certification to File Action 2, 1987 . . . [t]hey were given the option or preferential right to purchase the
.... property.
On May 5, 1988, the Appellants filed their complaint for "Specific Performance" xxx xxx xxx
against the Appellees-Vendors and Appellee Adalin in the Court a quo. When the defendants-vendors accepted defendants-vendees' option to buy, the
On June 14, 1988, the Appellants caused the annotation of a "Notice of Lis former returned the initial payment of P200,000.00 to the plaintiffs . . . but they
Pendens" at the dorsal portion of Transfer Certificate of Title No. 12963 under the refused to accept the same. This refusal however did not diminish the effect of the
names of the Appellees-Vendors . . . . On October 25, 1988, the Appellees- acceptance of the option to buy, which in fact led to the execution of the said Deed
Vendees filed a "Motion for Intervention as Plaintiffs-Intervenors" appending of Sale of Registered Land . . . and the subsequent issuance of the Transfer
thereto a copy of the "Deed of Sale of Registered Land" signed by the Appellees- Certificate of Title No. T-24791 of the Registry of Deeds for the City of Cotabato in
Vendors . . . . On October 27, 1988, the Appellees-Vendees filed the "Deed of Sale the names of the defendants-vendees . . . . . .
of Registered Land" . . . with the Register of Deeds on the basis of which Transfer . . . [T]he defendants-vendors acted in bad faith when, while during the effectivity
Certificate of Title No. 24791 over the property was issued under their names . . . . of the period of the option to buy [that] they gave to the defendants-vendees, they
On the same day, the Appellees-Vendees filed in the Court a quo a "Motion To executed a Deed of Conditional Sale . . . in favor of the plaintiffs. This was only six
Admit Complaint-In-Intervention . . . . Attached to the Complaint-In-Intervention (6) days from date of the option. . . .6
was the "Deed of Sale of Registered Land" signed by the Appellees-Vendees . . . The trial court also ruled that the conditional sale of the subject property to private
. The Appellants were shocked to learn that the Appellees-Vendors had signed the respondents Faustino Yu and Antonio Lim and the sale of the same property to
said deed. As a counter-move, the Appellants filed a motion for leave to amend petitioners, did not involve a double sale as to warrant the application of Article 1544 of
Complaint and, on November 11, 1988, filed their Amended Complaint impleading the Civil Code. The court a quo ratiocinated in this manner:
the Appellees-Vendees as additional Defendants. . . . . . . [T]he plaintiffs assert that this case is one of double sale and should be
xxx xxx xxx governed by Article 1544 of the Civil Code. The first sale, plaintiffs claim, is that
The Appellees-Vendors suffered a rebuff when, on January 10, 1989, the Regional under the Deed of Conditional Sale . . . in their favor and the second sale is that
Trial Court of General Santos City issued an Order dismissing the Petition of the ultimately covered by the Deed of Sale of Registered Land for P860,000.00 . . . in
Appellees-Vendors for consignation . . . . In the meantime, on November 30, 1989, favor of the defendants-vendee. As already pointed out by the court, the execution
Appellee Adalin died and was substituted, per order of the Court a quo, on January of the Deed of Conditional Sale did not transfer ownership of the property to the
5, 1990, by his heirs, namely, Anita, Anelita, Loreto, Jr., Teresita, Wilfredo, Lilibeth, plaintiff, hence, there can be no double sale. As held in the case of Mendoza
Nelson, Helen and Jocel, all surnamed Adalin, as Appellees-Vendees . . . . vs. Kalaw, 42 Phil. 236, Article 1544 does not apply to situations where one sale
After trial, the Court a quo rendered judgment in favor of the Appellees-Vendees . was subject to a condition which was not complied with. This is because a
. . .5 conditional sale, before the performance of the condition, can hardly be said to be
In the opinion of the court a quo, petitioners became the owners of the parcel of land in a sale of property, specially where the condition has not been performed or
question with the five-door, one storey commercial building standing thereon, when complied with.7
they purchased the same following the offer and the 30-day option extended to them Pursuant to the above ruminations of the court a quo, it ordered the following in the
by private respondent Elena Palanca, in behalf of the other Kado siblings, in her letter dispositive portion of its decision:
to them dated September 2, 1987. The trial court disregarded the fact that the Kado WHEREFORE, the court hereby orders the dismissal of plaintiffs' complaint against
siblings had already finished transacting with private respondents Faustino Yu and the defendants-vendees for lack or merit, and hereby further sustains the validity
Antonio Lim and had in fact entered into a conditional sale with them respecting the of Transfer Certificate of Title No. T-24791 issued in their names (defendants-
same property. The trial court brushed aside this fact as it reasoned that: vendees) by the Registry of Deeds for the City of Cotabato.
. . . In conditional deed of sale, ownership is only transferred after the purchase The defendants-vendors are hereby jointly and severally ordered to pay moral
price is fully paid or the fulfillment of the condition and the execution of a definite damages of P500,000.00 to each of the plaintiffs, P100,000.00 exemplary
or absolute deed of sale are made. . . . damages to each of the plaintiffs and P50,000.00 as and for attorney's fees.
In this case, it is clear from the provision of the Deed of Conditional Sale . . . that Defendants-vendors are hereby further ordered to return the P200,000.00 initial
the balance of the price of P2,300,000.00 shall be paid only after all the defendants- payment received by them with legal interest from date of receipt thereof up to
vendees shall have vacated and surrendered the premises to the defendants- November 3, 1987.
vendors. However, the tenants did not leave the premises. In fact they opted to buy Defendants-vendees' counterclaim is hereby ordered dismissed.
the property. Moreover, at that time, the property was legally leased to the With cost against the defendants-vendors
defendants-vendees. . . . SO ORDERED.8
xxx xxx xxx Private respondents Faustino Yu and Antonio Lim wasted no time in appealing from
Clearly therefore, the condition set forth in the said Deed of Conditional Sale the above decision of the court a quo. They were vindicated when the respondent Court
between the plaintiffs and the defendants-vendors was not fulfilled. Since the of Appeals rendered its decision in their favor. The respondent appellate court reversed
condition was not fulfilled, there was no transfer of ownership of the property from the trial court as it ruled, thus:
the defendants-vendors to the plaintiffs. . . .
. . . We find, and so declare. that the "Deed of Conditional Sale" . . . executed by had not been transferred to the Appellants because there had been neither
the Appellees-Vendors in favor of the Appellants was an absolute deed of sale and constructive nor actual delivery of the property to the Appellants . . . .
not a conditional sale. We do not agree. The evidence in the record shows that the Appellants and the
xxx xxx xxx Appellees-Vendors met in the house of Appellee Elena Palanca on September 2,
In ascertaining the nature of a contract and the intention of the parties thereto, it 1987. The Appellees-Vendees were represented by the Appellee-Vendee, Retired
behooves the trier of facts to look into the context of the contract in its entirety and Col. Magno Adalin. The latter did not object to the sale of the property to the
not merely specific words or phrases therein, standing alone, as well as the Appellants but merely insisted that each of the Appellees-Vendees be give in
contemporaneous and subsequent acts of the parties. It bears stressing that the P50,000.00 as disturbance fee by the Appellees-Vendors to which the latter
title of the contract is not conclusive of its nature. . . . acquiesced because Atty. Bayani Calonzo forthwith gave Atty. Eugenio Soyao, the
Although a contract may be denominated a "Deed of Conditional Sale", or go-signal to prepare the "Deed of Conditional Sale" for the signatures thereof by
"Agreement to Sell", the same may be, in reality a deed of absolute sale or a the parties on September 8, 1987. The Appellees-Vendors, on September 2, 1987,
contract of sale . . . . wrote letters to the Appellees-Vendees giving them the option to match the price
Under Article 1458 of the New Civil Code, a sale may be absolute or conditional. A offered by the Appellants. The Appellees-Vendees maintained a resounding
contract may be conditional when the ownership of the thing sold is retained until silence to the letter-offer of the Appellees-Vendors. It was only, on October 16,
the fulfillment of a positive suspensive condition, generally the payment of the 1987, that the Appellees-Vendees, after the execution by the Appellants and the
purchase price, the breach of which condition will prevent the onset of the Appellees-Vendors of the "Deed of Conditional Sale", that the Appellees-Vendees
obligation to deliver title . . . . A sale of immovables is absolute where the contract finally decided to themselves, purchase the property. The Appellees are estopped
does not contain any provision that title to the property sold is reserved to the from claiming that the property had not been delivered to the Appellants. The
Vendors or that the Vendor is entitled to unilaterally rescind the same. Appellants cannot use their gross bad faith as a shield to frustrate the enforcement,
xxx xxx xxx by the Appellants, of the "Deed of Conditional Sale". . . .
The Court a quo . . . resolutely subscribed to the view that the . . . deed is xxx xxx xxx
conditional, its efficacy dependent upon a suspensive condition — that of the The Appellees-Vendors cannot invoke the refusal of the Appellees-Vendees to
payment by the Appellants of the balance of the purchase price of the properly, vacate the property and the latter's decision to themselves purchase the property
after the Appellees-Vendees shall have been evicted from the property or shall as a valid justification to renege on and turn their backs against their obligation to
have voluntarily vacated the same and the Deed of Absolute Sale shall have been deliver or cause the eviction of the Appellees-Vendees from and deliver physical
executed in favor of the Appellants; and, since the condition was not fulfilled, the possession or the property to the Appellants. For, if We gave our approbation to
sale never became effective . . . . . . . Even a cursory reading of the deed will readily the stance of the Appellees, then We would thereby be sanctioning the
show absence of any stipulation in said deed that the title to the property was performance by the Appellees-Vendors of their obligations under the deed subject
reserved to the Appellees-Vendors until the balance of the purchase price was paid to the will and caprices of the Appellees-Vendees, which we cannot do . . . .
nor giving them the right to unilaterally rescind the contract if the Appellants failed It would be the zenith of inequity for the Appellees-Vendors to invoke the
to pay the said amount upon the eviction of the Appellees-Vendees. Inscrutably occupation by the Appellees-Vendees, as of the property, as a justification to ignore
the, the deed is a perfected deed of absolute sale, not a conditional one. . . . their obligation to have the Appellees-Vendees evicted from the property and for
xxx xxx xxx them to give P50,000.00 disturbance fee for each of the Appellees-Vendees and a
There may not have been delivery of the properly to the Appellants either justification for the latter to hold on to the possession of the property.
symbolically or physically and more, the Appellees-Vendors may have deferred xxx xxx xxx
their obligation of delivering physical possession of the property to the Appellees Assuming, gratia arguendi, for the nonce, that there had been no consummation of
only after the Appellees-Vendees shall have vacated the property, however, the the "Deed of Conditional Sale" . . . by reason of the non-delivery to the Appellants
right of retention of the Appellees-Vendors of title to or ownership over the property of the property, it does not thereby mean that the "Deed of Sale of Registered Land"
cannot thereby be inferred therefrom. . . . . . . . executed by the Appellees should be given preference. Apropos to this, We
In fine, the non-payment of the balance of the purchase price of the property and give our approbation to the plaint of the Appellants that the Court a quo erred in
the consequent eviction of the Appellees-Vendees therefrom were not conditions not applying the second and third paragraphs of Article 1544 . . . . .
which suspended the efficacy of the "Deed of Conditional Sale". Rather, the same, For, the evidence in the record shows that, although the Appellees-Vendees
if due to the fault of the Appellants, merely accorded the Appellees-Vendors the managed to cause the registration of the Deed of Sale of Registered Land . . . on
option to rescind the already existing and effective sale. October 27, 1988 and procure Transfer Certificate of Title No. 24791 under their
The Appellants and the Appellees-Vendors, having entered into, under the "Deed names, on said date, and that they were, as of said date, in physical possession of
of Conditional Sale" . . . an absolute sale, the Appellants thus had every right to the property, however, the evidence in the record shows that the Appellees-
demand that the Appellees-Vendors performed their prestation under the deed, to Vendees were in gross evident bad faith. At the time the Appellees executed the
wit — the eviction of the Appellees-Vendees from the property — so that the "Deed of Sale of Registered Land" in December 1987 . . . they were aware that the
Appellants may then pay the balance of the purchase price of the property. Appellees-Vendors and the Appellants had executed their "Deed of Conditional
xxx xxx xxx Sale" as early as September 8, 1987. . . . In the light of the foregoing, We arrive at
The Court a quo and the Appellees, however, posit that the "Deed of Conditional the ineluctable conclusion that preference must be accorded the "Deed of
Sale" . . . had not been consummated and title to and ownership over the property Conditional Sale" executed by the Appellants and the Appellees-Vendors.9
Accordingly, the respondent Court of Appeals rendered another judgment in the case The grounds relied upon by petitioners are essentially a splitting of the various aspects
and ordered the following: of the one pivotal issue that holds the key to the resolution of this controversy: the true
1. The "Deed of Conditional Sale", Exhibit "A" is hereby declared valid; nature of the sale transaction entered into by the Kado siblings with private respondents
2. The "Deeds of Sale of Registered Land", Exhibits "E", "F" and "G" and Faustino Yu and Antonio Lim. Our task put simply, amounts to a declaration of what
Transfer Certificate of Title No. 24791 are hereby declared null and void; kind contract had been entered into by said parties and of what their respective rights
3. The Appellees-Vendees except the heirs of Loreto Adalin are hereby and obligations are thereunder.
ordered to vacate the property within thirty (30) days from the finality of this It is not disputed that in August, 1987, Elena K. Palanca, in behalf of the Kado siblings,
Decision; commissioned Ester Bautista to look for buyers for their property fronting the Imperial
4. The Appellees-Vendors are hereby ordered to execute, in favor of the Hotel in Cotabato City. Bautista logically offered said property to the owners of the
Appellants, a "Deed of Absolute Sale" covering four (4) doors of the property Imperial Hotel which may be expected to grab the offer and take advantage of the
(which includes the area of the property on which said four doors are proximity of the property to the hotel site. True enough, private respondent Faustino
constructed) except the door purchased by the Appellee-Vendee Loreto Yu, the President-General Manager of Imperial Hotel, agreed to buy said property.
Adalin, free of any liens or encumbrances; Thus during that same month of August, 1987, a conference was held in the office of
5. The Appellants are hereby ordered to remit to the Appellees-Vendors the private respondent Yu at the Imperial Hotel. Present there were private respondent Yu,
balance of the purchase price of the four (4) doors in the amount of Loreto Adalin who was one of the tenants of the five-door, one-storey building standing
P1,880,000.00; on the subject property, and Elena Palanca and Teofilo Kado in their own behalf as
6. The Appellees-Vendors are hereby ordered to refund to the Appellees- sellers and in behalf of the other tenants of said building. During the conference, private
Vendees the amount of P840,000.00 which they paid for the properly under respondents Yu and Lim categorically asked Palanca whether the other tenants were
the "Deed of Conditional Sale of Registered Land", Exhibit "G", without interested to buy the property, but Palanca also categorically answered that the other
interest considering that they also acted in bad faith; tenants were not interested to buy the same. Consequently, they agreed to meet at the
7. The Appellee-Vendee Magno Adalin is hereby ordered to pay the amount house of Palanca on September 2, 1987 to finalize the sale.
of P3,000.00 a month, and each of the Appellees-Vendees, except the On September 2, 1987, Loreto Adalin; Yu and Lim and their legal counsel; Palanca and
Appellee Adalin, the amount of P1,500.00 to the Appellants, from November, Kado and their legal counsel; and one other tenant, Magno Adalin, met at Palanca's
1987, up to the time the property is vacated and delivered to the Appellants, house. Magno Adalin was there in his own behalf as tenant of two of the five doors of
as reasonable compensation for the occupancy of the property, with interest the one-storey building standing on the subject property and in behalf of the tenants of
thereon at the rate of 6% per annum; the two other doors, namely. Carlos Calingasan and Demetrio Adaya. Again, private
8. The Appellees-Vendors are hereby ordered to pay, jointly and severally, to respondents Yu and Lim asked Palanca and Magno Adalin whether the other tenants
each of the Appellants the amount of P100,000.00 by way of moral damages, were interested to buy the subject property, and Magno Adalin unequivocally answered
P20,000.00 by way of exemplary damages and P20,000.00 by way of that he and the other tenants were not so interested mainly because they could not
attorney's fees; afford it. However, Magno Adalin asserted that he and the other tenants were each
9. The counterclaims of the Appellees are dismissed. entitled to a disturbance fee of P50,000.00 as consideration for their vacating the
With costs against the Appellees. subject property.
SO ORDERED.10 During said meeting, Palanca and Kado, as sellers, and Loreto Adalin and private
Unable to agree with the above decision of the respondent appellate court, petitioners respondents Yu and Lim, as buyers, agreed that the latter will pay P300,000.00 as
seek reversal thereof on the basis on the following grounds: downpayment for the property and that as soon as the former secures the eviction of
1. The Unconsummated Conditional Contract of Sale in favor of the herein the tenants, they will be paid the balance of P2,300,000.00.
respondent VENDEES is Inferior to and Cannot Prevail Over the Pursuant to the above terms and conditions, a Deed of Conditional Sale was drafted
Consummated Absolute Contracts of Sale in favor of the herein petitioners. by the counsel of private respondents Yu and Lim. On September 8, 1987, at the
2. The Deeds of Sale in favor of the herein Petitioners as well as Transfer Imperial Hotel office of private respondent Yu, Palanca and Eduarda Vargas,
Certificate of Title No. 24791 in their names are Perfectly Valid Documents. representing the sellers, and Loreto Adalin and private respondents Yu and Lim signed
3. The herein Petitioners may not be Legally and Rightfully Ordered to Vacate the Deed of Conditional Sale. They also agreed to defer the registration of the deed
the Litigated Property or Pay Reasonable Compensation for the Occupancy until after the sellers have secured the eviction of the tenants from the subject property.
Thereof . The tenants, however, refused to vacate the subject property. Being under obligation
4. The herein Petitioners may not be Held Liable to Pay the Costs.11 to secure the eviction of the tenants, in accordance with the terms and conditions of the
5. The Court of Appeals erred in holding that the Deed of Conditional Sale is Deed of Conditional Sale, Elena Palanca filed with the Barangay Captain a letter
in reality an absolute deed of sale. complaint for unlawful detainer against the said tenants.
6. The Court of Appeals erred in relying totally and exclusively on the evidence Undisputedly, Palanca, in behalf of the Kado siblings who had already committed to
presented by respondents and in disregarding the evidence for petitioners. sell the property to private respondents Yu and Lim and Loreto Adalin, understood her
7. The Court of Appeals erred in holding that herein petitioners are guilty of obligation to eject the tenants on the subject property. Having gone to the extent of
bad faith and that Article 1544 of the Civil Code is filing an ejectment case before the Barangay Captain, Palanca clearly showed an
applicable.12 intelligent appreciation of the nature of the transaction that she had entered into: that
The petition lacks merit. she, in behalf of the Kado siblings, had already sold the subject property to private
respondents Yu and Lim and Loreto Adalin, and that only the payment of the balance that characterized such second sale, and consequently, there is no legal basis to rule
of the purchase price was subject to the condition that she would successfully secure that such second sale prevails over the first sale of the said property to private
the eviction of their tenants. In the sense that the payment of the balance of the respondents Yu and Lim.
purchase price was subject to a condition, the sale transaction was not yet completed, We agree, thus, with the ruminations of the respondent Court of Appeals that:
and both sellers and buyers have their respective obligations yet to be fulfilled: the The Appellees-Vendors cannot invoke the refusal of the Appellees-Vendees
former, the ejectment of their tenants; and the latter, the payment of the balance of the to vacate the property and the latter's decision to themselves purchase the
purchase price. In this sense, the Deed of Conditional Sale may be an accurate property as a valid justification to renege on and turn their backs against their
denomination of the transaction. But the sale was conditional only inasmuch as there obligation to deliver or cause the eviction of the Appellees-Vendees from the
remained yet to be fulfilled, the obligation of the sellers to eject their tenants and the deliver physical possession or the property to the Appellants. For, if We gave
obligation of the buyers to pay the balance of the purchase price. The choice of who to our approbation to the stance of the Appellees, then We would thereby be
sell the property to, however, had already been made by the sellers and is thus no sanctioning the performance by the Appellees-Vendors of their obligations
longer subject to any condition nor open to any change. In that sense, therefore, the under the deed subject to the will and caprices of the Appellees-Vendees,
sale made by Palanca to private respondents was definitive and absolute. which we cannot do . . . .
Nothing in the acts of the sellers and buyers before, during or after the said transaction It would be the zenith of inequity for the Appellees-Vendors to invoke the
justifies the radical change of posture of Palanca who, in order to provide a legal basis occupation by the Appellees-Vendees, as of the property, as a justification to
for her later acceptance of the tenants' offer to buy the same property, in effect claimed ignore their obligation to have the Appellees-Vendees evicted from the
that the sale, being conditional, was dependent on the sellers not changing their minds property and for them to give P50,000.00 disturbance fee for each of the
about selling the property to private respondents Yu and Lim. The tenants, for their part, Appellees-Vendees and a justification for the latter to hold on to the
defended Palanca's subsequent dealing with them by asserting their option rights under possession of the property.
Palanca's letter of September 2, 1987 and harking on the non-fulfillment of the condition xxx xxx xxx
that their ejectment be secured first. Assuming, gratia arguendi, for the nonce, that there had been no
Two days after Palanca filed an ejectment case before the Barangay Captain against consummation of the "Deed of Conditional Sale" . . . by reason of the non-
the tenants of the subject property, Magno Adalin, Demetrio Adaya and Carlos delivery to the Appellants of the property, it does not thereby mean that the
Calingasan wrote letters to Palanca informing the Kado siblings that they have decided "Deed of Sale of Registered Land" . . . executed by the Appellees should be
to purchase the doors that they were leasing for the purchase price of P600,000.00 per given preference. Apropos to this, We give our approbation to the plaint of the
door. Almost instantly, Palanca, in behalf of the Kado siblings, accepted the offer of the Appellants that the Court a quo erred in not applying the second and third
said tenants and returned the downpayments of private respondents Yu and Lim. Of paragraphs of Article 1544 . . . .
course, the latter refused to accept the reimbursements. For, the evidence in the record shows that, although the Appellees-Vendees
Certainly, we cannot countenance the double dealing perpetrated by Palanca in behalf managed to cause the registration of the Deed of Sale of Registered Land . .
of the Kado siblings. No amount of legal rationalizing can sanction the arbitrary breach . on October 27, 1988 and procure Transfer Certificate of Title No. 24791
of contract that Palanca committed in accepting the offer of Magno Adalin, Adaya and under their names, on said date, and that they were, as of said date, in
Calingasan to purchase a property already earlier sold to private respondents Yu and physical possession of the property, however, the evidence in the record
Lim. shows that the Appellees-Vendees were in gross evident bad faith. At the time
Petitioners claim that they were given a 30-day option to purchase the subject property the Appellees executed the "Deed of Sale of Registered Land" in December
as contained in the September 2, 1987 letter of Palanca. In the first place, such option 1987 . . . they were aware that the Appellees-Vendors and the Appellants had
is not valid for utter lack of consideration.13Secondly, private respondents twice asked executed their "Deed of Conditional Sale" as early as September 8, 1987. . . .
Palanca and the tenants concerned as to whether or not the latter were interested to In the light of the foregoing, We arrive at the ineluctable conclusion that
buy the subject property, and twice, too, the answer given to private respondents was preference must be accorded the "Deed
that the said tenants were not interested to buy the subject property because they could of Conditional Sale" executed by the Appellants and the Appellees-Vendors.14
not afford it. Clearly, said tenants and Palanca, who represented the former in the initial WHEREFORE, the instant petition is HEREBY DISMISSED.
negotiations with private respondents, are estopped from denying their earlier Costs against petitioners.
statement to the effect that the said tenants Magno Adalin, Adaya and Calingasan had SO ORDERED.
no intention of buying the four doors that they were leasing from the Kado siblings. Davide, Jr., Vitug and Kapunan, JJ., concur.
More significantly, the subsequent sale of the subject property by Palanca to the said Bellosillo, J., took no part.
tenants, smacks of gross bad faith, considering that Palanca and the said tenants were
in full awareness of the August and September negotiations between Bautista and
Palanca, on the one hand, and Loreto Adalin, Faustino Yu and Antonio Lim, on the
other, for the sale of the one-storey building. It cannot be denied, thus, that Palanca
and the said tenants entered into the subsequent or second sale notwithstanding their
full knowledge of the subsistence of the earlier sale over the same property to private
respondents Yu and Lim. It goes without saying, thus, that though the second sale to
the said tenants was registered, such prior registration cannot erase the gross bad faith
EN BANC likewise null and void, being without the necessary formal requisites, aside to its
G.R. No. L-18018 December 26, 1963 being fictitious and the fact that the alleged vendor acquired no rights whatsoever
ESPERANZA ESPIRITU and ANTONIA APOSTOL, petitioners, vs.FRANCISCO in the land."
VALERIO, respondent. In view of this conflicting claims of the plaintiff and the defendants, the trial court
Sales; Same land sold to two different vendees; Vendee first registering sale has correctly stated, "apparently, this case concerns the sales of one parcel of land by
better right under Art. 1544, Civil Code.—Where the owner of a parcel of unregistered the same vendor but in favor of two different vendees. If these were the only issues
land sold it to two different parties,—assuming that both sales are valid—the vendee in this case, there is no question that under Art. 1544 of the New Civil Code, Exhibit
whose deed of sale was first registered under the provisions of Act 3344 would have a "1" would be considered to be effective as against Exhibit "A", it having been
better right. registered prior to Exhibit "A". But this is not the only question at issue. Over and
Same; Same; Art. 1544, Civil Code, not applicable where one deed of sale is the above the application of Art. 1544 of the New Civil Code is the determination
falsified.—Where the same parcel of land was sold to two different parties, it of whether or not Exhibits "1" and "2" have been falsified". Having arrived at the
is held that, despite the fact that one deed of sale was registered ahead of the other, conclusion that the two exhibits just mentioned had been falsified, the trial court
Art. 1544 of the Civil Code will not apply where said deed is found to be a forgery; the rendered decision on July 23, 1956, "adjudging ownership of the land described in
result of this being, that the right of the other vendee should prevail. the complaint in favor of the plaintiff and hereby permanently and definitely enjoins
the defendants to abstain and desist from disturbing and molesting the plaintiff from
APPEAL from a decision of the Court of Appeals.
the peaceful enjoyment and possession of the parcel of land described in the
DIZON, J.: complaint or in any way to interfere personally or by agents in the said peaceful
Appeal taken by Esperanza Espiritu and her daughter, Antonia Apostol, from the possession by the plaintiff of the land in litigation; the defendants are hereby further
decision of the Court of Appeals affirming the one rendered by the Court of First ordered to pay the costs of this suit."
Instance of Pangasinan in Civil Case No. 13293 declaring appellee Francisco Valerio, It is principally contended by defendants-appellants that the trial court erred in
to be the owner of the land described in his complaint and enjoining defendants from deciding the case in favor of the plaintiff-appellee and against the defendants-
molesting him in the peaceful possession thereof. appellants, based upon the testimony of Pelagia Vegilia and Mariano Vegilia; the
On September 15, 1955 Valerio filed an action to quiet title in the above mentioned first, emphatically denying that she sold the land in question to Mariano Vegilia,
Court against appellants, alleging in his complaint that he was the owner of a parcel of and that she appeared before Notary Public Lino Abad Pine before whom the
unregistered land containing an area of approximately 8,573 square meters situated in "Escritura de Compraventa Definita" Exhibit 1, was allegedly ratified; and the
Barrio Olo, Municipality of Mangatarem, Pangasinan, and more particularly described second, denying that he bought the said land from Pelagia Vegilia, and that he sold
in paragraph two thereof, having acquired the same from the former owner, Pelagia the same to Santiago Apostol as recited in "Recivo", Exhibit 2. In giving credence
Vegilia, as evidenced by a deed of sale executed by the latter in his favor on January to the testimony of the aforementioned two witnesses, the trial court said: "An
31, 1955 (Exhibit A); that appellants had been asserting adversary rights over said land examination of Exh. "1" reveals the glaring fact that it cannot be determined whose
and disturbing his possession thereof. thumbmark is the one appearing on said Exh. "1" for the simple reason that it
Appellants' answer denied the material allegations of the complaint and alleged, as immediately precedes the name Anselmo Vegilia but it is under the name Pelagia
affirmative defense, they were the owners of the land in question, having acquired it by Vegilia. Ordinarily, this thumbmark would be considered as the thumbmark of
inheritance from the late Santiago Apostol, husband and father of appellants Espiritu Anselmo Vegilia and not of Pelagia Vegilia. While the Judge presiding this Court
and Apostol respectively; that said deceased bought the property from Mariano Vegilia does not claim any knowledge of finger print, it is, however, apparent that the
on June 3, 1934, as evidenced by the deed of sale Exhibit 2, who, in turn, had acquired thumbmark appearing in Exh "1" different from the thumbmark appearing in Exh.
it from his niece, Pelagia Vegilia, on May 26, 1932, by virtue of the deed of sale Exhibit "X". Furthermore, it is also very clear that the one who wrote the name Anselmo
1. Vegilia is the very one who wrote the name Pelagia Vegilia; and from said Exh. "1",
The present appeal depends entirely upon the validity of the Deed of Sale Exhibit 1 it is apparent also that Anselmo Vegilia could not have written the name Anselmo
allegedly executed by Pelagia Vegilia in favor of Mariano Vegilia, and of the Deed of Vegilia in Exh. "1" for the simple reason that it has been certified by the Notary
Sale Exhibit 2 allegedly executed by the latter in favor of Santiago Apostol. If both are Public that said Anselmo Vegilia is physically incapable (inutil physicamente), and
valid, appellant's contention that they have a better right than that the claimed by the other factor which leads this Court to believe that Exh. "1" has been falsified is
appellee would seem to be meritorious in the light of the facts of the case and the the apparent difference of the ink used in writing the names of Pelagia Vegilia and
provisions of Article 1544 of the New Civil Code, it not being disputed that the Deed of Anselmo Vegilia from the ink used by the other persons who signed in Exh. "1",
Sale in favor of appellee was registered under the provision of Act. 3344 on June 16, and the apparent fact that the names Pelagia Vegilia and Anselmo Vegilia must
1955, while Exhibits 1 and 2 were similarly registered eleven days before. have been written in a much later date than the other names appearing in said Exh.
Regarding the genuiness of the questioned documents, however, the Court of Appeals "1". With respect to Exh. "2", the denial Mariano Vegilia as to his having purchased
found as follows:lawphil.net the land in question from Pelagia Vegilia is enough for this Court to disregard "2".
