Republic of the Philippines Gaite in turn executed a general assignment (Record on Appeal,
SUPREME COURT pp. 17-19) conveying the development and exploitation of said
Manila
EN BANC
G.R. No. L-11827             July 31, 1961
FERNANDO A. GAITE, plaintiff-appellee,
vs.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO
DANTE, PACIFICO ESCANDOR and FERNANDO
TY, defendants-appellants.
Alejo Mabanag for plaintiff-appellee.
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
defendants-appellants.
REYES, J.B.L., J.:
This appeal comes to us directly from the Court of First Instance
because the claims involved aggregate more than P200,000.00.
Defendant-appellant Isabelo Fonacier was the owner and/or
holder, either by himself or in a representative capacity, of 11 iron
lode mineral claims, known as the Dawahan Group, situated in
the municipality of Jose Panganiban, province of Camarines
Norte.
By a "Deed of Assignment" dated September 29, 1952(Exhibit
"3"), Fonacier constituted and appointed plaintiff-appellee
Fernando A. Gaite as his true and lawful attorney-in-fact to enter
into a contract with any individual or juridical person for the
exploration and development of the mining claims
aforementioned on a royalty basis of not less than P0.50 per ton
of ore that might be extracted therefrom. On March 19, 1954,
mining claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty basis
provided for in Exhibit "3". Thereafter, Gaite embarked upon the
development and exploitation of the mining claims in question,
opening and paving roads within and outside their boundaries,
making other improvements and installing facilities therein for use
in the development of the mines, and in time extracted therefrom
what he claim and estimated to be approximately 24,000 metric
tons of iron ore.
For some reason or another, Isabelo Fonacier decided to revoke
the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of
Power of Attorney and Contract" was executed on December 8,
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
interests on all the roads, improvements, and facilities in or
outside said claims, the right to use the business name "Larap
Iron Mines" and its goodwill, and all the records and documents
relative to the mines. In the same document, Gaite transferred to
Fonacier all his rights and interests over the "24,000 tons of iron
ore, more or less" that the former had already extracted from the
mineral claims, in consideration of the sum of P75,000.00,
P10,000.00 of which was paid upon the signing of the agreement,
and
b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00) will be paid from and out of the first letter of
credit covering the first shipment of iron ores and of the
first amount derived from the local sale of iron ore made
by the Larap Mines & Smelting Co. Inc., its assigns,
administrators, or successors in interests.
To secure the payment of the said balance of P65,000.00,
Fonacier promised to execute in favor of Gaite a surety bond, and
pursuant to the promise, Fonacier delivered to Gaite a surety
bond dated December 8, 1954 with himself (Fonacier) as
principal and the Larap Mines and Smelting Co. and its
stockholders George Krakower, Segundina Vivas, Pacifico
Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit
"A-1"). Gaite testified, however, that when this bond was
presented to him by Fonacier together with the "Revocation of
Power of Attorney and Contract", Exhibit "A", on December 8,
1954, he refused to sign said Exhibit "A" unless another bond
under written by a bonding company was put up by defendants to
secure the payment of the P65,000.00 balance of their price of
the iron ore in the stockpiles in the mining claims. Hence, a
second bond, also dated December 8, 1954 (Exhibit "B"),was
executed by the same parties to the first bond Exhibit "A-1", with
the Far Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company would
attach only when there had been an actual sale of iron ore by the
Larap Mines & Smelting Co. for an amount of not less then
P65,000.00, and that, furthermore, the liability of said surety
company would automatically expire on December 8, 1955. Both
bonds were attached to the "Revocation of Power of Attorney and
Contract", Exhibit "A", and made integral parts thereof.
On the same day that Fonacier revoked the power of attorney he
gave to Gaite and the two executed and signed the "Revocation
of Power of Attorney and Contract", Exhibit "A", Fonacier entered
into a "Contract of Mining Operation", ceding, transferring, and
conveying unto the Larap Mines and Smelting Co., Inc. the right
to develop, exploit, and explore the mining claims in question,
together with the improvements therein and the use of the name
"Larap Iron Mines" and its good will, in consideration of certain
royalties. Fonacier likewise transferred, in the same document,
the complete title to the approximately 24,000 tons of iron ore
which he acquired from Gaite, to the Larap & Smelting Co., in
consideration for the signing by the company and its stockholders
of the surety bonds delivered by Fonacier to Gaite (Record on
Appeal, pp. 82-94).
Up to December 8, 1955, when the bond Exhibit "B" expired with
respect to the Far Eastern Surety and Insurance Company, no
sale of the approximately 24,000 tons of iron ore had been made
by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00
balance of the price of said ore been paid to Gaite by Fonacier
and his sureties payment of said amount, on the theory that they
had lost right to make use of the period given them when their
bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24").
And when Fonacier and his sureties failed to pay as demanded
by Gaite, the latter filed the present complaint against them in the
Court of First Instance of Manila (Civil Case No. 29310) for the
payment of the P65,000.00 balance of the price of the ore,
consequential damages, and attorney's fees.
All the defendants except Francisco Dante set up the uniform
defense that the obligation sued upon by Gaite was subject to a
condition that the amount of P65,000.00 would be payable out of
the first letter of credit covering the first shipment of iron ore
and/or the first amount derived from the local sale of the iron ore
by the Larap Mines & Smelting Co., Inc.; that up to the time of the
filing of the complaint, no sale of the iron ore had been made,
hence the condition had not yet been fulfilled; and that
consequently, the obligation was not yet due and demandable.
Defendant Fonacier also contended that only 7,573 tons of the
estimated 24,000 tons of iron ore sold to him by Gaite was
actually delivered, and counterclaimed for more than
P200,000.00 damages.
At the trial of the case, the parties agreed to limit the presentation
of evidence to two issues:
(1) Whether or not the obligation of Fonacier and his sureties to
pay Gaite P65,000.00 become due and demandable when the
defendants failed to renew the surety bond underwritten by the
Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which
expired on December 8, 1955; and
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff
Gaite to defendant Fonacier were actually in existence in the
mining claims when these parties executed the "Revocation of
Power of Attorney and Contract", Exhibit "A."
On the first question, the lower court held that the obligation of
the defendants to pay plaintiff the P65,000.00 balance of the price
of the approximately 24,000 tons of iron ore was one with a term:
i.e., that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before
December 8, 1955; that the giving of security was a condition
precedent to Gait's giving of credit to defendants; and that as the
latter failed to put up a good and sufficient security in lieu of the
Far Eastern Surety bond (Exhibit "B") which expired on
December 8, 1955, the obligation became due and demandable
under Article 1198 of the New Civil Code.
As to the second question, the lower court found that plaintiff
Gaite did have approximately 24,000 tons of iron ore at the
mining claims in question at the time of the execution of the
contract Exhibit "A."
Judgment was, accordingly, rendered in favor of plaintiff Gaite
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until
payment, plus costs. From this judgment, defendants jointly
appealed to this Court.
During the pendency of this appeal, several incidental motions
were presented for resolution: a motion to declare the appellants
Larap Mines & Smelting Co., Inc. and George Krakower in
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial
and/or to take judicial notice of certain documents, filed by
appellee Gaite. The motion for contempt is unmeritorious
because the main allegation therein that the appellants Larap
Mines & Smelting Co., Inc. and Krakower had sold the iron ore
here in question, which allegedly is "property in litigation", has not
been substantiated; and even if true, does not make these
appellants guilty of contempt, because what is under litigation in
this appeal is appellee Gaite's right to the payment of the balance
of the price of the ore, and not the iron ore itself. As for the
several motions presented by appellee Gaite, it is unnecessary to
resolve these motions in view of the results that we have reached
in this case, which we shall hereafter discuss.
The main issues presented by appellants in this appeal are:
(1) that the lower court erred in holding that the obligation of
appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
of the price of the iron ore in question)is one with a period or term
and not one with a suspensive condition, and that the term
expired on December 8, 1955; and
(2) that the lower court erred in not holding that there were only
10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite
to appellant Fonacier.
The first issue involves an interpretation of the following provision
in the contract Exhibit "A":
7. That Fernando Gaite or Larap Iron Mines hereby
transfers to Isabelo F. Fonacier all his rights and interests
over the 24,000 tons of iron ore, more or less, above-
referred to together with all his rights and interests to
operate the mine in consideration of the sum of
SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which
the latter binds to pay as follows:
a. TEN THOUSAND PESOS (P10,000.00) will be paid
upon the signing of this agreement.
 b. The balance of SIXTY-FIVE THOUSAND PESOS
(P65,000.00)will be paid from and out of the first letter of
credit covering the first shipment of iron ore made by the
Larap Mines & Smelting Co., Inc., its assigns,
administrators, or successors in interest.
We find the court below to be legally correct in holding that the
shipment or local sale of the iron ore is not a condition precedent
(or suspensive) to the payment of the balance of P65,000.00, but
was only a suspensive period or term. What characterizes a
conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the
happening of a future and uncertain event; so that if the
suspensive condition does not take place, the parties would stand
