G.R. No.

L-16570             March 9, 1922 The case having been tried, the court below absolved the defendants from the complaint
insofar as the tanks and the electric motors were concerned, but rendered judgment against
them, ordering them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty
SMITH, BELL & CO., LTD., plaintiff-appellant, thousand pesos (P50,00), the price of the said goods, with legal interest thereon from July 26,
vs. 1919, and costs."
VICENTE SOTELO MATTI, defendant-appellant.
Both parties appeal from this judgment, each assigning several errors in the findings of the
Ross and Lawrence and Ewald E. Selph for plaintiff-appellant. lower court.
Ramon Sotelo for defendant-appellant.
The principal point at issue in this case is whether or not, under the contracts entered into and
ROMUALDEZ, J.: the circumstances established in the record, the plaintiff has fulfilled, in due time, its
obligation to bring the goods in question to Manila. If it has, then it is entitled to the relief
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into prayed for; otherwise, it must be held guilty of delay and liable for the consequences thereof.
contracts whereby the former obligated itself to sell, and the latter to purchase from it, two
steel tanks, for the total price of twenty-one thousand pesos (P21,000), the same to be shipped To solve this question, it is necessary to determine what period was fixed for the delivery of
from New York and delivered at Manila "within three or four months;" two expellers at the the goods.
price of twenty five thousand pesos (P25,000) each, which were to be shipped from San
Francisco in the month of September, 1918, or as soon as possible; and two electric motors at
As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in
the price of two thousand pesos (P2,000) each, as to the delivery of which stipulation was
both of them we find this clause:
made, couched in these words: "Approximate delivery within ninety days. — This is not
guaranteed."
To be delivered within 3 or 4 months — The promise or indication of shipment carries
with it absolutely no obligation on our part — Government regulations, railroad
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October,
embargoes, lack of vessel space, the exigencies of the requirement of the United States
1918; and the motors on the 27th of February, 1919.
Government, or a number of causes may act to entirely vitiate the indication of shipment
as stated. In other words, the order is accepted on the basis of shipment at Mill's
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but convenience, time of shipment being merely an indication of what we hope to accomplish.
Mr. Sotelo refused to receive them and to pay the prices stipulated.
In the contract Exhibit C (page 63 of the record), with reference to the expellers, the following
The plaintiff brought suit against the defendant, based on four separate causes of action, stipulation appears:
alleging, among other facts, that it immediately notified the defendant of the arrival of the
goods, and asked instructions from him as to the delivery thereof, and that the defendant
The following articles, hereinbelow more particularly described, to be shipped at San
refused to receive any of them and to pay their price. The plaintiff, further, alleged that the
Francisco within the month of September /18, or as soon as possible. — Two Anderson oil
expellers and the motors were in good condition. (Amended complaint, pages 16-30, Bill of
expellers . . . .
Exceptions.)

And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears:
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-
Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their
arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive Approximate delivery within ninety days. — This is not guaranteed. — This sale is subject
them and pay their price, and the good condition of the expellers and the motors, alleging as to our being able to obtain Priority Certificate, subject to the United States Government
special defense that Mr. Sotelo had made the contracts in question as manager of the requirements and also subject to confirmation of manufactures.
intervenor, the Manila Oil Refining and By-Products Co., Inc which fact was known to the
plaintiff, and that "it was only in May, 1919, that it notified the intervenor that said tanks had In all these contracts, there is a final clause as follows:
arrived, the motors and the expellers having arrived incomplete and long after the date
stipulated." As a counterclaim or set-off, they also allege that, as a consequence of the
plaintiff's delay in making delivery of the goods, which the intervenor intended to use in the The sellers are not responsible for delays caused by fires, riots on land or on the sea,
manufacture of cocoanut oil, the intervenor suffered damages in the sums of one hundred strikes or other causes known as "Force Majeure" entirely beyond the control of the sellers
sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (P116,783.91) for or their representatives.
the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (P21,250)
on account of the expellers and the motors not having arrived in due time.
Under these stipulations, it cannot be said that any definite date was fixed for the delivery of
the goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4
months," but that period was subject to the contingencies referred to in a subsequent clause.