Upon motion of plaintiff, the Court ordered the defendants to produce, for But this Court further takes into account the fact the names Mariano Vegilia and
examination and inspection by plaintiff, the two documents referred to. The plaintiff, Jose B. Aviles appearing in said Exh. "2" must have been written by only one man.
after examining and inspecting said documents, filed, on June 22, 1956 a Assuming that the above findings of the Court of Appeals are reviewable, we find
supplementary complaint alleging that the document dated May 26, 1932, "is nothing in the record sufficient to justify their reversal.
fictitious and a falsification", and that the private document of June 3, 1934, "is WHEREFORE, the decision appealed from is hereby affirmed, with costs.
G.R. No. 104482. January 22, 1996.* Appeals; Petition for Review on Certiorari; In petitions for review under Rule
45 of the Revised Rules of Court, only questions of law may be raised and passed
BELINDA TAÑEDO, for herself and in representation of her brothers and sisters, and
upon, and absent any whimsical or capricious exercise of judgment, and unless the
TEOFILA CORPUZ TAÑEDO, representing her minor daughter VERNA TAÑEDO,
lack of any basis for the conclusions made by the lower courts be amply demonstrated,
petitioners, vs.THE COURT OF APPEALS, SPOUSES RICARDO M. TAÑEDO AND
the Supreme Court will not disturb their findings.—To be sure, there are indeed many
TERESITA BARERA TAÑEDO, respondents.
conflicting documents and testimonies as well as arguments over their probative value
Appeals; Petition for Review on Certiorari; Supreme Court; The “errors” which and significance. Suffice it to say, however, that all the above contentions involve
are reviewable by the Supreme Court in a petition for review on certiorari from a questions of fact, appreciation of evidence and credibility of witnesses, which are not
decision of the Court of Appeals are only those committed by said court, and not directly proper in this review. It is well-settled that the Supreme Court is not a trier of facts. In
those of the trial court.—At the outset, let it be clear that the “errors” which are petitions for review under Rule 45 of the Revised Rules of Court, only questions of law
reviewable by this Court in this petition for review on certiorari are only those allegedly may be raised and passed upon. Absent any whimsical or capricious exercise of
committed by the respondent Court of Appeals and not directly those of the trial court, judgment, and unless the lack of any basis for the conclusions made by the lower courts
which is not a party here. The “assignment of errors” in the petition quoted above are be amply demonstrated, the Supreme Court will not disturb their findings.
therefore totally misplaced, and for that reason, the petition should be dismissed. But
Same; Evidence; The mere fact that a party’s evidence was not believed by
in order to give the parties substantial justice we have decided to delve into the issues
both the trial court and the appellate courts, and that the said courts tended to give
as above re-stated. The errors attributed by petitioners to the latter (trial) court will be
more credence to the evidence presented by the other party, is in itself not a reason for
discussed only insofar as they are relevant to the appellate court’s assailed Decision
setting aside such courts’ findings.—At most, it appears that petitioners have shown
and Resolution.
that their evidence was not believed by both the trial and the appellate courts, and that
Succession; Contracts; Sales; No contract may be entered into upon a future the said courts tended to give more credence to the evidence presented by private
inheritance except in cases expressly authorized by law—such a contract is not valid respondents. But this in itself is not a reason for setting aside such findings. We are far
and cannot be the source of any right nor the creator of any obligation between the from convinced that both courts gravely abused their respective authorities and judicial
parties.—The sale made in 1962 involving future inheritance is not really at issue here. prerogatives.
In context, the assailed Decision conceded “it may be legally correct that a contract of
sale of anticipated future inheritance is null and void.” But to remove all doubts, we
hereby categorically rule that, pursuant to Article 1347 of the Civil Code, “(n)o contract The facts are stated in the opinion of the Court.
may be entered into upon a future inheritance except in cases expressly authorized by
Jose T. Bartolome for petitioners.
law.” Consequently, said contract made in 1962 is not valid and cannot be the source
Joselito L. Lim for private respondents.
of any right nor the creator of any obligation between the parties.
PANGANIBAN, J.:
Same; Same; Same; An “affidavit of conformity” seeking to validate or ratify a
sale of future inheritance is useless.—Hence, the “affidavit of conformity” dated Is a sale of future inheritance valid? In multiple sales of the same real property, who
February 28, 1980, insofar as it sought to validate or ratify the 1962 sale, is also useless has preference in ownership? What is the probative value of the lower court’s finding
and, in the words of the respondent Court, “suffers from the same infirmity.” Even of good faith in registration of such sales in the registry of property? These are the main
private respondents in their memorandum concede this. questions raised in this Petition for review on certiorari under Rule 45 of the Rules of
Court to set aside and reverse the Decision1 of the Court of Appeals2 in CA-G.R. CV
Land Registration; Sales; Ownership; Ownership in an immovable shall
NO. 24987 promulgated on September 26, 1991 affirming the decision of the Regional
belong to the buyer who in good faith registers it first in the registry of property.—The
Trial Court, Branch 63, Third Judicial Region, Tarlac, Tarlac in Civil Case No. 6328,
property in question is land, an immovable, and following the above-quoted law,
and its Resolution denying reconsideration thereof, promulgated on May 27, 1992.
ownership shall belong to the buyer who in good faith registers it first in the registry of
property. Thus, although the deed of sale in favor of private respondents was later than By the Court’s Resolution on October 25, 1995, this case (along with several others)
the one in favor of petitioners, ownership would vest in the former because of the was transferred from the First to the Third Division and after due deliberation, the Court
undisputed fact of registration. On the other hand, petitioners have not registered the assigned it to the undersigned ponente for the writing of this Decision.
sale to them at all. The Facts
Same; Same; Same; Possession; As between two purchasers, the one who On October 20, 1962, Lazaro Tañedo executed a notarized deed of absolute sale in
registered the sale in his favor has a preferred right over the other who has not favor of his eldest brother, Ricardo Tañedo, and the latter’s wife, Teresita Barera,
registered his title, even if the latter is in actual possession of the immovable property.— private respondents herein, whereby he conveyed to the latter in consideration of
Petitioners contend that they were in possession of the property and that private P1,500.00, “one hectare of whatever share I shall have over Lot No. 191 of the
respondents never took possession thereof. As between two purchasers, the one who cadastral survey of Gerona, Province of Tarlac and covered by Title T-13829 of the
registered the sale in his favor has a preferred right over the other who has not Register of Deeds of Tarlac,” the said property being his “future inheritance” from his
registered his title, even if the latter is in actual possession of the immovable property. parents (Exh. 1). Upon the death of his father Matias, Lazaro executed an “Affidavit of
Conformity” dated February 28, 1980 (Exh. 3) to “re-affirm, respect, acknowledge and
validate the sale I made in 1962.” On January 13, 1981, Lazaro executed another
notarized deed of sale in favor of private respondents covering his “undivided ONE II.The trial court erred in holding that defendants-appellees acted in good faith in
TWELVE (1/12) of a parcel of land known as Lot 191 x x x” (Exh. 4). He acknowledged registering the deed of sale of January 13, 1981 (Exhibit 9) with the Register of Deeds
therein his receipt of P10,000.00 as consideration therefor. In February 1981, Ricardo of Tarlac and therefore ownership of the land in question passed on to defendants-
learned that Lazaro sold the same property to his children, petitioners herein, through appellees.
a deed of sale dated December 29, 1980 (Exh. E). On June 7, 1982, private
“III.The trial court erred in ignoring and failing to consider the testimonial and
respondents recorded the Deed of Sale (Exh. 4) in their favor in the Registry of Deeds
documentary evidence of plaintiffs-appellants which clearly established by
and the corresponding entry was made in Transfer Certificate of Title No. 166451 (Exh.
preponderance of evidence that they are indeed the legitimate and lawful owners of the
5).
property in question.
Petitioners on July 16, 1982 filed a complaint for rescission (plus damages) of the deeds
“IV.The decision is contrary to law and the facts of the case and the conclusions drawn
of sale executed by Lazaro in favor of private respondents covering the property
from the established facts are illogical and off-tangent.”
inherited by Lazaro from his father.
From the foregoing, the issues may be restated as follows:
Petitioners claimed that their father, Lazaro, executed an “Absolute Deed of Sale” dated
December 29, 1980 (Exh. E), conveying to his ten children his allotted portion under 1.Is the sale of a future inheritance valid?
the extrajudicial partition executed by the heirs of Matias, which deed included the land 2.Was the subsequent execution on January 13, 1981 (and registration with
in litigation (Lot 191). the Registry of Property) of a deed of sale covering the same property to the
Petitioners also presented in evidence: (1) a private writing purportedly prepared and same buyers valid?
signed by Matias dated December 28, 1978, stating that it was his desire that whatever 3.May this Court review the findings of the respondent Court (a) holding that
inheritance Lazaro would receive from him should be given to his (Lazaro’s) children the buyers acted in good faith in registering the said subsequent deed of sale
(Exh. A); (2) a typewritten document dated March 10, 1979 signed by Lazaro in the and (b) in “failing to consider petitioners’ evidence”? Are the conclusions of
presence of two witnesses, wherein he confirmed that he would voluntarily abide by the the respondent Court “illogical and off-tangent?”
wishes of his father, Matias, to give to his (Lazaro’s) children all the property he would
inherit from the latter (Exh. B); and (3) a letter dated January 1, 1980 of Lazaro to his The Court’s Ruling
daughter, Carmela, stating that his share in the extrajudicial settlement of the estate of At the outset, let it be clear that the “errors” which are reviewable by this Court in this
his father was intended for his children, petitioners herein (Exh. C). petition for review on certiorari are only those allegedly committed by the respondent
Private respondents, however presented in evidence a “Deed of Revocation of a Deed Court of Appeals and not directly those of the trial court, which is not a party here. The
of Sale” dated March 12, 1981 (Exh. 6), wherein Lazaro revoked the sale in favor of “assignment of errors” in the petition quoted above are therefore totally misplaced, and
petitioners for the reason that it was “simulated or fictitious—without any consideration for that reason, the petition should be dismissed. But in order to give the parties
whatsoever.” substantial justice we have decided to delve into the issues as above re-stated. The
errors attributed by petitioners to the latter (trial) court will be discussed only insofar as
Shortly after the case a quo was filed, Lazaro executed a sworn statement (Exh. G) they are relevant to the appellate court’s assailed Decision and Resolution.
which virtually repudiated the contents of the Deed of Revocation of a Deed of Sale
(Exh. 6) and the Deed of Sale (Exh. 4) in favor of private respondents. However, Lazaro The sale made in 1962 involving future inheritance is not really at issue here. In context,
testified that he sold the property to Ricardo, and that it was a lawyer who induced him the assailed Decision conceded “it may be legally correct that a contract of sale of
to execute a deed of sale in favor of his children after giving him five pesos (P5.00) to anticipated future inheritance is null and void.”3
buy a “drink” (TSN September 18, 1985, pp. 204-205). But to remove all doubts, we hereby categorically rule that, pursuant to Article 1347 of
The trial court decided in favor of private respondents, holding that petitioners failed “to the Civil Code, “(n)o contract may be entered into upon a future inheritance except in
adduce a preponderance of evidence to support (their) claim.” On appeal, the Court of cases expressly authorized by law.”
Appeals affirmed the decision of the trial court, ruling that the Deed of Sale dated Consequently, said contract made in 1962 is not valid and cannot be the source of any
January 13, 1981 (Exh. 9) was valid and that its registration in good faith vested title in right nor the creator of any obligation between the parties.
said respondents.
Hence, the “affidavit of conformity” dated February 28, 1980, insofar as it sought to
The Issues validate or ratify the 1962 sale, is also useless and, in the words of the respondent
Petitioners raised the following “errors” in the respondent Court, which they also now Court, “suffers from the same infirmity.” Even private respondents in their
allege in the instant Petition: memorandum4concede this.
“I.The trial court erred in concluding that the Contract of Sale of October 20, 1962 However, the documents that are critical to the resolution of this case are: (a) the deed
(Exhibit 7, Answer) is merely voidable or annulable and not void ab initio pursuant to of sale of January 13, 1981 in favor of private respondents covering Lazaro’s undivided
paragraph 2 of Article 1347 of the New Civil Code involving as it does a ‘future inheritance of one-twelfth (1/12) share in Lot No. 191, which was subsequently
inheritance.’ registered on June 7, 1982; and (b) the deed of sale dated December 29, 1980 in favor
of petitioners covering the same property. These two documents were executed after
the death of Matias (and his spouse) and after a deed of extra-judicial settlement of his
(Matias’) estate was executed, thus vesting in Lazaro actual title over said property. In of the deed of sale executed by Lazaro in favor of his children ‘about a month
other words, these dispositions, though conflicting, were no longer infected with the or sometime in February 1981’ (p. 111, tsn, Nov. 28, 1984). x x x”6
infirmities of the 1962 sale.
The respondent Court, reviewing the trial court’s findings, refused to overturn the latter’s
Petitioners contend that what was sold on January 13, 1981 was only one-half hectare assessment of the testimonial evidence, as follows:
out of Lot No. 191, citing as authority the trial court’s decision. As earlier pointed out,
“We are not prepared to set aside the finding of the lower court upholding
what is on review in these proceedings by this Court is the Court of Appeals’ decision—
Ricardo Tañedo’s testimony, as it involves a matter of credibility of witnesses
which correctly identified the subject matter of the January 13, 1981 sale to be the entire
which the trial judge, who presided at the hearing, was in a better position to
undivided 1/12 share of Lazaro in Lot No. 191 and which is the same property disposed
resolve.” (Court of Appeals’ Decision, p. 6.)
of on December 29, 1980 in favor of petitioners.
In this connection, we note the tenacious allegations made by petitioners, both in their
Critical in determining which of these two deeds should be given effect is the
basic petition and in their memorandum, as follows:
registration of the sale in favor of private respondents with the register of deeds on June
7, 1982. 1.The respondent Court allegedly ignored the claimed fact that respondent
Ricardo “by fraud and deceit and with foreknowledge” that the property in
Article 1544 of the Civil Code governs the preferential rights of vendees in cases of
question had already been sold to petitioners, made Lazaro execute the
multiple sales, as follows:
deed of January 13, 1981;
“Art. 1544. If the same thing should have been sold to different vendees, the
2. There is allegedly adequate evidence to show that only 1/2 of the
ownership shall be transferred to the person who may have first taken
purchase price of P10,000.00 was paid at the time of the execution of the
possession thereof in good faith, if it should be movable property.
deed of sale, contrary to the written acknowledgment, thus showing bad
Should it be immovable property, the ownership shall belong to the person faith;
acquiring it who in good faith first recorded it in the Registry of Property.
3.There is allegedly sufficient evidence showing that the deed of revocation
Should there be no inscription, the ownership shall pertain to the person who of the sale in favor of petitioners “was tainted with fraud or deceit.”
in good faith was first in the possession; and, in the absence thereof, to the
4.There is allegedly enough evidence to show that private respondents “took
person who presents the oldest title, provided there is good faith.”
undue advantage over the weakness and unschooled and pitiful situation of
The property in question is land, an immovable, and following the above-quoted law, Lazaro Tañedo . . .” and that respondent Ricardo Tañedo “exercised moral
ownership shall belong to the buyer who in good faith registers it first in the registry of ascendancy over his younger brother he being the eldest brother and who
property. Thus, although the deed of sale in favor of private respondents was later than reached fourth year college of law and at one time a former Vice-Governor
the one in favor of petitioners, ownership would vest in the former because of the of Tarlac, while his younger brother only attained first year high school x x
undisputed fact of registration. On the other hand, petitioners have not registered the x”;
sale to them at all.
5.The respondent Court erred in not giving credence to petitioners’ evidence,
Petitioners contend that they were in possession of the property and that private especially Lazaro Tañedo’s Sinumpaang Salaysay dated July 27, 1982
respondents never took possession thereof. As between two purchasers, the one who stating that Ricardo Tañedo deceived the former in executing the deed of
registered the sale in his favor has a preferred right over the other who has not sale in favor of private respondents.
registered his title, even if the latter is in actual possession of the immovable property.5
To be sure, there are indeed many conflicting documents and testimonies as well as
As to third issue, while petitioners conceded the fact of registration, they nevertheless arguments over their probative value and significance. Suffice it to say, however, that
contended that it was done in bad faith. On this issue, the respondent Court ruled: all the above contentions involve questions of fact, appreciation of evidence and
credibility of witnesses, which are not proper in this review. It is well-settled that the
“Under the second assignment of error, plaintiffs-appellants contend that
Supreme Court is not a trier of facts. In petitions for review under Rule 45 of the Revised
defendants-appellees acted in bad faith when they registered the Deed of Sale
Rules of Court, only questions of law may be raised and passed upon. Absent any
in their favor as appellee Ricardo already knew of the execution of the deed
whimsical or capricious exercise of judgment, and unless the lack of any basis for the
of sale in favor of the plaintiffs; appellants cite the testimony of plaintiff Belinda
conclusions made by the lower courts be amply demonstrated, the Supreme Court will
Tañedo to the effect that defendant Ricardo Tañedo called her up on January
not disturb their findings. At most, it appears that petitioners have shown that their
4 or 5, 1981 to tell her that he was already the owner of the land in question
evidence was not believed by both the trial and the appellate courts, and that the said
‘but the contract of sale between our father and us were (sic) already
courts tended to give more credence to the evidence presented by private respondents.
consummated’ (pp. 9-10, tsn, January 6, 1984). This testimony is obviously
But this in itself is not a reason for setting aside such findings. We are far from
self-serving, and because it was a telephone conversation, the deed of sale
convinced that both courts gravely abused their respective authorities and judicial
dated December 29, 1980 was not shown; Belinda merely told her uncle that
prerogatives.
there was already a document showing that plaintiffs are the owners (p. 80).
Ricardo Tañedo controverted this and testified that he learned for the first time As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp.:7
“The Court has consistently held that the factual findings of the trial court, as
well as the Court of Appeals, are final and conclusive and may not be reviewed
on appeal. Among the exceptional circumstances where a reassessment of
facts found by the lower courts is allowed are when the conclusion is a finding
grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is grave abuse
of discretion in the appreciation of facts; when the judgment is premised on a
misapprehension of facts; when the findings went beyond the issues of the
case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above
grounds present to justify the re-evaluation of the findings of fact made by the
courts below.”
In the same vein, the ruling in the recent case of South Sea Surety and Insurance
Company, Inc. vs. Hon. Court of Appeals, et al.8 is equally applicable to the present
case:
“We see no valid reason to discard the factual conclusions of the appellate
court. x x x (I)t is not the function of this Court to assess and evaluate all over
again the evidence, testimonial and documentary, adduced by the parties,
particularly where, such as here, the findings of both the trial court and the
appellate court on the matter coincide.” (italics supplied)
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of
Appeals is AFFIRMED. No costs.
SO ORDERED.
Narvasa (C.J., Chairman), Davide, Jr., Melo and Francisco, JJ., concur.
Petition denied, judgment affirmed.
FIRST DIVISION representing the price of the second sale are well taken insofar as the seller Leodegaria
G.R. No. L-56232 June 22, 1984 Cabana is concerned. These amounts have been received by the said seller
ABELARDO CRUZ (deceased) substituted by Heirs Consuelo C. Cruz, Claro C. Leodegaria Cabana on account of a void second sale and must be duly reimbursed by
Cruz and Stephen C. Cruz, per Resolution, petitioners, vs. her to petitioner’s heirs, but the Legaspi spouses cannot be held liable therefor since
LEODEGARIA CABANA, TEOFILO LEGASPI , ILUMINADA CABANA and THE they had nothing to do with the said second sale nor did they receive any benefit
HONOR- ABLE COURT OF APPEALS,* respondents. therefrom. Petitioner’s claim for reimbursement of the amount of P102.58 as real estate
Nazareno, Azada, Sabado & Dizon for petitioners. taxes paid on the property is not well taken because the respondents Legaspi spouses
Felixberto N. Boquiren for respondents. had been paying the real estate taxes on the same property since June 1, 1969.
PETITION for review the decision of the Court of Appeals.
Civil Law; Sales; Double sale of real property; Article 1544, Civil Code, applied;
Knowledge of a prior transfer of registered property by a subsequent purchaser makes TEEHANKEE, J.:
the subsequent purchaser in bad faith and vitiates his title acquired thereto which The Court affirms the questioned decision of the now defunct Court of Appeals which
creates no right as against the first purchaser.—Said respondents spouses were affirmed that of the Court of First Instance of Quezon Province, but directs that the
likewise the first to register the sale with right of repurchase in their favor on May 13, seller, respondent Leodegaria Cabana who sold the property in question twice, first to
1965 under Primary Entry No. 210113 of the Register of Deeds. They could not register her co-respondents Teofilo Legaspi and Iluminada Cabana and later to petitioner
the absolute deed of sale in their favor and obtain the corresponding transfer certificate Abelardo Cruz (now deceased), should reimburse to petitioner's heirs the amounts of
of title because at that time the seller’s duplicate certificate was still with the bank. But P2,352.50, which the late petitioner Abelardo Cruz paid to the Philippine National Bank
there is no question, and the lower courts so found conclusively as a matter of fact, that to discharge the mortgage obligation of said respondent Leodegaria Cabana in favor of
when petitioner Cruz succeeded in registering the later sale in his favor, he knew and said bank, and of P3,397.50, representing the amount paid by said Abelardo Cruz to
he was informed of the prior sale in favor of respondents-spouses. Respondent her as consideration of the sale with pacto de retro of the subject property.
appellate court correctly held that such “knowledge of a prior transfer of a registered This is a simple case of double sale of real property. Respondent appellate court in its
property by a subsequent purchaser makes him a purchaser in bad faith and his decision of August 13, 1980 stated the background facts and resolved the issue in favor
knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of of defendants- appellees, first buyers- respondents herein, and against plaintiff-
conveyance which creates no right as against the first purchaser.” appellant Abelardo Cruz, petitioner herein (substituted by his heirs), as follows:
Defendants' evidence shows that on October 21, 1968, defendant Leodegaria
Same; Same; Same; Same; Same; First unregistered sale prevails over a
Cabana sold the land in question to defendants-spouses Teofilo Legaspi and
registered second sale; Reason; Requirement that before the second buyer can obtain
Iluminada Cabana (Exh. 1). The said defendants-spouses attempted to
priority over the first buyer, the second buyer must show that he acted in good faith
register the deed of sale but said registration was not accomplished because
throughout from the time of acquisition until title is transferred to him by registration, or
they could not present the owner's duplicate of title which was at that time in
failing registration, by delivery of possession.—As the Court held in Carbonell vs. Court
the possession of the PNB as mortgage.
of Appeals “it is essential that the buyer of realty must act in good faith in registering
Likewise, when plaintiff tried to register the deed of sale executed by
his deed of sale to merit the protection of the second paragraph of [the above quoted]
Leodegaria Cabana on September 3, 1970, said plaintiff was informed that
Article 1544.” As the writer stressed in his concurring opinion therein, “(T)he governing
the owner thereof had sold the land to defendants-spouses on October 21,
principle here is prius tempore, potior jure (first in time, stronger in right). Knowledge
1968. Plaintiff was able to register the land in his name on February 9, 1971
gained by the first buyer of the second sale cannot defeat the first buyer’s rights except
(Exh. A). With the admission of both parties that the land in question was sold
only as provided by the Civil Code and that is where the second buyer first registers
to two persons, the main issue to be resolved in this appeal is as to who of
in good faith the second sale ahead of the first. Such knowledge of the first buyer does
said vendees has a better title to said land.
not bar her from availing of her rights under the law, among them, to register firsther
There is no dispute that the land in question was sold with right of repurchase
purchase as against the second buyer. But in conversoknowledge gained by the
on June 1, 1965 to defendants- spouses Teofilo Legaspi and Iluminada
second buyer of the first sale defeats his rights even if he is first to register the second
Cabana (Exh. 1). The said document 'Bilihang Muling Mabibili' stipulated that
sale, since such knowledge taints his prior registration with bad faith. This is the price
the land can be repurchased by the vendor within one year from December
exacted by Article 1544 of the Civil Code for the second buyer being able to displace
31, 1966 (see par. 5, Exh. 1).lwphl@itç Said land was not repurchased and in
the first buyer; that before the second buyer can obtain priority over the first, he must
the meantime, however, said defendants-spouses took possession of the
show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the
land.
first buyer’s rights)—from the time of acquisition until the title is transferred to him by
Upon request of Leodegaria Cabana, the title of the land was lent to her in
registration or failing registration, by delivery of possession. The second buyer must
order to mortgage the property to the Philippine National Bank. Said title was,
show continuing good faith and innocence or lack of knowledge of the first sale until his
forthwith, deposited with the PNB. On October 21, 1968, defendant
contract ripens into full ownership through prior registration as provided by law.”
Leodegaria Cabana sold the land by way of absolute sale to the defendants-
Same; Same; Same; Seller of property twice, required to reimburse the second
spouses (Exh. 2). However, on November 29, 1968 defendant sold the same
buyer on account of the void second sale; Case at bar.—Petitioner’s prayer for
property to herein plaintiff and the latter was able to register it in his name.
alternative relief for reimbursement of the amount of P2,352.50 paid by him to the bank
to discharge the existing mortgage on the property and of the amount of P3,397.50
The transaction in question is governed by Article 1544 of the Civil Code. True Should it be immovable property, the ownership shall belong to the person
it is that the plaintiff was able to register the sale in his name but was he in acquiring it who in good faith first recorded it in the Registry of Property.
good faith in doing so? Should there be no inscription, the ownership shall pertain to the person who
While the title was registered in plaintiff- appellant's name on February 9, 1971 in good faith was first in the possession; and, in the absence thereof, to the
(Exh. A), it appears that he knew of the sale of the land to defendants-spouses person who presents the oldest title, provided there is good faith.
Legaspi as he was informed in the Office of the Register of Deeds of Quezon. There is no question that respondents-spouses Teofilo Legaspi and Iluminada Cabana
It appears that the defendants-spouses registered their document of sale on were the first buyers, first on June 1, 1965 under a sale with right of repurchase and
May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds (Exh. later on October 21, 1968 under a deed of absolute sale and that they had taken
2). possession of the land sold to them; that petitioner was the second buyer under a deed
Under the foregoing circumstances, the right of ownership and title to the land of sale dated November 29, 1968, which to all indications, contrary to the text, was a
must be resolved in favor of the defendants- spouses Legaspi on three counts. sale with right of repurchase for ninety (90) days. 1 There is no question either that
First, the plaintiff-appellant was not in good faith in registering the title in his respondents legaspi spouses were the first and the only ones to be in possession of
name. Consistent is the jurisprudence in this jurisdiction that in order that the the subject property.
provisions of Article 1544 of the new Civil Code may be invoked, it is Said respondents spouses were likewise the first to register the sale with right of
necessary that the conveyance must have been made by a party who has an repurchase in their favor on May 13, 1965 under Primary Entry No. 210113 of the
existing right in the thing and the power to dispose of it (10 Manresa 170, 171). Register of Deeds. They could not register the absolute deed of sale in their favor and
It cannot be set up by a second purchaser who comes into possession of the obtain the corresponding transfer certificate of title because at that time the seller's
property that has already been acquired by the first purchaser in full dominion duplicate certificate was still with the bank. But there is no question, and the lower
(Bautista vs. Sison, 39 Phil. 615), this not withstanding that the second courts so found conclusively as a matter of fact, that when petitioner Cruz succeeded
purchaser records his title in the public registry, if the registration be done in in registering the later sale in his favor, he knew and he was informed of the prior sale
bad faith, the philosophy underlying this rule being that the public records in favor of respondents-spouses. Respondent appellate court correctly held that such
cannot be covered into instruments of fraud and oppression by one who "knowledge of a prior transfer of a registered property by a subsequent purchaser
secures an inscription therein in bad faith (Chupinghong vs. Borreros, 7 CA makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title
Rep. 699). acquired by virtue of the latter instrument of conveyance which creates no right as
A purchaser who has knowledge of fact which would put him upon inquiry and against the first purchaser."
investigation as to possible defects of the title of the vendor and fails to make As the Court held in Carbonell vs. Court of Appeals 2 "it is essential that the buyer of
such inquiry and investigation, cannot claim that he is a purchaser in good realty must act in good faith in registering his deed of sale to merit the protection of the
faith. Knowledge of a prior transfer of a registered property by a subsequent second paragraph of [the above quoted] Article 1544." As the writer stressed in his
purchaser makes him a purchaser in bad faith and his knowledge of such concurring opinion therein, "(T)he governing principle here is prius tempore, potior
transfer vitiates his title acquired by virtue of the latter instrument of jure(first in time, stronger in right). Knowledge gained by the first buyer of the second
conveyance which creates no right as against the first purchaser (Reylago vs. sale cannot defeat the first buyer's rights except only as provided by the Civil Code and
Jarabe, L-20046, March 27, 1968, 22 SCRA 1247). that is where the second buyer first registers in good faith the second sale ahead of the
In the second place, the defendants-spouses registered the deed of absolute first. Such knowledge of the first buyer does not bar her from availing of her rights under
sale ahead of plaintiff- appellant. Said spouses were not only able to obtain the law, among them, to register first her purchase as against the second buyer. But in
the title because at that time, the owner's duplicate certificate was still with the converso knowledge gained by the second buyer of the first sale defeats his rights even
Philippine National Bank. if he is first to register the second sale, since such knowledge taints his prior registration
In the third place, defendants-spouses have been in possession all along of with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second
the land in question. If immovable property is sold to different vendees, the buyer being able to displace the first buyer; that before the second buyer can obtain
ownership shall belong to the person acquiring it who in good faith first priority over the first, he must show that he acted in good faith throughout (i.e. in
recorded it in the registry of property; and should there be no inscription, the ignorance of the first sale and of the first buyer's rights) — from the time of acquisition
ownership shall pertain to the person who in good faith was first in the until the title is transferred to him by registration or failing registration, by delivery of
possession (Soriano, et al. vs. The Heirs of Domingo Magali et al., L-15133 , possession. The second buyer must show continuing good faith and innocence or lack
July 31, 1963, 8 SCRA 489). Priority of possession stands good in favor of of knowledge of the first sale until his contract ripens into full ownership through prior
herein defendants-spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913; registration as provided by law."