as if the conditional obligation had never existed. That the parties
to the contract Exhibit "A" did not intend any such state of things
to prevail is supported by several circumstances:
1) The words of the contract express no contingency in the
buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit
covering the first shipment of iron ores . . ." etc. There is no
uncertainty that the payment will have to be made sooner or later;
what is undetermined is merely the exact date at which it will be
made. By the very terms of the contract, therefore, the existence
of the obligation to pay is recognized; only
its maturity or demandability is deferred.
2) A contract of sale is normally commutative and onerous: not
only does each one of the parties assume a correlative obligation
(the seller to deliver and transfer ownership of the thing sold and
the buyer to pay the price),but each party anticipates
performance by the other from the very start. While in a sale the
obligation of one party can be lawfully subordinated to an
uncertain event, so that the other understands that he assumes
the risk of receiving nothing for what he gives (as in the case of a
sale of hopes or expectations, emptio spei), it is not in the usual
course of business to do so; hence, the contingent character of
the obligation must clearly appear. Nothing is found in the record
to evidence that Gaite desired or assumed to run the risk of losing
his right over the ore without getting paid for it, or that Fonacier
understood that Gaite assumed any such risk. This is proved by
the fact that Gaite insisted on a bond a to guarantee payment of
the P65,000.00, an not only upon a bond by Fonacier, the Larap
Mines & Smelting Co., and the company's stockholders, but also
on one by a surety company; and the fact that appellants did put
up such bonds indicates that they admitted the definite existence
of their obligation to pay the balance of P65,000.00.
3) To subordinate the obligation to pay the remaining P65,000.00
to the sale or shipment of the ore as a condition precedent, would
be tantamount to leaving the payment at the discretion of the
debtor, for the sale or shipment could not be made unless the
appellants took steps to sell the ore. Appellants would thus be
able to postpone payment indefinitely. The desireability of
avoiding such a construction of the contract Exhibit "A" needs no
stressing.
4) Assuming that there could be doubt whether by the wording of
the contract the parties indented a suspensive condition or a
suspensive period (dies ad quem) for the payment of the
P65,000.00, the rules of interpretation would incline the scales in
favor of "the greater reciprocity of interests", since sale is
essentially onerous. The Civil Code of the Philippines, Article
1378, paragraph 1, in fine, provides:
If the contract is onerous, the doubt shall be settled in
favor of the greatest reciprocity of interests.
and there can be no question that greater reciprocity obtains if the
buyer' obligation is deemed to be actually existing, with only its
maturity (due date) postponed or deferred, that if such obligation
were viewed as non-existent or not binding until the ore was sold.
The only rational view that can be taken is that the sale of the ore
to Fonacier was a sale on credit, and not an aleatory contract
where the transferor, Gaite, would assume the risk of not being
paid at all; and that the previous sale or shipment of the ore was
not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the
payment.
This issue settled, the next point of inquiry is whether appellants,
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving
payment; or, in other words, whether or not they are entitled to
take full advantage of the period granted them for making the
payment.
We agree with the court below that the appellant have forfeited
the right court below that the appellants have forfeited the right to
compel Gaite to wait for the sale of the ore before receiving
payment of the balance of P65,000.00, because of their failure to
renew the bond of the Far Eastern Surety Company or else
replace it with an equivalent guarantee. The expiration of the
bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as
creditor for the unpaid P65,000.00, a security that Gaite
considered essential and upon which he had insisted when he
executed the deed of sale of the ore to Fonacier (Exhibit "A"). The
case squarely comes under paragraphs 2 and 3 of Article 1198 of
the Civil Code of the Philippines:
"ART. 1198. The debtor shall lose every right to make use
of the period:
(1) . . .
(2) When he does not furnish to the creditor the
guaranties or securities which he has promised.
(3) When by his own acts he has impaired said guaranties
or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately
gives new ones equally satisfactory.
Appellants' failure to renew or extend the surety company's bond
upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or
replaced.
There is no merit in appellants' argument that Gaite's acceptance
of the surety company's bond with full knowledge that on its face
it would automatically expire within one year was a waiver of its
renewal after the expiration date. No such waiver could have
been intended, for Gaite stood to lose and had nothing to gain
barely; and if there was any, it could be rationally explained only if
the appellants had agreed to sell the ore and pay Gaite before the
surety company's bond expired on December 8, 1955. But in the
latter case the defendants-appellants' obligation to pay became
absolute after one year from the transfer of the ore to Fonacier by
virtue of the deed Exhibit "A.".
All the alternatives, therefore, lead to the same result: that Gaite
acted within his rights in demanding payment and instituting this
action one year from and after the contract (Exhibit "A") was
executed, either because the appellant debtors had impaired the
securities originally given and thereby forfeited any further time
within which to pay; or because the term of payment was
originally of no more than one year, and the balance of
P65,000.00 became due and payable thereafter.
Coming now to the second issue in this appeal, which is whether
there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had
been a short-delivery as claimed by appellants, they are entitled
to the payment of damages, we must, at the outset, stress two
things: first, that this is a case of a sale of a specific mass of
fungible goods for a single price or a lump sum, the quantity of
"24,000 tons of iron ore, more or less," stated in the contract
Exhibit "A," being a mere estimate by the parties of the total
tonnage weight of the mass; and second, that the evidence
shows that neither of the parties had actually measured of
weighed the mass, so that they both tried to arrive at the total
quantity by making an estimate of the volume thereof in cubic
meters and then multiplying it by the estimated weight per ton of
each cubic meter.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the
measuring or weighing of the ore sold in order to complete or
perfect the sale, nor was the price of P75,000,00 agreed upon by
the parties based upon any such measurement.(see Art. 1480,
second par., New Civil Code). The subject matter of the sale is,
therefore, a determinate object, the mass, and not the actual
number of units or tons contained therein, so that all that was
required of the seller Gaite was to deliver in good faith to his
buyer all of the ore found in the mass, notwithstanding that the
quantity delivered is less than the amount estimated by them
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage
Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil
Code). There is no charge in this case that Gaite did not deliver to
appellants all the ore found in the stockpiles in the mining claims
in questions; Gaite had, therefore, complied with his promise to
deliver, and appellants in turn are bound to pay the lump price.
But assuming that plaintiff Gaite undertook to sell and appellants
undertook to buy, not a definite mass, but approximately 24,000
tons of ore, so that any substantial difference in this quantity
delivered would entitle the buyers to recover damages for the
short-delivery, was there really a short-delivery in this case?
We think not. As already stated, neither of the parties had actually
measured or weighed the whole mass of ore cubic meter by cubic
meter, or ton by ton. Both parties predicate their respective claims
only upon an estimated number of cubic meters of ore multiplied
by the average tonnage factor per cubic meter.
Now, appellee Gaite asserts that there was a total of 7,375 cubic
meters in the stockpiles of ore that he sold to Fonacier, while
appellants contend that by actual measurement, their witness
Cirpriano Manlañgit found the total volume of ore in the stockpiles
to be only 6.609 cubic meters. As to the average weight in tons
per cubic meter, the parties are again in disagreement, with
appellants claiming the correct tonnage factor to be 2.18 tons to a
cubic meter, while appellee Gaite claims that the correct tonnage
factor is about 3.7.
In the face of the conflict of evidence, we take as the most
reliable estimate of the tonnage factor of iron ore in this case to
be that made by Leopoldo F. Abad, chief of the Mines and
Metallurgical Division of the Bureau of Mines, a government
pensionado to the States and a mining engineering graduate of
the Universities of Nevada and California, with almost 22 years of
experience in the Bureau of Mines. This witness placed the
tonnage factor of every cubic meter of iron ore at between 3
metric tons as minimum to 5 metric tons as maximum. This
estimate, in turn, closely corresponds to the average tonnage
factor of 3.3 adopted in his corrected report (Exhibits "FF" and
FF-1") by engineer Nemesio Gamatero, who was sent by the
Bureau of Mines to the mining claims involved at the request of
appellant Krakower, precisely to make an official estimate of the
amount of iron ore in Gaite's stockpiles after the dispute arose.
Even granting, then, that the estimate of 6,609 cubic meters of
ore in the stockpiles made by appellant's witness Cipriano
Manlañgit is correct, if we multiply it by the average tonnage
factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
which is not very far from the estimate of 24,000 tons made by
appellee Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a reasonable
percentage of error should be allowed anyone making an
estimate of the exact quantity in tons found in the mass. It must
not be forgotten that the contract Exhibit "A" expressly stated the
amount to be 24,000 tons, more or less. (ch. Pine River Logging
& Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would
entitle appellants to the payment of damages, nor could Gaite
have been guilty of any fraud in making any misrepresentation to
appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's
estimate appears to be substantially correct.