With regard to the expellers, the contract says "within the month of September, 1918," but to
this is added "or as soon as possible." And with reference to the motors, the contract contains
this expression, "Approximate delivery within ninety days," but right after this, it is noted that
"this is not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time of the world war
when there existed rigid restrictions on the export from the United States of articles like the
machinery in question, and maritime, as well as railroad, transportation was difficult, which
fact was known to the parties; hence clauses were inserted in the contracts, regarding
"Government regulations, railroad embargoes, lack of vessel space, the exigencies of the
requirements of the United States Government," in connection with the tanks and "Priority
Certificate, subject to the United State Government requirements," with respect to the motors.
At the time of the execution of the contracts, the parties were not unmindful of the
contingency of the United States Government not allowing the export of the goods, nor of the
fact that the other foreseen circumstances therein stated might prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude that the term
which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter
of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the
obligations must be regarded as conditional.
Obligations for the performance of which a day certain has been fixed shall be demandable
only when the day arrives.
A day certain is understood to be one which must necessarily arrive, even though its date
be unknown.
If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next preceding section. (referring to
pure and conditional obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the contract, contingent upon
the sellers obtaining certificate of priority and permission of the United States Government,
subject to the rules and regulations, as well as to railroad embargoes, then the delivery was
subject to a condition the fulfillment of which depended not only upon the effort of the herein
plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the
condition. In cases like this, which are not expressly provided for, but impliedly covered, by
the Civil Code, the obligor will be deemed to have sufficiently performed his part of the
obligation, if he has done all that was in his power, even if the condition has not been fulfilled
in reality.
In such cases, the decisions prior to the Civil Code have held that the obligee having done
all that was in his power, was entitled to enforce performance of the obligation. This
performance, which is fictitious — not real — is not expressly authorized by the Code,
which limits itself only to declare valid those conditions and the obligation thereby
affected; but it is neither disallowed, and the Code being thus silent, the old view can be
maintained as a doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8, page
132.)
The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on
November 19, 1896, and February 23, 1871.
In the former it is held:
First. That when the fulfillment of the conditions does not depend on the will of the
obligor, but on that of a third person who can in no way be compelled to carry it out, and it
is found by the lower court that the obligor has done all in his power to comply with the
obligation, the judgment of the said court, ordering the other party to comply with his part
of the contract, is not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the
"Novísima Recopilación," or Law 12, Tit. 11, of Partida 5, when in the said finding of the
lower court, no law or precedent is alleged to have been violated. (Jurisprudencia
Civil published by the directors of the Revista General de Legislacion y
Jurisprudencia [1866], vol. 14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend on the will of the
obligor, but on that of a third person, who can in no way be compelled to carry it out, the
obligor's part of the contract is complied withalf Belisario not having exercised his right of
repurchase reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof, the
affidavit of Basilio Borja for the consolidacion de dominio was presented for record in the
registry of deeds and recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and three minor
children, Vitaliana, Eugenio, and Aureno Belisario as his only heirs.
(33) That in the execution and sales thereunder, in which C. H. McClure appears as the
judgment creditor, he was represented by the opponent Peter W. Addison, who prepared
and had charge of publication of the notices of the various sales and that in none of the
sales was the notice published more than twice in a newspaper.
The claims of the opponent-appellant Addison have been very fully and ably argued by his
counsel but may, we think, be disposed of in comparatively few words. As will be seen
from the foregoing statement of facts, he rest his title (1) on the sales under the executions
issued in cases Nos. 435, 450, 454, and 499 of the court of the justice of the peace of
Dagupan with the priority of inscription of the last two sales in the registry of deeds, and
(2) on a purchase from the Director of Lands after the land in question had been forfeited
to the Government for non-payment of taxes under Act No. 1791.