Sanchez vs. Ramos, 40 Phil. 614, Quimson vs, Rosete, 87 Phil. 159). Petitioner's prayer for alternative relief for reimbursement of the amount of P2,352.50
The Court finds that in this case of double sale of real property, respondent appellate paid by him to the bank to discharge the existing mortgage on the property and of the
court, on the basis of the undisputed facts, correctly applied the provisions of Article amount of P3,397.50 representing the price of the second sale are well taken insofar
1544 of the Civil Code that as the seller Leodegaria Cabana is concerned. These amounts have been received by
Art. 1544. If the same thing should have been sold to different vendees, the the said seller Leodegaria Cabana on account of a void second sale and must be duly
ownership shall be transferred to the person who may have first taken reimbursed by her to petitioner's heirs, but the Legaspi spouses cannot be held liable
possession thereof in good faith, if it should be movable property. therefor since they had nothing to do with the said second sale nor did they receive any
benefit therefrom. Petitioner's claim for reimbursement of the amount of P102.58 as
real estate taxes paid on the property is not well taken because the respondents
Legaspi spouses had been paying the real estate taxes on the same property since
June 1, 1969. 4
ACCORDINGLY, the appealed judgment of respondent appellate court, upholding
respondents-spouses Teofilo Legaspi and Iluminada Cabana as the true and rightful
owners of the property in litigation and ordering the issuance of a new title with the
cancellation as null and void of Title No. T- 99140 obtained by petitioner Abelardo C.
Cruz, is hereby affirmed in toto. In accordance with the partial grant of petitioner's
prayer for alternative relief as stated in the preceding paragraph hereof, the Court
hereby orders and sentences respondent Leodegaria Cabana to reimburse and pay to
petitioner's heirs the total sum of P5,750.00.
Melencio-Herrera, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
Footnotes
* Eighth Division composed of Samuel F. Reyes, Jorge R.
Coquia, ponente, and Mariano A. Zosa, JJ.
1 Respondents Legaspi spouses cite in their brief "facts of record" which were
not denied or disputed by petitioner, as follows:
First. The price paid by Cruz was unconscionably small. The complaint alleged
that the land with an area of 27,882 square meters had an annual income of
P3,000.00 (Record on Appeal p. 8) but the vendor, Leodegaria Cabana, was
paid the paltry sum of only P5,000.00 (Record on Appeal, p. 25).
Second. Cruz bought the land without even making an inspection. The deed
of sale was executed on November 25, 1968 but he visited the property only
after February, 1971 or after a lapse of more than two years. (tsn Nov. 23,
1971, page 18). Surely, there must be something fishy when real estate with
an income of P3,000.00 yearly can he had for only P5,000.00. By this
fantastically low price, the buyer is already put on notice of a possible defect
in seller's title and vet Cruz did not even visit the locality where he could have
made appropriate inquiries.
Third. By petitioner's own admission (brief, p. 4), the agreement between them
(Cruz and Leodegaria Cabana) was SALE WITH RIGHT OF REPURCHASE
within 90 days, however, the deed prepared by Atty. Bonus, counsel of Cruz
in the trial court up to the Court of Appeals, was a deed of absolute sale.
a clear premeditated circumvention of the agreement. ...
Fourth. The deed of sale in favor of Cruz was executed on November 29, 1968
(Record on Appeal, p. 11) but he declared the property for taxation only on
April 20, 1971, or after the lapse of over two years.
an indubitable showing that Cruz was uncertain of his title and was not duty
bound to pay taxes thereon. And please note that he was constrained to pay
the real estate taxes only because he found in Legaspi's answer to his
complaint in the trial court that legaspi had been paying the taxes on this
property since June 1, 1969 (Record on appeal,p.9).lwphl@itç Obviously Cruz
must have realized that his claim of ownership would be adversely affected by
not declaring this property in his name and not paying real estate taxes.
2 60 SCRA 99 (1976).
3 Idem, pp. 122,123.
4 See footnote, 1, supra.
FIRST DIVISION Same; Same; Same; Same; Petitioner is not entitled to extraordinary acquisitive
G.R. No. L-56838 April 26, 1990 prescription, in the absence of sufficient proof of compliance with the thirty-year
GENARO NAVERA AND EMMA AMADOR, petitioners, vs. THE HONORABLE requirement of possession in case of bad faith.—After a careful examination of the
COURT OF APPEALS, ARSENIO NARES AND FELIX NARES, respondents. records, We are of the opinion that there is lack of sufficient proof to establish clearly
Madrid Law Office for petitioners. and positively petitioner’s claim of acquisitive prescription. In fact, We are more inclined
to believe respondents’ version that respondent Arsenio Nares was evicted from the
Sales; Double Sale; Remedial Law; The conclusions and findings of facts by the
property by petitioner sometime in 1957, thereby showing the latter’s bad faith in
trial court are entitled to great weight.—We agree with the aforequoted findings and
acquiring the possession of the property until 1971 when the action against petitioner
conclusions of the lower court which were affirmed on appeal by the Court of Appeals.
was filed. Thus, the ordinary acquisitive prescription of ten years cannot be considered
The conclusions and findings of facts by the trial court are entitled to great weight and
in favor of petitioner in the absence of good faith. Neither is the petitioner entitled to
will not be disturbed on appeal unless for strong and cogent reasons because the trial
extraordinary acquisitive prescription, in the absence of sufficient proof of compliance
court is in a better position to examine real evidence as well as to observe the demeanor
with the thirty-year requirement of possession in case of bad faith.
of witnesses while testifying on the case.
Same; Same; Same; Sales not recorded in the Registry of Property, the law PETITION for certiorari to review the decision of the Court of Appeals.
vests ownership upon the person who in good faith was first in possession.—The first
sale of Eduarda Navera’s share in the said lot to Arsenio Nares was made in a public
MEDIALDEA, J.:
instrument on May 14, 1947. The second sale of the same property was executed also
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-
in a public instrument in favor of Mariano Navera, who is the predecessor in interest of
G.R. No. 63926-R affirming in toto the decision of the Court of First Instance of Albay
petitioner Genaro Navera, on June 26, 1948, or more than a year after the first sale.
(now Regional Trial Court) in Civil Case No. 4359 entitled "Arsenio Nares and Felix
Since the records show that both sales were not recorded in the Registry of Property,
Nares vs. Genaro Navera and Emma Amador," which declared the private respondents
the law clearly vests the ownership upon the person who in good faith was first in
Arsenio Nares and Felix Nares owners of the land in dispute.
possession of the disputed lot.
The antecedent facts of this case are as follows:
Same; Same; Same; Same; The possession mentioned in Article 1544 for
Leocadio Navera has five (5) children, namely: Elena, Mariano, Basilio, Eduarda and
determining who has better right when the same piece of land has been sold several
Felix, all surnamed Navera. Mariano Navera is the father of petitioner Genaro Navera.
times by the same vendor includes not only the material but also the symbolic
Elena Navera, on the other hand has three children by Antonio Nares. Two of them are
possession.—The possession mentioned in Article 1544 for determining who has better
respondent Arsenio Nares and Felix Nares. The other child, Dionisia is already
right when the same piece of land has been sold several times by the same vendor
deceased and has left children. Petitioner and respondents are therefore, first cousins.
includes not only the material but also the symbolic possession, which is acquired by
Way back in 1916, Leocadio Navera donated to Fausto Mustar in a private instrument
the execution of a public instrument. This means that after the sale of a realty by means
a certain property in consideration of the marriage of the former's son, Mariano Navera,
of a public instrument, the vendor, who resells it to another, does not transmit anything
to the daughter of Fausto Mustar by the name of Restituta Mustar. The said property
to the second vendee, and if the latter, by virtue of this second sale, takes material
donated is described as follows:
possession of the thing, he does it as mere detainer, and it would be unjust to protect
The land that I am giving to my compadres (Cablaye) is located in Caguiba
this detention against the rights of the thing lawfully acquired by the first vendee
Camalig, Albay, Philippines, and the boundaries and area are the following:
(Quimson vs. Rosete, 87 Phil. 159; Sanchez vs. Ramos, 40 Phil. 614; Florendo vs. Foz,
North, property of Angel Navera, and measures 98 meters on this side and
20 Phil. 388). In the case at bar, the prior sale of the land to respondent Arsenio Nares
the visible boundary is a row of Pasao; East, property of Josefa Moratalla and
by means of a public instrument is clearly tantamount to a delivery of the land resulting
measures 150 meters on this side with row of Pasao and bani, on the South,
in the material and symbolic possession thereof by the latter. Verily, factual points to
property belong to me and measures 63 meters on this side and the visible
the prior actual possession by respondent Nares before he was evicted from the land
mark is shoulder of the mountain: on the west, my own property and measures
by petitioners and their predecessors in 1957 when the latter entered the disputed
108 meters on this side with row of Pasao with a dita tree." (p. 110, Records)
property. No other evidence exists on record to show the contrary.
On July 19, 1927, Original Certificate of Title No. RO-154(NA) was issued in the name
Same; Same; Same; Same; Prescription must be expressly relied upon in the
of "Elena Navera, et al.", covering the land in dispute, namely Lot 1460, situated in the
pleadings and cannot be availed of, unless pleaded in the answer.—Prescription as a
Municipality of Camalig, Albay, particularly described as follows:
defense, must be expressly relied upon in the pleadings. It cannot be availed of, unless
A parcel of land (Lot No. 1460 of the Cadastral Survey of Camalig), with all
it is specially pleaded in the answer; and it must be proved or established with the same
the improvements thereon; bounded on the SE, along lines 12, by Lot 1459;
degree of certainty as any essential allegation in the civil action (Hodges vs. Salas, 63
on the SW, along lines 2-3-4-5-6-7-8, by creek; on the NE, along line 8-9, by
Phil. 567; Corporacion de PP. Augustinus Recolectos vs. Crisostomo, 32 Phil. 427). In
Lot 1474; and on the E, along line 9-1, by Lot 1441, containing an area of
the instant case, petitioners, who were the defendants in the lower court, did not claim
TWENTY SIX THOUSAND NINE HUNDRED NINETY FIVE (26,995) square
acquisitive prescription in their answer, and even if they did, it cannot be given judicial
meters more or less; . . . (pp. 30- 31, Records)
sanction on mere allegations. The law requires one who asserts ownership by adverse
Sometime in 1924, Elena Navera died.
possession to prove the presence of the essential elements of acquisitive prescription
On May 14, 1947, Eduarda Navera, by means of a public instrument, sold to her
(Morales vs. CFI, et al., No. L-52278, May 29, 1980, 97 SCRA 872).
nephew, respondent Arsenio Nares, all of her share in Lot 1460, which is titled in the
name of "Elena Navera, et al." Eduarda Navera's share in the aforementioned lot is
one-half (1/2) of the total area of Lot 1460. The deed of sale which the latter executed On September 3, 1971, Francisco Dacillo sold to petitioner Genaro Navera the land
in favor of respondent Arsenio Nares particularly describes the lot subject of the sale, which the former received by way of donation from Perpetua Dacillo. The lot sold is
as follows: specifically described as follows:
A portion from the tax No. 28081, of one (11) half belong to EDUARDA A parcel of land (Lot No. 1460, Camalig, Cad. Survey), Albay, with all the
NAVERA and the other one (1) half to own by the deceased Lina Navera, only improvements thereon. Bounded on the N. by Genaro Navera; on the E by
is sold by this present deed of sale, the one to belong to Eduarda Navera. But Roman Morga; on the S. by CIPRIANO Morga and on the W. by Heirs of Felix
the other half being owned by Lina Navera, is the very deceased mother of Samson . . containing an area of seven thousand and twenty six hundred
the buyer of this deed of absolute sale. Although the other half to belong to (7,026) square meters. (p. 101, Records)
Lina Navera but the present administrator is also name[d] the present buyer. All of the foregoing transfers of Lot 1460 were not annotated and inscribed in the
And by this reason, the whole lot is now under care of Arsenio Nares. The Original Certificate of Title.
boundaries of the portion to belong to Eduarda Navera, to sell the said In their complaint dated March 14, 1971 filed with the then Court of First Instance of
purchaser are: on the North by Mariano Navera; on the East by Roman Marga, Albay (now Regional Trial Court), respondents Arsenio Nares and Felix Nares,
on the South by Enrico Obligado and on the West by Felix Samson. (pp. 32- alleged inter alia: that they are the absolute owners of the whole of Lot 1460 covered
33, Records) by Original Certificate of Title No. RO-154(NA), and are entitled to the possession of
On June 26, 1948, Eduarda Navera sold for the second time a portion of Lot 1460 to the same; that Lot 1460 is registered in the name of "Elena Navera, et al.", the "et. al"
Mariano Navera. The property sold is described as follows: being Eduarda Navera; that the respondents acquired the above described property by
A portion of 50 meters long, 59 meters wide, the length has a terminus consisting of inheritance from their deceased mother Elena Navera; that a portion thereof which had
stone set by the Bureau of Lands from the West and straight to the East, reaching the been adjudicated to Eduarda Navera was later sold to respondent Arsenio Nares; that
goal of a tree namely Ditadita and from, that point down the South reaching the point sometime in August, 1955, Mariano Navera, without any legal right whatsoever and
with the symbol of a Gomian tree and from Gomian for North Direction reaching under the pretense of ownership sold the said property to his brother-in-law Serapio
Anonang with a dimension of 48 meters and from Anonang tree curving to the point of Mustar, who in turn sold the same to Genaro Navera, son of Mariano. Plaintiffs,
a goal set by the Bureau of Lands and from that point at ends North direction to the last respondents herein, also claimed that all the foregoing sales were sham and
is again a stone placed by the Bureau of Lands, 12 m. This portion is taken from land manipulated transactions and that Mariano Navera knew fully well that he had no right
tax No. R-124. Title No. ___________________________ and Lot No. to sell the property. Respondents admitted however, that they sold a portion of the
_________________________. The declaration has the value of P280.00. The property containing 5,726 square meters to Perpetua Dacillo, so that the remaining
boundaries of the portion to be sold are: — North, by Igmedio Navera; on the east by portion still belongs to them. They further contended that petitioner Genaro Navera
Mariano Navera; on the south by Arsenio Nares, and on the west, by Januario Nolasco, entered the land after the sale to him by Mustar and took possession of the same and
Arsenio Nares had also same bought a portion from the whole lot. (p. 111, Records) acquired the produce thereof since 1957 up to the present time; and that respondents
On January 30, 1953, respondent Arsenio Nares sold to Perpetua Dacillo a portion of have exerted earnest efforts toward a compromise but petitioners instead challenged
Lot No. 4167 containing an area of five thousand seven hundred twenty six (5,726) them to go to court.
square meters (p. 112, Records). Perpetua Dacillo thereafter donated the said property Petitioners Genaro Navera and Emma Amador filed their answer with counterclaim,
to Francisco Dacillo. On August 13, 1955, Mariano Navera, sold to his brother-in-law, denying all the respondents' claims, and alleging inter alia: that Leocadio Navera is the
Serapio Mustar, the lot which he bought from Eduarda Navera, particularly described father of five children, namely, Elena, Mariano, Eduarda, Basilio and Felix; that after
as follows: deducting 12,415 square meters which Leocadio Navera donated to Fausto Mustar in
A certain parcel of land situated in the barrio of Tiniguiban, Caguiba Camalig, 1916, the remaining area of Lot 1460 was divided in equal shares among Elena,
Albay, Philippines, containing an area of (00-09-16) square meters more or Mariano and Eduarda, to the extent of 4,860 square meters each; that Basilio and Felix
less. Bounded on the North by Igmedio Navera. This property is declared for were given their shares in other parcels of land. Petitioners also submitted that the et.
taxation purposes under Tax No. R-124. Visible boundaries consist of mojon al.1âwphi1 appearing in the title of the property refers to Fausto Mustar-12,415 square
and other trees. Assessed at P280.00. (pp. 105-106, Records) meters, Eduarda Navera-4,860 square meters, Mariano Navera-4,860 square meters
On February 11, 1956, the foregoing deed of sale was supplemented by the following and Elena Navera-4,860 square meters; that Eduarda Navera sold 2,695 square
stipulation: meters of her share to Mariano Navera while the remaining 2,166 square meters of her
(b) As to the property under paragraph (2) thereof, the same pertains to share was sold to Arsenio Nares; that Arsenio's property totalled 7,026 sq. meters
Cadastral Lot No. 1460, containing an area of 1-99-69 square meters, more which he later sold to Perpetua Dacillo. Petitioners further contended that they are
or less, (in the said document there was clerical error of the area, as previously presently in possession of Lot 1460 and their possession tacked to that of their
stated in the total area of 00-09-16, which is hereto corrected as 1-90-71 predecessor-in-interest as early as 1916; that the complaint states no cause of action
square meters, as the total area sold). (p. 107, Records) and that if the respondents had any, the same has long prescribed.
On April 7, 1959, Serapio Mustar later sold to petitioner Genaro Navera Lot 1460 which During the pre-trial on December 14, 1973, the parties agreed on the following matters:
he bought from the latter's father, Mariano Navera, containing an area of nineteen identity of the land, the identity of the parties, that 5,726 sq. meters of the said Lot 1460
thousand nine hundred sixty nine (19,969) square meters more or less (p. 160, had already been sold to Perpetua Dacillo and; that the defendants are in possession
Records). of the land in question.
On February 28, 1978, the trial court rendered a decision, the dispositive portion of
which states:
PREMISES CONSIDERED, judgment is hereby rendered: alleged conveyance made by Serapio Mustar in favor of appellant Genaro
1. Declaring the plaintiff[s] owner[s] of the lot described in the Original Navera have no legal effect whatsoever, for the simple reason that Serapio
Certificate of Title RO-15480, except 5,726 square meters which rightfully Mustar could not properly convey the portion referred to in the sale of June
belongs to defendant Genaro Navera. 26, 1948, by Eduarda Navera in favor of Mariano Navera. In the first place,
SO ORDERED. (p. 47, Rollo) Eduarda Navera has no existing right to convey another portion of the property
Not satisfied with the decision of the trial court, the petitioner appealed to the Court of because she had already sold all her portion to appellee Arsenio Nares. Thus
Appeals. On December 16, 1980, the respondent appellate court rendered judgment at the time Eduarda Navera conveyed a portion of the property which she
affirming in toto the decision of the trial court. already conveyed to appellee Arsenio Nares, she has no right on the property
Hence, the instant petition was filed, praying for a reversal of the above-mentioned and the power to dispose it. It clearly appears, therefore, that Mariano Navera
decision, with the petitioner assigning the following errors: never acquired that portion subject of the sale on June 26, 1948. Having
1. That the Honorable Court of Appeals failed to appreciate acquisitive acquired that portion of the property subject of the sale on June 26, 1948 from
prescription in favor of defendants (now petitioners). (p. 1 0, Rollo) Mariano Navera, Serapio Mustar has likewise no existing right and power to
2. That the Honorable Lower Court failed to apply the rule of law that actual dispose of that portion of the property to appellant Genaro Navera.
knowledge is equivalent to, if not serve the purpose of registration. (p. 1 Contrary to the appellants' claim that they are possessors in good faith, Article
2, Rollo) 526 of the New Civil Code provides that a possessor in good faith is one who
3. That the Honorable Court of Appeals erred in finding defendants-appellants is not aware that there exists in his title or mode of acquisition any flaw which
(now petitioners) to be in bad faith instead of the plaintiff-appellees (now invalidates it and a possessor in bad faith is one who possesses in any case
private respondents). (p. 13, Rollo) contrary to the foregoing. And our Supreme Court said "every possessor in
In their first assigned error, petitioners-spouses Genaro Navera and Emma Amador good faith becomes a possessor in bad faith from the moment he becomes
allege that the evidence on record, particularly Exhibit 12 and 12-A, clearly show their aware that what he believed to be true is not so." His possession is legally
possession of the disputed property, the whole of Lot 1460, for more than forty-six (46) interrupted when he is summoned to trial according to Article 1123 of the New
years which is tantamount to their ownership of the same by prescription, be it ordinary Civil Code. Tacas v. Tabon, 53 Phil. 356)" (pp. 25-26, Rollo).
or extraordinary prescription; that respondents Arsenio Nares and Felix Nares should We agree with the aforequoted findings and conclusions of the lower court which were
not have been declared owners of Lot 1460 since they have lost whatever rights they affirmed on appeal by the Court of Appeals. The conclusions and findings of facts by
have on the land due to the possession thereof by petitioners; and that the sale by the trial court are entitled to great weight and will not be disturbed on appeal unless for
Eduarda Navera of her property to Arsenio Nares was not recorded or annotated in the strong and cogent reasons because the trial court is in a better position to examine real
title just like the sale by Eduardo Navera of the same lot to Mariano Navera. evidence as well as to observe the demeanor of witnesses while testifying on the ease.
As found by the trial court and respondent appellate court, the property in dispute, (Macua vs. Intermediate Appellate Court, No. L-70810, October 26, 1987, 155 SCRA
namely, the whole of Lot 1460 is titled in the name of "Elena Navera, et al.", the phrase 29).
et. al." referring only to Eduarda, sister of Elena since the other brothers of Elena and Clearly applicable herein is Article 1544 of the Civil Code which provides:
Eduarda namely, Mariano, Basilio and Felix had received their shares from the other If the same thing should have been sold to different vendees, the ownership
properties of their father Leocadio Navera. These factual findings are conclusive upon shall be transferred to the person who may have first taken possession thereof
Us. Thus, when Elena Navera died sometime in 1924, her compulsory heirs including in good faith, if it should be movable property.
respondents Arsenio Nares and Felix Nares acquired Elena's shares in Lot 1460 by Should it be immovable property, the ownership shall belong to the person
inheritance, which is one-half of Lot 1460. As to the other half of Lot 1460 owned by acquiring it who in good faith first recorded it in the Registry of Property.
Eduarda Navera, the latter sold the same to two vendees, one in favor of respondent Should there be no inscription, the ownership shall pertain to the person who
Arsenio Nares and the other in favor of Mariano Navera, petitioner's predecessor-in- in good faith was first in the possession; and, in the absence thereof, to the
interest. person who presents the oldest title, provided there is good faith.(Emphasis
On this matter of double sale, the appellate court upheld the findings of the trial court, Ours)
as follows, to wit: In the instant case, the first sale of Eduarda Navera's share in the said lot to Arsenio
"As correctly noted by the trial court, all the transfers or conveyances are not Nares was made in a public instrument on May 14, 1947. The second sale of the same
inscribed in the Original Certificate of Title No. RO-15480(NA) ("Exhibit A"). It property was executed also in a public instrument in favor of Mariano Navera, who is
would not be amiss to state that the sa[l]e of Eduarda Navera to Arsenio the predecessor in interest of petitioner Genaro Navera, on June 26, 1948, or more
Nares, and the sale of Eduarda Navera to Mariano Navera, which as above- than a year after the first sale. Since the records show that both sales were not recorded
mentioned, the property referred to in both sales is the very same property in the Registry of Property, the law clearly vests the ownership upon the person who in
covered by reconstituted title — Exhibit A. The sale of Eduarda Navera to good faith was first in possession of the disputed lot.
appellee Arsenio Nares covered all her portion to the property, thus, she could The possession mentioned in Article 1544 for determining who has better right when
not possibly sell on June 26, 1948, another portion of the same property to the same piece of land has been sold several times by the same vendor includes not
Mariano Navera. Thus, the portion referred to in the sale to Mariano Navera only the material but also the symbolic possession, which is acquired by the execution
by Eduarda Navera may not be validly transferred by Mariano Navera to of a public instrument. This means that after the sale of a realty by means of a public
Serapio Mustar. It likewise follow that Serapio Mustar may not effectively instrument, the vendor, who resells it to another, does not transmit anything to the
convey the same to Genaro Navera . . . It is irremissible to state that the second vendee, and if the latter, by virtue of this second sale, takes material possession
of the thing, he does it as mere detainer, and it would be unjust to protect this detention of the land. It was only in the year 1966 when petitioner Genaro Navera started to
against the rights of the thing lawfully acquired by the first vendee (Quimson vs. Rosete, declare himself owner of the land for taxation purposes (p. 126, Records).
87 Phil. 159; Sanchez vs. Ramos, 40 Phil. 614; Florendo vs. Foz, 20 Phil. 388). In the In their second assignment of error, petitioners contend that private respondents are
case at bar, the prior sale of the land to respondent Arsenio Nares by means of a public bound by their knowledge of the previous donation propter nuptias by their ancestor,
instrument is clearly tantamount to a delivery of the land resulting in the material and Leocadio Navera in favor of Fausto Mustar. This contention has no merit. The
symbolic possession thereof by the latter. Verily, factual evidence points to the prior respondent appellate court affirmed the findings of the lower court on this matter, as
actual possession by respondent Nares before he was evicted from the land by follows, to wit:
petitioners and their predecessors in 1957 when the latter entered the disputed After a careful perusal and thorough review of the whole evidence on record,
property. No other evidence exists on record to show the contrary. we cannot find any basis therein for upholding the claim of appellants,
Based on the foregoing, it is correct to conclude that the priority of possession stands articulated in their appellants' brief. It is apropos to state that the
good in favor of respondents. It is well-settled in our jurisprudence that prior est in donation propter nuptias made by Leocadio Navera sometime in October,
tempore, potior est in jure (he who is first in time is preferred in right). Ownership should 1916, should have been at least recorded in the registry of property or
therefore be recognized in favor of the first vendee, respondent Arsenio Nares. inscribed in the Original Certificate of Title or the donee shall have titled the
Petitioners further submit that they have been in possession of the whole lot for more property in his name. As the trial court correctly noted that the alleged donee
than 46 years, that this can be gleaned from the letter sent by respondent Nares, Fausto Mustar is not a party to the case nor had he transferred the said
wherein the latter admitted that it was the petitioner Navera who continuously gathered donated property to the spouses Mariano Navera in a public instrument or
the produce of the land for 46 years; that such possession for a considerable length of conveyance. Nowhere in the evidence on record would show that the said
time entitled them to ownership by prescription whether ordinary or extraordinary. donated property was ever transferred to Mariano Navera, father of
This contention is devoid of merit. Prescription as a defense, must be expressly relied defendant-appellant Genaro Navera." (p. 24, Rollo)
upon in the pleadings. It cannot be availed of, unless it is specially pleaded in the No important reasons exist to compel Us to ignore the findings of the respondent
answer; and it must be proved or established with the same degree of certainty as any appellate court. Besides, the knowledge of private respondents concerning the alleged
essential allegation in the civil action (Hodges vs. Salas, 63 Phil. 567; Corporacion de previous donation is immaterial. The facts are clear that the original certificate of title
PP. Autinus Recolectos vs. Crisostomo, 32 Phil. 427). In the instant case, petitioners, itself covers the whole of 26,995 square meters of the disputed Lot 1460 in the name
who were the defendants in the lower court, did not claim acquisitive prescription in of "Elena Navera, et al.", without any mention of any previous donation of a portion of
their answer, and even if they did, it cannot be given judicial sanction on mere the said lot to the alleged donee.
allegations. The law requires one who asserts ownership by adverse possession to Petitioners' third assigned error was already treated and resolved in the foregoing
prove the presence of the essential elements of acquisitive prescription (Morales vs. discussions.
CFI, et al., No. L- 52278, May 29, 1980, 97 SCRA 872). ACCORDINGLY, the petition is DENIED but the decision of the Court of Appeals dated
After a careful examination of the records, We are of the opinion that there is lack of December 16, 1980 is hereby MODIFIED to the effect that as against the petitioners
sufficient proof to establish clearly and positively petitioner's claim of acquisitive Genaro Navera and Emma Amador, the respondents Arsenio Nares and Felix Nares
prescription. In fact, We are more inclined to believe respondents' version that are declared the rightful owners of the disputed Lot 1460, except with respect to 5,726
respondent Arsenio Nares was evicted from the property by petitioner sometime in square meters thereof which belongs to petitioner Genaro Navera, without prejudice
1957, thereby showing the latter's bad faith in acquiring the possession of the property however, to whatever rights and interests that the other compulsory heirs of Elena
until 1971 when the action against petitioner was filed. Thus, the ordinary acquisitive Navera may have in the one-half portion of Lot 1460. The respective rights of
prescription of ten years cannot be considered in favor of petitioner in the absence of respondents to Lot 1460 as between themselves is a matter outside of this controversy
good faith. Neither is the petitioner entitled to extraordinary acquisitive prescription, in and is therefore, beyond the jurisdiction of this Court to pass upon.
the absence of sufficient proof of compliance with the thirty-year requirement of SO ORDERED.
possession in case of bad faith. Narvasa, Cruz, Gancayco and Griño- Aquino, JJ., concur.
Moreover, the law clearly states that "possession has to be in the concept of an owner,
public, peaceful and uninterrupted" (Article 1118, Civil Code). The actuations of
petitioners, however, show the contrary. A reading of the demand letter from
respondents dated May 27, 1970, submitted in evidence by petitioners, shows that the
dispute over Lot 1460 had been going on for a number of years among petitioners,
respondents and their families. This goes to show that during the time when the
petitioners bought the land in 1959 and the following years thereafter when the latter
possessed the property, they have known or should have known of the rights and
interests of their cousins, respondents herein, over the disputed land. Moreover, the
tax declarations for the years 1951 and 1965 showed that the respondents Arsenio
Nares and Felix Nares were the declared owners (p. 34 and 113, Records). In other
words, petitioner's predecessors in interest, namely, Mariano Navera and the
subsequent purchasers of the lot, had not bothered to declare the land in their own
names for purposes of taxation during the time that they were allegedly in possession
FIRST DIVISION register the Deed of Absolute Sale because he said he was advised in the Office of the
[G.R. No. 92310. September 3, 1992.] Register of Deeds of Pasig of the existence of notices of lis pendens on the
AGRICULTURAL AND HOME EXTENSION DEVELOPMENT GROUP, represented title.chanrobles law library
by Nicasio D. Sanchez, Sr., substituted by Milagros S. Bucu, Petitioner, v. COURT On November 20, 1972, Gundran and the herein petitioner, Agricultural and Home
OF APPEALS, and LIBRADO CABAUTAN, Respondents. Development Group, entered into a Joint Venture Agreement for the improvement and
Gideon C. Bondoc for Petitioner. subdivision of the land. This agreement was also not annotated on the title.
Balgos & Perez for Private Respondent. On August 30, 1976, the spouses Andres Diaz and Josefa Mia again entered into
another contract of sale of the same property with Librado Cabautan, the herein
1. CIVIL LAW; SPECIAL CONTRACTS; SALE; RULE IN CASE OF DOUBLE SALE; private Respondent.
APPLICATION IN CASE AT BAR. — Under Article 1544 of the Civil Code of the On September 3, 1976, by virtue of an order of the Court of First Instance of Rizal, a
Philippines: Art. 1544. If the same thing should have been sold to different vendees, new owner’s copy of the certificate of title was issued to the Diaz spouses, who had
the ownership shall be transferred to the person who may have first taken possession alleged the loss of their copy. On that same date, the notices of lis pendens annotated
thereof in good faith, if it should be movable property. Should it be immovable property, on TCT No. 287416 were canceled and the Deed of Sale in favor of private respondent
the ownership shall belong to the person acquiring it who in good faith first recorded it Cabautan was recorded. A new TCT No. S-33850/T-172 was thereupon issued in his
in the Registry of Property. Should there be no inscription, the ownership shall pertain name in lieu of the canceled TCT No. 287416.
to the person who in good faith was first in the possession; and, in the absence thereof, On March 14, 1977, Gundran instituted an action for reconveyance before the Court of
to the person who presents the oldest title, provided there is good faith. It is not disputed First Instance of Pasay City * against Librado Cabautan and Josefa Mia seeking,
that the first sale to Gundran was not registered while the second sale to Cabautan was among others, the cancellation of TCT No. 33850/T-172 and the issuance of a new
registered. Following the above-quoted provision, the courts below were justified in certificate of title in his name.
according preferential rights to the private respondent, who had registered the sale in On August 31, 1977, the petitioner, represented by Nicasio D. Sanchez, Sr., filed a
his favor, as against the petitioner’s co-venturer whose right to the same property had complaint in intervention with substantially the same allegations and prayers as that in
not been recorded. Gundran’s complaint.