WHEREFORE, finding no error in the decision appealed from, we

hereby affirm the same, with costs against appellants.

Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,

Dizon, De Leon and Natividad, JJ., concur.

THIRD DIVISION
[G.R. NO. 170115 : February 19, 2008]
PROVINCE OF CEBU, Petitioner, v. HEIRS
OF RUFINA MORALES, NAMELY:
FELOMINA V. PANOPIO, NENITA
VILLANUEVA, ERLINDA V. ADRIANO and
CATALINA V. QUESADA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a Petition for Review on Certiorari of
the Decision1 of the Court of Appeals dated
March 29, 2005 in CA-G.R. CV No. 53632,
which affirmed in toto the Decision2 of the
Regional Trial Court of Cebu City, Branch 6,
in Civil Case No. CEB-11140 for specific
performance and reconveyance of property.
Also assailed is the Resolution3 dated August
31, 2005 denying the motion for
reconsideration.
On September 27, 1961, petitioner Province
of Cebu leased4 in favor of Rufina Morales a
210-square meter lot which formed part of
Lot No. 646-A of the Banilad Estate.
Subsequently or sometime in 1964,
petitioner donated several parcels of land to
the City of Cebu. Among those donated was
Lot No. 646-A which the City of Cebu
divided into sub-lots. The area occupied by
Morales was thereafter denominated as Lot
No. 646-A-3, for which Transfer Certificate
of Title (TCT) No. 308835 was issued in favor
of the City of Cebu.
On July 19, 1965, the city sold Lot No. 646-
A-3 as well as the other donated lots at
public auction in order to raise money for
infrastructure projects. The highest bidder
for Lot No. 646-A-3 was Hever Bascon but
Morales was allowed to match the highest
bid since she had a preferential right to the
lot as actual occupant thereof.6 Morales thus
paid the required deposit and partial
payment for the lot.7
In the meantime, petitioner filed an action
for reversion of donation against the City of
Cebu docketed as Civil Case No. 238-BC
before Branch 7 of the then Court of First
Instance of Cebu. On May 7, 1974,
petitioner and the City of Cebu entered into
a compromise agreement which the court
approved on July 17, 1974.8 The agreement
provided for the return of the donated lots
to petitioner except those that have already
been utilized by the City of Cebu. Pursuant
thereto, Lot No. 646-A-3 was returned to
petitioner and registered in its name under
TCT No. 104310.9
Morales died on February 20, 1969 during
the pendency of Civil Case No. 238-
BC.10 Apart from the deposit and down
payment, she was not able to make any
other payments on the balance of the
purchase price for the lot.
On March 11, 1983, one of the nieces of
Morales, respondent Catalina V. Quesada,
wrote to then Cebu Governor Eduardo R.
Gullas asking for the formal conveyance of
Lot No. 646-A-3 to Morales' surviving heirs,
in accordance with the award earlier made
by the City of Cebu.11 This was followed by
another letter of the same tenor dated
October 10, 1986 addressed to Governor
Osmundo G. Rama.12
The requests remained unheeded thus,
Quesada, together with the other nieces of
Morales namely, respondents Nenita
Villanueva and Erlinda V. Adriano, as well as
Morales' sister, Felomina V. Panopio, filed an
action for specific performance and
reconveyance of property against petitioner,
which was docketed as Civil Case No. CEB-
11140 before Branch 6 of the Regional Trial
Court of Cebu City.13 They also consigned
with the court the amount of P13,450.00
representing the balance of the purchase
price which petitioner allegedly refused to
accept.14
Panopio died shortly after the complaint was
filed.15
Respondents averred that the award at
public auction of the lot to Morales was a
valid and binding contract entered into by
the City of Cebu and that the lot was
inadvertently returned to petitioner under
the compromise judgment in Civil Case No.
238-BC. They alleged that they could not
pay the balance of the purchase price during
the pendency of said case due to confusion
as to whom and where payment should be
made. They thus prayed that judgment be
rendered ordering petitioner to execute a
final deed of absolute sale in their favor, and
that TCT No. 104310 in the name of
petitioner be cancelled.16
Petitioner filed its answer but failed to
present evidence despite several
opportunities given thus, it was deemed to
have waived its right to present evidence.17
On March 6, 1996, the trial court rendered
judgment, the dispositive part of which
reads:
WHEREFORE, judgment is rendered in favor
of the plaintiffs and against the defendant
Province of Cebu, hereby directing the latter
to convey Lot 646-A-3 to the plaintiffs as
heirs of Rufina Morales, and in this
connection, to execute the necessary deed
in favor of said plaintiffs.
No pronouncement as to costs.
SO ORDERED.18
In ruling for the respondents, the trial court
held thus:
[T]he Court is convinced that there was
already a consummated sale between the
City of Cebu and Rufina Morales. There was
the offer to sell in that public auction sale. It
was accepted by Rufina Morales with her bid
and was granted the award for which she
paid the agreed downpayment. It cannot be
gainsaid that at that time the owner of the
property was the City of Cebu. It has the
absolute right to dispose of it thru that
public auction sale. The donation by the
defendant Province of Cebu to Cebu City
was not voided in that Civil Case No. 238-
BC. The compromise agreement between
the parties therein on the basis of which
judgment was rendered did not provide
nullification of the sales or disposition made
by the City of Cebu. Being virtually
successor-in-interest of City of Cebu, the
defendant is bound by the contract lawfully
entered into by the former. Defendant did
not initiate any move to invalidate the sale
for one reason or another. Hence, it stands
as a perfectly valid contract which defendant
must respect. Rufina Morales had a vested
right over the property. The plaintiffs being
the heirs or successors-in-interest of Rufina
Morales, have the right to ask for the
conveyance of the property to them. While it
may be true that the title of the property
still remained in the name of the City of
Cebu until full payment is made, and this
could be the reason why the lot in question
was among those reverted to the Province,
the seller's obligation under the contract
was, for all legal purposes, transferred to,
and assumed by, the defendant Province of
Cebu. It is then bound by such contract.19
Petitioner appealed to the Court of Appeals
which affirmed the decision of the trial
court in toto. Upon denial of its motion for
reconsideration, petitioner filed the instant
petition under Rule 45 of the Rules of Court,
alleging that the appellate court erred in:
FINDING THAT RUFINA MORALES AND
RESPONDENTS, AS HER HEIRS, HAVE THE
RIGHT TO EQUAL THE BID OF THE HIGHEST
BIDDER OF THE SUBJECT PROPERTY AS
LESSEES THEREOF;
FINDING THAT WITH THE DEPOSIT AND
PARTIAL PAYMENT MADE BY RUFINA
MORALES, THE SALE WAS IN EFFECT
CLOSED FOR ALL LEGAL PURPOSES, AND
THAT THE TRANSACTION WAS PERFECTED
AND CONSUMMATED;
FINDING THAT LACHES AND/OR
PRESCRIPTION ARE NOT APPLICABLE
AGAINST RESPONDENTS;
FINDING THAT DUE TO THE PENDENCY OF
CIVIL CASE NO. 238-BC, PLAINTIFFS WERE
NOT ABLE TO PAY THE AGREED
INSTALLMENTS;
AFFIRMING THE DECISION OF THE TRIAL
COURT IN FAVOR OF THE RESPONDENTS
AND AGAINST THE PETITIONERS.20
The petition lacks merit.
The appellate court correctly ruled that
petitioner, as successor-in-interest of the
City of Cebu, is bound to respect the
contract of sale entered into by the latter
pertaining to Lot No. 646-A-3. The City of
Cebu was the owner of the lot when it
awarded the same to respondents'
predecessor-in-interest, Morales, who later
became its owner before the same was
erroneously returned to petitioner under the
compromise judgment. The award is
tantamount to a perfected contract of sale
between Morales and the City of Cebu, while
partial payment of the purchase price and
actual occupation of the property by Morales
and respondents effectively transferred
ownership of the lot to the latter. This is
true notwithstanding the failure of Morales
and respondents to pay the balance of the
purchase price.
Petitioner can no longer assail the award of
the lot to Morales on the ground that she
had no right to match the highest bid during
the public auction. Whether Morales, as
actual occupant and/or lessee of the lot, was
qualified and had the right to match the
highest bid is a foregone matter that could
have been questioned when the award was
made. When the City of Cebu awarded the
lot to Morales, it is assumed that she met all
qualifications to match the highest bid. The
subject lot was auctioned in 1965 or more
than four decades ago and was never
questioned. Thus, it is safe to assume, as
the appellate court did, that all requirements
for a valid public auction sale were complied
with.
A sale by public auction is perfected "when
the auctioneer announces its perfection by
the fall of the hammer or in other customary
manner".21 It does not matter that Morales
merely matched the bid of the highest
bidder at the said auction sale. The contract
of sale was nevertheless perfected as to
Morales, since she merely stepped into the
shoes of the highest bidder.
Consequently, there was a meeting of minds
between the City of Cebu and Morales as to
the lot sold and its price, such that each
party could reciprocally demand
performance of the contract from the
other.22 A contract of sale is a consensual
contract and is perfected at the moment
there is a meeting of minds upon the thing
which is the object of the contract and upon
the price. From that moment, the parties
may reciprocally demand performance
subject to the provisions of the law
governing the form of contracts. The
elements of a valid contract of sale under
Article 1458 of the Civil Code are: (1)
consent or meeting of the minds; (2)
determinate subject matter; and (3) price
certain in money or its equivalent.23 All
these elements were present in the
transaction between the City of Cebu and
Morales.
There is no merit in petitioner's assertion
that there was no perfected contract of sale
because no "Contract of Purchase and Sale"
was ever executed by the parties. As
previously stated, a contract of sale is a
consensual contract that is perfected upon a
meeting of minds as to the object of the
contract and its price. Subject to the
provisions of the Statute of Frauds, a formal
document is not necessary for the sale
transaction to acquire binding effect.24 For
as long as the essential elements of a
contract of sale are proved to exist in a
given transaction, the contract is deemed
perfected regardless of the absence of a
formal deed evidencing the same.
Similarly, petitioner erroneously contends
that the failure of Morales to pay the
balance of the purchase price is evidence
that there was really no contract of sale
over the lot between Morales and the City of
Cebu. On the contrary, the fact that there
was an agreed price for the lot proves that a
contract of sale was indeed perfected
between the parties. Failure to pay the
balance of the purchase price did not render
the sale inexistent or invalid, but merely
gave rise to a right in favor of the vendor to
either demand specific performance or
rescission of the contract of sale.25 It did not
abolish the contract of sale or result in its
automatic invalidation.
As correctly found by the appellate court,
the contract of sale between the City of
Cebu and Morales was also partially
consummated. The latter had paid the
deposit and downpayment for the lot in
accordance with the terms of the bid award.
She first occupied the property as a lessee
in 1961, built a house thereon and was
continuously in possession of the lot as its
owner until her death in 1969. Respondents,
on the other hand, who are all surviving
heirs of Morales, likewise occupied the
property during the latter's lifetime and
continue to reside on the property to this
day.26
The stages of a contract of sale are as
follows: (1) negotiation, covering the period
from the time the prospective contracting
parties indicate interest in the contract to
the time the contract is perfected;
(2) perfection, which takes place upon the
concurrence of the essential elements of the
sale which are the meeting of the minds of
the parties as to the object of the contract
and upon the price; and (3) consummation,
which begins when the parties perform their
respective undertakings under the contract
of sale, culminating in the extinguishment
thereof.27 In this case, respondents'
predecessor had undoubtedly commenced
performing her obligation by making a down
payment on the purchase price.
Unfortunately, however, she was not able to
complete the payments due to legal
complications between petitioner and the
city.
Thus, the City of Cebu could no longer
dispose of the lot in question when it was
included as among those returned to
petitioner pursuant to the compromise
agreement in Civil Case No. 238-BC. The
City of Cebu had sold the property to
Morales even though there remained a
balance on the purchase price and a formal
contract of sale had yet to be executed.
Incidentally, the failure of respondents to
pay the balance on the purchase price and
the non-execution of a formal agreement
was sufficiently explained by the fact that
the trial court, in Civil Case No. 238-BC,
issued a writ of preliminary injunction
enjoining the city from further disposing the
donated lots. According to respondents,
there was confusion as to the circumstances
of payment considering that both the city
and petitioner had refused to accept
payment by virtue of the injunction.28 It
appears that the parties simply mistook Lot
646-A-3 as among those not yet sold by the
city.
The City of Cebu was no longer the owner of
Lot 646-A-3 when it ceded the same to
petitioner under the compromise agreement
in Civil Case No. 238-BC. At that time, the
city merely retained rights as an unpaid
seller but had effectively transferred
ownership of the lot to Morales. As
successor-in-interest of the city, petitioner
could only acquire rights that its predecessor
had over the lot. These rights include the
right to seek rescission or fulfillment of the
terms of the contract and the right to
damages in either case.29
In this regard, the records show that
respondent Quesada wrote to then Cebu
Governor Eduardo R. Gullas on March 11,
1983, asking for the formal conveyance of
Lot 646-A-3 pursuant to the award and sale
earlier made by the City of Cebu. On
October 10, 1986, she again wrote to
Governor Osmundo G. Rama reiterating her
previous request. This means that petitioner
had known, at least as far back as 1983,
that the city sold the lot to respondents'
predecessor and that the latter had paid the
deposit and the required down payment.
Despite this knowledge, however, petitioner
did not avail of any rightful recourse to
resolve the matter.
Article 1592 of the Civil Code pertinently
provides:
Article 1592. In the sale of immovable
property, even though it may have been
stipulated that upon failure to pay the price
at the time agreed upon the rescission of
the contract shall of right take place, the
vendee may pay, even after the expiration
of the period, as long as no demand for
rescission of the contract has been made
upon him either judicially or by notarial act.
After the demand, the court may not grant
him a new term. (Underscoring supplied) cralawlibrary
Thus, respondents could still tender
payment of the full purchase price as no
demand for rescission had been made upon
them, either judicially or through notarial
act. While it is true that it took a long time
for respondents to bring suit for specific
performance and consign the balance of the
purchase price, it is equally true that
petitioner or its predecessor did not take
any action to have the contract of sale
rescinded. Article 1592 allows the vendee to
pay as long as no demand for rescission has
been made.30 The consignation of the
balance of the purchase price before the trial
court thus operated as full payment, which
resulted in the extinguishment of
respondents' obligation under the contract
of sale.