The sheriff's sales under the execution mentioned are fatally defective for what of
sufficient publication of the notice of sale. Section 454 of the Code of civil Procedure
reads in part as follows:
 SEC. 454. Before the sale of property on execution, notice thereof must be given, as
follows:
1. In case of perishable property, by posing written notice of the time and place of the sale
in three public places of the municipality or city where the sale is to take place, for such
time as may be reasonable, considering the character and condition of the property;
2. *     *     *     *     *     *     *
3. In cases of real property, by posting a similar notice particularly describing the property,
for twenty days in three public places of the municipality or city where the property is
situated, and also where the property is to be sold, and publishing a copy thereof once a
week, for the same period, in some newspaper published or having general circulation in
the province, if there be one. If there are newspaper published in the province in both the
Spanish and English languages, then a like publication for a like period shall be made in
one newspaper published in the Spanish language, and in one published in the English
language: Provided, however, That such publication in a newspaper will not be required
when the assessed valuation of the property does not exceed four hundred pesos;
4. *     *     *     *     *     *     *
Examining the record, we find that in cases Nos. 435 and 450 the sales took place on October
14, 1916; the notice first published gave the date of the sale as October 15th, but upon
discovering that October 15th was a Sunday, the date was changed to October 14th. The
correct notice was published twice in a local newspaper, the first publication was made on
October 7th and the second and last on October 14th, the date of the sale itself. The newspaper
is a weekly periodical published every Saturday afternoon.
In case No. 454 there were only two publications of the notice in a newspaper, the first
publication being made only fourteen days before the date of the sale. In case No. 499, there
were also only two publications, the first of which was made thirteen days before the sale. In
the last case the sale was advertised for the hours of from 8:30 in the morning until 4:30 in the
afternoon, in violation of section 457 of the Code of Civil Procedure. In cases Nos. 435 and
450 the hours advertised were from 9:00 in the morning until 4.30 in the afternoon. In all of
the cases the notices of the sale were prepared by the judgment creditor or his agent, who also
took charged of the publication of such notices.
In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), this court held
that if a sheriff sells without the notice prescribe by the Code of Civil Procedure induced
thereto by the judgment creditor and the purchaser at the sale is the judgment creditor, the sale
is absolutely void and not title passes. This must now be regarded as the settled doctrine in this
jurisdiction whatever the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is a newspaper
published in the province where the sale in question took place and that the assessed valuation
of the property disposed of at each sale exceeded P400. Comparing the requirements of section
454, supra, with what was actually done, it is self-evident that notices of the sales mentioned
were not given as prescribed by the statute and taking into consideration that in connection
with these sales the appellant Addison was either the judgment creditor or else occupied a
position analogous to that of a judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands is equally invalid.
The provisions of Act No. 1791 pertinent to the purchase or repurchase of land confiscated for
non-payment of taxes are found in section 19 of the Act and read:
. . . In case such redemption be not made within the time above specified the Government
of the Philippine Islands shall have an absolute, indefeasible title to said real property.
Upon the expiration of the said ninety days, if redemption be not made, the provincial
treasurer shall immediately notify the Director of Lands of the forfeiture and furnish him
with a description of the property, and said Director of Lands shall have full control and
custody thereof to lease or sell the same or any portion thereof in the same manner as other
public lands are leased or sold: Provided, That the original owner, or his legal
representative, shall have the right to repurchase the entire amount of his said real
property, at any time before a sale or contract of sale has been made by the director of
Lands to a third party, by paying therefore the whole sum due thereon at the time of
ejectment together with a penalty of ten per centum . . . .
The appellant Addison repurchased under the final proviso of the section quoted and was
allowed to do so as the successor in interest of the original owner under the execution sale
above discussed. As we have seen, he acquired no rights under these sales, was therefore not
the successor of the original owner and could only have obtained a valid conveyance of such
titles as the Government might have by following the procedure prescribed by the Public Land
Act for the sale of public lands. he is entitled to reimbursement for the money paid for the
redemption of the land, with interest, but has acquired no title through the redemption.
The question of the priority of the record of the sheriff's sales over that of the sale from
Belisario to Borja is extensively argued in the briefs, but from our point of view is of no
importance; void sheriff's or execution sales cannot be validated through inscription in the
Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained that the land in
question was community property of the marriage of Eulalio Belisario and Paula Ira: that upon
the death of Paula Ira inealed from is modified, and the defendant Mr. Vicente Sotelo Matti,
sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors in
question, and to pay the plaintiff the sum of ninety-six thousand pesos (P96,000), with legal
interest thereon from July 17, 1919, the date of the filing of the complaint, until fully paid, and
the costs of both instances. So ordered.
Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and Johns, JJ., concur.
G.R. No. L-17150             June 20, 1922
ANDRES SOLER, plaintiff-appellee,
vs.
EDWARD CHESLEY, defendant-appellant.
Kincaid, Perkins and Kincaid for appellant.
Recto and Casal and Angel Roco for appellee.
ROMUALDEZ, J.:
The plaintiff had agreed with Wm. H. Anderson and Co., for the purchase of certain
machinery, as evidenced by the document Exhibit A, of which the following is an exact copy:
This agreement made and entered into by and between Wm. H. Anderson and Co., party of
the first part, and Andres Soler, party of the second part, Witnesseth:
The party of the first part hereby agrees to deliver to the party of the second part the herein
described coconut oil machinery which was ordered by cable by the party of the first part
on March 4, 1918, and the party of the second part agrees to purchase the said machinery
from the party of the first part on the terms and conditions given below:
1. 4 Anderson oil expellers No. 1, side drive complete with stationary strainer, and fitted
with a 15-h. p. motor, the same mounted on a special base on the expeller and connected to
the expeller by a suitable silent chain drive.
2. 4 Rotary pumps (oil) attached to and driven from expeller.
3. Sufficient 6" and 9" metal conveyor, etc., for the 4 expellers to make complete conveyor
line with supports for securing to expeller.
4. 1 Vertical triplex pump, 2 ½" x 4", 1 ½ suction and discharge, capacity 12 gallons per
minute, belt drive.
5. 1 Bauer ball-bearing motor-driven attrition mill, 22", fitted with 2 15-h. p. electric
motors, 220 volt, 2 phase, 60 cycle, direct-connected and complete with automatic starter,
6. 1 Shriver filter press, 30", 36 plates, complete with one extra set of filter cloths.
7. 1 Buckeys cooker, 62", 3 high, direct-connected by silent chain drive to a 15-h. p., 220
volt, 2 phase, 60 cycle, alternating current motor.
8. Sufficient meters of standard chain elevator, etc.
Terms and conditions: The foregoing machinery is to be invoiced at manufacturers' price,
plus all charges such as freight, insurance, interest and exchange, arrastre, landing charges,
delivery, internal revenue, etc., plus a buying commission of 5 per cent.
The terms of payment are fifty per cent (50%) deposit to be made upon arrival of the
machinery, and the balance ninety (90) days after delivery of the machinery.
In the event that the party of the second part shall fail to live up to the terms of this
agreement, such failure by the party of the second part will be sufficient cause to terminate
this contract, and any payments made by the party of the second part under and by virtue
of this contract shall be and remain the exclusive property of the party of the first part. The
title of the machinery in question is to remain in the name of the party of the first part until
payment in full has been made, at which time transfer of all right and title to the above
mentioned machinery will be made to the party of the second part.
This agreement is contingent upon strikes, fire, accidents, extraordinary shipping and other
conditions imposed on account of war and other causes unavoidable or beyond the control
of the party of the first part.
It is strictly understood that the quotations made to Mr. Andres Soler under date of
February 27, 1919, were approximated and were subject to change without notice. We can
therefore make no guarantee as to prices and delivery, it being understood that prices
charged will be those shown on the invoices of the manufacturers, and shipment will be
made by first possible opportunity.
Dated Manila, P.I., March ___, 1918.
(Sgd.) WM. H. ANDERSON and CO.,
By P. A. THOMPSON,
Party of the first part.
(Sgd.) ANDRES SOLER,
Party of the second part.
Witness:
(Sgd.) W. JENUDE,
FERNANDO COUTME
On November 16, 1918, the plaintiff sold the defendant all his rights and interest in the
aforesaid contract of sale, the document executed to that end, Exhibit B, being as follows:
This agreement made in Manila, Philippine Islands, by and between Mr. Andres Soler, of
age, and resident of the municipality of Naga, Province of Ambos Camarines, party of the
first part; and Mr. Edward Chesley, of age, and resident of this city of Manila, party of the
second part, . . .