2. ID.; ID.; ID.; PURCHASER IN GOOD FAITH; DEFINED. — A purchaser in good faith In a decision dated January 12, 1987, 1 Gundran’s complaint and petitioner’s complaint
is defined as "one who buys the property of another without notice that some other in intervention were dismissed for lack of merit. So was the private respondent’s
person has a right to or interest in such property and pays a full and fair price for the counterclaims, for insufficiency of evidence.
same at the time of such purchase or before he has notice of the claim or interest of Upon appeal, this decision was affirmed by the respondent Court of Appeals, with the
some other person in the property."cralaw virtua1aw library modification that Josefa Mia was ordered to pay Gundran the sum of P90,000.00, with
3. ID.; ID.; ID.; ID.; SALE OF PROPERTY REGISTERED UNDER THE TORRENS legal interest from September 3, 1976, plus the costs of suit. 2
SYSTEM; EFFECT OF NOTICE OF LIS PENDENS ANNOTATED ON THE Under Article 1544 of the Civil Code of the Philippines:
CERTIFICATE. — The petitioner claims, however, that Cabautan was a purchaser in Art. 1544. If the same thing should have been sold to different vendees, the ownership
bad faith because he was fully aware of the notices of lis pendens at the back of TCT shall be transferred to the person who may have first taken possession thereof in good
No. 287416 and of the earlier sale of the land to Gundran. An examination of TCT No. faith, if it should be movable property.chanrobles virtual lawlibrary
287416 discloses no annotation of any sale, lien, encumbrance or adverse claim in Should it be immovable property, the ownership shall belong to the person acquiring it
favor of Gundran or the petitioner. Well-settled is the rule that when the property sold who in good faith first recorded it in the Registry of Property.
is registered under the Torrens system, registration is the operative act to convey or Should there be no inscription, the ownership shall pertain to the person who in good
affect the land insofar as third persons are concerned. Thus, a person dealing with faith was first in the possession; and, in the absence thereof, to the person who
registered land is only charged with notice of the burdens on the property which are presents the oldest title, provided there is good faith.
noted on the register or certificate of title. While it is true that notices of lis pendens in It is not disputed that the first sale to Gundran was not registered while the second sale
favor of other persons were earlier inscribed on the title, these did not have the effect to Cabautan was registered.
of establishing a lien or encumbrance on the property affected. Their only purpose was Following the above-quoted provision, the courts below were justified in according
to give notice to third persons and to the whole world that any interest they might preferential rights to the private respondent, who had registered the sale in his favor,
acquire in the property pending litigation would be subject to the result of the suit. as against the petitioner’s co-venturer whose right to the same property had not been
recorded.
DECISION The petitioner claims, however, that Cabautan was a purchaser in bad faith because
CRUZ, J.: he was fully aware of the notices of lis pendens at the back of TCT No. 287416 and of
We are asked again to determine who as between two successive purchasers of the the earlier sale of the land to Gundran.chanrobles virtual lawlibrary
same land should be recognized as its owner. The answer is simple enough. But we A purchaser in good faith is defined as "one who buys the property of another without
must first, as usual, plow through some alleged complications. notice that some other person has a right to or interest in such property and pays a full
The pertinent background facts are as follows: and fair price for the same at the time of such purchase or before he has notice of the
On March 29, 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno Gundran claim or interest of some other person in the property." 3
a 19-hectare parcel of land in Las Piñas, Rizal, covered by TCT No. 287416. The An examination of TCT No. 287416 discloses no annotation of any sale, lien,
owner’s duplicate copy of the title was turned over to Gundran. However, he did not encumbrance or adverse claim in favor of Gundran or the petitioner. Well-settled is the
rule that when the property sold is registered under the Torrens system, registration is WHEREFORE, the petition is DENIED and the questioned decision AFFIRMED in toto,
the operative act to convey or affect the land insofar as third persons are concerned. 4 with costs against the petitioner.
Thus, a person dealing with registered land is only charged with notice of the burdens SO ORDERED.
on the property which are noted on the register or certificate of title. 5 Griño-Aquino, Medialdea and Bellosillo, JJ., concur.
While it is true that notices of lis pendens in favor of other persons were earlier inscribed
on the title, these did not have the effect of establishing a lien or encumbrance on the
property affected. Their only purpose was to give notice to third persons and to the
whole world that any interest they might acquire in the property pending litigation would
be subject to the result of the suit.
Cabautan took this risk. Significantly, three days after the execution of the deed of sale
in his favor, the notices of lis pendens were canceled by virtue of the orders of the Court
of First Instance of Rizal, Branch 23, dated April 1, 1974, and April 4, 1974. Cabautan
therefore acquired the land free of any liens or encumbrances and so could claim to be
a purchaser in good faith and for value.
The petitioner insists that it was already in possession of the disputed property when
Cabautan purchased it and that he could not have not known of that possession. Such
knowledge should belie his claim that he was an innocent purchaser for value.
However, the courts below found no evidence of the alleged possession, which we
must also reject in deference to this factual finding.chanrobles virtual lawlibrary
The petitioner’s reliance on Casis v. Court of Appeals 6 is misplaced.
The issue at bar is whether private respondent Cabautan is an innocent purchaser for
value and so entitled to the priority granted under Article 1544 of the Civil Code. The
Casis case, on the other hand, involved the issues of whether or not: 1) certiorari was
the proper remedy of the petitioner: 2) the previous petition for certiorari which
originated from the quieting of title case was similar to and, hence, a bar to the petition
for certiorari arising from the forcible entry case; and 3) the court a quo committed grave
abuse of discretion amounting to lack or excess of jurisdiction in issuing the order which
dissolved the restraining order issued in connection with the ejectment case. The Court
was not called upon in that case to determine who as between the two purchasers of
the subject property should be preferred.
The petitioner invokes the ruling of the lower court in that case to the effect that the
registration of the sale in favor of the second purchaser and the issuance of a new
certificate of title in his favor did not in any manner vest in him any right of possession
and ownership over the subject property because the seller, by reason of their prior
sale, had already lost whatever right or interest she might have had in the property at
the time the second sale was made.
This excerpt was included in the ponencia only as part of the narration of the
background facts and was not thereby adopted as a doctrine of the Court. It was
considered only for the purpose of ascertaining if the court below had determined the
issue of the possession of the subject property pending resolution of the question of
ownership. Obviously, the Court could not have adopted that questionable ruling as it
would clearly militate against the provision of Article 1544.chanrobles.com:cralaw:red
Worthy of note at this juncture is the observation of Justice Edgardo L. Paras, to wit:
True, no one can sell what he does not own, but this is merely the general rule. Is Art.
1544 then an exception to the general rule? In a sense, yes, by reason of public
convenience (See Aitken v. Lao, 36 Phil. 510); in still another sense, it really reiterates
the general rule in that insofar as innocent third persons are concerned, the registered
owner (in the case of real property) is still the owner, with power of disposition. 7
The language of Article 1544 is clear and unequivocal. In light of its mandate and of the
facts established in this case, we hold that ownership must be recognized in the private
respondent, who bought the property in good faith and, as an innocent purchaser for
value, duly and promptly registered the sale in his favor.
SECOND DIVISION to the whole world.—This is an instance of a double sale of an immovable property
G.R. No. 109410 August 28, 1996 hence, the ownership shall vest in the person acquiring it who in good faith first
CLARA M. BALATBAT, petitioner, vs. COURT OF APPEALS and Spouses JOSE recorded it in the Registry of Property. Evidently, private respondents Repuyans
REPUYAN and AURORA REPUYAN, respondents. caused the annotation of an adverse claim on the title of the subject property
Civil Law; Sales; The failure of the buyer to make good the price does not, in denominated as Entry No. 5627/T135671 on July 21, 1980. The annotation of the
law, cause the ownership to revest to the seller unless the bilateral contract of sale is adverse claim on TCT No. 135671 in the Registry of Property is sufficient compliance
first rescinded or resolved pursuant to Article 1191 of the New Civil Code.—Devoid of as mandated by law and serves notice to the whole world.
any stipulation that “ownership in the thing shall not pass to the purchaser until he has Same; Same; Same; As between two purchasers, the one who has registered
fully paid the price,” ownership in the thing shall pass from the vendor to the vendee the sale in his favor, has a preferred right over the other who has not registered his title
upon actual or constructive delivery of the thing “sold even if the purchase price has even if the latter is in actual possession of the immovable property.—As between two
not yet been fully paid. The failure of the buyer to make good the price does not, in law, purchasers, the one who has registered the sale in his favor, has a preferred right over
cause the ownership to revest to the seller unless the bilateral contract of sale is first the other who has not registered his title even if the latter is in actual possession of the
rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment immovable property. Further, even in default of the first registrant or first in possession,
only creates a right to demand the fulfillment of the obligation or to rescind the contract. private respondents have presented the oldest title. Thus, private respondents who
Same; Same; When the sale is made through a public instrument, the execution acquired the subject property in good faith and for valuable consideration established
thereof shall be equivalent to the delivery of the thing which is the object of the contract, a superior right as against the petitioner.
if from the deed the contrary does not appear or cannot be inferred.—With respect to Same; Same; Same; A purchaser of a valued piece of property cannot just close
the nondelivery of the possession of the subject property to the private respondent, his eyes to facts which should put a reasonable man upon his guard and then claim
suffice it to say that ownership of the thing sold is acquired only from the time of delivery that he acted in good faith and under the belief that there was no defect in the title of
thereof, either actual or constructive. Article 1498 of the Civil Code provides that—when the vendor.—It is incumbent upon the vendee of the property to ask for the delivery of
the sale is made through a public instrument, the execution thereof shall be equivalent the owner’s duplicate copy of the title from the vendor. A purchaser of a valued piece
to the delivery of the thing which is the object of the contract, if from the deed the of property cannot just close his eyes to facts which should put a reasonable man upon
contrary does not appear or cannot be inferred. The execution of the public instrument, his guard and then claim that he acted in good faith and under the belief that there were
without actual delivery of the thing, transfers the ownership from the vendor to the no defect in the title of the vendor. One who purchases real estate with knowledge of a
vendee, who may thereafter exercise the rights of an owner over the same. defect or lack of title in his vendor cannot claim that he has acquired title thereto in good
Same; Same; The provision of Article 1358 on the necessity of a public document faith as against the true owner of the land or of an interest therein; and the same rule
is only for convenience, not for validity or enforceability.—In the instant case, vendor must be applied to one who has knowledge of facts which should have put him upon
Roque delivered the owner’s certificate of title to herein private respondent. It is not such inquiry and investigation as might be necessary to acquaint him with the defects
necessary that vendee be physically present at every square inch of the land bought in the title of his vendor. Good faith, or the want of it is not a visible, tangible fact that
by him, possession of the public instrument of the land is sufficient to accord him the can be seen or touched, but rather a state or condition of mind which can only be judged
rights of ownership. Thus, delivery of a parcel of land may be done by placing the of by actual or fancied tokens or signs.
vendee in control and possession of the land (real) or by embodying the sale in a public
instrument (constructive). The provision of Article 1358 on the necessity of a public
document is only for convenience, not for validity or enforceability. It is not a TORRES, JR. , J.:p
requirement for the validity of a contract of sale of a parcel of land that this be embodied Petitioner Clara M. Balatbat instituted this petition for review pursuant to Rule 45 of the
in a public instrument. Revised Rules of Court seeking to set aside the decision dated August 12, 1992 of the
Same; Same; A contract of sale being consensual, it is perfected by the mere respondent Court of Appeals in CA-GR. CV No. 29994 entitled "Alexandra Balatbat and
consent of the parties.—A contract of sale being consensual, it is perfected by the mere Clara Balatbat, plaintiffs-appellants versus Jose Repuyan and Aurora Repuyan,
consent of the parties. Delivery of “the thing bought or payment of the price is not defendants-appellees", the dispositive portion of which reads: 1
necessary for the perfection of the contract; and failure of the vendee to pay the price WHEREFORE, the judgment appealed from is affirmed with the modification
after the execution of the contract does not make the sale null and void for lack of that the awards of P10,000.00 for attorney's fees and P5,000.00 as costs of
consideration but results at most in default on the part of the vendee, for which the litigation are deleted.
vendor may exercise his legal remedies. SO ORDERED.
Same; Same; Double Sales; Persons to whom ownership of an immovable The records show the following factual antecedents:
property shall be transferred in case of double sale.—Article 1544 of the Civil Code It appears that on June 15, 1977, Aurelio A. Roque filed a complaint for partition
provides that in case of double sale of an immovable property, ownership shall be docketed as Civil Case No. 109032 against Corazon Roque, Alberto de los Santos,
transferred (1) to the person acquiring it who in good faith first recorded it in the Registry Feliciano Roque, Severa Roque and Osmundo Roque before the then Court of First
of Property; (2) in default thereof, to the person who in good faith was first in Instance of Manila, Branch IX. 2 Defendants therein were declared in default and
possession; and (3) in default thereof, to the person who presents the oldest title, plaintiff presented evidence ex-parte. On March 29, 1979, the trial court rendered a
provided there is good faith. decision in favor of plaintiff Aurelio A. Roque, the pertinent portion of which reads: 3
Same; Same; Same; The annotation of the adverse claim on TCT No. 135671 in From the evidence, it has been clearly established that the lot in question
the Registry of Property is sufficient compliance as mandated by law and serves notice covered by Transfer Certificate of Title No. 51330 was acquired by plaintiff
Aurelio Rogue and Maria Mesina during their conjugal union and the house On August 20, 1980, Aurelio A. Roque filed a complaint for "Rescission of Contract"
constructed thereon was likewise built during their marital union. Out of their docketed as Civil Case No. 134131 against spouses Aurora Tuazon-Repuyan and Jose
union, plaintiff and Maria Mesina had four children, who are the defendants in Repuyan before Branch IV of the then Court of First Instance of Manila. The complaint
this case. When Maria Mesina died on August 28, 1966, the only conjugal is grounded on spouses Repuyan's failure to pay the balance of P45,000.00 of the
properties left are the house and lot above stated of which plaintiff herein, as purchase price. 9 On September 5, 1980, spouses Repuyan filed their answer with
the legal spouse, is entitled to one-half share pro-indiviso thereof. With counterclaim. 10
respect to the one-half share pro-indiviso now forming the estate of Maria In the meantime, the trial court issued an order in Civil Case No. 109032 (Partition case)
Mesina, plaintiff and the four children, the defendants here, are each entitled dated February 2, 1982, to wit: 11
to one-fifth (1/5) share pro-indiviso. The deceased wife left no debt. In view of all the foregoing and finding that the amount of
Wherefore, judgment is hereby rendered ordering the partition of the P100,000.00 as purchase price for the sale of the parcel of land
properties, subject matter of this case consisting of the house and lot, in the covered by TCT No. 51330 of the Registry of Deeds of Manila
following manner: consisting of 84 square meters situated in Callejon Sulu, District of
1. Of the house and lot forming the conjugal properties, plaintiff is entitled to Santa Cruz, Manila, to be reasonable and fair, and considering the
one-half share pro-indiviso thereof while the other half forms the estate of the opportunities given defendants to sign the deed of absolute sale
deceased Maria Mesina; voluntarily, the Court has no alternative but to order, as it hereby
2. Of the Estate of deceased Maria Mesina, the same is to be divided into five orders, the Deputy Clerk of this Court to sign the deed of absolute
(5) shares and plaintiff and his four children are entitled each to one-fifth share sale for and in behalf of defendants pursuant to Sec. 10, Rule 39 of
thereof pro-indiviso. the Rules of Court, in order to effect the partition of the property
Plaintiff claim for moral, exemplary and actual damages and attorney's fees involved in this case.
not having been established to the satisfaction of the Court, the same is SO ORDERED.
hereby denied. A deed of absolute sale was executed on February 4, 1982 between Aurelio
Without pronouncement as to costs. S. Roque, Corazon Roque, Feliciano Roque, Severa Roque and Osmundo
SO ORDERED Roque and Clara Balatbat, married to Alejandro Balatbat. 12On April 14, 1982,
On June 2, 1979, the decision became final and executory. The corresponding entry of Clara Balatbat filed a motion for the issuance of a writ of possession which
judgment was made on March 29, 1979. 4 was granted by the trial court on September 14, 1982 "subject, however, to
On October 5, 1979, the Register of Deeds of Manila issued a Transfer Certificate of valid rights and interest of third persons over the same portion thereof, other
Title No. 135671 in the name of the following persons in the following proportions: 5 than vendor or any other person or persons privy to or claiming any rights or
Aurelio A. Roque 6/10 share interests under it." The corresponding writ of possession was issued on
Severina M. Roque 1/10 share September 20, 1982. 13
Osmundo M. Roque 1/10 share On May 20, 1982, petitioner Clara Balatbat filed a motion to intervene in Civil Case No.
Feliciano M. Roque 1/10 share 134131 14 which was granted as per court's resolution of October 21, 1982. 15 However,
Corazon M. Roque 1/10 share Clara Balatbat failed to file her complaint in intervention. 16 On April 15, 1986, the trial
On April 1, 1980, Aurelio A. Rogue sold his 6/10 share in T.C.T. No. 135671 to spouses court rendered a decision dismissing the complaint, the pertinent portion of which
Aurora Tuazon-Repuyan and Jose Repuyan as evidenced by ."Deed of Absolute reads: 17
Sale." 6 The rescission of contracts are provided for in the laws and nowhere in the
On July 21, 1980, Aurora Tuazon Repuyan caused the annotation of her affidavit of provision of the Civil Code under the title Rescissible Contracts does the
adverse claim 7 on the Transfer Certificate of Title No. 135671, 8 to wit: circumstances in the case at bar appear to have occurred, hence, the prayer
Entry No. 5627/T-135671 — NOTICE OF ADVERSE CLAIM — for rescission is outside the ambit for which rescissible [sic] could be granted.
Filed by Aurora Tuazon Repuyan, married, claiming among others The Intervenor — Plaintiff, Clara Balatbat, although allowed to intervene, did
that she bought 6/10 portion of the property herein described from not file her complaint in intervention.
Aurelio Roque for the amount of P50,000.00 with a down payment Consequently, the plaintiff having failed to prove with sufficient preponderance
of P5,000.00 and the balance of P45,000.00 to be paid after the his action, the relief prayed for had to be denied. The contract of sale
partition and subdivision of the property herein described, other denominated as "Deed of Absolute Sale" (Exh. 7 and sub-markings) being
claims set forth in Doc. No. 954, page 18, Book 94 of valid and enforceable, the same pursuant to the provisions of Art. 1159 of the
________________ 64 _______ PEDRO DE CASTRO, Notary Civil Code which says:
Public of Manila. Obligations arising from contracts have the force of law between the
Date of instrument — July 21, 1980 contracting parties and should be complied with in good faith.
Date of inscription — July 21, 1980 at 3:35 p.m. has the effect of being the law between the parties and should be complied
with.pThe obligation of the plaintiff under the contract being to have the land
covered
u by TCT No. 135671 partitioned and subdivided, and title issued in the
namet of the defendant buyer (see page 2 par. C of Exh. 7-A) plaintiff had to
comply
y thereto to give effect to the contract.
WHEREFORE, judgment is rendered against the plaintiff, Aurelio A. Roque, III
and the plaintiff in intervention, Clara Balatbat, and in favor of the defendants, WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD FAITH AND
dismissing the complaint for lack of merit, and declaring the Deed of Absolute FOR VALUE?
Sale dated April 1, 1980 as valid and enforceable and the plaintiff is, as he is IV
hereby ordered, to partition and subdivide the land covered by T.C.T. No. WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING
135671, and to aggregate therefrom a portion equivalent to 6/10 thereof, and WEIGHT AND CONSIDERATION TO THE EVIDENCE OF THE PRIVATE
cause the same to be titled in the name of the defendants, and after which, RESPONDENTS WHICH WERE NOT OFFERED?
the defendants, and after which, the defendants, and after which, the Petitioner asseverates that the respondent Court of Appeals committed grave abuse of
defendants, and after which, the defendants to pay the plaintiff the sum of discretion tantamount to lack or excess of jurisdiction in affirming the appealed
P45,000.00. Considering further that the defendants suffered damages since judgment considering (1) that the alleged sale in favor of the private respondents
they were forced to litigate unnecessarily, by way of their counterclaim, plaintiff Repuyan was merely executory; (2) that there is no double sale; (3) that petitioner is a
is hereby ordered to pay defendants the sum of P15,000.00 as moral buyer in good faith and for value; and (4) that private respondents did not offer their
damages, attorney's fees in the amount of P5,000.00. evidence during the trial.
Costs against plaintiff. Contrary to petitioner's contention that the sale dated April 1, 1980 in favor of private
SO ORDERED. respondents Repuyan was merely executory for the reason that there was no delivery
On March 3, 1987, petitioner Balatbat filed a notice of lis pendens in Civil Case No. of the subject property and that consideration/price was not fully paid, we find the sale
109032 before the Register of Deeds of Manila. 18 as consummated, hence, valid and enforceable. In a decision dated April 15, 1986 of
On December 9, 1988, petitioner Clara Balatbat and her husband, Alejandro Balatbat the Regional Trial Court of Manila Branch IV in Civil Case No. 134131, the Court
filed the instant complaint for delivery of the owners duplicate copy of T.C.T. No. dismissed vendor's Aurelio Roque complaint for rescission of the deed of sale and
135671 docketed as Civil Case No. 88-47176 before Branch 24 of the Regional Trial declared that the Sale dated April 1, 1980, as valid and enforceable. No appeal having
Court of Manila against private respondents Jose Repuyan and Aurora Repuyan. 19 been made, the decision became final and executory. It must be noted that herein
On January 27, 1989, private respondents filed their answer with affirmative defenses petitioner Balatbat filed a motion for intervention in that case but did not file her
and compulsory counterclaim. 20 complaint in intervention. In that case wherein Aurelio Roque sought to rescind the April
On November 13, 1989, private respondents filed their memorandum 21 while 1, 1980 deed of sale in favor of the private respondents for non-payment of the
petitioners filed their memorandum on November 23, 1989. 22 P45,000.00 balance, the trial court dismissed the complaint for rescission. Examining
On August 2, 1990, the Regional Trial Court of Manila, Branch 24, rendered a decision the terms and conditions of the "Deed of Sale" dated April 1, 1980, the P45,000.00
dismissing the complaint, the dispositive portion of which reads : 23 balance is payable only "after the property covered by T.C.T. No. 135671 has been
Considering all the foregoing, this Court finds that the plaintiffs have not been partitioned and subdivided, and title issued in the name of the BUYER" hence, vendor
able to establish their cause of action against the defendants and have no Roque cannot demand payment of the balance unless and until the property has been
right to the reliefs demanded in the complaint and the complaint of the plaintiff subdivided and titled in the name of private respondents. Devoid of any stipulation that
against the defendants is hereby DISMISSED. On the counterclaim, the "ownership in the thing shall not pass to the purchaser until he has fully paid the
plaintiff are ordered to pay defendants the amount of Ten Thousand Pesos by price" 26, ownership in thing shall pass from the vendor to the vendee upon actual or
way of attorney's fees, Five Thousand Pesos as costs of litigation and further constructive delivery of the thing sold even if the purchase price has not yet been fully
to pay the costs of the suit. paid. The failure of the buyer has not yet been fully paid. The failure of the buyer to
SO ORDERED. make good the price does not, in law, cause the ownership to revest to the seller unless
Dissatisfied, petitioner Balatbat filed an appeal before the respondent Court of Appeals the bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the
which rendered the assailed decision on August 12, 1992, to wit: 24 New Civil Code. 27 Non-payment only creates a right to demand the fulfillment of the
WHEREFORE, the judgment appealed from is affirmed with the modification obligation or to rescind the contract.
that the awards of P10,000.00 for attorney's fees and P5,000.00 as costs of With respect to the non-delivery of the possession of the subject property to the private
litigation are deleted. respondent, suffice it to say that ownership of the thing sold is acquired only from the
SO ORDERED. time of delivery thereof, either actual or constructive. 28Article 1498 of the Civil Code
On March 22, 1993, the respondent Court of Appeals denied petitioner's motion for provides that — when the sale is made through a public instrument, the execution
reconsideration. 25 thereof shall be equivalent to the delivery of the thing which is the object of the contract,
Hence, this petition for review. if from the deed the contrary does not appear or cannot be inferred. 29 The execution
Petitioner raised the following issues for this Court's resolution: of the public instrument, without actual delivery of the thing, transfers the ownership
I from the vendor to the vendee, who may thereafter exercise the rights of an owner over
WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE the same. 30 In the instant case, vendor Roque delivered the owner's certificate of title
RESPONDENTS WAS MERELY EXECUTORY AND NOT A to herein private respondent. It is not necessary that vendee be physically present at
CONSUMMATED TRANSACTION? every square inch of the land bought by him, possession of the public instrument of the
II land is sufficient to accord him the rights of ownership. Thus, delivery of a parcel of land
WHETHER OR NOT THERE WAS A DOUBLE SALE AS CONTEMPLATED may be done by placing the vendee in control and possession of the land (real) or by
UNDER ART. 1544 OF THE CIVIL CODE? embodying the sale in a public instrument (constructive). The provision of Article 1358
on the necessity of a public document is only for convenience, not for validity or hence, the decision was rendered adversely against her. If petitioner did investigate
enforceability. It is not a requirement for the validity of a contract of sale of a parcel of before buying the land on February 4, 1982, she should have known that there was a
land that this be embodied in a public instrument. 31 pending case and an annotation of adverse claim was made in the title of the property
A contract of sale being consensual, it is perfected by the mere consent of the before the Register of Deeds and she could have discovered that the subject property
parties. 32 Delivery of the thing bought or payment of the price is not necessary for the was already sold to the private respondents. It is incumbent upon the vendee of the
perfection of the contract; and failure of the vendee to pay the price after the execution property to ask for the delivery of the owner's duplicate copy of the title from the vendor.
of the contract does not make the sale null and void for lack of consideration but results A purchaser of a valued piece of property cannot just close his eyes to facts which
at most in default on the part of the vendee, for which the vendor may exercise his legal should put a reasonable man upon his guard and then claim that he acted in good faith
remedies. 33 and under the belief that there were no defect in the title of the vendor. 39 One who
Article 1544 of the New Civil Code provides: purchases real estate with knowledge of a defect or lack of title in his vendor cannot
If the same thing should have been sold to different vendees, the ownership claim that he has acquired title thereto in good faith as against the true owner of the
shall be transferred to the person who may have first taken possession thereof land or of an interest therein; and the same rule must be applied to one who has
in good faith, if it should be movable property. knowledge of facts which should have put him upon such inquiry and investigation as
Should it be movable property, the ownership shall belong to the person might be necessary to acquaint him with the defects in the title of his vendor. Good
acquiring it who in good faith first recorded it in the Registry of Property. faith, or the want of it is not a visible, tangible fact that can be seen or touched, but
Should there be no inscription, the ownership shall pertain to the person who rather a state or condition of mind which can only be judged of by actual or fancied
in good faith was first in the possession and in the absence thereof, to the tokens or signs. 40
person who present the oldest title, provided there is good faith. In fine, petitioner had nobody to blame but herself in dealing with the disputed property
Article 1544 of the Civil Code provides that in case of double sale of an immovable for failure to inquire or discover a flaw in the title to the property, thus, it is axiomatic
property, ownership shall be transferred (1) to the person acquiring it who in good faith that — culpa lata dolo aequiparatur — gross negligence is equivalent to intentional
first recorded it in the Registry of Property; (2) in default thereof, to the person who in wrong.
good faith was first in possession; and (3) in default thereof, to the person who presents IN VIEW OF THE FOREGOING PREMISES, this petition for review is hereby
the oldest title, provided there is good faith. 34 DISMISSED for lack of merit. No pronouncement as to costs.
In the case at bar, vendor Aurelio Roque sold 6/10 portion of his share in TCT No. IT IS SO ORDERED. Regalado, Romero, Puno and Mendoza, JJ., concur.
135671 to private respondents Repuyan on April 1, 1980. Subsequently, the same lot Footnotes
was sold again by vendor Aurelio Roque (6/10) and his children (4/10), represented by 26 Article 1478, New Civil Code.
the Clerk of Court pursuant to Section 10, Rule 39 of the Rules of Court, on February 27 Chua Hai vs. Hon. Kapunan, 104 Phil. 110; No. L-11108, June 30, 1958.
4, 1982. Undoubtedly, this is a case of double sale contemplated under Article 1544 of Art. 1191 the power to rescind obligations is implied in reciprocal ones, in case one of
the New Civil Code. the obligors should not comply with what is incumbent upon him. The injured party may
This is an instance of a double sale of an immovable property hence, the ownership choose between the fulfillment and the rescission of the obligation, with the payment of
shall vests in the person acquiring it who in good faith first recorded it in the Registry of damages in either case. He may also seek rescission, even after he has chosen
Property. Evidently, private respondents Repuyan's caused the annotation of an fulfillment, if the latter should become impossible.
adverse claim on the title of the subject property denominated as Entry No. 5627/T- The Court shall decree the rescission claimed, unless there be just cause authorizing
135671 on July 21, 1980. 35 The annotation of the adverse claim on TCT No. 135671 the fixing of a period.
in the Registry of Property is sufficient compliance as mandated by law and serves This is understood to be without prejudice to the rights of third persons who have
notice to the whole world. acquired the thing, in accordance with Articles 1385 and 1388 of the Mortgage Law.
On the other hand, petitioner filed a notice of lis pendens only on February 2, 1982. 28 Obaña vs. Court of Appeals, 135 SCRA 557; G.R. No. L-36249, March 29, 1985.