Finally, petitioner cannot raise the issue of

prescription and laches at this stage of the
proceedings. Contrary to petitioner's
assignment of errors, the appellate court
made no findings on the issue because
petitioner never raised the matter of
prescription and laches either before the
trial court or Court of Appeals. It is basic
that defenses and issues not raised below
cannot be considered on appeal.31 Thus,
petitioner cannot plead the matter for the
first time before this Court.

WHEREFORE, in view of the foregoing, the

petition is hereby DENIED and the decision
and resolution of the Court of Appeals in CA-
G.R. CV No. 53632 are AFFIRMED.

SO ORDERED.

SECOND DIVISION
[G.R. No. 109410. August 28, 1996.]
CLARA M. BALATBAT, Petitioner, v. COURT OF
APPEALS and Spouses JOSE REPUYAN and AURORA
REPUYAN, Respondents.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALES; TRANSFER
OF OWNERSHIP; CONSUMMATED UPON ACTUAL OR
CONSTRUCTIVE DELIVERY THEREOF. — Devoid of any
stipulation that "ownership in the thing shall not pass to
the purchaser until he has fully paid the price,"
ownership in the thing shall pass from the vendor to the
vendee upon actual or constructive delivery of the thing
sold even if the purchase price has not yet been fully
paid. The failure of the buyer to make good the price
does not, in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the New
Civil Code. Non-payment only creates a right to demand
the fulfillment of the obligation or to rescind the contract.
2. ID.; ID.; ID.; ID.; WHEN THE SALE IS MADE
THROUGH A PUBLIC INSTRUMENT, THE EXECUTION
THEREOF SHALL BE EQUIVALENT TO THE DELIVERY OF
THE THING WHICH IS THE OBJECT OF THE CONTRACT.
— With respect to the non-delivery of the possession of
the subject property to the private respondent, suffice it
to say that ownership of the thing sold is acquired only
from the time of delivery thereof, either actual or
constructive. Article 1498 of the Civil Code provides that
— when the sale is made through a public instrument,
the execution thereof shall be equivalent to the delivery
of the thing which is the object of the contract, if from
the deed the contrary does not appear or cannot be
inferred. The execution of the public instrument, without
actual delivery of the thing, transfers the ownership from
the vendor to the vendee, who may thereafter exercise
the rights of an owner over the same. In the instant
case, vendor Roque delivered the owner’s certificate of
title to herein private Respondent. It is not necessary
that vendee be physically present at every square inch of
the land bought by him, possession of the public
instrument of the land is sufficient to accord him the
rights of ownership. Thus, delivery of a parcel of land
may be done by placing the 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 requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public
instrument.
3. ID.; ID.; ID.; PERFECTED BY MERE CONSENT OF THE
PARTIES. — A contract of sale being consensual, it is
perfected by the mere consent of the parties. Delivery of
the thing bought or payment of the price is not necessary
for the perfection of the contract; and failure of the
vendee to pay the price after the execution of the
contract does not make the sale null and void for lack of
consideration but results at most in default on the part of
the vendee, for which the vendor may exercise his legal
remedies.
4. ID.; ID.; ID.; RULE IN CASE OF DOUBLE SALE OF AN
IMMOVABLE PROPERTY. — Article 1544 of the Civil Code
provides that in case of double sale of an immovable
property, ownership shall be transferred (1) to the
person acquiring it who in good faith first recorded it in
the Registry of Property; (2) in default thereof, to the
person who in good faith was first in possession; and (3)
in default thereof, to the person who presents the oldest
title, provided there is good faith. This is an instance of a
instance of a double sale of an immovable property
hence, the ownership shall vests in the person acquiring
it who in good faith first recorded it in the Registry of
Property. Evidently, private respondents Repuyan’s
caused the annotation of an adverse claim on the title of
the subject property denominated as Entry No. 5627/T-
135671 on July 21, 1980. The annotation of the adverse
claim on TCT No. 135671 in the Registry of Property is
sufficient compliance as mandated by law and serves
notice to the whole world.
5. ID.; ID.; ID.; IT IS INCUMBENT UPON THE VENDEE
TO ASK FOR THE DELIVERY OF THE OWNER’S
DUPLICATE COPY OF THE TITLE IN ORDER TO INQUIRE
OR DISCOVER A FLAW THEREOF. — It is incumbent upon
the vendee of the property to ask for the delivery of the
owner’s duplicate copy of the title from the vendor. A
purchaser of a valued piece of property cannot just close
his eyes to facts which should put a reasonable man
upon his guard and then claim that he acted in good faith
and under the belief that there were no defect in the title
of the vendor. One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest
therein; and the same rule must be applied to one who
has knowledge of facts which should have put him upon
such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.
Good faith, or the want of it is not a visible, tangible fact
that can be seen or touched, but rather a state or
condition of mind which can only be judged of by actual
or fancied tokens or signs. In fine, petitioner had nobody
to blame but herself in dealing with the disputed property
for failure to inquire or discover a flaw in the title to the
property, thus, it is axiomatic that — culpa lata dolo
aequiparatur — gross negligence is equivalent to
intentional wrong.
DECISION
TORRES, JR., J.:
Petitioner Clara M. Balatbat instituted this petition for
review pursuant to Rule 45 of the Revised Rules of Court
seeking to set aside the decision dated August 12, 1992
of the respondent Court of Appeals in CA-G.R. CV No.
29994 entitled "Alejandro Balatbat and Clara Balatbat,
plaintiffs-appellants versus Jose Repuyan and Aurora
Repuyan, defendants-appellees", the dispositive portion
of which reads: 1
"WHEREFORE, the judgment appealed from is affirmed
with the modification that the awards of P10,000.00 for
attorney’s fees and P5,000.00 as costs of litigation are
deleted.
 1. Of the house and lot forming the conjugal properties,
SO ORDERED." cralaw virtua1aw library plaintiff is entitled to one-half share pro-indiviso thereof
while the other half forms the estate of the deceased
The records show the following factual antecedents: chanrob1es virtual 1aw library Maria Mesina;

It appears that on June 15, 1977, Aurelio A. Roque filed
a complaint for partition docketed as Civil Case No.
109032 against Corazon Roque, Alberto de los Santos,
Feliciano Roque, Severa Roque and Osmundo Roque
before the then Court of First Instance of Manila, Branch
IX. 2 Defendants therein were declared in default and
plaintiff presented evidence ex-parte. On March 29,
1979, the trial court rendered a decision in favor of
plaintiff Aurelio A. Roque, the pertinent portion of which
reads: 3
2. Of the Estate of deceased Maria Mesina, the same is to
be divided into five (5) shares and plaintiff and his four
children are entitled each to one-fifth share thereof pro-
indiviso.
Plaintiff claim for moral, exemplary and actual damages
and attorney’s fees not having been established to the
satisfaction of the Court, the same is hereby denied.
Without pronouncement as to costs.