WITNESSETH
First. That Mr. Andres Soler has an agreement in due form with Messers. Wm. H.
Anderson and Co. for the purchase of a coconut oil machinery, more particularly described
in the said agreement as follows: * * *.
1. 4 Anderson oil expellers No. 1, side drive complete with stationary strainer, and fitted
with the 15-h. p. motor, the same mounted on a special base on the expeller and connected
to the expeller by a suitable silent chain drive, * * *.
2. 4 Rotary pumps (oil) attached to and driven from expeller . . . .
3. Sufficient 6" and 9" metal conveyor, etc., for the 4 expellers to make complete conveyor
line with supports for securing to expeller * * *.
4. 1 Vertical triplex pump, 2 ½ x 4", 1 ½" suction and discharge, capacity 12 gallons per
minute, belt drive * * *.
5. 1 Bauer ball-bearing motor-driven attrition mill, 22" fitted with 2 15-h. p. electric
motors, 220 volt, 2 phase, 60 cycle, direct-connected and complete with automatic starter *
* *.
6. 1 Shriver filter press, 30", 36 plates, complete with one extra set of filter cloths * * *.
7. 1 Buckeys cooker, 62", 3 high, direct-connected by silent chain drive to a 15-h. p., 220
volt, 2 phase, 60 cycle, alternating current motor * * *.
8. Sufficient meters of standard chain elevator, etc., * * *.
Second. That a part of the aforesaid machinery is at this time on the way, the other part
being already in this city of Manila, the price of which has not as yet been paid by Mr.
Soler to Messrs. Wm. H. Anderson and Co. * * *.
Third. That being interested in acquiring the aforesaid machinery, Mr. Edward Chesley has
made Mr. Soler a proposition whereby the latter should transfer it to him, and he should
assume the obligation to pay Messrs. Wm. H. Anderson and Co. the amount of the
invoices thereof, Mr. Soler to be relieved from his contract with Messrs. Wm. H.
Anderson and Co., which proposition has been agreed to as hereinbelow set forth, and to
have an evidence of the agreement this contract is made and entered into by them in the
following terms and conditions:
(a) Mr. Andres Soler conveys and transfers to Mr. Edward Chesley all the rights and
interest which he may have in his agreement with Messrs. Wm. H. Anderson and Co. for
the purchase of the oil machinery, more particularly described in the first paragraph
hereof; Mr. Chesley being subrogated, therefore, to whatever rights and obligations Mr.
Soler may have acquired and contracted under the aforesaid agreement. * * *.
(b) This sale of the said machinery is for the price of one hundred thousand pesos,
Philippine currency, the same to be paid by Mr. Chesley by paying Messrs. Wm. H.
Anderson and Co. the amount of the invoices of said machinery, and Mr. Andres Soler the
difference which may be found to exist between the amount of said invoices and the above
mentioned sum of one hundred thousand pesos, said payment to be secured by a personal
or corporation bond to the satisfaction of Mr. Soler. * * *.
(c) In subrogating himself to the right and obligations which Mr. Soler may have under his
agreement with Messrs. Wm. H. Anderson and Co. for the purchase of the aforesaid
machinery, Mr. Chesley relieves Mr. Soler from whatever obligation he has, or may have,
under the aforesaid agreement with Wm. H. Anderson and Co., concerning the machinery
hereinbefore more particularly described. * * *.
(d) Messrs. Soler and Chesley declare that Messrs. Wm. H. Anderson and Co. have actual
knowledge of this sale of the machinery, as well as of Mr. Chesley being subrogated to the
rights and obligations created by the agreement entered into by and between Mr. Soler and
Messrs. Wm. H. Anderson and Co., the latter being in absolute conformity therewith. * *
*.
And (e) Mr. Chesley shall pay Mr. Soler the difference which may be found to exist
between the amount of the invoices of the machinery and the sum of one hundred
thousand pesos immediately upon the arrival of said machinery at this city of Manila;
provided that if any part of the machinery not affecting the expellers is found lacking, a
proportional deduction shall be made from the amount which Mr. Soler may have received
from Mr. Chesley. * * *.