Accordingly, private respondents who first caused the annotation of the adverse claim Edca Publishing & Distributing Corps. vs. Santos, 184 SCRA 614, G.R. No. 80298,
in good faith shall have a better right over herein petitioner. Moreover, the physical April 26, 1990.
possession of herein petitioners by virtue of a writ of possession issued by the trial court 29 Dy vs. Court of Appeals, G.R. 92989, July 8, 1991.
on September 20, 1982 is "subject to the valid rights and interest of third persons over 30 Puato vs. Mendoza, 64 Phil. 457, No. 44169, July 16, 1937.
the same portion thereof, other than vendor or any other person or persons privy to or 31 Dalion vs. Court of Appeals, G.R. 78903, February 28, 1990.
claiming any rights to interest under it." 36 As between two purchasers, the one who has 32 Aspi vs. Court of Appeals, 236 SCRA 94; G.R. No. 83527, September 1, 1994.
registered the sale in his favor, has a preferred right over the other who has not 33 Sorogon vs. Parreñas, 54 Official Gazette 1860.
registered his title even if the latter is in actual possession of the immovable 34 Radiowealth Finance Co. vs. Palileo, G.R. 83432, May 20, 1991.
property. 3 7 Further, even in default of the first registrant or first in possession, private 35 Adverse Claim, Original Records, pp. 152-154; Valdez vs. Court of Appeals, G.R.
respondents have presented the oldest title. 38 Thus, private respondents who acquired No. 85082, February 25, 1991.
the subject property in good faith and for valuable consideration established a superior 36 Writ of Possession, Original Records, p. 32.
right as against the petitioner. 37 Gonzaga vs. Javellana, 23 Phil. 125; No. 6843, September 3, 1912.
Evidently, petitioner cannot be considered as a buyer in good faith. In the complaint for 38 Deed of Absolute Sale, dated April 1, 1980, Original Records, pp. 156-159.
rescission filed by vendor Aurelio Roque on August 20, 1980, herein petitioner filed a 39 De la Cruz vs. Intermediate Appellate Court, G.R. 72981, January 29, 1988.
motion for intervention on May 20, 1982 but did not file her complaint in intervention, 40 Bautista vs. Court of Appeals, G.R. 106042, February 28, 1994.
FIRST DIVISION representing the price of the second sale are well taken insofar as the seller Leodegaria
G.R. No. L-56232 June 22, 1984 Cabana is concerned. These amounts have been received by the said seller
ABELARDO CRUZ (deceased) substituted by Heirs Consuelo C. Cruz, Claro C. Leodegaria Cabana on account of a void second sale and must be duly reimbursed by
Cruz and Stephen C. Cruz, per Resolution, petitioners, vs. her to petitioner’s heirs, but the Legaspi spouses cannot be held liable therefor since
LEODEGARIA CABANA, TEOFILO LEGASPI , ILUMINADA CABANA and THE they had nothing to do with the said second sale nor did they receive any benefit
HONOR- ABLE COURT OF APPEALS,* respondents. therefrom. Petitioner’s claim for reimbursement of the amount of P102.58 as real estate
Nazareno, Azada, Sabado & Dizon for petitioners. taxes paid on the property is not well taken because the respondents Legaspi spouses
Felixberto N. Boquiren for respondents. had been paying the real estate taxes on the same property since June 1, 1969.
PETITION for review the decision of the Court of Appeals.
Civil Law; Sales; Double sale of real property; Article 1544, Civil Code, applied;
Knowledge of a prior transfer of registered property bya subsequent purchaser makes TEEHANKEE, J.:
the subsequent purchaser in bad faith and vitiates his title acquired thereto which The Court affirms the questioned decision of the now defunct Court of Appeals which
creates no right as against the first purchaser.—Said respondents spouses were affirmed that of the Court of First Instance of Quezon Province, but directs that the
likewise the first to register the sale with right of repurchase in their favor on May 13, seller, respondent Leodegaria Cabana who sold the property in question twice, first to
1965 under Primary Entry No. 210113 of the Register of Deeds. They could not register her co-respondents Teofilo Legaspi and Iluminada Cabana and later to petitioner
the absolute deed of sale in their favor and obtain the corresponding transfer certificate Abelardo Cruz (now deceased), should reimburse to petitioner's heirs the amounts of
of title because at that time the seller’s duplicate certificate was still with the bank. But P2,352.50, which the late petitioner Abelardo Cruz paid to the Philippine National Bank
there is no question, and the lower courts so found conclusively as a matter of fact, that to discharge the mortgage obligation of said respondent Leodegaria Cabana in favor of
when petitioner Cruz succeeded in registering the later sale in his favor, he knew and said bank, and of P3,397.50, representing the amount paid by said Abelardo Cruz to
he was informed of the prior sale in favor of respondents-spouses. Respondent her as consideration of the sale with pacto de retro of the subject property.
appellate court correctly held that such “knowledge of a prior transfer of a registered This is a simple case of double sale of real property. Respondent appellate court in its
property by a subsequent purchaser makes him a purchaser in bad faith and his decision of August 13, 1980 stated the background facts and resolved the issue in favor
knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of of defendants- appellees, first buyers- respondents herein, and against plaintiff-
conveyance which creates no right as against the first purchaser.” appellant Abelardo Cruz, petitioner herein (substituted by his heirs), as follows:
Defendants' evidence shows that on October 21, 1968, defendant Leodegaria
Same; Same; Same; Same; Same; First unregistered sale prevails over a
Cabana sold the land in question to defendants-spouses Teofilo Legaspi and
registered second sale; Reason; Requirement that before the second buyer can obtain
Iluminada Cabana (Exh. 1). The said defendants-spouses attempted to
priority over the first buyer, the second buyer must show that he acted in good faith
register the deed of sale but said registration was not accomplished because
throughout from the time of acquisition until title is transferred to him by registration, or
they could not present the owner's duplicate of title which was at that time in
failing registration, by delivery of possession.—As the Court held in Carbonell vs. Court
the possession of the PNB as mortgage.
of Appeals “it is essential that the buyer of realty must act in good faith in registering
Likewise, when plaintiff tried to register the deed of sale executed by
his deed of sale to merit the protection of the second paragraph of [the above quoted]
Leodegaria Cabana on September 3, 1970, said plaintiff was informed that
Article 1544.” As the writer stressed in his concurring opinion therein, “(T)he governing
the owner thereof had sold the land to defendants-spouses on October 21,
principle here is prius tempore, potior jure (first in time, stronger in right). Knowledge
1968. Plaintiff was able to register the land in his name on February 9, 1971
gained by the first buyer of the second sale cannot defeat the first buyer’s rights except
(Exh. A). With the admission of both parties that the land in question was sold
only as provided by the Civil Code and that is where the second buyer first registers
to two persons, the main issue to be resolved in this appeal is as to who of
in good faith the second sale ahead of the first. Such knowledge of the first buyer does
said vendees has a better title to said land.
not bar her from availing of her rights under the law, among them, to register firsther
There is no dispute that the land in question was sold with right of repurchase
purchase as against the second buyer. But in conversoknowledge gained by the
on June 1, 1965 to defendants- spouses Teofilo Legaspi and Iluminada
second buyer of the first sale defeats his rights even if he is first to register the second
Cabana (Exh. 1). The said document 'Bilihang Muling Mabibili' stipulated that
sale, since such knowledge taints his prior registration with bad faith. This is the price
the land can be repurchased by the vendor within one year from December
exacted by Article 1544 of the Civil Code for the second buyer being able to displace
31, 1966 (see par. 5, Exh. 1).lwphl@itç Said land was not repurchased and in
the first buyer; that before the second buyer can obtain priority over the first, he must
the meantime, however, said defendants-spouses took possession of the
show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the
land.
first buyer’s rights)—from the time of acquisition until the title is transferred to him by
Upon request of Leodegaria Cabana, the title of the land was lent to her in
registration or failing registration, by delivery of possession. The second buyer must
order to mortgage the property to the Philippine National Bank. Said title was,
show continuing good faith and innocence or lack of knowledge of the first sale until his
forthwith, deposited with the PNB. On October 21, 1968, defendant
contract ripens into full ownership through prior registration as provided by law.”
Leodegaria Cabana sold the land by way of absolute sale to the defendants-
Same; Same; Same; Seller of property twice, required to reimburse the second
spouses (Exh. 2). However, on November 29, 1968 defendant sold the same
buyer on account of the void second sale; Case at bar.—Petitioner’s prayer for
property to herein plaintiff and the latter was able to register it in his name.
alternative relief for reimbursement of the amount of P2,352.50 paid by him to the bank
to discharge the existing mortgage on the property and of the amount of P3,397.50
The transaction in question is governed by Article 1544 of the Civil Code. True Should it be immovable property, the ownership shall belong to the person
it is that the plaintiff was able to register the sale in his name but was he in acquiring it who in good faith first recorded it in the Registry of Property.
good faith in doing so? Should there be no inscription, the ownership shall pertain to the person who
While the title was registered in plaintiff- appellant's name on February 9, 1971 in good faith was first in the possession; and, in the absence thereof, to the
(Exh. A), it appears that he knew of the sale of the land to defendants-spouses person who presents the oldest title, provided there is good faith.
Legaspi as he was informed in the Office of the Register of Deeds of Quezon. There is no question that respondents-spouses Teofilo Legaspi and Iluminada Cabana
It appears that the defendants-spouses registered their document of sale on were the first buyers, first on June 1, 1965 under a sale with right of repurchase and
May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds (Exh. later on October 21, 1968 under a deed of absolute sale and that they had taken
2). possession of the land sold to them; that petitioner was the second buyer under a deed
Under the foregoing circumstances, the right of ownership and title to the land of sale dated November 29, 1968, which to all indications, contrary to the text, was a
must be resolved in favor of the defendants- spouses Legaspi on three counts. sale with right of repurchase for ninety (90) days. 1 There is no question either that
First, the plaintiff-appellant was not in good faith in registering the title in his respondents legaspi spouses were the first and the only ones to be in possession of
name. Consistent is the jurisprudence in this jurisdiction that in order that the the subject property.
provisions of Article 1544 of the new Civil Code may be invoked, it is Said respondents spouses were likewise the first to register the sale with right of
necessary that the conveyance must have been made by a party who has an repurchase in their favor on May 13, 1965 under Primary Entry No. 210113 of the
existing right in the thing and the power to dispose of it (10 Manresa 170, 171). Register of Deeds. They could not register the absolute deed of sale in their favor and
It cannot be set up by a second purchaser who comes into possession of the obtain the corresponding transfer certificate of title because at that time the seller's
property that has already been acquired by the first purchaser in full dominion duplicate certificate was still with the bank. But there is no question, and the lower
(Bautista vs. Sison, 39 Phil. 615), this not withstanding that the second courts so found conclusively as a matter of fact, that when petitioner Cruz succeeded
purchaser records his title in the public registry, if the registration be done in in registering the later sale in his favor, he knew and he was informed of the prior sale
bad faith, the philosophy underlying this rule being that the public records in favor of respondents-spouses. Respondent appellate court correctly held that such
cannot be covered into instruments of fraud and oppression by one who "knowledge of a prior transfer of a registered property by a subsequent purchaser
secures an inscription therein in bad faith (Chupinghong vs. Borreros, 7 CA makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title
Rep. 699). acquired by virtue of the latter instrument of conveyance which creates no right as
A purchaser who has knowledge of fact which would put him upon inquiry and against the first purchaser."
investigation as to possible defects of the title of the vendor and fails to make As the Court held in Carbonell vs. Court of Appeals 2 "it is essential that the buyer of
such inquiry and investigation, cannot claim that he is a purchaser in good realty must act in good faith in registering his deed of sale to merit the protection of the
faith. Knowledge of a prior transfer of a registered property by a subsequent second paragraph of [the above quoted] Article 1544." As the writer stressed in his
purchaser makes him a purchaser in bad faith and his knowledge of such concurring opinion therein, "(T)he governing principle here is prius tempore, potior
transfer vitiates his title acquired by virtue of the latter instrument of jure(first in time, stronger in right). Knowledge gained by the first buyer of the second
conveyance which creates no right as against the first purchaser (Reylago vs. sale cannot defeat the first buyer's rights except only as provided by the Civil Code and
Jarabe, L-20046, March 27, 1968, 22 SCRA 1247). that is where the second buyer first registers in good faith the second sale ahead of the
In the second place, the defendants-spouses registered the deed of absolute first. Such knowledge of the first buyer does not bar her from availing of her rights under
sale ahead of plaintiff- appellant. Said spouses were not only able to obtain the law, among them, to register first her purchase as against the second buyer. But in
the title because at that time, the owner's duplicate certificate was still with the converso knowledge gained by the second buyer of the first sale defeats his rights even
Philippine National Bank. if he is first to register the second sale, since such knowledge taints his prior registration
In the third place, defendants-spouses have been in possession all along of with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second
the land in question. If immovable property is sold to different vendees, the buyer being able to displace the first buyer; that before the second buyer can obtain
ownership shall belong to the person acquiring it who in good faith first priority over the first, he must show that he acted in good faith throughout (i.e. in
recorded it in the registry of property; and should there be no inscription, the ignorance of the first sale and of the first buyer's rights) — from the time of acquisition
ownership shall pertain to the person who in good faith was first in the until the title is transferred to him by registration or failing registration, by delivery of
possession (Soriano, et al. vs. The Heirs of Domingo Magali et al., L-15133 , possession. The second buyer must show continuing good faith and innocence or lack
July 31, 1963, 8 SCRA 489). Priority of possession stands good in favor of of knowledge of the first sale until his contract ripens into full ownership through prior
herein defendants-spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913; registration as provided by law."
Sanchez vs. Ramos, 40 Phil. 614, Quimson vs, Rosete, 87 Phil. 159). Petitioner's prayer for alternative relief for reimbursement of the amount of P2,352.50
The Court finds that in this case of double sale of real property, respondent appellate paid by him to the bank to discharge the existing mortgage on the property and of the
court, on the basis of the undisputed facts, correctly applied the provisions of Article amount of P3,397.50 representing the price of the second sale are well taken insofar
1544 of the Civil Code that as the seller Leodegaria Cabana is concerned. These amounts have been received by
Art. 1544. If the same thing should have been sold to different vendees, the the said seller Leodegaria Cabana on account of a void second sale and must be duly
ownership shall be transferred to the person who may have first taken reimbursed by her to petitioner's heirs, but the Legaspi spouses cannot be held liable
possession thereof in good faith, if it should be movable property. therefor since they had nothing to do with the said second sale nor did they receive any
benefit therefrom. Petitioner's claim for reimbursement of the amount of P102.58 as
real estate taxes paid on the property is not well taken because the respondents
Legaspi spouses had been paying the real estate taxes on the same property since
June 1, 1969. 4
ACCORDINGLY, the appealed judgment of respondent appellate court, upholding
respondents-spouses Teofilo Legaspi and Iluminada Cabana as the true and rightful
owners of the property in litigation and ordering the issuance of a new title with the
cancellation as null and void of Title No. T- 99140 obtained by petitioner Abelardo C.
Cruz, is hereby affirmed in toto. In accordance with the partial grant of petitioner's
prayer for alternative relief as stated in the preceding paragraph hereof, the Court
hereby orders and sentences respondent Leodegaria Cabana to reimburse and pay to
petitioner's heirs the total sum of P5,750.00.
Melencio-Herrera, Plana, Relova, Gutierrez, Jr. and De la Fuente, JJ., concur.
Footnotes
* Eighth Division composed of Samuel F. Reyes, Jorge R. Coquia, ponente, and
Mariano A. Zosa, JJ.
1 Respondents Legaspi spouses cite in their brief "facts of record" which were not
denied or disputed by petitioner, as follows:
First. The price paid by Cruz was unconscionably small. The complaint alleged that the
land with an area of 27,882 square meters had an annual income of P3,000.00 (Record
on Appeal p. 8) but the vendor, Leodegaria Cabana, was paid the paltry sum of only
P5,000.00 (Record on Appeal, p. 25).
Second. Cruz bought the land without even making an inspection. The deed of sale
was executed on November 25, 1968 but he visited the property only after February,
1971 or after a lapse of more than two years. (tsn Nov. 23, 1971, page 18). Surely,
there must be something fishy when real estate with an income of P3,000.00 yearly can
he had for only P5,000.00. By this fantastically low price, the buyer is already put on
notice of a possible defect in seller's title and vet Cruz did not even visit the locality
where he could have made appropriate inquiries.
Third. By petitioner's own admission (brief, p. 4), the agreement between them (Cruz
and Leodegaria Cabana) was SALE WITH RIGHT OF REPURCHASE within 90 days,
however, the deed prepared by Atty. Bonus, counsel of Cruz in the trial court up to the
Court of Appeals, was a deed of absolute sale.
a clear premeditated circumvention of the agreement. ...
Fourth. The deed of sale in favor of Cruz was executed on November 29, 1968 (Record
on Appeal, p. 11) but he declared the property for taxation only on April 20, 1971, or
after the lapse of over two years.
an indubitable showing that Cruz was uncertain of his title and was not duty bound to
pay taxes thereon. And please note that he was constrained to pay the real estate taxes
only because he found in Legaspi's answer to his complaint in the trial court that legaspi
had been paying the taxes on this property since June 1, 1969 (Record on
appeal,p.9).lwphl@itç Obviously Cruz must have realized that his claim of ownership
would be adversely affected by not declaring this property in his name and not paying
real estate taxes.
2 60 SCRA 99 (1976).
3 Idem, pp. 122,123.
4 See footnote, 1, supra.
FIRST DIVISION in good faith first recorded it in the Registry of Property; (2) in default thereof, to the
G.R. No. 83432 May 20, 1991 person who in good faith was first in possession; and (3) in default thereof, to the person
RADIOWEALTH FINANCE COMPANY, petitioner, vs. MANUELITO S. who presents the oldest title, provided there is good faith. There is no ambiguity
PALILEO, respondent. regarding the application of the law with respect to lands registered under the Torrens
Rolando A. Calang for petitioner. System. Section 51 of Presidential Decree No. 1529 (amending Section 50 of Act No.
Sisenando Villaluz, Sr. for respondent. 496 clearly provides that the act of registration is the operative act to convey or affect
Evidence; Findings of fact of the Court of Appeals are conclusive and will not be registered lands insofar as third persons are concerned. Thus, a person dealing with
disturbed unless there is grave abuse of discretion.—As regards the first and second registered land is not required to go behind the register to determine the condition of
assigned errors, suffice it to state that findings of fact of the Court of Appeals are the property. He is only charged with notice of the burdens on the property which are
conclusive on this Court and will not be disturbed unless there is grave abuse of noted on the face of the register or certificate of title.1 Following this principle, this Court
discretion. The finding of the Court of Appeals that the property in question was already has time and again held that a purchaser in good faith of registered land (covered by a
sold to private respondent by its previous owner before the execution sale is evidenced Torrens Title) acquires a good title as against all the transferees thereof whose right is
by a deed of sale. Said deed of sale is notarized and is presumed authentic. There is not recorded in the registry of deeds at the time of the sale.2
no substantive proof to support petitioner’s allegation that the document is fictitious or The question that has to be resolved in the instant petition is whether or not the rule
simulated. With this in mind, We see no reason to reject the conclusion of the Court of provided in Article 1544 of the Civil Code as discussed above, is applicable to a parcel
Appeals that private respondent was not a mere administrator of the property. That he of unregistered land purchased at a judicial sale. To be more specific, this Court is
exercised acts of ownership through his mother also remains undisputed. asked to determine who, as between two buyers of unregistered land, is the rightful
Sales; Double Sale; Land Titles and Deeds; A bona fide purchaser of a owner—the first buyer in a prior sale that was unrecorded, or the second buyer who
registered land at an execution sale acquires a good title as against a prior transferee, purchased the land in an execution sale whose transfer was registered in the Register
if such transfer was unrecorded.—There is no doubt that had the property in question of Deeds.
been a registered land, this case would have been decided in favor of petitioner since The facts as found by the Court of Appeals are as follows:
it was petitioner that had its claim first recorded in the Registry of Deeds. For, as already On April 13, 1970, defendant spouses Enrique Castro and Herminia R. Castro
mentioned earlier, it is the act of registration that operates to convey and affect sold to plaintiff-appellee Manuelito Palileo (private respondent herein), a
registered land. Therefore, a bona fide purchaser of a registered land at an execution parcel of unregistered coconut land situated in Candiis, Mansayaw, Mainit,
sale acquires a good title as against a prior transferee, if such transfer was unrecorded. Surigao del Norte. The sale is evidenced by a notarized Deed of Absolute Sale
Same; Same; Same; Same; Execution Sale; Art. 1544 does not apply to land not (Exh. "E"). The deed was not registered in the Registry of Property for
registered under Act 496; The purchaser of unregistered land at a sheriffs’ execution unregistered lands in the province of Surigao del Norte. Since the execution
sale only steps into the shoes of the judgment debtor, and merely acquires the latter’s of the deed of sale, appellee Manuelito Palileo who was then employed at
interest in the property sold as of the time the property was levied upon.—Under Act Lianga Surigao del Sur, exercised acts of ownership over the land through his
No. 3344, registration of instruments affecting unregistered lands is “without prejudice mother Rafaela Palileo, as administratrix or overseer. Appellee has
to a third party with a better right”. The aforequoted phrase has been held by this Court continuously paid the real estate taxes on said land from 1971 until the present
to mean that the mere registration of a sale in one’s favor does not give him any right (Exhs. "C" to "C-7", inclusive).
over the land if the vendor was not anymore the owner of the land having previously On November 29, 1976, a judgment was rendered against defendant Enrique
sold the same to somebody else even if the earlier sale was unrecorded. The case T. Castro, in Civil Case No. 0103145 by the then Court of First Instance of
of Carumba vs. Court of Appeals is a case in point. It was held therein that Article 1544 Manila, Branch XIX, to pay herein defendant-appellant Radiowealth Finance
of the Civil Code has no application to land not registered under Act No. 496. Like in Company (petitioner herein), the sum of P22,350.35 with interest thereon at
the case at bar, Carumba dealt with a double sale of the same unregistered land. The the rate of 16% per annum from November 2, 1975 until fully paid, and the
first sale was made by the original owners and was unrecorded while the second was further sum of P2,235.03 as attorney's fees, and to pay the costs. Upon the
an execution sale that resulted from a complaint for a sum of money filed against the finality of the judgment, a writ of execution was issued. Pursuant to said writ,
said original owners. Applying Section 35, Rule 39 of the Revised Rules of Court, this defendant provincial Sheriff Marietta E. Eviota, through defendant Deputy
Court held that Article 1544 of the Civil Code cannot be invoked to benefit the purchaser Provincial Sheriff Leopoldo Risma, levied upon and finally sold at public
at the execution sale though the latter was a buyer in good faith and even if this second auction the subject land that defendant Enrique Castro had sold to appellee
sale was registered. It was explained that this is because the purchaser of unregistered Manuelito Palileo on April 13,1970. A certificate of sale was executed by the
land at a sheriff’s execution sale only steps into the shoes of the judgment debtor, and Provincial Sheriff in favor of defendant- appellant Radiowealth Finance
merely acquires the latter’s interest in the property sold as of the time the property was Company, being the only bidder. After the period of redemption has (sic)
levied upon. 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
PETITION for certiorari to review the decision of the Court of Appeals.
Registry of Deeds.3
GANCAYCO, J.: Learning of what happened to the land, private respondent Manuelito Palileo filed an
If the same piece of land was sold to two different purchasers, to whom shall ownership action for quieting of title over the same. After a trial on the merits, the court a
belong? Article 1544 of the Civil Code provides that in case of double sale of an quo rendered a decision in his favor. On appeal, the decision of the trial court was
immovable property, ownership shall be transferred: (1) to the person acquiring it who affirmed. Hence, this petition for review on certiorari.
In its petition, Radiowealth Finance Company presents the following errors: the purchaser at the execution sale though the latter was a buyer in good faith and even
1. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE DEED if this second sale was registered. It was explained that this is because the purchaser
OF ABSOLUTE SALE (EXHIBIT B) ALLEGEDLY EXECUTED BY ENRIQUE of unregistered land at a sheriffs execution sale only steps into the shoes of the
CASTRO IN FAVOR OF APPELLEE MANUELITO PALILEO, WAS judgment debtor, and merely acquires the latter's interest in the property sold as of the
SIMULATED OR FICTITIOUS. time the property was levied upon.
2. THE COURT OF APPEALS ERRED IN NOT FINDING APPELLEE Applying this principle, the Court of Appeals correctly held that the execution sale of
MANUELITO PALILEO AS ADMINISTRATOR ONLY OF THE DISPUTED the unregistered land in favor of petitioner is of no effect because the land no longer
PROPERTY; AND belonged to the judgment debtor as of the time of the said execution sale.
3. THE COURT OF APPEALS ERRED IN NOT FINDING DEFENDANT- WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-
APPELLANT RADIOWEALTH FINANCE COMPANY OWNER OF THE G.R. CV No. 10788 is hereby AFFIRMED. No costs.
DISPUTED PROPERTY BY REASON OF THE CERTIFICATE OF SALE AND SO ORDERED.
THE DEED OF FINAL SALE WHICH WERE ALL REGISTERED IN THE Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.
REGISTER OF DEEDS, HENCE, SUPERIOR TO THAT OF THE DEED OF
SALE IN POSSESSION OF MANUELITO PALILEO, FOR BEING NOT Footnotes
REGISTERED.4 1
William H. Anderson & Co. vs. Garcia, 64 Phil. 506 (1937).
2
As regards the first and second assigned errors, suffice it to state that findings of fact Vargas vs. Tancioco, 67 Phil. 308 (1939).
3
of the Court of Appeals are conclusive on this Court and will not be disturbed unless Pages 10-11, Rollo.
4
there is grave abuse of discretion. The finding of the Court of Appeals that the property Page 5, Rollo.
5
in question was already sold to private respondent by its previous owner before the Page 14, Rollo; Emphasis supplied.
6
execution sale is evidenced by a deed of sale. Said deed of sale is notarized and is 31 SCRA 558 (1970).
7
presumed authentic. There is no substantive proof to support petitioner's allegation that The second paragraph of this provision states that: "Upon the execution and delivery
the document is fictitious or simulated. With this in mind, We see no reason to reject of said deed the purchaser, or redemptioner, or his assignee, shall be substituted to
the conclusion of the Court of Appeals that private respondent was not a mere and acquired all the right, title, interestand claim of the judgment debtor to the property
administrator of the property. That he exercised acts of ownership through his mother as of the time of the levy, except as against the judgment debtor in possession, in which
also remains undisputed. case the substitution shall be effective as of the time of the deed. . . ." (Emphasis
Going now to the third assigned error which deals with the main issue presented in the supplied.)
instant petition, We observe that the Court of Appeals resolved the same in favor of
private respondent due to the following reason; what the Provincial Sheriff levied upon
and sold to petitioner is a parcel of land that does not belong to Enrique Castro, the
judgment debtor, hence the execution is contrary to the directive contained in the writ
of execution which commanded that the lands and buildings belonging to Enrique
Castro be sold to satisfy the execution.5
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 Registry of Deeds. For, as already mentioned earlier, it is the act
of registration that operates to convey and affect registered land. Therefore, a bona
fide purchaser of a registered land at an execution sale acquires a good title as against
a prior transferee, if such transfer was unrecorded.
However, it must be stressed that this case deals with a parcel of unregistered land and
a different set of rules applies. We affirm the decision of the Court of Appeals.
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 one's 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.
The case of Carumba vs. Court of Appeals6 is a case in point. It was held therein that
Article 1544 of the Civil Code has no application to land not registered under Act No.
496. Like in the case at bar, Carumba dealt with a double sale of the same unregistered
land. The first sale was made by the original owners and was unrecorded while the
second was an execution sale that resulted from a complaint for a sum of money filed
against the said original owners. Applying Section 35, Rule 39 of the Revised Rules of
Court,7 this Court held that Article 1544 of the Civil Code cannot be invoked to benefit
EN BANC In the year 1955, Sammy Maron and his seven brothers and sisters were pro-indiviso
G.R. No. L-18497 May 31, 1965 owners of a parcel of unregistered land located in barrio Parayao, Municipality of
DAGUPAN TRADING COMPANY, petitioner, vs. RUSTICO MACAM, respondent. Binmaley, Pangasinan. While their application for registration of said land under Act
Angel Sanchez for petitioner. No. 496 was pending, they executed, on June 19 and September 21, 1955, two deeds
Manuel L. Fernandez for respondent. of sale conveying the property to appellee, who thereafter took possession thereof and
Sales; Conflicting sales; One sale before registration of land and the other an proceeded to introduce substantial improvements therein. One month later, that is, on
execution sale after registration of land; Law governing.—Where one of two conflicting October 14, 1955, Original Certificate of Title No. 6942 covering the land was issued in
sales of a piece of land was executed before the land was registered, while the other the name of the Maron's, free from all liens and encumbrances.
was an execution sale in favor of the judgment creditor of the owner made after the On August 4, 1956, by virtue of a final judgment rendered in Civil Case No. 42215 of
same property had been registered, what should determine the issue are the provisions the Municipal Court of Manila against Sammy Maron in favor of the Manila Trading and
of the last paragraph of Section 35, Rule 39 of the Rules of Court to the effect that, Supply Company, levy was made upon whatever interest he had in the aforementioned
upon the execution and delivery of the final certificate of sale in favor of the purchaser property, and thereafter said interest was sold at public auction to the judgment creditor.
of land sold in an execution sale, such purchaser “shall be substituted to and acquire The corresponding notice of levy, certificate of sale and the Sheriff's certificate of final
all the rights, title, interest and claim of the judgment debtor to the property as of the sale in favor of the Manila Trading and Supply Co. — because nobody exercised the
time of the levy.” right of redemptions — were duly registered. On March 1, 1958, the latter sold all its
Same; Same; Same; Unregistered sale cannot be defeated by subsequent rights and title to the property to appellant.
execution sale and registration of latter.—Where for a considerable time prior to the The question before Us now is: Who has the better right as between appellant Dagupan
levy on execution interest of the owner of the land levied upon had already been Trading Company, on the one hand, and appellee Rustico Macam, on the other, to the
convened to another who took possession thereof and introduced improvements one-eighth share of Sammy Maron in the property mentioned heretofore?
thereon, the aforesaid levy is void. The prior sale, albeit unregistered, cannot be If the property covered by the conflicting sales were unregistered land, Macam would
deemed automatically cancelled upon the subsequent issuance of the Torrens Title undoubtedly have the better right in view of the fact that his claim is based on a prior
over the land. sale coupled with public, exclusive and continuous possession thereof as owner. On
Same; Same; Same; Right of ownership already fixed under Civil Law and/or the other hand, were the land involved in the conflicting transactions duly registered
Mortgage Law cannot be overthrown by law.—As between a right of ownership already land, We would be inclined to hold that appellant has the better right because, as We
fixed and established under the Civil Law and/or the Spanish Mortgage Law, and a new have consistently held, in case of conveyance of registered real estate, the registration
law or system which would make possible the overthrowing of such ownership on of the deed of sale is the operative act that gives validity to the transfer. This would be
admittedly artificial and technical grounds, the former must be upheld. fatal to appellee's claim, the deeds of sale executed in his favor by the Maron's not
having been registered, while the levy in execution and the provisional certificate of
APPEAL from a decision of the Court of Appeals.
sale as well as the final deed of sale in favor of appellant were registered.