"From the evidence, it has been clearly established that SO ORDERED.”

the lot in question covered by Transfer Certificate of Title
No. 51330 was acquired by plaintiff Aurelio Roque and On June 2, 1979, the decision became final and
Maria Mesina during their conjugal union and the house executory. The corresponding entry of judgment was
constructed thereon was likewise built during their made on March 29, 1979. 4
marital union. Out of their union, plaintiff and Maria
Mesina had four children, who are the defendants in this On October 5, 1979, the Register of Deeds of Manila
case. When Maria Mesina died on August 28, 1966, the issued a Transfer Certificate of Title No. 135671 in the
only conjugal properties left are the house and lot above name of the following persons in the following
stated of which plaintiff herein, as the legal spouse, is proportions: 5
entitled to one-half share pro-indiviso thereof. With
respect to the one-half share pro-indiviso now forming Aurelio A. Roque 6/10 share
the estate of Maria Mesina, plaintiff and the four children,
the defendants here, are each entitled to one-fifth (1/5) Severina M. Roque 1/10 share
share pro-indiviso. The deceased wife left no debt.
Osmundo M. Roque 1/10 share
Wherefore, judgment is hereby rendered ordering the
partition of the properties, subject matter of this case Feliciano M. Roque 1/10 share
consisting of the house and lot, in the following manner:
virtual 1aw library
chanrob1es

Corazon M. Roque 1/10 share

On April 1, 1980, Aurelio A. Roque sold his 6/10 share in
T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan
and Jose Repuyan as evidenced by a "Deed of Absolute
Sale." 6
On July 21, 1980, Aurora Tuazon Repuyan caused the
annotation of her affidavit of adverse claim 7 on the
Transfer Certificate of Title No. 135671, 8 to wit:
jgc:chanrobles.com.ph
"Entry No. 5627/T-135671 — NOTICE OF ADVERSE
CLAIM — Filed by Aurora Tuazon Repuyan, married,
claiming among others that she bought 6/10 portion of
the property herein described from Aurelio Roque for the
amount of P50,000.00 with a down payment of
P5,000.00 and the balance of P45,000.00 to be paid after
the partition and subdivision of the property herein
described, other claims set forth in Doc. No. 954, page
18, Book 94 of _________________ 64
__________________ PEDRO DE CASTRO, Notary Public
of Manila.
Date of instrument — July 21, 1980
Date of inscription -July 21, 1980 at 3:35 p.m.
TERESITA H. NOBLEJAS
Acting Register of Deeds
By: chanrob1es virtual 1aw library
RAMON D. MACARICAN
Acting Second Deputy"
On August 20, 1980, Aurelio A. Roque filed a complaint
for "Rescission of Contract" docketed as Civil Case No.
134131 against spouses Aurora Tuazon-Repuyan and
Jose Repuyan before Branch IV of the then Court of First
Instance of Manila. The complaint is grounded on
spouses Repuyan’s failure to pay the balance of
P45,000.00 of the purchase price. 9 On September 5,
1980, spouses Repuyan filed their answer with
counterclaim. 10
In the meantime, the trial court issued an order in Civil
Case No. 109032 (Partition case) dated February 2,
1982, to wit: 11
"In view of all the foregoing and finding that the amount
of P100,000.00 as purchase price for the sale of the
parcel of land covered by TCT No. 51330 of the Registry
of Deeds of Manila consisting of 84 square meters
situated in Callejon Sulu, District of Santa Cruz, Manila,
to be reasonable and fair, and considering the
opportunities given defendants to sign the deed of
absolute sale voluntarily, the Court has no alternative but
to order, as it hereby orders, the Deputy Clerk of this
Court to sign the deed of absolute sale for and in behalf
of defendants pursuant to Sec. 10, Rule 39 of the Rules
of Court, in order to effect the partition of the property
involved in this case.
SO ORDERED." cralaw virtua1aw library
A deed of absolute sale was executed on February 4,
1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and
Clara Balatbat, married to Alejandro Balatbat. 12 On
April 14, 1982, Clara Balatbat filed a motion for the
issuance of a writ of possession which was granted by
the trial court on September 14, 1982 "subject, however,
to valid rights and interest of third persons over the
same portion thereof, other than vendor or any other
person or persons privy to or claiming any rights or
interest under it." The corresponding writ of possession
was issued on September 20, 1982. 13
On May 20, 1982, petitioner Clara Balatbat filed a motion
to intervene in Civil Case No. 134131 14 which was
granted as per court’s resolution of October 21, 1982. 15
However, Clara Balatbat failed to file her complaint in
intervention. 16 On April 15, 1986, the trial court
rendered a decision dismissing the complaint, the
pertinent portion of which reads: 17
"The rescission of contracts are provided for in the laws
and nowhere in the provision of the Civil Code under the
title Rescissible Contracts does the circumstances in the
case at bar appear to have occurred, hence, the prayer
for rescission is outside the ambit for which rescissible
[sic] could be granted.
"The Intervenor — Plaintiff, Clara Balatbat, although
allowed to intervene, did not file her complaint in
intervention.
"Consequently, the plaintiff having failed to prove with
sufficient preponderance his action, the relief prayed for
had to be denied. The contract of sale denominated as
"Deed of Absolute Sale" (Exh. 7 and sub-markings) being
valid and enforceable, the same pursuant to the
provisions of Art. 1159 of the Civil Code which says: jgc:chanrobles.com.ph
"Obligations arising from contracts have the force of law
between the contracting parties and should be complied
with in good faith."
cralaw virtua1aw library
has the effect of being the law between the parties and
should be complied with. The obligation of the plaintiff
under the contract being to have the land covered by
TCT No. 135671 partitioned and subdivided, and title
issued in the name of the defendant buyer (see page 2
par. C of Exh. 7-A) plaintiff had to comply thereto to give
effect to the contract.
"WHEREFORE, judgment is rendered against the plaintiff,
Aurelio A. Roque, and the plaintiff in intervention, Clara
Balatbat, and in favor of the defendants, dismissing the
complaint for lack of merit, and declaring the Deed of
Absolute Sale dated April 1, 1980 as valid and
enforceable and the plaintiff is, as he is hereby ordered,
to partition and subdivide the land covered by T.C.T. No.
135671, and to aggregate therefrom a portion equivalent
to 6/10 thereof, and cause the same to be titled in the
name of the defendants, and after which, the defendants
to pay the plaintiff the sum of P45,000.00. Considering
further that the defendants suffered damages since they
were forced to litigate unnecessarily, by way of their
counterclaim, plaintiff is hereby ordered to pay
defendants the sum of P15,000.00 as moral damages,
attorney’s fees in the amount of P5,000.00.
Costs against plaintiff.
SO ORDERED." cralaw virtua1aw library
On March 3, 1987, petitioner Balatbat filed a notice of lis
pendens in Civil Case No. 109032 before the Register of
Deeds of Manila. 18
On December 9, 1988, petitioner Clara Balatbat and her
husband, Alejandro Balatbat filed the instant complaint
for delivery of the owners duplicate copy of T.C.T. No. attorney’s fees and P5,000.00 as costs of litigation are
135671 docketed as Civil Case No. 88-47176 before deleted.
Branch 24 of the Regional Trial Court of Manila against
private respondents Jose Repuyan and Aurora Repuyan. SO ORDERED." cralaw virtua1aw library

19
On March 22, 1993, the respondent Court of Appeals
On January 27, 1989, private respondents filed their denied petitioner’s motion for reconsideration.25 cralaw:red

answer with affirmative defenses and compulsory

counterclaim. 20 Hence, this petition for review.