And fourth. That Messrs. Soler and Chesley solemnly make and enter into this contract on
the terms and conditions hereinbefore set forth. * * *.
In testimony whereof, the parties have hereunto set their hands at Manila, this sixteenth
day of November, nineteen hundred and eighteen.
(Sgd.) ED. CHESLEY.
(Sgd.) ANDRES SOLER.
Signed in the presence of:
(Sgd.) MANUEL SANSANO.
P. BLANC.
UNITED STATES OF AMERICA
CITY OF MANILA, PHILIPPINE ISLANDS
At the city of Manila, Philippine Islands, this 16th day of November 1918, before me, Enrique
Barrera y Caldes, notary public in and for the said city, personally appeared Mr. Andres Soler
and Mr. Edward Chesley known to me to be the persons who executed the foregoing
instrument, and acknowledged that the same is their free act and deed. They exhibited their
cedulas Nos. 220440 and 2074, issued at the municipality of Naga, Province of Ambos
Camarines and at this city of Manila on the 2d and 3d of January, 1918, respectively.
This document is No. 526 of my notarial register, and is entered  on page 4 of said register.
Before me,
 DON ENRIQUE BARRERA Y CALDES,
Notary Public.
My commission expires December 31, 1918.
Notarial seal.
I, manager of the firm of Anderson and Co., am agreeable to the transfer of the machinery
which Mr. Soler has purchased through our firm on the conditions stipulated in our contract.
WM. H. ANDERSON AND CO.,
By ---------------------
Vice-President.
Of the parts of the machinery covered by these contracts, only the "filter press," the "cooker"
and the "chains" were in Manila on November 16, 1918, the date of Exhibit B, but the most
important parts, such as the "oil expellers" and the "grinding mills" were not then yet in this
city.
These "oil expellers" were shipped for Manila on the 12th of December, 1918, the motors on
the 8th of January, 1919, the machinery on the 16th of January 1919 and the grinding mills on
the 21st of February, 1919, all of which arrived at Manila on February 13, March 8, April 27,
and August 23, 1919, respectively.
These effects were received and paid for by the defendant under protest, on account of the fact
that they were not delivered within the period stipulates in the contract.
On April 25, 1919, the defendant's attorney-in-fact, Fred A. Leas, through Attorney Francisco
A. Delgado, wrote the plaintiff the letter, Exhibit 2, advising him that he contract above
referred to was rescinded, it appearing that the parts of the machinery, which the plaintiff
asserted in said contract were on the way, were not at the time and it was only several days
later that they were shipped for Manila. In this letter the parts received were placed at the
plaintiff's disposal upon the repayment of the sums advanced by the defendant to Messrs.
Anderson and Co.
On the 14th of October, 1919, the plaintiff commenced this action in which, basing himself on
the contract Exhibit B and on the facts set forth in his complaint, he prayed that the defendant
be sentenced to pay him the sum of P30,546.03 with interest thereon, which sum was the
difference between the P100,000, the consideration of the contract, Exhibit B, and the price of
the aforesaid machinery which had been paid by the defendant, plus the incidental expenses, as
stipulated in the said contract.
The defendant answered, denying generally and specifically the allegations of the complaint
and setting up a special defense and a counterclaim. In his special defense, he alleges that he
had accepted and signed the contract Exhibit B on the assertion therein contained that of the
machinery, which was the subject matter of the said contract, a part was already in Manila, and
the other part on the way, and also on the promises, assertions, and contemporary and previous
acts of the plaintiff to the same effect, by means of which the latter succeeded in inducing the
defendant to make and sign the aforesaid contract; that the parts of the machinery which, on
the date of the contract, were said to be on the way, were not in fact in, and did not arrive at,
Manila but long thereafter; that if he signed the contract, it was because he was desirous of
having the machinery, and the defendant assured him that it would be delivered to him,
immediately or within a short time; that otherwise he would not have signed the contract; that
the prepared in a shed the necessary compartments to install the machinery on or before the 1st
day of January, 1919; that on April 25, 1919, he advised the plaintiff that he regarded the
contract as rescinded; that he had complied with his part of the contract, having paid Messrs.
Anderson and Co. the sum of P69,453.97; that he suffered damages in the sum of P120,000.