DIZON, J.: Consequently, this registered conveyance must prevail although posterior to the one
Appeal taken by the Dagupan Trading Company from the decision of the Court of executed in favor of appellee, and appellant must be deemed to have acquired such
Appeals affirming the one rendered by the Court of First Instance of Pangasinan in Civil right, title and interest as appeared on the certificate of title issued in favor of Sammy
Case No. 13772, dismissing its complaint. Maron, subject to no lien, encumbrance or burden not noted thereon. (Anderson & Co.
On September 4, 1958, appellant commenced the action mentioned above against vs. Garcia, 64 Phil. 506; Reynes, et al. vs. Barrera, et al., 68 Phil. 656; Banco Nacional,
appellee Rustico Macam, praying that it be declared owner of one-eighth portion of the etc. vs. Camus, 70 Phil. 289)
land described in paragraph 2 of the complaint; that a partition of the whole property be The present case, however, does not fall within either, situation. Here the sale in favor
made; that appellee be ordered to pay it the amount of P500.00 a year as damages of appellee was executed before the land subject-matter thereof was registered, while
from 1958 until said portion is delivered, plus attorney's fees and costs. the conflicting sale in favor of appellant was executed after the same property had been
Answering the complaint, appellee alleged, in the main, that Sammy Maron's share in registered. We cannot, therefore, decide the case in the light of whatever adjudicated
the property described in the complaint, as well as that of all his co-heirs, had been cases there are covering the two situations mentioned in the preceding paragraph. It is
acquired by purchase by appellee since June 19 and September 21, 1955, before the our considered view that what should determine the issue are the provisions of the last
issuance of the original certificate of title in their name; that at the time the levy in paragraph of Section 35, Rule 39 of the Rules of Court, to the effect that upon the
execution was made on Sammy Maron's share therein, the latter had no longer any execution and delivery of the final certificate of sale in favor of the purchaser of land
right or interest in said property; that appellant and its predecessor in interest were sold in an execution sale, such purchaser "shall be substituted to and acquire all the
cognizant of the facts already mentioned; that since the sales made in his favor, he had right, title, interest and claim of the judgment debtor to the property as of the time of the
enjoyed uninterrupted possession of the property and introduced considerable levy." Now We ask: What was the interest and claim of Sammy Maron on the one-
improvements thereon. Appellee likewise sought to recover damages by way of eighth portion of the property inherited by him and his co-heirs, at the time of the levy?
counterclaim. The answer must necessarily be that he had none, because for a considerable time
After trial upon the issue thus joined, the court rendered judgment dismissing the prior to the levy, his interest had already been conveyed to appellee, "fully and
complaint, which, on appeal, was affirmed by the Court of Appeals. retrievably — as the Court of Appeals held. Consequently, subsequent levy made on
The facts of the case are not disputed. the property for the purpose of satisfying the judgment rendered against Sammy Maron
in favor of the Manila Trading Company was void and of no effect (Buson vs. Licuaco,
13 Phil. 357-358; Landig vs. U.S. Commercial Company, G.R. No. L-3597, July 31,
1951). Needless to say, the unregistered sale and the consequent conveyance of title
and ownership in favor of appellee could not have been cancelled and rendered of no
effect upon the subsequent issuance of the Torrens title over the entire parcel of land.
We cannot, therefore, but agree with the following statement contained in the appealed
decision:
... . Separate and apart from this however, we believe that in the inevitable
conflict between a right of ownership already fixed and established under the
Civil Law and/or the Spanish Mortgage Law — which cannot be affected by
any subsequent levy or attachment or execution — and a new law or system
which would make possible the overthrowing of such ownership on admittedly
artificial and technical grounds, the former must be upheld and applied.
But to the above considerations must be added the important circumstance that, as
already stated before, upon the execution of the deed of sale in his favor by Sammy
Maron, appellee took possession of the land conveyed as owner thereof, and
introduced considerable improvements thereon. To deprive him now of the same by
sheer force of technicality would be against both justice and equity.
IN VIEW OF ALL THE FOREGOING, the decision appealed from is affirmed, with costs.
Bengzon, C.J., Bautista Angelo, Barrera, Regala, Makalintal, Bengzon, J.P., and
Zaldivar, JJ., concur.
EN BANC of Camarines Sur, on October 3, 1958. The aforesaid property was declared
G.R. No. L-27587 February 18, 1970 for taxation purposes (Exh. 1) in the name of Santiago Balbuena in 1958.
AMADO CARUMBA, petitioner, vs. THE COURT OF APPEALS, SANTIAGO The Court of First instance, finding that after execution of the document Carumba had
BALBUENA and ANGELES BOAQUIÑA as Deputy Provincial Sheriff, respondents. taken possession of the land, planting bananas, coffee and other vegetables thereon,
Luis N. de Leon for petitioner. declared him to be the owner of the property under a consummated sale; held void the
Reno R. Gonzales for respondents. execution levy made by the sheriff, pursuant to a judgment against Carumba's vendor,
Civil law; Sale; Double sale; Article 15UU of Civil Code does not apply to Amado Canuto; and nullified the sale in favor of the judgment creditor, Santiago
unregistered land.—The rule in Article 1544 of the Civil Code applies to lands covered Balbuena. The Court, therefore, declared Carumba the owner of the litigated property
by Torrens title, where the prior sale is neither recorded nor known to the execution and ordered Balbuena to pay P30.00, as damages, plus the costs.
purchaser prior to the levy. But where the land in question is not registered under Act The Court of Appeals, without altering the findings of fact made by the court of origin,
No. 496, the rule is different. While under Article 1544 of Civil Code registration in good declared that there having been a double sale of the land subject of the suit Balbuena's
faith prevails over possession in the event of a double sale by the vendor of the same title was superior to that of his adversary under Article 1544 of the Civil Code of the
piece of land to different vendees, said article is not applicable even if the later vendee Philippines, since the execution sale had been properly registered in good faith and the
was ignorant of the prior sale made by his judgment debtor in favor of another vendee. sale to Carumba was not recorded.
The reason is that the purchaser of unregistered land at a sheriff’s execution sale only We disagree. While under the invoked Article 1544 registration in good faith prevails
steps into the shoes of the judgment debtor, and merely acquires the latter’s interest in over possession in the event of a double sale by the vendor of the same piece of land
the property sold as of the time the property was levied upon, as provided in Sec. 35 of to different vendees, said article is of no application to the case at bar, even if Balbuena,
Rule 39 of the Revised Rules of Court. the later vendee, was ignorant of the prior sale made by his judgment debtor in favor of
Remedial law; Civil procedure; Execution; Purchaser acquires interest of petitioner Carumba. The reason is that the purchaser of unregistered land at a sheriff's
judgment debtor as of the time of the levy.—The purchaser of unregistered land at a execution sale only steps into the shoes of the judgment debtor, and merely acquires
sheriff’s execution sale only steps into the shoes of the judgment debtor, and merely the latter's interest in the property sold as of the time the property was levied upon. This
acquires the latter’s interest in the property sold as of the time the property was levied is specifically provided by section 35 of Rule 39 of the Revised Rules of Court, the
upon. This is specifically provided by Section 35 of Rule 39 of the Revised Rules of second paragraph of said section specifically providing that:
Court. Upon the execution and delivery of said (final) deed the purchaser,
redemptioner, or his assignee shall be substituted to and acquire all the right,
PETITION for certiorari to review a decision of the Court of Appeals.
title, interest, and claim of the judgment debtor to the property as of the time
REYES, J.B.L., J.: of the levy, except as against the judgment debtor in possession, in which
Amado Carumba petitions this Supreme Court for a certiorari to review a decision of case the substitution shall be effective as of the time of the deed ... (Emphasis
the Court of Appeals, rendered in its Case No. 36094-R, that reversed the judgment in supplied)
his favor rendered by the Court of First Instance of Camarines Sur (Civil Case 4646). While the time of the levy does not clearly appear, it could not have been made prior to
The factual background and history of these proceedings is thus stated by the Court of 15 April 1957, when the decision against the former owners of the land was rendered
Appeals (pages 1-2): in favor of Balbuena. But the deed of sale in favor of Canuto had been executed two
On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue years before, on 12 April 1955, and while only embodied in a private document, the
of a "Deed of Sale of Unregistered Land with Covenants of Warranty" (Exh. same, coupled with the fact that the buyer (petitioner Carumba) had taken possession
A), sold a parcel of land, partly residential and partly coconut land with a of the unregistered land sold, sufficed to vest ownership on the said buyer. When the
periphery (area) of 359.09 square meters, more or less, located in the barrio levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical
of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado Carumba and interest nor any real right over the land that could pass to the purchaser at the execution
Benita Canuto, for the sum of P350.00. The referred deed of sale was never sale.1 Hence, the latter must yield the land to petitioner Carumba. The rule is different
registered in the Office of the Register of Deeds of Camarines Sur, and the in case of lands covered by Torrens titles, where the prior sale is neither recorded nor
Notary, Mr. Vicente Malaya, was not then an authorized notary public in the known to the execution purchaser prior to the levy;2 but the land here in question is
place, as shown by Exh. 5. Besides, it has been expressly admitted by admittedly not registered under Act No. 496.
appellee that he is the brother-in-law of Amado Canuto, the alleged vendor of WHEREFORE, the decision of the Court of Appeals is reversed and that of the Court
the property sold to him. Amado Canuto is the older brother of the wife of the of First Instance affirmed. Costs against respondent Santiago Balbuena.
herein appellee, Amado Carumba. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Teehankee,
On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by Barredo and Villamor, JJ., concur.
Santiago Balbuena against Amado Canuto and Nemesia Ibasco before the
Justice of the Peace Court of Iriga, Camarines Sur, known as Civil Case No. Footnotes
139 and on April 15, 1967, a decision (Exh. C) was rendered in favor of the 1 Lanci vs. Yangco, 52 Phil. 563; Laxamana vs. Carlos, 57 Phil. 722.
plaintiff and against the defendants. On October 1, 1968, the ex-officio Sheriff, 2 Cf. Hernandez vs. Katigbak, 69 Phil. 744; Phil. Executive Commission vs. Abadilla 74
Justo V. Imperial, of Camarines Sur, issued a "Definite Deed of Sale (Exh. D) Phil. 68, and cases cited.
of the property now in question in favor of Santiago Balbuena, which
instrument of sale was registered before the Office of the Register of Deeds
EN BANC Salvador Hermanos was a copartnership and during the month of January, 1919,
G.R. No. L-16483 December 7, 1921 executed to the defendant eight promissory notes aggregating P156,000, payable on
PHILIPPINE TRUST COMPANY, as assignee of Salvador Hermanos, demand, and each secured by a quedan, or warehouse receipt, issued by the firm of
insolvent, plaintiff-appellant, vs.PHILIPPINE NATIONAL BANK, defendant-appellee. Nieva, Ruiz and Company, Each note recites that it is payable on demand after date,
Ross & Lawrence and Ewald E. Selph for appellant. for value received, and that the firm has deposited "with the said bank as collateral
Roman J. Lacson for appellee. security for the payment of this note, or any note given in extension or renewal thereof,
as well as for the payment of any other liability or liabilities of the undersigned to the
1.Insolvent Cannot Make Preference.—Where a person files a petition in the Court of
said bank due or to become due, whether now existing or hereafter arising, the following
First Instance to be adjudged insolvent under Act No. 1956 of the Philippine
property owned by the undersigned." The note then specifies the number of the quedan
Legislature, pending the final adjudication, the filing of the petition ipso facto takes
and the amount of copra in piculs, and states that the quedan was issued by Nieva,
away from, and deprives the petitioner of the right to, do or commit any act of
Ruiz and Company. The note for P8,000, dated January 18, 1919, was secured by
preference as to creditors.
warehouse receipt No. 30; for P20,000, dated January 22, 1919, was secured by
2.Title of Assignee Relates Back.—Where an insolvency petition is filed in the proper
receipt No. 35; for P20,000, dated January 24, 1919 was secured by receipt No. 38; for
court, and, in the ordinary course of business, the petitioner is adjudged insolvent
P20,000, dated January 27, 1919, was secured by receipt No. 41; for P14,000, dated
and an assignee is duly elected, the title of the assignee to the property of the
January 28, 1919 was secured by receipt No. 42; for P18,000, dated January 21, 1919,
insolvent relates back and becomes vested as of the date the insolvency petition
was secured by receipt No. 33; for P18,000, dated January 23, 1919, was secured by
was filed.
receipt No. 36; and for P18,000, dated January 25, 1919, was secured by receipt No.
3.Title Carries Possession.—Where in January, 1919, a firm borrowed money from a
39, making a total of 16,051.10 piculs of copra, covered by the warehouse receipts of
bank and executed its promissory notes and delivered to the bank negotiable
the firm of Nieva, Ruiz and Company issued to the firm of Salvador Hermano, and by
quedans as collateral to secure their payment, the indorsement and delivery of the
that firm pledged as collateral to the defendant to secure the payment of the eight
quedans and the pledging of the collateral ipso facto carries with it the title to the
above-described notes. Each of them further recites that "on the nonperformance of
property described in the quedans, together with the constructive possession of it,
this promise, or upon the non-payment of any of the liabilities above-mentioned, or upon
and legally the owner and holder of the quedans becomes the owner of the property
the failure of the undersigned forthwith, with or without notice, to furnish satisfactory
described in the quedans, and is entitled to its possession.
additional securities in case of decline, as aforesaid, then and in either such case, this
4.Owner of Negotiable Quedans is Owner of Property.—Where quedans were
note and all liabilities of the undersigned, or any of them, shall forthwith become due
endorsed and delivered in January, 1919, to secure a preexisting debt, and the
and payable, without demand or notice, and full power and authority are hereby given
insolvency petition was filed on April 21, 1919, the holder of such quedans is the
to said bank to sell, assign, transfer and deliver the whole of the said securities, or any
owner of the property therein described, as against the assignee or any creditor of
part thereof, or any substitutes therefor or any additions thereto, or any other securities
the insolvent.
or property given unto or left in the possession of or hereafter give unto or left in the
5.Statements and Representations do not Convey Title.—"Where on February 10,
possession of said bank by the undersigned for safe keeping or otherwise, at any
1919, a firm received certain quedans under a promise to return them on or before
brokers' board or at public or private sale, at the option of said bank or of its president
February 27th, to which was attached a certificate of the firm dated February 8,
or secretary, without either demand, advertisement or notice of any kind, which are
1919, that certain described property was in its bodegas which it promised would
hereby expressly waived. At any such sale, the said bank may itself purchase the whole
not be removed without first consulting its creditor, construed together, such
or any part of the property sold, free from any right of redemption on the part of the
instruments do not constitute a negotiable quedan, and are nothing more than a
undersigned, which is hereby waived and released." Stamped in red ink across the face
representation and a promise and do not convey title to the property.
of each quedan are the words "Negotiable Warrant," and each of them was in the usual
6.Assignee Entitled to Possession.—Where it appears that on February 8, 1919, on
form of warehouse receipts.
behalf of one of its creditors, a firm made a representation, and on February 10th,
On February 10, 1919, the firm of Salvador Hermanos withdrew from the defendant
made a certificate as to certain property, and filed its insolvency petition on April
bank, by and with its consent, warehouse receipts Nos. 33, 36, and 39 above described,
21, 1919, and the property was left and remained in possesion of the insolvent firm,
which the bank was holding as collateral security for each of the three 18,000-peso
and was not delivered to the creditor until May 3, 1919, the assignee of the insolvent
notes amounting to P54,000. the total amount of copra evidenced by the receipts
firm, as against such creditor, is entitled to the possession of the property or its
withdrawn was 6,024.55 piculs, the declared value of which, shown on the face of such
value.
receipts, was P90,368.25. At the time of the withdrawal, the firm executed the following
7.Declared Value May Become Market Value.—Where there is no evidence of the
writing:
actual market value of the property, but the parties themselves placed a declared
We received from the Philippine National Bank the warehouse receipts issued by
value on the property at the time of delivery, in the absence of other testimony, the
Messrs. Nieva, Ruiz and Company, the contents of which are as follows:
declared value will be considered and treated as the market value.
No. Date Sacks Piculs Declared Value
APPEAL from a judgment of the Court of First Instance of Manila. Ostrand, J.
33 January 21/19 2,325 2,040.55 P30,608.25
JOHNS, J.: 36 January 23/19 2,175 1,992.00 29,880.00
The plaintiff and defendant are corporations organized under the laws of the Philippine 39 January 25/19 2,335 1,992.00 29,880.00
Islands and domiciled in the city of Manila. Total 6,835 6,024.55 90,368.25
We promise to return to his bank the warehouse receipts above cited on or before the thereof shall be published in a newspaper, and that "said order shall further
27th instant. These warehouse receipts are guaranteed by the attached certificate of contain an absolute injunction forbidding the petitioning debtor from disposing
existence of the effects of the 8th of February, 1919, issued by us. in any manner of his property, except in so far as concerns the ordinary
operations of commerce or of industry in which the petitioner is engaged, and,
Manila, P.I., February 10, 1919. furthermore, from making any payments outside of the necessary or legitimate
SALVADOR HERMANOS. expenses of his business or industry, so long as the proceedings relative for
Per (Sgd.) G. SALVADOR. the suspension of payments are pendings, and said proceedings for the
to which was attached this writing: purposes of this Act shall be considered to have been instituted from the date
MANILA, P. I., February 8, 1919. of the filing of the petition."
We hereby certify that there exist the following articles in our bodegas as follows: Section 14, chapter 3, provides that any person owing debts exceeding
P1,000 may apply to be discharged from his debts and liabilities by petition to
Soler Bodega. the Court of First Instance in which he has resided for six months preceding
100 tons kapok @ 200.00 ................ P20,000.00 the filing of the petition.
100 piculs hemp @ 60.00 .................... 6,000.00 Section 18 enacts that upon receiving and filing of the petition, schedule, and
20,000 sacks (empty) @ 0.30 .............. 6,000.00 inventory, the court, or the judge, shall make an order declaring the petitioner
1 lot gum copal ..................................... 1,900.00 insolvent, and "shall further forbid the payment to the debtor of any debts due
1 lot gum elemi ..................................... 1,700.00 to him and the delivery to the debtor, or to any person for him, of any property
500,000 rattan @ 12.00 ....................... 6,000.00 belonging to him, and the transfer of any property by him, and shall further
Aceites y grasas ...................................... 800.00 appoint a time and place for a meeting of the creditors to choose an assignee
9,000 sacks common salt @ 2.00 ...... 18,000.00 of the estate."
60,400.00 On April 21, 1919, Salvador Hermanos filed a petition of insolvency in the Court of First
Instance of the city of Manila. Article 5 of the petition recites:
Wise and Co. — Gagalañgin Bodega. That the following property and merchandise are being pledged in favor of the
905 cas. Gs. in case @ 12.75 ....................... P11,538.75 Philippine National Bank, as shown by a written document, on account of its
77 Cas, Gs. in drums credit which amounts to P175,563.19, which are described as follows:
54 gals. 64.89 .................................................... 4,989.60
16,528.35 81,904 kilos kapok @ 0.20 ko ............................ P16,380.80
P76,928.35 521,600 pieces rattan split 11.00 m ....................... 5,737.60
======== 93.94 piculs almaciga value ................................... 2,300.00
and promise that none of the above articles would be removed without consulting first {@ 53 gls. each}
with the Philippine National Bank. 80 drums Union gasoline {@1.485 gal. } ................ 6,415.20
SALVADOR HERMANOS. 100 cases gasoline 14.00 cs. ..................................1,400.00
Per (Sgd.) G. SALVADOR. 8 drums gasoline @ 54 gals, ea. 1.485 gl ................. 641.52
Neither writing was in any manner authenticated by a notary or by a competent public 10,000 piculs copra p. picul 14.50 ...................... 145,000.00
official. The writing of February 10 is in form a receipt from the firm of Salvador 35 bales cardboard value ....................................... 1,451.52
Hermanos to the Philippine National Bank of the quedans, or warehouse receipts, for P179,326.64
the copra therein described. The one of February 8 is, in legal effect, the certificate of
Salvador Hermanos "that there exist the following articles in our bodegas as follows:" The testimony is undisputed and conclusive that about May 3, 1919, Gregorio Salvador,
(Here follows the described property.) That is to say, that the firm certifies that the a member of the firm of Salvador Hermanos, deliver certain goods, wares, and
property described is in the warehouse of the firm. merchandise to and in the warehouse of Nieva, Ruiz and Company, and requested that
Act No. 1956 of the Philippine Legislature provides for the suspension of payments, the firm to issue its receipt therefor to and in favor of the Philippine National Bank, and that,
relief of insolvent debtors, the protection of creditors, and the punishment of fraudulent pursuant to such request, that firm did issue eight quedans to the bank as follows:
debtors. The Act provides: No. 161 for 32 bales of hemp;
SECTION 1. This Act shall be known and may be cited as The Insolvency No. 162 for 953 bundles of rattan;
Law, and in accordance with its provisions every insolvent debtor may be No. 165 for 72 bundles of empty sacks;
permitted to suspend payments or be discharged from his debts and liabilities. No. 167 for 136 sacks of gum;
Section 2 provides that debtor who possesses sufficient property to cover the No. 168 for 1,461 bales of kapok;
debts, be it an individual, firm or corporation, and who is unable to meet them No. 175 for 288 packages of Talcum Powder;
at maturity, "may petition that he be declared in the state of suspension of No. 176 for 35 packages of cardboard; and
payments by the court, or the judge thereof in vacation." No. 185 for 134 bundles of empty sacks.
Section 3 enacts that upon the filing of the petition, the court shall make an On and between May 6, 1919 and August 7, 1919, acting under the terms and
order calling a meeting of creditors specifying the time and place; that notice provisions of its respective notes, the defendant bank sold all of the personal property
for which it held warehouse receipts, or which had been surrendered to it by the reason that the plaintiff claims that its was the property of the firm, and that the
Hermanos firm, save and except the property described in the three warehouse defendant should account to the assignee.
receipts, which were released and surrendered to the firm on February 10, 1919. Each quedan, or warehouse receipt, was specifically described in a given note, and
Based upon its insolvency petition, and in the ordinary course of business, the firm of was made a part of it, and the note recites that, for any breach of its terms or conditions,
Salvador Hermanos was adjudged insolvent, and on July 19, 1919, the Philippine Trust the bank has full power and authority "to sell, assign, transfer and deliver the whole of
Company was elected assignee of said firm and duly qualified. September 13, 1919, the said security, or any part thereof, etc.," and that "at any such sale, the said bank
as such assignee, it made a demand upon the bank for the surrender and delivery of may itself purchase the whole any part of the property sold, free from any right of
the property described in all of the above receipts, and, upon the bank's refusal, redemption on the part of the undersigned, which is hereby waived and released."
commenced this action to recover its value alleged to be P242,579.61, claiming that on In addition, the quedan itself was delivered to and held by the bank, and the
April 21, 1919, the firm of Salvador Hermanos was the sole and exclusive owner of the warehouseman recognized the bank as the owner of the property. Legally speaking,
property, and that, as to the copra, about June 28, 1919, and after the filing of the the owner of the quedans, or warehouse receipts, was the owner of the property
insolvency petition, the bank unlawfully seized and converted the copra to its own use, described in them, and the quedans were given as collateral to secure promissory
the value of which was P192,260. For a second cause of action, the plaintiff alleges notes, which, for value received, were executed to the bank.
that, as such assignee, it was the owner of the remaining personal property, and that, The execution of the notes, the physical possession of the negotiable quedan, or
after the insolvency petition was filed, the defendant unlawfully seized and converted warehouse receipt, and the recognition of ownership by the warehouseman, legally
such property to its own use, and that it was of the value of P50,319.61. carried with it both the titled to, and the possession of, the property. In such a case, a
For answer, the bank makes a general denial, as to each cause of action, of all of the title is not founded on a public instrument which should be authenticated by a notary or
material allegations of the complaint. This presents the question as to who is the owner by competent public official. Legally speaking, the execution of the promissory notes
and entitled to possession of the property. There is but little, if any, dispute as to the and the pledging of the quedans, or warehouse receipts, as collateral, and the
facts. describing of them in the notes, and the manual delivery of the quedan, or warehouse
It is conceded that in January, 1919, the firm of Salvador Hermanos executed to the receipt itself carries with it not only the title, but the legal possession of the property. In
Philippine National Bank the eight promissory notes above described, and that each other words, as to the property described in the quedans, or warehouse receipts, which
note was secured by the quedan, or warehouse receipt, of Nieva, Ruiz and Company, were pledged, as collateral, in January, 1919, to secure the eight respective promissory
issued to the firm of Salvador Hermanos for so many piculs of copra. That the notes notes, both the title and the possession of that property were delivered to and vested
are of the same form, the only difference being the date and the amount of the note, in the defendant bank in January, 1919. Three of those quedans, or warehouse
and the number of the quedan, or warehouse receipt, and the amount of copra in piculs. receipts, were returned to the firm by the bank on February 10, 1919, but the bank still
Each warehouse receipt was duly numbered, dated and signed by Nieva, Ruiz and owned and held the notes, which were secured by those warehouse receipts, and no
Company, and recites "received from Salvador Hermanos the following packages of part of the debt itself was paid by or through the surrender of the receipts. For such
copra as specified below, which are stored in warehouse No. 2, situated at reason, as to the first cause of action, the plaintiff cannot recover, and, as to it, the
_______________, subject to the terms and conditions stated on the face and back judgment of the lower court should be affirmed.
hereof, to be delivered unto Salvador Hermanos, or order," giving the number of the The second cause of action presents another and different question.
warehouse where located, and the number of sacks, gross weight and the declared February 10, 1919, for some unexplained reason, the bank surrendered and returned
value; across the face of each receipt is stamped in red ink the words "Negotiable to Salvador Hermanos the three quedans, or warehouse receipts, Nos. 33, 36 and 39,
Warrant." Among the conditions printed on the back of the receipt is paragraph 4, as which the firm has pledged to it as collateral on January 21, 23, and 25, 1919, to secure
follows: the payment of the three notes of P18,000 each, executed on those respective dates.
4. This Company will deliver the packages noted hereon, on surrender to the In its receipt for them, the firm promised to return the quedans to the bank "on or before
Company of this warrant endorsed by the party who shall be for the time the 27th instant," meaning January 27, 1919, and it was therein stated that such
registered in the books of the Company as the owner of the packages warehouse receipts "are guaranteed by the attached certificate of existence of the
described hereon; and the production by the Company of this warrant shall at effects of the 8th of February, 1919, issued by us." The legal effect of this receipt is a
all times be conclusive proof that the Company and shall exempt the Company promise on the part of the firm to return the three quedans on or before January 27,
from all responsibility in connection with the said packages or goods. 1919, and a statement that such receipts are guaranteed by the attached certificate of
Also the following: the existence in the warehouse of the property described in the certificate. The
"Delivery is hereby authorized unto _____________________," opposite which some statement of February 8, recites "we hereby certify that there exist the following articles
of the receipts were signed by the firm of Salvador Hermanos, and others were not in our bodegas." Then follows a description of the property. This is nothing but a
signed by any one. statement or representation to the effect that the firm has the property in its warehouse.
The fact remains that at the time the eight promissory notes were executed, a given Nothing more. After describing the property, the certificate then says: "And promise that
quedan, or warehouse receipt, was described and incorporated in the note as to its none of the above articles would be removed without consulting first with the Philippine
number, when and by whom issued, and the property it represented, and each receipt National Bank." There is no statement or representation of any kind showing when or
was then delivered by the firm to the defendant bank, all of which was during the month from whom the property was received, or how it was held, or who was the owner, or
of January, 1919. The bank never had the manual possession or the physical control when or to whom it would be delivered. When analyzed, this writing is nothing more
of any of this property until after the insolvency petition was filed, and it is for such than a certificate of the firm that the described property was then in its warehouse, and
a promise that none of the "articles would be removed without consulting first with the
Philippine National Bank." Such a writing would not transfer the title of the property to There is not any evidence of the actual market value of the property, but it does appear
the bank, or give it possession, either actual or constructive. It will be noted that both that at the time quedans Nos. 161 to 185, inclusive, were issued, the bank itself placed
the receipt of February 10 and the certificate and promise of February 8, are signed by a declared value upon that property of P40,742.62. Those quedans do not include the
the firm of Salvador Hermanos, and that the certificate says that the property was then gasoline which the bank admits it sold on May 24, 1919, for P4,989.60, and the gasoline
in the firm's warehouse, and that neither instrument was in any manner authenticated when it held on May 28, 1919, for the sum of P2,641.80, or P7,631.40 which it received
by a notary or a competent public officials, as provided by article 1216 of the Civil code, for gasoline. It is true that it appears from the sales report that the bank sold the property
and that the property was in the warehouse of the firm. described in quedans Nos. 161 to 185, inclusive, for much less money than the
Article 1863 of the Civil Code provides: valuation which it placed upon the property, but, in legal effect, when the quedans were
In addition to the requisites mentioned in article 1857, it shall be necessary, in issued, the conversion of that property took place at the time they were issued to and
order to constitute the contract of pledge, that the pledge be placed in the accepted by the bank, and it should be charged with the value of the property at the
possession of the creditor or of a third person appointed by common consent. time of its conversion, and in the absence of any testimony as to the market value, it
But here it appears from the certificate that the property was then in the possession of should be charged with the amount which it actually received from the sale of the
the firm, who made the certificate, and that it was in the possession of that firm when gasoline.
its insolvency petition was filed on April 21, 1919. It further appears that on May 3, It will be noted that the promissory notes executed by the firm to the bank recite:
1919, Gregorio Salvador, a member of the firm, appeared at the offices of Nieva, Ruiz Full power and authority are hereby given to said bank to sell, assign, transfer
and Company, and requested that firm to issue its warehouse receipts to the Philippine and deliver the whole of the said securities, or any part thereof, or any
National Bank for certain goods, which on that date he placed in the warehouse of that substitutes therefor or any additions thereto, or any other securities or property
company, and, in accord with his request, Nieva, Ruiz and Company did issue to and given unto or left in the possession of or hereafter given unto or left in the
in favor of the Philippine National Bank the following quedans, or warehouse receipts: possession of the said Bank by the undersigned.
No. 161 for 32 bales of hemp, in warehouse No. 2, of the declared value of P880; Hence, the power and authority of the bank to sell, assign, or transfer is confined to
No. 162 for 953 bundles of rattan, in warehouse No. 2, of the declared value of property which was given unto or left in its possession.