On November 13, 1989, private respondents filed their Petitioner raised the following issues for this Court’s
memorandum 21 while petitioners filed their resolution:chanrob1es virtual 1aw library

memorandum on November 23, 1989. 22

I
On August 2, 1990, the Regional Trial Court of Manila,
Branch 24, rendered a decision dismissing the complaint,
the dispositive portion of which reads: 23 WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE
RESPONDENTS WAS MERELY EXECUTORY AND NOT A
"Considering all the foregoing, this Court finds that the CONSUMMATED TRANSACTION?
plaintiffs have not been able to establish their cause of
action against the defendants and have no right to the II
reliefs demanded in the complaint and the complaint of
the plaintiff against the defendants is hereby
DISMISSED. On the counterclaim, the plaintiff are WHETHER OR NOT THERE WAS A DOUBLE SALE AS
ordered to pay defendants the amount of Ten Thousand CONTEMPLATED UNDER ART. 1544 OF THE CIVIL CODE?
Pesos by way of attorney’s fees, Five Thousand Pesos as
costs of litigation and further to pay the costs of the suit. III

SO ORDERED." cralaw virtua1aw library

WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD

Dissatisfied, petitioner Balatbat filed an appeal before the FAITH AND FOR VALUE?
respondent Court of Appeals which rendered the assailed
decision on August 12, 1992, to wit: 24 IV

"WHEREFORE, the judgment appealed from is affirmed

with the modification that the awards of P10,000.00 for WHETHER OR NOT THE COURT OF APPEALS ERRED IN
GIVING WEIGHT AND CONSIDERATION TO THE
EVIDENCE OF THE PRIVATE RESPONDENTS WHICH
WERE NOT OFFERED?
Petitioner asseverates that the respondent Court of
Appeals committed grave abuse of discretion tantamount
to lack or excess of jurisdiction in affirming the appealed
judgment considering (1) that the alleged sale in favor of
the private respondents Repuyan was merely executory;
(2) that there is no double sale; (3) that petitioner is a
buyer in good faith and for value; and (4) that private
respondents did not offer their evidence during the trial.
Contrary to petitioner’s contention that the sale dated
April 1, 1980 in favor of private respondents Repuyan
was merely executory for the reason that there was no
delivery of the subject property and that
consideration/price was not fully paid, we find the sale as
consummated, hence, valid and enforceable. In a
decision dated April 15, 1986 of the Regional Trial Court
of Manila, Branch IV in Civil Case No. 134131, the Court
dismissed vendor’s Aurelio Roque complaint for rescission
of the deed of sale and declared that the sale dated April
1, 1980, as valid and enforceable. No appeal having been
made, the decision became final and executory. It must
be noted that herein petitioner Balatbat filed a motion for
intervention in that case but did not file her complaint in
intervention. In that case wherein Aurelio Roque sought
to rescind the April 1, 1980 deed of sale in favor of the
private respondents for non-payment of the P45,000.00
balance, the trial court dismissed the complaint for
rescission. Examining the terms and conditions of the
"Deed of Sale" dated April 1, 1980, the P45,000.00
balance is payable only "after the property covered by
T.C.T No. 135671 has been partitioned and subdivided,
and title issued in the name of the BUYER" hence, vendor
Roque cannot demand payment of the balance unless
and until the property has been subdivided and titled in
the name of the private respondents. Devoid of any
stipulation that "ownership in the thing shall not pass to
the purchaser until he has fully paid the price", 26
ownership in the thing shall pass from the vendor to the
vendee upon actual or constructive delivery of the thing
sold even if the purchase price has not yet been fully
paid. The failure of the buyer to make good the price
does not, in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first
rescinded or resolved pursuant to Article 1191 of the New
Civil Code. 27 Non-payment only creates a right to
demand the fulfillment of the obligation or to rescind the
contract.
With respect to the non-delivery of the possession of the
subject property to the private respondent, suffice it to
say that ownership of the thing sold is acquired only from
the time of delivery thereof, either actual or constructive.
28 Article 1498 of the Civil Code provides that — when
the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of
the thing which is the object of the contract, if from the
deed the contrary does not appear or cannot be inferred.
29 The execution of the public instrument, without actual
delivery of the thing, transfers the ownership from the
vendor to the vendee, who may thereafter exercise the
rights of an owner over the same. 30 In the instant case,
vendor Roque delivered the owner’s certificate of title to
herein private Respondent. It is not necessary that
vendee be physically present at every square inch of the
land bought by him, possession of the public instrument
of the land is sufficient to accord him the rights of
ownership. Thus, delivery of a parcel of land may be
done by placing the 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
requirement for the validity of a contract of sale of a
parcel of land that this be embodied in a public
instrument. 31
A contract of sale being consensual, it is perfected by the
mere consent of the parties. 32 Delivery of the thing
bought or payment of the price is not necessary for the
perfection of the contract; and failure of the vendee to
pay the price after the execution of the contract does not
make the sale null and void for lack of consideration but
results at most in default on the part of the vendee, for
which the vendor may exercise his legal remedies. 33
Article 1544 of the New Civil Code provides: jgc:chanrobles.com.ph
"If the same thing should have been sold to different
vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in
good faith, if it should be movable property.
"Should it be movable property, the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
"Should there be no inscription, the ownership shall
pertain to the person who in good faith was first in the
possession and in the absence thereof, to the person who
present the oldest title, provided there is good faith."
Article 1544 of the Civil Code provides that in case of
double sale of an immovable property, ownership shall
be transferred (1) to the person acquiring it who in good
faith first recorded it in the Registry of Property; (2) in
default thereof, to the person who in good faith was first
in possession; and (3) in default thereof, to the person
who presents the oldest title, provided there is good
faith. 34
In the case at bar, vendor Aurelio Roque sold 6/10
portion of his share in TCT No. 135671 to private
respondents Repuyan on April 1, 1980. Subsequently,
the same lot was sold again by vendor Aurelio Roque
(6/10) and his children (4/10), represented by the Clerk
of Court pursuant to Section 10, Rule 39 of the Rules of
Court, on February 4, 1982. Undoubtedly, this is a case
of double sale contemplated under Article 1544 of the
New Civil Code.
This is an instance of a double sale of an immovable
property hence, the ownership shall vests in the person
acquiring it who in good faith first recorded it in the
Registry of Property. Evidently, private respondents
Repuyan’s caused the annotation of an adverse claim on
the title of the subject property denominated as Entry
No. 5627/T-135671 on July 21, 1980. 35 The annotation
of the adverse claim on TCT No. 135671 in the Registry
of Property is sufficient compliance as mandated by law
and serves notice to the whole world.
On the other hand, petitioner filed a notice of lis pendens
only on February 2, 1982. Accordingly, private
respondents who first caused the annotation of the
adverse claim in good faith shall have a better right over
cralaw virtua1aw library herein petitioner. Moreover, the physical possession of
herein petitioners by virtue of a writ of possession issued
by the trial court on September 20, 1982 is "subject to
the valid rights and interest of third persons over the
same portion thereof, other than vendor or any other
person or persons privy to or claiming any rights to such inquiry and investigation as might be necessary to
interest under it." 36 As between two purchasers, the acquaint him with the defects in the title of his vendor.
one who has registered the sale in his favor, has a Good faith, or the want of it is not a visible, tangible fact
preferred right over the other who has not registered his that can be seen or touched, but rather a state or
title even if the latter is in actual possession of the condition of mind which can only be judged of by actual
immovable property. 37 Further, even in default of the or fancied tokens or signs. 40
first registrant or first in possession, private respondents
have presented the oldest title. 38 Thus, private In fine, petitioner had nobody to blame but herself in
respondents who acquired the subject property in good dealing with the disputed property for failure to inquire or
faith and for valuable consideration established a discover a flaw in the title to the property, thus, it is
superior right as against the petitioner. axiomatic that — culpa lata dolo aequiparatur — gross
negligence is equivalent to intentional wrong.
Evidently, petitioner cannot be considered as a buyer in
good faith. In the complaint for rescission filed by vendor IN VIEW OF THE FOREGOING PREMISES, this petition for
Aurelio Roque on August 20, 1980, herein petitioner filed review is hereby DISMISSED for lack of merit. No
a motion for intervention on May 20, 1982 but did not file pronouncement as to costs.
her complaint in intervention, hence, the decision was
rendered adversely against her. If petitioner did IT IS SO ORDERED.
investigate before buying the land on February 4, 1982,
she should have known that there was a pending case
and an annotation of adverse claim was made in the title
of the property before the Register of Deeds and she
could have discovered that the subject property was
already sold to the private respondents. It is incumbent
upon the vendee of the property to ask for the delivery of
the owner’s duplicate copy of the title from the vendor. A
purchaser of a valued piece of property cannot just close
his eyes to facts which should put a reasonable man
upon his guard and then claim that he acted in good faith
and under the belief that there were no defect in the title
of the vendor. 39 One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest
therein; and the same rule must be applied to one who
has knowledge of facts which should have put him upon