In his counterclaim, the defendant alleges that the giving of a bond in favor of plaintiff being
one of the conditions of the contract, he (the defendant) gave such bond, having paid the
Philippine Guaranty Co. a premium of P400 for the quarter beginning with November 16,
1918.
The defendant prays in his answer that he be absolved from the complaint, the aforesaid
contract declared rescinded, and the plaintiff compelled to receive the machinery in question,
to pay the defendant P69,453.97, and be sentenced to pay P120,000 as damages.
Trial having been held, the lower court sentenced the defendant to pay the plaintiff
P30,546.03, with legal interest thereon from October 16, 1919, and the costs, and absolved the
plaintiff from the set-off and the counterclaim.
From this judgment the defendant has appealed to this court, making the following
assignments of error:
1. The trial court erred in not holding that time was an essential element of the contract
Exhibit B.
2. The trial court erred in giving judgment in favor of the plaintiff, and
3. The trial court erred in dismissing the counterclaim of the defendant.
The defendant, testifying as witness, said that he had asked the plaintiff and his broker, Mr.
Bank, whether at that time the machinery had already left the factory, and that they answered
yes. True, the plaintiff denies in his testimony having made such a statement, but Mr. Blanc
does not deny it, and it is a fact that in the contract in question was inserted the following:
Second. That a part of the aforesaid machinery is at this time on the way, the other part
being already in this city of Manila, the price of which has not as yet been paid by Mr.
Soler to Messrs. Wm. H. Anderson and Co.
It appears sufficiently established in the record that if the plaintiff gave his consent to this
contract, it was because he expected that said machinery would arrive within a short time, —
the time reasonably necessary for such machinery to reach Manila from America, — as the
plaintiff asserted in the document itself that said machinery was then on the way. The act of
the defendant in insisting that this guaranty as to the arrival of the machinery be stated in the
contract, his repeated complaints and protests when he afterwards made payments as the parts
arrived, and his letter of April 25, 1919, leave no room for doubt that the arrival of said
machinery within a reasonably short time was one of the determining elements of his consent.
These acts of the defendant disclose the fact that he intented the arrival of the machinery to be
an essential element of the contract (art. 1282, Civil Code). We hold that in the case at bar the
arrival of the machinery within a reasonable time was an essential element of the contract,
such time to be determined by taking into account the fact that is was then on the way to
Manila.
The defendant had no reason to doubt the veracity of the plaintiff's assertion that said
machinery was then on the way. The plaintiff himself testified that he had showed the letters,
copies of which are Exhibits X, Y, and Z, in the last of which Messrs. Anderson and Co. stated
that according to the information received, the expellers had already been sent out by the
manufacturers.
The fact that the plaintiff had no control of the prompt transportation of the said machinery to
Manila, does not relieve the plaintiff from making good the guaranty inserted in the contract
that said machinery was already on the way to Manila. The plaintiff elected to bind himself in
that way, although he knew, as he ought to have known that, had his rights not been
transferred to the defendant, he could not have charged Messrs. Anderson and Co. so much,
who in the contract Exhibit A did not guarantee the delivery nor the amount of the price. The
plaintiff having bound himself in favor of the defendant for more than what Messrs. Anderson
and Co. had bound themselves for in hi favor, we entertain no doubt that he acted in good
faith, encouraged by the information of Messrs. Anderson and Co. (although the most that the
expellers, — only the expellers, — had been sent out by the factory), but it was he, not Messrs.
Anderson and Co., who contracted the obligation, and, therefore, he is the only one to be
responsible for the obligation arising from the contract. He who contracts and assumes an
obligation is presumed to know the circumstances under which said obligation can be
complied with (Ferrer vs. Ignacio, 39 Phil., 446).
It cannot be said that such a statement of the plaintiff that the machinery was on the way is not
one of the conditions of the contract Exhibit B. It is true that it is only in the third paragraph of
the said contract that the terms and conditions were thereof are set out in detail, but such terms
and conditions were stipulated upon the understanding that the machinery is that described in
the first paragraph of the contract and that a part thereof was already in Manila and the other
part on the way.