P3,700.40; As we have pointed out none of the property described in the certificate of February 8
No. 165 for empty sacks, in warehouse No. 2, of the declared value P450; was ever given unto or left in the possession of the bank.
No. 167 for 136 sacks, of almaciga, in warehouse No. 1, of the declared value of The insolvency petition was filed April 21, 1919, and the plaintiff was duly elected and
P2,300; qualified, as assignee, on July 19, 1919, and, as such, it represents both the creditors
No. 168 for 1,461 bales of kapok, in warehouse No. 1, of the declared value of and the firm. Although it was not appointed until July, 1919, yet when it did qualify its
P14,571.48; right and title to all the property of the firm related back and became vested as of April
No. 175 for 288 packages of talcum power, in warehouse No. 5, of the declared value 21, 1919, when the insolvency petition was filed, and from that time it alone had the
of P15,582.26; power and authority to act for and represent the firm. Under the terms and provisions
No. 176 for 35 packages of cartulina, in warehouse No. 5, of the declared value of of Act No. 1956 of the Philippine Legislature, after it was filed, the power of the firm or
P2,588.48; and any member of it to deliver possession of the property to secure a preexisting debt was
No. 185 for 134 bundles of empty sacks, in warehouse No. 2, of the declared value of suspended pending final adjudication. That is to say, if the debt was not legally secured
P670, making a total declared value of the property evidenced by such receipts of before the insolvency petition was filed, no member of the firm had any legal right to
P40,742.62. secure it after the petition was filed, and any attempt to do so would be null and void.
In the second cause of action, the complaint alleges that the defendant took and As to the first cause of action, we hold that in January, 1919, the bank became and
converted 88 drums of gasoline and 100 cases of gasoline; none of which is included remained the owner of the five quedans Nos. 30, 35, 38, 41 and 42; that they were in
in the above receipts. Otherwise the property described in quedans Nos. 161 to 185, form negotiable, and that, as such owner, it was legally entitled to the possession and
inclusive, correspond and are identical with the property described in the second cause control of the property therein described at the time the insolvency petition was filed
of action.1awphil.net and had a right to sell it and apply the proceeds of the sale to its promissory notes,
The bank founds its rights to claim the property described in the quedans Nos. 161 to including the three notes of P18,000 each, which were formerly secured by the three
185, inclusive, upon the firm's certificate of February 8, 1919, above quoted. By quedans Nos. 33, 36, and 39, which the bank surrendered to the firm. That is to say,
comparison, it will be found that the property described in such quedans, or warehouse the bank had a legal right to apply the proceeds from the property descried in the five
receipts, does not correspond with the property described in the firm's certificate of remaining quedans to the payment of its eight promissory notes.
February 8. In the certificate of February 8, there are aceites y grasas, or oil and grease, As to the second cause of action, the judgment of the lower court is reversed, and one
valued at P800, and 9,000 sacks of common salt valued at P18,000 in the bodegas of will be entered here in favor of the Philippine National Bank, the defendant, for
the firm, and 905 cases of gasoline valued at P11,538.75, and 77 cases of gasoline in P40,742.62, the declared value of the property described in quedans Nos. 161 to 185,
drums, 54 gallons, valued at P4,989.60, in the warehouse of Wise and Company, that inclusive, and for the further sum of P7,631.40, the value of the gasoline sold in May,
are not described in the quedans Nos. 161 to 185 inclusive. It also appears that Talcum 1919, or a total of P48,374.02 with interest thereon from September 22, 1919, at the
Power in receipt No. 175 of the value of P17,140, and cartulina in receipt No. 176 of rate of 6 per cent per annum, and for the costs and disbursements in this and the lower
the value of P2,847 are not included in the property described in the certificate of court. So ordered.
February 8, making a total value of the property described in those two receipts, and Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor and Romualdez, JJ.,
which is not included in the certificate of February 8, of P19,987. concur.
EN BANC Banking Corporation to secure the payment of his preexisting debts to the
G.R. No. L-34655 March 5, 1932 latter:
SIY CONG BIENG & CO., INC., plaintiff-appellee, vs. HONGKONG & SHANGHAI
BANKING CORPORATION, defendant-appellant. No. Warehouseman Depositor Bales
DeWitt, Perkins & Brandy for appellant.
Feria & La O for appellee. 1707 Public Warehouse Co Siy Cong Bieng & Co., Inc. 27
1. 1.NEGOTIABLE WAREHOUSE RECEIPTS; ENDORSED IN BLANK.—
Plaintiff sold certain quantity of hemp to one by the name of Otto Ranft 133 W.F. Stevenson Co do 67
by quedans and sent the quedans,together with the covering invoice, to
Ranft, without having been paid for, but plaintiff's understanding was that the 1722 Public Warehouse Co do 60
payment would be made against the quedans. Ranft on the same day turned
over the quedans to the defendant bank to secure payment of his preexisting 1723 do do 4
debts. Ranft died on the evening of the day the quedans were delivered to
the bank. Plaintiff brought this action to recover the quedans or their 1634 The Philippine Warehouse Company do 99
values. Held: Taking into consideration that the quedanswere negotiable in
form and duly endorsed in blank by the plaintiff and by Otto Ranft, it follows 1918 Public Warehouse Co O. Ranft 166
that on delivery of the quedans to the bank, they were no longer the property
of the indorser unless he liquidated his debts with the bank. 2 Siy Cong Bieng & Co., Inc do 2
1. 2.ID.; ID.; AUTHORITY TO NEGOTIATE.—The bank had a perfect right to
accept the quedans in security of preexisting debts without investigation of
1702 The Philippine Warehouse Company Siy Cong Bieng & Co., Inc. 39
the authority of the person negotiating them. (Sections 47, 38 and 40 of the
Warehouse Receipts Act No. 2137.) And that the baled hemp covered by these warehouse receipts was worth
1. 3.ID.; ID.; ESTOPPEL TO DENY VALID TITLE.—Since plaintiff had P31,635; receipts number 1707,133,1722, 1723, 1634, and 1702 being
voluntarily clothed the person who negotiated the quedans with all the endorsed in blank by the plaintiff and Otto Ranft, and numbers 1918 and 2, by
attributes of ownership and upon which the bank relied, it is estopped to deny Otto Ranft alone.
that the bank had a valid title to the quedans. 4. That in the night of June 25, 1926, said Otto Ranft died suddenly
APPEAL from a judgment of the Court of First Instance of Manila. Sison, J. at his house in the City of Manila.
5. That both parties submit this agreed statement of facts, but reserve
OSTRAND, J.: their right to have in evidence upon other points not included herein,
This action was brought in the Court of First Instance of Manila to recover the sum of and upon which they cannot come to an agreement.
P31,645, the value of 464 bales of hemp deposited in certain bonded warehouses as Manila, August 7, 1929.
evidenced by the quedans (warehouse receipts) described in the complaint, The evidence shows that on June 25, 1926, Ranft called at the office of the herein
said quedans having been delivered as pledge by one Otto Ranft to the herein plaintiff to purchase hemp (abaca), and he was offered the bales of hemp as described
defendant, the Hongkong and Shanghai Banking Corporation, for the guarantee of a in the quedans above mentioned. The parties agreed to the aforesaid price, and on the
preexisting debt of the former to the latter. The record shows that both parties, through same date the quedans, together with the covering invoice, were sent to Ranft by the
their respective counsel, subscriber and submitted to the court below the following plaintiff, without having been paid for the hemp, but the plaintiff's understanding was
agreement of facts: that the payment would be made against the same quedans, and it appear that in
STIPULATION OF FACTS previous transaction of the same kind between the bank and the plaintiff, quedans were
(Translated into English) paid one or two days after their delivery to them.
Come now the parties, both the plaintiff and the defendant Hongkong & In the evening of the day upon which the quedans in question were delivered to the
Shanghai Banking Corporation, through their respective counsel in the above herein defendant, Ranft died, and when the plaintiff found that such was the case, it
entitled case, and respectfully submit to the court the following agreed immediately demanded the return of the quedans, or the payment of the value, but was
statements of facts: told that the quedans had been sent to the herein defendant as soon as they were
1. That both the plaintiff and the defendant Hongkong & Shanghai Banking received by Ranft.
Corporation are corporations domicile in the City of Manila and duly authorized Shortly thereafter the plaintiff filed a claim for the aforesaid sum of P31,645 in the
to transact business in accordance with the laws of the Philippine Islands. intestate proceedings of the estate of the deceased Otto Ranft, which on an appeal
2. That the plaintiff is a corporation engaged in business generally, and that form the decision of the committee on claims, was allowed by the Court of First Instance
the defendant Hongkong & Shanghai Banking Corporation is a foreign bank in case No. 31372 (City of Manila). In the meantime, demand had been made by the
authorized to engage in the banking business in the Philippines. plaintiff on the defendant bank for the return of the quedans, or their value, which
3. That on June 25, 1926, certain negotiable warehouse receipts described demand was refused by the bank on the ground that it was a holder of the quedans in
below were pledge by Otto Ranft to the defendant Hongkong & Shanghai due course. Thereupon the plaintiff filed its first complaint against the defendant,
wherein it alleged that it has "sold" the quedans in question to the deceased O. Ranft
for cash, but that the said O. Ranft had not fulfilled the conditions of the sale. Later on, value therefor, without notice of the breach of duty, or fraud, mistake, or
plaintiff filed an amended complaint, wherein they changed the word "sold" referred to duress.
in the first complaint to the words "attempted to sell". SEC. 38. Negotiation of negotiable receipts by indorsement. — A negotiable
Upon trial the judge of the court below rendered judgment in favor of the plaintiff receipt may be negotiated by the indorsement of the person to whose order
principally on the ground that in the opinion of the court the defendant bank "could not the goods are, by the terms of the receipt, deliverable. Such indorsement may
have acted in good faith for the reason that according to the statements of its own be in blank, to bearer or to a specified person. . . . Subsequent negotiation
witness, Thiele, the quedans were delivered to the bank in order to secure the debts of may be made in like manner.
Ranft for the payment of their value and from which it might be deduced that the said SEC. 40. Who may negotiate a receipt. — A negotiable receipt may be
bank knew that the value of the said quedans was not as yet paid when the same were negotiated:
endorsed to it, and its alleged belief that Ranft was the owner of the said quedans was (a) By the owner thereof, or
not in accordance with the facts proved at the time"; and that, moreover, the (b) By any person to whom the possession or custody of the receipt has been
circumstances were such that "the bank knew, or should have known, that Ranft had entrusted by the owner, if, by the terms of the receipt, the warehouseman
not yet acquired the ownership of the said quedans and that it therefore could not undertakes to deliver the goods to the order of the person to whom the
invoke the presumption that it was acting in good faith and without negligence on its possession or custody of the receipt has been entrusted, or if at the time of
part". such entrusting the receipt is in such form that it may be negotiated by
In our opinion the judgment of the court below is not tenable. It may be noted, first, that delivery.
the quedans in question were negotiable in form; second, that they were pledge by Otto The question as to the rights the defendant bank acquired over the aforesaid quedans
Ranft to the defendant bank to secure the payment of his preexisting debts to said bank after indorsement and delivery to it by Ranft, we find in section 41 of the Warehouse
(paragraph 3 of the Stipulation of Facts); third, that such of the quedans as were issued Receipts Act (Act No. 2137):
in the name of the plaintiff were duly endorsed in blank by the plaintiff and by Otto Ranft; SEC. 41. Rights of person to whom a receipt has been negotiated. — A person
and fourth, that the two remaining quedans which were duly endorsed in blank by him. to whom a negotiable receipt has been duly negotiated acquires thereby:
When these quedans were thus negotiated, Otto Ranft was indebted to the Hongkong (a) Such title to the goods as the person negotiating the receipt to him had or
& Shanghai Banking Corporation in the sum of P622,753.22, which indebtedness was had ability to convey to a purchaser in good faith for value, and also such title
partly covered by quedans. He was also being pressed to deposit additional payments to the goods as the depositor of person to whose order the goods were to be
as a further security to the bank, and there is no doubt that the quedans here in delivered by the terms of the receipt had or had ability to convey to a purchaser
question were received by the bank to secure the payment of Ranft's preexisting debts; in good faith for value, and. . . .
it is so stated in paragraph 3 of the stipulation of the facts agreed on by the parties and In the case of the Commercial National Bank of New Orleans vs. Canal-Louisiana Bank
hereinbefore quoted. & Trust Co. (239 U.S., 520), Chief Justice Hughes said in regard to negotiation of
It further appears that it has been the practice of the bank in its transactions with Ranft receipts:
that the value of the quedans has been entered in the current accounts between Ranft It will be observed that "one who takes by trespass or a finder is not included
and the bank, but there is no evidence to the effect that the bank was at any time bound within the description of those who may negotiate." (Report of Commissioner
to pay back to Ranft the amount of any of the quedans, and there is nothing in the on Uniform States Laws, January 1, 1910, p. 204.) Aside from this, the
record to show that the bank has promised to pay the values of the quedans neither to intention is plain to facilitate the use of warehouse receipts as documents of
Ranft nor to the herein plaintiff; on the contrary, as stated in the stipulation of facts, the title. Under sec. 40, the person who may negotiate the receipt is either the
"negotiable warehouse receipts — were pledged by Otto Ranft to the defendant "owner thereof", or a "person to whom the possession or custody of the receipt
Hongkong & Shanghai Banking Corporation secure the payment of his preexisting has been intrusted by the owner" if the receipt is in the form described. The
debts to the latter", and taking into consideration that the quedans were negotiable in warehouse receipt represents the goods, but the intrustion of the receipt, as
form and duly endorsed in blank by the plaintiff and by Otto Ranft, it follows that on the stated, is more than the mere delivery of the goods; it is a representation that
delivery of the qeudans to the bank they were no longer the property of the indorser the one to whom the possession of the receipt has been so intrusted has the
unless he liquidated his debt with the bank. title to the goods. By sec. 47, the negotiation of the receipt to a purchaser for
In his brief the plaintiff insists that the defendant, before the delivery of the quedans, value without notice is not impaired by the fact that it is a breach of duty, or
should have ascertained whether Ranft had any authority to negotiate the quedans. that the owner of the receipt was induced "by fraud, mistake, or duree" to
We are unable to find anything in the record which in any manner would have compelled intrust the receipt to the person who negotiated it. And, under sec. 41, one to
the bank to investigate the indorser. The bank had a perfect right to act as it did, and whom the negotiable receipt has been duly negotiated acquires such title to
its action is in accordance with sections 47, 38, and 40 of the Warehouse Receipts Act the goods as the person negotiating the receipt to him, or the depositor or
(Act No. 2137), which read as follows: person whose order the goods were delivered by the terms of the receipt,
SEC. 47. When negotiation not impaired by fraud, mistake, or duress. — The either had or "had ability to convey to a purchaser in good faith for value." The
validity of the negotiation of a receipt is not impaired by the fact that such clear import of these provisions is that if the owner of the goods permit another
negotiation was a breach of duty on the part of the person making the to have the possession or custody of negotiable warehouse receipts running
negotiation, or by the fact that the owner of the receipt was induced by fraud, to the order of the latter, or to bearer, it is a representation of title upon
mistake, or duress to intrust the possession or custody of the receipt was which bona fide purchasers for value are entitled to rely, despite breaches of
negotiated, or a person to whom the receipt was subsequent negotiated, paid trust or violations of agreement on the part of the apparent owner.
In its second assignment of error, the defendant-appellant maintains that the plaintiff-
appellee is estopped to deny that the bank had a valid title to the quedans for the
reason that the plaintiff had voluntarily clothed Ranft with all the attributes of ownership
and upon which the defendant bank relied. In our opinion, the appellant's view is
correct. In the National Safe Deposit vs. Hibbs (229 U.S., 391), certain certificates of
stock were pledged as collateral by the defendant in error to the plaintiff bank, which
certificates were converted by one of the trusted employees of the bank to his own use
and sold by him. The stock certificates were unqualified endorsed in blank by the
defendant when delivered to the bank. The Supreme Court of the United States through
Justice Day applied the familiar rule of equitable estoppel that where one of two
innocent persons must suffer a loss he who by his conduct made the loss possible must
bear it, using the following language:
We think this case correctly states the principle, and, applied to the case in
hand, is decisive of it. Here one of two innocent person must suffer and the
question at last is, Where shall the loss fall? It is undeniable that the broker
obtained the stock certificates, containing all the indicia of ownership and
possible of ready transfer, from one who had possession with the bank's
consent, and who brought the certificates to him, apparently clothed with the
full ownership thereof by all the tests usually applied by business men to gain
knowledge upon the subject before making a purchase of such property. On
the other hand, the bank, for a legitimate purpose, with confidence in one of
its own employees, instrusted the certificates to him, with every evidence of
title and transferability upon them. The bank's trusted agent, in gross breach
of his duty, whether with technical criminality or not is unimportant, took such
certificates, thus authenticated with evidence of title, to one who, in the
ordinary course of business, sold them to parties who paid full value for them.
In such case we think the principles which underlie equitable estoppel place
the loss upon him whose misplaced confidence has made the wrong possible.
...
We regret that the plaintiff in this case has suffered the loss of the quedans, but as far
as we can see, there is now no remedy available to the plaintiff. The bank is not
responsible for the loss; the negotiable quedans were duly negotiated to the bank and
as far as the record shows, there has been no fraud on the part of the defendant.
The appealed judgment is reversed and the appellant is absolved from the plaintiff's
complaint. Without costs. So ordered.
Johnson, Street, Malcolm, Villamor, Villa-Real and Imperial, JJ., concur.
THIRD DIVISION 2. Declaring said plaintiff as owner and entitled to the possession of Lot 6353 as
described in the sketch, without prejudice to whatever may be the rights thereto of her
G.R. No. 75111 November 21, 1991
sister Melecia Ceno who is said to be presently in China;
MARGARITO ALMENDRA, DELIA ALMENDRA, BERNARDINA OJEDA and 3. Declaring defendant Aleja C. Almendra as owner and entitled to the possession of
MELECIA CENO, petitioners, vs. THE HON. INTERMEDIATE APPELLATE Lot No. 6366 as described in the sketch found on page 44 of the record;
COURT, ANGELES ALMENDRA, ROMAN ALMENDRA and MAGDALENO
4. Declaring said defendant also as owner and entitled to the possession of Lot No.
CENO, respondents.
6352 as described in the sketch, subject to whatever may be the rights thereto of her
Custodio P. Canete for petitioners.
son Magdaleno Ceno who is said to be presently in China.
Serafin P. Ramento and Leon T. Tumandao for private respondents.
Property; Sale; Validity and due execution of deeds of sale.—While petitioners’ No special pronouncement as to costs, except that the fees of the commissioner shall
contention is basically correct, we agree with the appellate court that there is no valid, be proportionately borne by the parties.
legal and convincing reason for nullifying the questioned deeds of sale. Petitioner had SO ORDERED.
not presented any strong, complete and conclusive proof to override the evidentiary Meanwhile, Aleja married Santiago Almendra with whom she had four children named
value of the duly notarized deeds of sale. Moreover, the testimony of the lawyer who Margarito, Angeles, Roman and Delia. During said marriage Aleja and Santiago
notarized the deeds of sale that he saw not only Aleja signing and affixing her acquired a 59,196-square-meter parcel of land in Cagbolo, Abuyog, Leyte. Original
thumbmark on the questioned deeds but also Angeles and Aleja “counting money Certificate of Title No. 10094 was issued therefor in the name of Santiago Almendra
between them,” deserves more credence than the self-serving allegations of the married to Aleja Ceno and it was declared for tax purposes in his name. 5
petitioners. Such testimony is admissible as evidence without further proof of the due In addition to said properties, Aleja inherited from her father, Juan Ceno, a 16,000-
execution of the deeds in question and is conclusive as to the truthfulness of their square-meter parcel of land also in Cagbolo. 6 For his part, her husband Santiago
contents in the absence of clear and convincing evidence to the contrary. inherited from his mother Nicolasa Alvero, a 164-square-meter parcel of residential land
Same; Same; Sale of particular portions of yet undivided real properties.—The located in Nalibunan, Abuyog, Leyte. 7
unquestionability of the due execution of the deeds of sale notwithstanding, the Court
While Santiago was alive, he apportioned all these properties among Aleja's children
may not put an imprimatur on the intrinsic validity of all the sales. The August 10, 1973 in the Philippines, including Bernardina, who, in turn, shared the produce of the
sale to Angeles of one-half portion of the corjugal property covered by OCT No. P10094 properties with their parents. After Santiago's death, Aleja sold to her daughter, Angeles
may only be considered valid as a sale of Aleja’s one-half interest therein. Aleja could Almendra, for P2,000 two parcels of land more particularly described in the deed of
not have sold the particular hilly portion specified in the deed of sale in the absence of sale dated August 10, 1973, 8 as follows:
proof that the conjugal partnership property had been partitioned after the death of
Santiago, Before such partition, Aleja could not claim title to any definite portion of the 1. Half-portion, which pertains to me as my conjugal share, with my late husband
property for all she had was an ideal or abstract quota or proportionate share in the Santiago Almendra of the land located at Bo. Cagbolo, under T/D No. 22234, covered
entire property. by OCT No. P-10094 in name of Santiago Almendra; having an area of 5.9196
hectares; with boundaries specifically designated at the technical descriptions of the
PETITION for certiorari to review the decision of the then Intermediate Appellate Court. title thereof; and hence the half portion subject of sale shall have an area of more or
FERNAN, C.J.: less 2.9598 hectares; specifically designated in the sketch below marked as X: the hilly
portion.
This is a petition for review on certiorari of the then Intermediate Appellate Court's 2. Half-portion of a parcel of land located at Bo. Cagbolo, Abuyog, Leyte under T/D No.
decision and resolution denying the motion for reconsideration of said decision which 27190 in the name of Aleja Ceno; having an area of 1.6000 hectares bounded as
upheld the validity of three (3) deeds of sale of real properties by a mother in favor of follows to wit: N. Cagbolo creek; E. Leon Elmido; S. Magno Elmido and W., Higasan
two of her children in total reversal of the decision the lower court. River, which portion shall have an area of more or less 8000 hec. (sic), and designated
The mother, Aleja Ceno, was first married to Juanso Yu Book with whom she had three as X in the sketch below: 9
children named Magdaleno, Melecia and Bernardina, all surnamed Ceno. Sometime in On December 26, 1973, Aleja sold to her son, Roman Almendra, also for P2,000 a
the 1920's, Juanso Yu Book took his family to China where he eventually died. Aleja parcel of land described in the deed of sale as located in Cagbulo (sic), Abuyog, Leyte
and her daughter Bernardina later returned to the Philippines. "under T/D No. 11500 which cancelled T/D No. 9635; having an area of 6.6181 hec.,
During said marriage, Aleja acquired a parcel of land which she declared in her name assessed at P1,580.00 . . ." 10
under Tax Declaration No. 11500. 1 After Juanso Yu Book's death, Bernardina filed On the same day, Aleja sold to Angeles and Roman again for P2,000 yet another parcel
against her mother a case for the partition of the said property in the then Court of First of land described in the deed of sale 11 as follows:
Instance of Leyte. 2 On August 17, 1970, the lower court 3 rendered a "supplemental
decision" 4 finding that the said property had been subdivided into Lots Nos. 6354 A parcel of land designated as Lot No. 6352 in the name of Melicia Ceno, under Project
(13,788 square meters), 6353 (16,604 square meters), 6352 (23,868 square meters) PLS-645, Abuyog, Leyte, which had been treated in the CIVIL CASE No. 4387, For
and 6366 (71,656 square meters). The dispositive portion of said decision reads: PARTITION OF REAL PROPERTY, CFI-Leyte, Tacloban City, Branch 11; Bernardina
Ojeda, Plaintiff, -vs.- Aleja C. Almendra, defendant, wherein said SUPPLEMENTAL
IN VIEW OF THE FOREGOING, the Court hereby renders judgment: DECISION, dated August 17th, 1970, in said case by Judge Jesus N. Borromeo:
1. Declaring plaintiff Bernardina C. Ojeda as owner and entitled to the possession of PART OF THE DECISION, COMMISSIONER'S REPORT:
Lot No. 6354 as described in the sketch found on page 44 of the record;
Par. 3) That the partition, plaintiff and defendant agreed to exchange the names or signing and affixing her thumbmark on the questioned deeds but also Angeles and
owners of Lot No. 6353 which is in the name of Magdaleno Ceno with Lot No. 6352 in Aleja "counting money between
the name of Melecia Ceno as appearing in the sketch, copy of the Public Land them," 16 deserves more credence than the self-serving allegations of the petitioners.
Subdivision of Abuyog, Leyte, under Project PLS-645 . . . . Such testimony is admissible as evidence without further proof of the due execution of
DISPOSITIVE PORTION OF SAID DECISION: the deeds in question and is conclusive as to the truthfulness of their contents in the
Par. 4) Declaring said defendant (Aleja C. Almendra) also as owner and entitled to the absence of clear and convincing evidence to the contrary. 17
possession of Lot No. 6352 as described in the sketch, subject to whatever may be the The petitioners' allegations that the deeds of sale were "obtained through fraud, undue
rights thereto of her son Magdaleno Ceno who is said to be presently in China. influence and misrepresentation," and that there was a defect in the consent of Aleja in
Aleja died on May 7, 1975. On January 21, 1977 Margarito, Delia and Bernardina filed the execution of the documents because she was then residing with Angeles, 18 had
a complaint against Angeles and Roman for the annulment of the deeds of sale in their not been fully substantiated. They failed to show that the uniform price of P2,000 in all
favor, partition of the properties subjects therein and accounting of their produce. 12 the sales was grossly inadequate. It should be emphasized that the sales were effected
From China, their sister Melecia signed a special power of attorney in favor of between a mother and two of her children in which case filial love must be taken into
Bernardina. Magdaleno, who was still in China, was impleaded as a defendant in the account. 19
case and summons by publication was made on him. Later, the plaintiffs informed the On the other hand, private respondents Angeles and Roman amply proved that they
court that they had received a document in Chinese characters which purportedly had the means to purchase the properties. Petitioner Margarito Almendra himself
showed that Magdaleno had died. Said document, however, was not produced in court. admitted that Angeles had a sari-sari store and was engaged in the business of buying
Thereafter, Magdaleno was considered as in default without prejudice to the provisions and selling logs. 20 Roman was a policeman before he became an auto mechanic and
of Section 4, Rule 18 of the Rules of Court which allows the court to decide a case his wife was a school teacher 21
wherein there several defendants upon the evidence submitted only by the answering The unquestionability of the due execution of the deeds of sale notwithstanding, the
defendants. Court may not put an imprimatur on the intrinsic validity of all the sales. The August 10,
On April 30, 1981, the lower court rendered a decision 13 the dispositive portion of 1973 sale to Angeles of one-half portion of the conjugal property covered by OCT No.
which states: P-10094 may only be considered valid as a sale of Aleja's one-half interesttherein. Aleja
WHEREFORE, judgment is hereby rendered declaring the deeds of sale herein could not have sold particular hilly portion specified in the deed of sale in absence of
(Exhs."E", "F"and"H") to be simulated and therefore null and void; ordering the partition proof that the conjugal partnership property had been partitioned after the death of
of the estate of the deceased Aleja Ceno among her heirs and assigns; appointing the Santiago. Before such partition, Aleja could not claim title to any definite portion of the
Acting Clerk of Court, Atty. Cristina T. Pontejos, as commissioner, for the purpose of property for all she had was an ideal or abstract quota or proportionate share in the
said partition, who is expected to proceed accordingly upon receipt of a copy of this entire property. 22
decision; and to render her report on or before 30 days from said receipt. The expenses However, the sale of the one-half portion of the parcel of land covered by Tax
of the commissioner shall be borne proportionately by the parties herein. Declaration No. 27190 is valid because the said property is paraphernal being Aleja's
SO ORDERED. inheritance from her own father. 23
The defendants appealed to the then Intermediate Appellate Court which, on February As regards the sale of the property covered by Tax Declaration No. 11500, we hold
20, 1986 rendered a decision 14 finding that, in nullifying the deeds of sale in question, that, since the property had been found in Civil Case No. 4387 to have been subdivided,
the lower court totally disregarded the testimony of the notary public confirming the Aleja could not have intended the sale of the whole property covered by said tax
authenticity of the signatures of Aleja on said deeds and the fact that Angeles and declaration. She could exercise her right of ownership only over Lot No. 6366 which
Roman actually paid their mother the amounts stipulated in the contracts. The appellate was unconditionally adjudicated to her in said case.
court also stated that the uniformity in the prices of the sale could not have nullified the Lot No. 6352 was given to Aleja in Civil Case No. 4387 "subject to whatever may be
sale because it had been duly proven that there was consideration and that Angeles the rights thereto of her son Magdaleno Ceno." A reading of the deed of Sale
and Roman could afford to pay the same. Hence, it upheld validity of the deeds of sale 24covering parcel of land would show that the sale is subject to the condition stated
and ordered the partition of the "undisposed" properties left by Aleja and Santiago above; hence, the rights of Magdaleno Ceno are amply protected. The rule on caveat
Almendra and, if an extrajudicial partition can be had, that it be made within a emptor applies.
reasonable period of time after receipt of its decision. WHEREFORE, the decision of the then Intermediate Appellate Court is hereby affirmed
The plaintiffs' motion for reconsideration having been denied, they filed the instant subject to the modifications herein stated. The lower court is directed to facilitate with
petition for review on certiorari contending principally that the appellate court erred in dispatch the preparation and approval of a project of partition of the properties
having sanctioned the sale of particular portions of yet undivided real properties. considered unsold under this decision. No costs.
While petitioners' contention is basically correct, we agree with the appellate court that SO ORDERED. Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.
there is no valid, legal and convincing reason for nullifying the questioned deeds of
sale. Petitioner had not presented any strong, complete and conclusive proof to
override the evidentiary value of the duly notarized deeds of sale. 15Moreover, the
testimony of the lawyer who notarized the deeds of sale that he saw not only Aleja
THIRD DIVISION begot two legitimate children, namely: Pascual Paulmitan, who also died in
G.R. No. 61584 November 25, 1992 1953, 4 apparently shortly after his mother passed away, and Donato Paulmitan, who
DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's daughter while the
FANESA, petitioners, vs. COURT OF APPEALS, ALICIO PAULMITAN, ELENA third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the other son
PAULMITAN, ABELINO PAULMITAN, ANITA PAULMITAN, BAKING PAULMITAN, of Agatona Sagario, is survived by the respondents, who are his children, name: Alicio,
ADELINA PAULMITAN and ANITO PAULMITAN, respondents. Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed Paulmitan.