SECOND DIVISION
G.R. No. 124242             January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL
LU and PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that
respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa,
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two
parcels of land to respondent Pablo Babasanta, (hereinafter,
Babasanta) for the price of fifteen pesos (₱15.00) per square
meter. Babasanta made a downpayment of fifty thousand pesos
(₱50,000.00) as evidenced by a memorandum receipt issued by
Pacita Lu of the same date. Several other payments totaling two
hundred thousand pesos (₱200,000.00) were made by
Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to
demand the execution of a final deed of sale in his favor so that
he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another
without his knowledge and consent. He demanded that the
second sale be cancelled and that a final deed of sale be issued
in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at fifteen
pesos (₱15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became
due, he requested for a reduction of the price and when she
refused, Babasanta backed out of the sale. Pacita added that she
returned the sum of fifty thousand pesos (₱50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before
the Regional Trial Court (RTC), Branch 31, of San Pedro,
Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu.
Babasanta alleged that the lands covered by TCT No. T- 39022
and T-39023 had been sold to him by the spouses at fifteen
pesos (₱15.00) per square meter. Despite his repeated demands
for the execution of a final deed of sale in his favor, respondents
allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained
loans from Babasanta and when the total advances of Pacita
reached fifty thousand pesos (₱50,000.00), the latter and
Babasanta, without the knowledge and consent of Miguel Lu, had
verbally agreed to transform the transaction into a contract to sell
the two parcels of land to Babasanta with the fifty thousand pesos
(₱50,000.00) to be considered as the downpayment for the
property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred
thousand pesos (₱200,000.00) and the latter allegedly failed to
pay the balance of two hundred sixty thousand pesos
(₱260,000.00) despite repeated demands. Babasanta had
purportedly asked Pacita for a reduction of the price from fifteen
pesos (₱15.00) to twelve pesos (₱12.00) per square meter and
when the Spouses Lu refused to grant Babasanta’s request, the
latter rescinded the contract to sell and declared that the original
loan transaction just be carried out in that the spouses would be
indebted to him in the amount of two hundred thousand pesos
(₱200,000.00). Accordingly, on 6 July 1989, they purchased
Interbank Manager’s Check No. 05020269 in the amount of two
hundred thousand pesos (₱200,000.00) in the name of
Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January
19903 wherein he prayed for the issuance of a writ of preliminary
injunction with temporary restraining order and the inclusion of
the Register of Deeds of Calamba, Laguna as party defendant.
He contended that the issuance of a preliminary injunction was
necessary to restrain the transfer or conveyance by the Spouses
Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint
contending that it raised new matters which seriously affect their
substantive rights under the original complaint. However, the trial
court in its Order dated 17 January 19905 admitted the amended
complaint.
On 19 January 1990, herein petitioner San Lorenzo Development
Corporation (SLDC) filed a Motion for Intervention6 before the trial
court. SLDC alleged that it had legal interest in the subject matter
under litigation because on 3 May 1989, the two parcels of land
involved, namely Lot 1764-A and 1764-B, had been sold to it in a
Deed of Absolute Sale with Mortgage.7 It alleged that it was a
buyer in good faith and for value and therefore it had a better right
over the property in litigation.
In his Opposition to SLDC’s motion for intervention,8 respondent
Babasanta demurred and argued that the latter had no legal
interest in the case because the two parcels of land involved
herein had already been conveyed to him by the Spouses Lu and
hence, the vendors were without legal capacity to transfer or
dispose of the two parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990
allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990.9 Respondent Babasanta’s motion
for the issuance of a preliminary injunction was likewise granted
by the trial court in its Order dated 11 January 199110 conditioned
upon his filing of a bond in the amount of fifty thousand pesos
(₱50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February
1989, the Spouses Lu executed in its favor an Option to Buy the
lots subject of the complaint. Accordingly, it paid an option money
in the amount of three hundred sixteen thousand one hundred
sixty pesos (₱316,160.00) out of the total consideration for the
purchase of the two lots of one million two hundred sixty-four
thousand six hundred forty pesos (₱1,264,640.00). After the
Spouses Lu received a total amount of six hundred thirty-two
thousand three hundred twenty pesos (₱632,320.00) they
executed on 3 May 1989 a Deed of Absolute Sale with
Mortgage in its favor. SLDC added that the certificates of title
over the property were delivered to it by the spouses clean and
free from any adverse claims and/or notice of lis pendens. SLDC
further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to
file the motion to intervene without delay. Claiming that it was a
buyer in good faith, SLDC argued that it had no obligation to look
beyond the titles submitted to it by the Spouses Lu particularly
because Babasanta’s claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July
1993 upholding the sale of the property to SLDC. It ordered the
Spouses Lu to pay Babasanta the sum of two hundred thousand
pesos (₱200,000.00) with legal interest plus the further sum of
fifty thousand pesos (₱50,000.00) as and for attorney’s fees. On
the complaint-in-intervention, the trial court ordered the Register
of Deeds of Laguna, Calamba Branch to cancel the notice of lis
pendens annotated on the original of the TCT No. T-39022 (T-
7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that
since both Babasanta and SLDC did not register the respective
sales in their favor, ownership of the property should pertain to
the buyer who first acquired possession of the property. The trial
court equated the execution of a public instrument in favor of
SLDC as sufficient delivery of the property to the latter. It
concluded that symbolic possession could be considered to have
been first transferred to SLDC and consequently ownership of the
property pertained to SLDC who purchased the property in good
faith.
Respondent Babasanta appealed the trial court’s decision to the
Court of Appeals alleging in the main that the trial court erred in
concluding that SLDC is a purchaser in good faith and in
upholding the validity of the sale made by the Spouses Lu in favor
of SLDC.
Respondent spouses likewise filed an appeal to the Court of
Appeals. They contended that the trial court erred in failing to
consider that the contract to sell between them and Babasanta
had been novated when the latter abandoned the verbal contract
of sale and declared that the original loan transaction just be
carried out. The Spouses Lu argued that since the properties
involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta
null and void ab initio for lack of knowledge and consent of Miguel
Lu. They further averred that the trial court erred in not dismissing
the complaint filed by Babasanta; in awarding damages in his
favor and in refusing to grant the reliefs prayed for in their
answer.
On 4 October 1995, the Court of Appeals rendered
its Decision11 which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu
was valid and subsisting and ordered the spouses to execute the
necessary deed of conveyance in favor of Babasanta, and the
latter to pay the balance of the purchase price in the amount of
two hundred sixty thousand pesos (₱260,000.00). The appellate
court ruled that the Absolute Deed of Sale with Mortgage in favor
of SLDC was null and void on the ground that SLDC was a
purchaser in bad faith. The Spouses Lu were further ordered to
return all payments made by SLDC with legal interest and to pay
attorney’s fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for
reconsideration with the appellate court.12 However, in
a Manifestation dated 20 December 1995,13 the Spouses Lu
informed the appellate court that they are no longer contesting
the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court
considered as withdrawn the motion for reconsideration filed by
the Spouses Lu in view of their manifestation of 20 December
1995. The appellate court denied SLDC’s motion for
reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant modification
or reversal of the court’s decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the
appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN
LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE
WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM
IT THE CASH ADVANCE OF ₱200,000.00, SAN LORENZO
WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE
PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO
APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED
FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN
LORENZO BOUGHT AND TOOK POSSESSION OF THE
PROPERTY AND NO ADVERSE CLAIM, LIEN,
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON
THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO
APPRECIATE THE FACT THAT RESPONDENT BABASANTA
HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN
THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE
FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED
AND SET ASIDE THE DECISION OF THE TRIAL COURT
UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND
FIRST POSSESSOR IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that
it had prior notice of Babasanta’s claim over the property merely
on the basis of its having advanced the amount of two hundred
thousand pesos (₱200,000.00) to Pacita Lu upon the latter’s
representation that she needed the money to pay her obligation
to Babasanta. It argued that it had no reason to suspect that
Pacita was not telling the truth that the money would be used to
pay her indebtedness to Babasanta. At any rate, SLDC averred
that the amount of two hundred thousand pesos (₱200,000.00)
which it advanced to Pacita Lu would be deducted from the
balance of the purchase price still due from it and should not be
construed as notice of the prior sale of the land to Babasanta. It
added that at no instance did Pacita Lu inform it that the lands
had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in
its favor it immediately took possession of the property and
asserted its rights as new owner as opposed to Babasanta who
has never exercised acts of ownership. Since the titles bore no
adverse claim, encumbrance, or lien at the time it was sold to it,
SLDC argued that it had every reason to rely on the correctness
of the certificate of title and it was not obliged to go beyond the
certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on
Babasanta to prove that it was aware of the prior sale to him but
the latter failed to do so. SLDC pointed out that the notice of lis
pendens was annotated only on 2 June 1989 long after the sale
of the property to it was consummated on 3 May 1989. 1awphi1.nét
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August
1999, the Spouses Lu informed the Court that due to financial
constraints they have no more interest to pursue their rights in the
instant case and submit themselves to the decision of the Court
of Appeals.16
On the other hand, respondent Babasanta argued that SLDC
could not have acquired ownership of the property because it
failed to comply with the requirement of registration of the sale in
good faith. He emphasized that at the time SLDC registered the
sale in its favor on 30 June 1990, there was already a notice of lis
pendens annotated on the titles of the property made as early as
2 June 1989. Hence, petitioner’s registration of the sale did not
confer upon it any right. Babasanta further asserted that
petitioner’s bad faith in the acquisition of the property is evident
from the fact that it failed to make necessary inquiry regarding the
purpose of the issuance of the two hundred thousand pesos
(₱200,000.00) manager’s check in his favor.
The core issue presented for resolution in the instant petition is
who between SLDC and Babasanta has a better right over the
two parcels of land subject of the instant case in view of the
successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor,
Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos
(₱50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa,
Laguna.17 While the receipt signed by Pacita did not mention the
price for which the property was being sold, this deficiency was
supplied by Pacita Lu’s letter dated 29 May 1989 18 wherein she
admitted that she agreed to sell the 3.6 hectares of land to
Babasanta for fifteen pesos (₱15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the
evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent, 19 which is
manifested by the meeting of the offer and the acceptance upon
the thing which are to constitute the contract. The offer must be
certain and the acceptance absolute. 20 Moreover, contracts shall
be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. 21
The receipt signed by Pacita Lu merely states that she accepted
the sum of fifty thousand pesos (₱50,000.00) from Babasanta as
partial payment of 3.6 hectares of farm lot situated in Sta. Rosa,
Laguna. While there is no stipulation that the seller reserves the
ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of
the parties convince us that the Spouses Lu never intended to
transfer ownership to Babasanta except upon full payment of the
purchase price.
Babasanta’s letter dated 22 May 1989 was quite telling. He stated
therein that despite his repeated requests for the execution of the
final deed of sale in his favor so that he could effect full payment
of the price, Pacita Lu allegedly refused to do so. In effect,
Babasanta himself recognized that ownership of the property
would not be transferred to him until such time as he shall have
effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the
document of sale in its required form simultaneously with their
acceptance of the partial payment, but they did not. Doubtlessly,
the receipt signed by Pacita Lu should legally be considered as a
perfected contract to sell.
The distinction between a contract to sell and a contract of sale is
quite germane. In a contract of sale, title passes to the vendee
upon the delivery of the thing sold; whereas in a contract to sell,
by agreement the ownership is reserved in the vendor and is not
to pass until the full payment of the price.22 In a contract of sale,
the vendor has lost and cannot recover ownership until and
unless the contract is resolved or rescinded; whereas in a
contract to sell, title is retained by the vendor until the full
payment of the price, such payment being a positive suspensive
condition and failure of which is not a breach but an event that
prevents the obligation of the vendor to convey title from
becoming effective.23
The perfected contract to sell imposed upon Babasanta the
obligation to pay the balance of the purchase price. There being
an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court
as required by law. Mere sending of a letter by the vendee
expressing the intention to pay without the accompanying
payment is not considered a valid tender of
payment.24 Consignation of the amounts due in court is essential
in order to extinguish Babasanta’s obligation to pay the balance
of the purchase price. Glaringly absent from the records is any
indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part
of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a
contract of sale and not a contract to sell, Babasanta’s claim of
ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere
consent25 and from that moment, the parties may reciprocally
demand performance.26 The essential elements of a contract of
sale, to wit: (1) consent or meeting of the minds, that is, to
transfer ownership in exchange for the price; (2) object certain
which is the subject matter of the contract; (3) cause of the
obligation which is established.27
The perfection of a contract of sale should not, however, be
confused with its consummation. In relation to the acquisition and
transfer of ownership, it should be noted that sale is not a mode,
but merely a title. A mode is the legal means by which dominion
or ownership is created, transferred or destroyed, but title is only
the legal basis by which to affect dominion or ownership. 28 Under
Article 712 of the Civil Code, "ownership and other real rights
over property are acquired and transmitted by law, by donation,
by testate and intestate succession, and in consequence of
certain contracts, by tradition." Contracts only constitute titles or
rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.29 Therefore, sale
by itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership. It is tradition
or delivery, as a consequence of sale, that actually transfers
ownership.
Explicitly, the law provides that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in
any of the ways specified in Article 1497 to 1501. 30 The word
"delivered" should not be taken restrictively to mean transfer of
actual physical possession of the property. The law recognizes
two principal modes of delivery, to wit: (1) actual delivery; and (2)
legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and
possession of the vendee.31 Legal or constructive delivery, on the
other hand, may be had through any of the following ways: the
execution of a public instrument evidencing the sale; 32 symbolical
tradition such as the delivery of the keys of the place where the
movable sold is being kept;33 traditio longa manu or by mere
consent or agreement if the movable sold cannot yet be
transferred to the possession of the buyer at the time of the
sale;34 traditio brevi manu if the buyer already had possession of
the object even before the sale;35 and traditio constitutum
possessorium, where the seller remains in possession of the
property in a different capacity.36
Following the above disquisition, respondent Babasanta did not
acquire ownership by the mere execution of the receipt by Pacita
Lu acknowledging receipt of partial payment for the property. For
one, the agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been effected. For
another, Babasanta had not taken possession of the property at
any time after the perfection of the sale in his favor or exercised
acts of dominion over it despite his assertions that he was the
rightful owner of the lands. Simply stated, there was no delivery to
Babasanta, whether actual or constructive, which is essential to
transfer ownership of the property. Thus, even on the assumption
that the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence of
delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold. 37
However, it must be stressed that the juridical relationship
between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between the
two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith.
The principle of primus tempore, potior jure (first in time, stronger
in right) gains greater significance in case of double sale of
immovable property. When the thing sold twice is an immovable,
the one who acquires it and first records it in the Registry of
Property, both made in good faith, shall be deemed the
owner.38 Verily, the act of registration must be coupled with good
faith— that is, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware
of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the
defects in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds
after it had acquired knowledge of Babasanta’s claim. Babasanta,
however, strongly argues that the registration of the sale by
SLDC was not sufficient to confer upon the latter any title to the
property since the registration was attended by bad faith.
Specifically, he points out that at the time SLDC registered the
sale on 30 June 1990, there was already a notice of lis
pendens on the file with the Register of Deeds, the same having
been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice
of lis pendens obliterate the effects of delivery and possession in
good faith which admittedly had occurred prior to SLDC’s
knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the
Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving ₱316,160.00 as option money from SLDC. After SLDC
had paid more than one half of the agreed purchase price of
₱1,264,640.00, the Spouses Lu subsequently executed on 3 May
1989 a Deed of Absolute Sale in favor or SLDC. At the time both
deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated,
from the time of execution of the first deed up to the moment of
transfer and delivery of possession of the lands to SLDC, it had
acted in good faith and the subsequent annotation of lis
pendens has no effect at all on the consummated sale between
SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of
another without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of the
claim or interest of some other person in the property. 40 Following
the foregoing definition, we rule that SLDC qualifies as a buyer in
good faith since there is no evidence extant in the records that it
had knowledge of the prior transaction in favor of Babasanta. At
the time of the sale of the property to SLDC, the vendors were
still the registered owners of the property and were in fact in
possession of the lands.  Time and again, this Court has ruled
l^vvphi1.net
that a person dealing with the owner of registered land is not
bound to go beyond the certificate of title as he is charged with
notice of burdens on the property which are noted on the face of
the register or on the certificate of title. 41 In assailing knowledge of
the transaction between him and the Spouses Lu, Babasanta
apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree
(P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. – Every
conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered,
filed, or entered in the office of the Register of Deeds for the
province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such
registering, filing, or entering.
However, the constructive notice operates as such¾by the
express wording of Section 52¾from the time of the registration
of the notice of lis pendens which in this case was effected only
on 2 June 1989, at which time the sale in favor of SLDC had long
been consummated insofar as the obligation of the Spouses Lu to
transfer ownership over the property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to
the claim of Babasanta the annotation of the notice of lis
pendens cannot help Babasanta’s position a bit and it is irrelevant
to the good or bad faith characterization of SLDC as a purchaser.
A notice of lis pendens, as the Court held in Nataño v.
Esteban,42 serves as a warning to a prospective purchaser or
incumbrancer that the particular property is in litigation; and that
he should keep his hands off the same, unless he intends to
gamble on the results of the litigation." Precisely, in this case
SLDC has intervened in the pending litigation to protect its rights.
Obviously, SLDC’s faith in the merit of its cause has been
vindicated with the Court’s present decision which is the ultimate
denouement on the controversy.
The Court of Appeals has made capital 43 of SLDC’s averment in
its Complaint-in-Intervention44 that at the instance of Pacita Lu it
issued a check for ₱200,000.00 payable to Babasanta and the
confirmatory testimony of Pacita Lu herself on cross-
examination.45 However, there is nothing in the said pleading and
the testimony which explicitly relates the amount to the
transaction between the Spouses Lu and Babasanta for what
they attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any event, the
incident took place after the Spouses Lu had already executed
the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal
position of SLDC.
Assuming ex gratia argumenti that SLDC’s registration of the sale
had been tainted by the prior notice of lis pendens and assuming
further for the same nonce that this is a case of double sale, still
Babasanta’s claim could not prevail over that of SLDC’s.
In Abarquez v. Court of Appeals,46 this Court had the occasion to
rule that if a vendee in a double sale registers the sale after he
has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon
him any right. If the registration is done in bad faith, it is as if there
is no registration at all, and the buyer who has taken possession
first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized
and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the
Israels were first in possession. This Court awarded the property
to the Israels because registration of the property by Abarquez
lacked the element of good faith. While the facts in the instant
case substantially differ from that in Abarquez, we would not
hesitate to rule in favor of SLDC on the basis of its prior
possession of the property in good faith. Be it noted that delivery
of the property to SLDC was immediately effected after the
execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in
favor of Babasanta. 1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is
priority of entry in the registry of property; there being no priority
of such entry, the second is priority of possession; and, in the
absence of the two priorities, the third priority is of the date of title,
with good faith as the common critical element. Since SLDC
acquired possession of the property in good faith in contrast to
Babasanta, who neither registered nor possessed the property at
any time, SLDC’s right is definitely superior to that of
Babasanta’s.

At any rate, the above discussion on the rules on double sale

would be purely academic for as earlier stated in this decision,
the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v.
Roxas,47 we had the occasion to rule that Article 1544 does not
apply to a case where there was a sale to one party of the land
itself while the other contract was a mere promise to sell the land
or at most an actual assignment of the right to repurchase the
same land. Accordingly, there was no double sale of the same
land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The

decision of the Court of Appeals appealed from is REVERSED
and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

SO ORDERED.