Civil Law; Succession; In every inheritance the relative nearest in degree Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles
excludes the more distant ones.—Since it is well-settled by virtue of Article 777 of the to the two lots mentioned above remained in the name of Agatona. However, on August
Civil Code that “[t]he rights to the succession are transmitted from the moment of the 11, 1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of Heirship,
death of the decedent,” the right of ownership, not only of Donato but also of Pascual, extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the
over their respective shares in the inheritance was automatically and by operation of only surviving heir of Agatona Sagario. The affidavit was filed with the Register of
law vested in them in 1953 when their mother died intestate. At that stage, the children Deeds of Negros Occidental on August 20, 1963, cancelled OCT No. RO-8376 in the
of Donato and Pascual did not yet have any right over the inheritance since “[i]n every name of Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in
inheritance the relative nearest in degree excludes the more distant ones.” Donato and Donato's name.
Pascual excluded their children as to the right to inherit from Agatona Sagario As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the
Paulmitan, their mother. same in favor of petitioner Juliana P. Fanesa, his daughter. 5
Same; Property; Co-ownership; Even if a co-owner sells the whole property as In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was
his, the sale will affect only his own share but not those of the other co-owners who did forfeited and sold at a public auction, with the Provincial Government of Negros
not consent to the sale.—This Court has ruled that even if a co-owner sells the whole Occidental being the buyer. A Certificate of Sale over the land was executed by the
property as his, the sale will affect only his own share but not those of the other co- Provincial Treasurer in favor of the Provincial Board of Negros Occidental. 6
owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial
Same; Same; Same; Same; Since a co-owner is entitled to sell his undivided Government of Negros Occidental for the amount of P2,959.09. 7
share, a sale of the entire property by one co-owner without the consent of the other On learning of these transactions, respondents children of the late Pascual Paulmitan
co-owners is not null and void.—This is because under the aforementioned codal filed on January 18, 1975 with the Court of First Instance of Negros Occidental a
provision, the sale or other disposition affects only his undivided share and the Complaint against petitioners to partition the properties plus damages.
transferee gets only what would correspond to his grantor in the partition of the thing Petitioners set up the defense of prescription with respect to Lot No. 757 as an
owned in common. affirmative defense, contending that the Complaint was filed more than eleven years
Remedial Law; Appeal; The settled rule is that only questions of law may be after the issuance of a transfer certificate of title to Donato Paulmitan over the land as
raised in a petition for review; Generally, findings of fact made by the trial court and the consequence of the registration with the Register of Deeds, of Donato's affidavit
Court of Appeals are final and conclusive and cannot be reviewed on appeal.— extrajudicially adjudicating unto himself Lot No. 757. As regards Lot No. 1091, petitioner
Petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for Juliana P. Fanesa claimed in her Answer to the Complaint that she acquired exclusive
them to pay private respondents P5,000.00 per year from 1966 until the partition of the ownership thereof not only by means of a deed of sale executed in her favor by her
estate which represents the share of private respondents in the fruits of the land. father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial
According to petitioners, the land is being leased for P2,000.00 per year only. This Government of Negros Occidental.
assigned error, however, raises a factual question. The settled rule is that only Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757,
questions of law may be raised in a petition for review. As a general rule, findings of the trial court issued an order dated April 22, 1976 dismissing the complaint as to the
fact made by the trial court and the Court of Appeals are final and conclusive and cannot said property upon finding merit in petitioners' affirmative defense. This order, which is
be reviewed on appeal. not the object of the present petition, has become final after respondents' failure to
appeal therefrom.
PETITION for review on certiorari, from the decision of the Court of Appeals.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the
ROMERO, J.: trial court decided in favor of respondents as to Lot No. 1091. According to the trial
This is a petition for review on certiorari seeking the reversal of the decision 1 of the court, the respondents, as descendants of Agatona Sagario Paulmitan were entitled to
Court of Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "Alicio one-half (1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to
Paulmitan, et al. v. Donato Sagario Paulmitan, et al." which affirmed the decision 2 of his daughter, petitioner Juliana P. Fanesa, did not prejudice their rights. And the
the then Court of First Instance (now RTC) of Negros Occidental, 12th Judicial District, repurchase by Juliana P. Fanesa of the land from the Provincial Government of Negros
Branch IV, Bacolod City, in Civil Case No. 11770. Occidental did not vest in Juliana exclusive ownership over the entire land but only
The antecedent facts are as follows: gave her the right to be reimbursed for the amount paid to redeem the property. The
Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels trial court ordered the partition of the land and directed petitioners Donato Paulmitan
of land located in the Province of Negros Occidental: (1) Lot No. 757 with an area of and Juliana P. Fanesa to pay private respondents certain amounts representing the
1,946 square meters covered by Original Certificate of Title (OCT) No. RO-8376; and latter's share in the fruits of the land. On the other hand, respondents were directed to
(2) Lot No. 1091 with an area of 69,080 square meters and covered by OCT No. RO- pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price paid by
11653. From her marriage with Ciriaco Paulmitan, who is also now deceased, Agatona
Fanesa to the Provincial Government of Negros Occidental. The dispositive portion of From the time of the death of Agatona Sagario Paulmitan to the subsequent passing
the trial court's decision reads: away of her son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the
WHEREFORE, judgment is hereby rendered on the second cause of action Civil Code provides: "Where there are two or more heirs, the whole estate of the
pleaded in the complain as follows: decedent is, before its partition, owned in common by such heirs, subject to the
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one- payment of debts of the deceased." 12 Donato and Pascual Paulmitan were, therefore,
half undivided portion of Lot 1091 is concerned as to vest ownership over said co-owners of the estate left by their mother as no partition was ever made.
half portion in favor of defendant Juliana Fanesa and her husband Rodolfo When Pascual Paulmitan died intestate in 1953, his children, the respondents,
Fanesa, while the remaining half shall belong to plaintiffs, pro-indiviso; succeeded him in the co-ownership of the disputed property. Pascual Paulmitan's right
2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, of ownership over an undivided portion of the property passed on to his children, who,
now covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The parties from the time of Pascual's death, became co-owners with their uncle Donato over the
must proceed to an actual partition by property instrument of partition, disputed decedent estate.
submitting the corresponding subdivision within sixty (60) days from finality of Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two
this decision, and should they fail to agree, commissioners of partition may be transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan;
appointed by the Court; and (b) her redemption of the land from the Provincial of Negros Occidental after it was
3. Pending the physical partition, the Register of Deeds of Negros Occidental forfeited for non-payment of taxes.
is ordered to cancel Original Certificate of Title No. RO-11653 (N.A.) covering When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P.
Lot 1091, Pontevedra Cadastre, and to issue in lieu thereof a new certificate Fanesa, he was only a co-owner with respondents and as such, he could only sell that
of title in the name of plaintiffs and defendants, one-half portion each,proportion which may be allotted to him upon termination of the co-ownership. 13 The sale
indiviso, as indicated in paragraph 1 above; did not prejudice the rights of respondents to one half (1/2) undivided share of the land
4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa which they inherited from their father. It did not vest ownership in the entire land with
the amount of P1,479.55 with interest at the legal rate from May 28, 1974 until the buyer but transferred only the seller's pro-indiviso share in the property 14 and
paid; consequently made the buyer a co-owner of the land until it is partitioned. In Bailon-
5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are Casilao v. Court of Appeals, 15 the Court, through Justice Irene R. Cortes, outlined the
ordered to account to plaintiffs and to pay them, jointly and severally, the value effects of a sale by one co-owner without the consent of all the co-owners, thus:
of the produce from Lot 1091 representing plaintiffs' share in the amount of The rights of a co-owner of a certain property are clearly specified in Article
P5,000.00 per year from 1966 up to the time of actual partition of the property, 493 of the Civil Code, Thus:
and to pay them the sum of P2,000.00 as attorney's fees as well as the costs Art. 493. Each co-owner shall have the full ownership of his part and of the
of the suit. fruits and benefits pertaining thereto, and he may therefore alienate, assign or
xxx xxx xxx mortgage it and even substitute another person its enjoyment, except when
On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition. personal rights are involved. But the effect of the alienation or mortgage, with
To determine the rights and obligations of the parties to the land in question, it is well respect to the co-owners, shall be limited to the portion which may be allotted
to review, initially, the relatives who survived the decedent Agatona Sagario Paulmitan. to him in the division upon the termination of the co-ownership. [Emphasis
When Agatona died in 1953, she was survived by two (2) sons, Donato and Pascual. supplied.]
A few months later in the same year, Pascual died, leaving seven children, the private As early as 1923, this Court has ruled that even if a co-owner sells the whole
respondents. On the other had, Donato's sole offspring was petitioner Juliana P. property as his, the sale will affect only his own share but not those of the
Fanesa. other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44
At the time of the relevant transactions over the properties of decedent Agatona Sagario Phil. 320 (1923)]. This is because under the aforementioned codal provision,
Paulmitan, her son Pascual had died, survived by respondents, his children. It is, thus, the sale or other disposition affects only his undivided share and the transferee
tempting to apply the principles pertaining to the right of representation as regards gets only what would correspond to his grantor in the partition of the thing
respondents. It must, however, be borne in mind that Pascual did no predecease his owned in common [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently,
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid
of representation 9 with respect to his children, the respondents. When Agatona with respect to their proportionate shares, and the subsequent transfers which
Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were culminated in the sale to private respondent Celestino Afable, the said Afable
still alive. Since it is well-settled by virtue of Article 777 of the Civil Code that "[t]he rights thereby became a co-owner of the disputed parcel of land as correctly held by
to the succession are transmitted from the moment of the death of the decedent," 10 the the lower court since the sales produced the effect of substituting the buyers
right of ownership, not only of Donato but also of Pascual, over their respective shares in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
in the inheritance was automatically and by operation of law vested in them in 1953 From the foregoing, it may be deduced that since a co-owner is entitled to sell
when their mother died intestate. At that stage, the children of Donato and Pascual did his undivided share, a sale of the entire property by one co-owner without the
not yet have any right over the inheritance since "[i]n every inheritance, the relative consent of the other co-owners is not null and void. However, only the rights
nearest in degree excludes the more distant ones." 11 Donato and Pascual excluded of the co-owner-seller are transferred, thereby making the buyer a co-owner
their children as to the right to inherit from Agatona Sagario Paulmitan, their mother. of the property.
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the questions of law may be raised in a petition for review. As a general rule, findings of
land to his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership fact made by the trial court and the Court of Appeals are final and conclusive and cannot
over the entire land but merely transferred to her the one half (1/2) undivided share of be reviewed on appeal. 18
her father, thus making her the co-owner of the land in question with the respondents, WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
her first cousins. AFFIRMED.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of SO ORDERED.
the fact that when the Provincial Government of Negros Occidental bought the land Gutierrez, Jr., Bidin, Davide, Jr., Romero and Melo, JJ., concur.
after it was forfeited for non-payment of taxes, she redeemed it.
The contention is without merit. Footnotes
The redemption of the land made by Fanesa did not terminate the co-ownership nor 1 Penned by Associate Justice Crisolito Pascual with the concurrence of Associate
give her title to the entire land subject of the co-ownership. Speaking on the same issue Justices Guillermo P. Villasor and Vicente V. Mendoza.
raised by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with 2 Penned by Judge Oscar R. Victoriano.
the following pronouncements: 3 Petition, page 3; Rollo, page 15.
The petition raises a purely legal issue: May a co-owner acquire exclusive 4 Record on Appeal, page 63, 65.
ownership over the property held in common? 5 Record on Appeal, pp. 21-24.
Essentially, it is the petitioners' contention that the property subject of dispute 6 Record on Appeal, page, 72.
devolved upon him upon the failure of his co-heirs to join him in its redemption 7 Record on Appeal, page 92.
within the period required by law. He relies on the provisions of Article 1515 8 The records of the case do not indicate the exact date when Agatona Sagario
of the old Civil Code, Article 1613 of the present Code, giving the vendee a Paulmitan and her son Pascual died in 1953 but all parties, including petitioners, do not
retro the right to demand redemption of the entire property. dispute that Agatona died ahead of her son (See Petition, p. 3; Rollo p. 15)
There is no merit in this petition. 9 See Articles 970-977, 981 of the Civil Code.
The right of repurchase may be exercised by co-owner with respect to his 10 Jimenez v. Fernandez, G.R. No. 46364, April 6, 1990, 184 SCRA 190; Quion v.
share alone (CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While Claridad, 74 Phil. 100 (1943).
the records show that petitioner redeemed the property in its entirety, 11 Article 962, Civil Code.
shouldering the expenses therefor, that did not make him the owner of all of 12 See also Mendoza I v. Court of Appeals, G.R. No. 44664, July 31, 1991, 199 SCRA
it. In other words, it did not put to end the existing state of co-ownership 778.
(Supra, Art. 489). There is no doubt that redemption of property entails a 13 Article 493, Civil Code; Reyes v. Concepcion, G.R. No. 56550, October 1, 1990, 190
necessary expense. Under the Civil Code: SCRA 171.
Art. 488. Each co-owner shall have a right to compel the other co-owners to 14 Abad v. Court of Appeals, G.R. No. 84908, December 4, 1989, 179 SCRA 817.
contribute to the expenses of preservation of the thing or right owned in 15 G.R. No. 78178, April 15, 1988, 160 SCRA 738, 744 -745.
common and to the taxes. Any one of the latter may exempt himself from this 16 G.R. No. L-44546, January 29, 1988, 157 SCRA 455, 459-460.
obligation by renouncing so much of his undivided interest as may be 17 Guinto v. Lim Bonfing, 48 Phil. 884 (1926).
equivalent to his share of the expenses and taxes. No such waiver shall be 18 Bustamante v. Court of Appeals, G.R. No. 89880, February 6, 1991, 193 SCRA 603;
made if it is prejudicial to the co-ownership. De Ocsio v. Court of Appeals, G.R. No. 44237, February 28, 1989, 170 SCRA 729.
The result is that the property remains to be in a condition of co-ownership.
While a vendee a retro, under Article 1613 of the Code, "may not be compelled
to consent to a partial redemption," the redemption by one co-heir or co-owner
of the property in its totality does not vest in him ownership over it. Failure on
the part of all the co-owners to redeem it entitles the vendee a retro to retain
the property and consolidate title thereto in his name (Supra, art. 1607). But
the provision does not give to the redeeming co-owner the right to the entire
property. It does not provide for a mode of terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the
redemption she made, nevertheless, she did acquire the right to reimbursed for half of
the redemption price she paid to the Provincial Government of Negros Occidental on
behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property
for the amount due her. 17
Finally, petitioners dispute the order of the trial court, which the Court of Appeals
affirmed, for them to pay private respondents P5,000.00 per year from 1966 until the
partition of the estate which represents the share of private respondents in the fruits of
the land. According to petitioners, the land is being leased for P2,000.00 per year only.
This assigned error, however raises a factual question. The settled rule is that only
EN BANC of residential land in Oroquieta, Misamis Occidental, and another parcel in Ozamis City
G.R. No. L-17681 February 26, 1965 in favor of Ildefonso D. Yap. Included in the sale were certain buildings situated on said
MINDANAO ACADEMY, INC., MAURICIO O. BAS, ERLINDA D. DIAZ, lands as well as laboratory equipment, books, furniture and fixtures used by two schools
accompanied by her husband ANTOLIN DIAZ, ESTER AIDA D. BAS, established in the respective properties, the Mindanao Academy in Oroquieta and the
accompanied by her husband MAURICIO O. BAS, ROSALINDA D. BELLEZA, Misamis Academy in Ozamis City. The aggregate price stated in the deed was
accompanied by her husband APOLINARIO BELLEZA, LUZ MINDA D. DAJAO, P100,700.00, to be paid according to the terms and conditions specified in the contract.
accompanied by her husband ELIGIO C. DAJAO, ADELAIDA D. NUESA, Besides Rosenda and her son Sotero, Jr., both of whom signed the instrument,
accompanied by her husband WILSON NUESA, PEDRO N. ABUTON, SY Adelaida Dionisio-Nuesa (a daughter of Rosenda) is also named therein as co-vendor,
PAOCO, JOSEFA DIGNUM, and PERFECTO VELASQUEZ, plaintiffs-appellees, but actually did not take part either personally or through her uncle and supposed
vs. attorney-in-fact, Restituto Abuton.
ILDEFONSO D. YAP, ROSENDA A. DE NUQUI, and SOTERO A. DIONISIO, These three — Rosenda and her two children above named — are referred to in the
JR., defendants, deed as the owners pro-indiviso of the properties sold. The truth, however, was that
ILDEFONSO D. YAP, defendant-appellant. there were other co-owners of the lands, namely, Erlinda D. Diaz, Ester Aida D. Bas,
----------------------------- Rosalinda D. Belleza, and Luz Minda D. Dajao, children also of Rosenda by her
G.R. No. L-17682 February 26, 1965 deceased husband Sotero Dionisio, Sr., and that as far as the school building,
ROSENDA A. DE NUQUI, SOTERO DIONISIO, JR., ERLINDA DIONISIO-DIAZ and equipment, books, furniture and fixtures were concerned, they were owned by the
ANTOLIN DIAZ, plaintiffs-appellees, Mindanao Academy, Inc., a corporation operating both the Mindanao Academy in
vs. Oroquieta and the Misamis Academy in Ozamis City.
ILDEFONSO D. YAP, defendant-appellant. The buyer, Ildefonso D. Yap, obtained possession of the properties by virtue of the sale,
Mauricio O. Bas for and in his own behalf as plaintiff-appellee. took over the operation of the two schools and even changed their names to Harvardian
Eligio C. Dayao for and in his own behalf as plaintiff-appellee. Colleges. In view thereof two actions were commenced in the Court of First Instance of
Roque Desquitado for other plaintiffs-appellees. Misamis Occidental. The first was for annulment of the sale and recovery of rents and
Ambrosio Padilla Law Offices for defendant-appellant. damages (Civil Case No. 1774, filed May 3, 1955) with the Mindanao Academy, Inc.,
Sale; Void entirely where vendors ceded also interest belonging to persons not the five children of Rosenda Nuqui who did not take part in the deed of sale, and several
parties and prestation is indivisible.—A contract of sale is entirely null and void where other persons who were stockholders of the said corporation, as plaintiffs, and the
it purports to sell properties of which the sellers were not the only owners and the parties who signed the deed of sale as defendants. The second action was for
prestation involved was indivisible, and therefore incapable of partial annulment. rescission (Civil Case No. 1907, filed July 17, 1956) with Rosenda Nuqui, Sotero
Same; Legal fiction of good faith ceases after complaint is filed in court.— Dionisio, Jr. and Erlinda D. Diaz (and the latter's husband Antolin Diaz) as plaintiffs,
Although the bad faith of one party neutralizes that of the other and hence as between and Ildefonso D. Yap as lone defendant. The other four children of Rosenda did not
themselves their rights would be as if both of them had acted in good faith at the time join, having previously ceded and quitclaimed their shares in the litigated properties in
of the transaction, this legal fiction of the buyer’s good faith ceased when the complaint favor of their sister Erlinda D. Diaz.
against him was filed. The two actions were tried jointly and on March 31, 1960 the court a quo rendered
Same; Same; Possessor in good faith not entitled to fruits after legal interruption judgment as follows:
of possession.—A possessor in good faith is entitled to the fruits only so long as his In both Cases —
possession is not legally interrupted, and such interruption takes place upon service of (1) The Mutual Agreement is hereby declared null and void ab initio;
judicial summons. (2) Defendant Ildefonso D. Yap is hereby ordered to pay the costs of the
Same; Same; Possessor in good faith not entitled to reimbursement of proceedings in both cases.
improvements constructed after filing of action for annulment.—A possessor in good In Civil Case No. 1907 only —
faith cannot recover the value of a new building constructed after the filing of an action (1) Defendant Ildefonso D. Yap is hereby ordered to restore to the plaintiffs in
for annulment of the sale of land on which it is constructed, thus rendering him a builder said case all the buildings and grounds described in the Mutual Agreement
in bad faith who is denied by law any right of reimbursement. together with all the permanent improvements thereon;
Damages; Nominal and exemplary damages not awarded to stockholders (2) To pay to the plaintiffs therein the amount of P300.00 monthly from July
already represented by the corporation.—Where the interests of the stockholders were 31, 1956 up to the time he shall have surrendered the properties in question
already represented by the corporation itself, which was the proper party plaintiff, and to the plaintiffs herein, plus P1,000.00 as attorney's fees to plaintiffs Antolin
no cause of action accruing to them separately from the corporation is alleged in the and Erlinda D. Diaz.
complaint, the trial court’s ruling out the claim for moral damages to the corporation In Civil Case No. 1774 only —
also rule’s out any award for such nominal and exemplary damages to the stockholders. (1) Defendant Ildefonso D. Yap is hereby ordered to restore to the Mindanao
Academy, Inc., all the books laboratory apparatus, furniture and other
APPEAL from a judgment of the Court of First Instance of Misamis Occidental.
equipments described in the Mutual Agreement and specified in the inventory
MAKALINTAL, J.: attached to the Records of this case; or in default thereof, their value in the
By deed entitled "Mutual Agreement," executed on May 10, 1964, Rosenda A. de Nuqui amount of P23,500.00;
(widow of deceased Sotero Dionisio) and her son Sotero Dionisio, Jr. sold three parcels
(2) To return all the Records of the Mindanao Academy and Misamis AFTER DECLARING THAT ALL THE PLAINTIFFS-APPELLEES IN CIVIL
Academy; CASE NO. 1907 ACTED IN BAD FAITH.
(3) To pay to the plaintiffs stockholders of the Mindanao Academy, Inc., the THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFFS-
amount of P10,000.00 as nominal damages, P3,000.00 as exemplary APPELLEES IN SAID CIVIL CASE NO. 1907 ARE ENTITLED TO RECOVER
damages; and P2,000.00 as attorney's fees. These damages shall be ALL THE LANDS, BUILDINGS AND OTHER PERMANENT
apportioned to each of the stockholders named as plaintiffs in said case in IMPROVEMENTS DESCRIBED IN THE MUTUAL AGREEMENT DATED
proportion to their respective interests in the corporation. MAY 10, 1954.
Ildefonso D. Yap appealed from the foregoing judgment and has assigned five errors The lower court correctly found that both vendors and vendee in the sale acted in bad
therein. faith and therefore must be treated, vis-a-vis each other, as having acted in good faith.
I. He first contends that the lower court erred "in declaring that the mutual agreement The return of the properties by the vendee is a necessary consequence of the decree
dated May 10, 1954 ... is entirely void and legally non-existent in that the vendors of annulment. No part of the purchase price having been paid, as far as the record
therein ceded to defendant-appellant not only their interests, rights, shares and shows, the trial court correctly made no corresponding order for the restitution thereof.
participation in the property sold but also those that belonged to persons who were not In regard to the rents the trial court found that prior to the sale the Mindanao Academy,
parties thereto." Inc., was paying P300.00 monthly for its occupancy of the lands on which the buildings
The lower court did not rule categorically on the question of rescission considering it are situated. This is the amount the defendant has been ordered to pay to the plaintiffs
unnecessary to do so in view of its conclusion that the contract of sale is null and void. in Civil Case No. 1907, beginning July 31, 1956, when he filed his "first pleading" in the
This conclusion is premised on two grounds: (a) the contract purported to sell properties case. There can be no doubt that Erlinda D. Diaz is entitled to recover a share of the
of which the sellers were not the only owners, since of the four parcels of land said rents in proportion to her own interests in the lands and the interest in the four co-
mentioned in the deed their shares consisted only of 7/12, (6/12 for Rosenda Nuqui owners which she had acquired. Rosenda Nuqui and her son Sotero, it is true, acted in
and 1/12 for Sotero, Jr.), while in the buildings, laboratory equipment, books, furniture bad faith when they sold the properties as theirs alone, but so did the defendant Yap
and fixtures they had no participation at all, the owner being the Mindanao Academy, when he purchased them with knowledge of the fact that there were other co-owners.
Inc.; and (b) the prestation involved in the sale was indivisible, and therefore incapable Although the bad faith of one party neutralizes that of the other and hence as between
of partial annulment, inasmuch as the buyer Yap, by his own admission, would not have themselves their rights would be as if both of them had acted in good faith at the time
entered into the transaction except to acquire all of the properties purchased by him. of the transaction, this legal fiction of Yap's good faith ceased when the complaint
These premises are not challenged by appellant. But he calls attention to one point, against him was filed, and consequently the court's declaration of liability for the rents
namely, that the four children of Rosenda Nuqui who did not take part in the sale, thereafter is correct and proper. A possessor in good faith is entitled to the fruits only
besides Erlinda Dionisio Diaz, quitclaimed in favor of the latter their interests in the so long as his possession is not legally interrupted, and such interruption takes place
properties; and that the trial court held that Erlinda as well as her husband acted in bad upon service of judicial summons (Arts. 544 and 1123, Civil Code).
faith, because "having reasonable notice of defendants' having unlawfully taken In our opinion the award of attorney's fees to Erlinda D. Diaz and her husband is
possession of the property, they failed to make reasonable demands for (him) to vacate erroneous. Civil Case No. 1907, in which said fees have been adjudged, is for
the premises to respect their rights thereto." It is argued that being herself guilty of bad rescission (more properly resolution) of the so-called "mutual agreement" on the ground
faith, Erlinda D. Diaz, as owner of 5/12 undivided interest in the properties (including that the defendant Yap failed to comply with certain undertakings specified therein
the 4/12 ceded to her by her four sisters), is in no position to ask for annulment of the relative to the payment of the purchase price. Erlinda Diaz was not a party to that
sale. The argument does not convince us. In the first place the quitclaim, in the form of agreement and hence had no cause of action for rescission. And as already stated, the
an extrajudicial partition, was made on May 6, 1956, after the action for annulment was trial court did not decide the matter of rescission because of the decree of annulment it
filed, wherein the plaintiffs were not only Erlinda but also the other co-owners who took rendered in the other case (Civil Case No. 1774), wherein the defendants are not only
no part in the sale and to whom there has been no imputation of bad faith. Secondly, Ildefonso D. Yap but also Rosenda Nuqui and her son Sotero. Erlinda D. Diaz could
the trial court's finding of bad faith is an erroneous conclusion induced by a manifest just as well have refrained from joining as plaintiff in the action for rescission, not being
oversight of an undisputed fact, namely, that on July 10, 1954, just a month after the a party to the contract sought to be rescission and being already one of the plaintiffs in
deed of sale in question, Erlinda D. Diaz did file an action against Ildefonso D. Yap and the other action. In other words, it cannot be said with justification that she was
Rosenda Nuqui, among others, asserting her rights as co-owner of the properties (Case constrained to litigate, in Civil Case No. 1907, because of some cause attributable to
No. 1646). Finally, bad faith on the part of Erlinda would not militate against the nullity the appellant.
of the sale, considering that it included not only the lands owned in common by The appellant claims reimbursement for the value of the improvements he allegedly
Rosenda Nuqui and her six children but also the buildings and school facilities owned introduced in the schools, consisting of a new building worth P8,000.00 and a toilet
by the Mindanao Academy, Inc., an entity which had nothing to do with the transaction costing P800.00, besides laboratory equipment, furniture, fixtures and books for the
and which could be represented solely by its Board of Trustees. libraries. It should be noted that the judgment of the trial court specifies, for delivery to
The first assignment of error is therefore without merit. the plaintiffs (in Civil Case No. 1907), only "the buildings and grounds described in the
II. The second and third errors are discussed jointly in appellant's brief. They read as mutual agreement together with all the permanent improvements thereon." If the
follows: defendant constructed a new building, as he alleges, he cannot recover its value
THE LOWER COURT ERRED IN HOLDING DEFENDANT-APPELLANT because the construction was done after the filing of the action for annulment, thus
LIABLE FOR RENTS AND ATTORNEY'S FEES IN THE SUM OF P1,000.00 rendering him a builder in bad faith who is denied by law any right of reimbursement.
In connection with the equipment, books, furniture and fixtures brought in by him, he is
not entitled to reimbursement either, because the judgment does not award them to
any of the plaintiffs in these two actions. What is adjudged (in Civil Case No. 1774) is
for the defendant to restore to the Mindanao Academy, Inc. all the books, laboratory
apparatus, furniture and other equipment "described in the Mutual Agreement and
specified in the Inventory attached to the records of this case; or in default thereof, their
value in the amount of P23,500.00." In other words, whatever has been brought in by
the defendant is outside the scope of the judgment and may be retained by him.
III. The appellant's fourth assignment of error refers to the nominal and exemplary
damages, as well as the attorney's fees, granted to the stockholders of the Mindanao
Academy, Inc. The trial court awarded no compensatory damages because the
Mindanao Academy, Inc. had been operating the two schools at a loss before the sale
in question, and the defendant himself was no more successful after he took over. Are
the stockholders of the said corporation who joined as plaintiffs in Civil Case No. 1774
entitled to nominal and exemplary damages? We do not believe so. According to their
second amended complaint they were joined merely pro forma, and "for the sole
purpose of the moral damage which has been all the time alleged in the original
complaint." Indeed the interests of the said stockholders, if any, were already
represented by the corporation itself, which was the proper party plaintiff; and no cause
of action accruing to them separately from the corporation is alleged in the complaint,
other than that for moral damages due to "extreme mental anguish, serious anxiety and
wounded feelings." The trial court, however, ruled out this claim for moral damages and
no appeal from such ruling has been taken. The award for nominal and exemplary
damages should be eliminated in toto.
The award for attorney's fees in the amount of P2,000.00 should be upheld, although
the same should be for the account, not of the plaintiff stockholders of the Mindanao
Academy, Inc., but of the corporation itself, and payable to their common counsel as
prayed for in the complaint.
IV. Under the fifth and last assignment of error the appellant insists on the warranty
provided for in clause VI of the deed of sale in view of the claims of the co-owners who
did not take part therein. The said clause provides: "if any claim shall be filed against
the properties or any right, share or interest which are in the possession of the party of
the First Part (vendors) which had been hereby transferred, ceded and conveyed unto
the party of the Second Part (vendee) the party of the First Part assumes as it hereby
holds itself answerable.
It is unnecessary to pass upon the question posed in this assignment of error in view
of the total annulment of the sale on grounds concerning which both parties thereto
were at fault. The nullity of the contract precludes enforcement of any of its stipulations.
WHEREFORE, the judgment appealed from is modified by eliminating therefrom the
award of attorney's fees of P1,000.00 in favor of Erlinda D. Diaz and her husband,
plaintiffs in Civil Case No. 1907, and the award of nominal and exemplary damages in
Civil Case No. 1774; and making the award of attorney's fees in the sum of P2,000.00
payable to counsel for the account of the Mindanao Academy, Inc. instead of the
plaintiff stockholders. In all other respects the judgment appealed from is affirmed. No
pronouncement as to costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes and Bengzon,
J.P., JJ., concur.
Barrera, Dizon, Regala and Zaldivar, JJ., took no part.

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G.R. No.

Dear Mr. Villonco: Dear Mr. Cervantes:

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