True, the plaintiff id not specify the date or time of the arrival of said mechanical devices; but
he did assert that they were on the way on the date of the contract, that is, the 16th of
November, 1918, which is tantamount to saying that they would arrive early in January, 1919,
under normal condition, taking into account that the expellers, which were shipped on
December 12, 1918, arrived at Manila on February 13, 1919. But it did not happen as asserted,
the last parts of the machinery, to wit, the grinding mills not having arrived at Manila until the
23rd of August, 1919, they not having been shipped until as late as the 21st of February of that
year.
Clause (c) of the third paragraph of the contract Exhibit B, discharged the plaintiff from all the
obligations contracted by him under the agreement Exhibit A made with Messrs. Anderson
and Co., relative to the payment of the price of the machinery; buy him under the contract
Exhibit B, for he has no such an obligation cannot be that referred to in clause (c) of the third
paragraph of Exhibit A, but Messrs. Anderson and Co.
We find that the plaintiff has failed to carry out his obligation incurred under the second
paragraph of the contract. Exhibit B, and has, therefore, no right to compel the defendant to
comply with his obligation to pay the plaintiff the sum claimed in the complaint (art. 1124,
Civil Code).
With regard to the counterclaim set up by the defendant, it appears from the record that he sold
the aforesaid machinery to a third person, the Philippine Refining Co. In cases like this, the
rescission of the contract does not lie (art. 1295, Civil Code).
As to the damages claimed by the defendant, we find that the evidence adduced on this point is
insufficient to fix the true amount thereof.
The judgement appealed from is reversed, and the defendant absolved from the complaint, and
the plaintiff from the counterclaim and other claims of the defendant without special
pronouncement as to costs. So ordered.
Araullo, C.J., Malcolm, Villamor, Ostrand and Johns, JJ., concur.
[G.R. No. L-5018. November 28, 1953.]
REPUBLIC OF THE PHILIPPINES, Plaintiff-Appellee, v. LITTON & CO., ET
AL., Defendants-Appellants.
Claro M. Recto for Appellants.
Solicitor General Pompeyo Diaz and Solicitor Meliton G. Soliman for Appellee.
DECISION
PARAS, J.:
This is an appeal by the defendants Litton & Co., G. Litton and Central Surety Co., from a
decision of the Court of First Instance of Manila the dispositive part of which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants for the sum of One hundred sixty-seven thousand and one hundred ninety-nine
pesos and sixty-five centavos (P167,199.65), ordering the defendants to pay to the plaintiff
said amount, out of which the sum of Forty thousand six hundred four pesos (P40,604) shall
be paid jointly and severally by Litton & Co., or George Litton and the Central Surety Co.,
Inc. and the rest by Litton & Co., or George Litton, and against its co-defendant Litton & Co.
and/or George Litton for any amount which said Central Surety Co., Inc., shall have paid to
the plaintiff as a result of this judgment. With costs against the defendants."
The allegations of the parties in their respective pleadings are correctly recited in the following
passages of the appealed decision:

"The complaint alleges in the first cause of action that on December 22, 1945, the defendants
Litton & Co. and George Litton, managing partner or agent of the defendant partnership,
entered into a contract with the plaintiff to supply and deliver to the latter on or before March
1, 1946, 96,000 padlocks at P1.87 each, in accordance with the specifications and under the
terms and conditions set forth in the said contract; that to guarantee and secure the faithful
performance of their obligation, the co-defendant Central Surety Co., Inc., executed on
January 3, 1946, a surety bond in favor of the plaintiff for P35,904; that the defendant Litton
& Co. delivered on or about April 8, 1946, 34,200 padlocks only, which is much less than the
quantity called for in the contract, and failed to deliver the balance of 61,800 padlocks which
were to be used during the elections of April 23, 1946.
"The complaint further alleges that for such failure of the defendant Litton & Co., the plaintiff
was compelled to make open market purchases of 25,613 padlocks, thereby incurring losses
and damages in the amount of P176,243.41, representing the difference between the price
actually paid for said open market purchases and the price which the government would have
paid to Litton & Co. in accordance with the contracts; that due notice was served on the co-
defendant Central Surety Co. Inc., of said failure on the part of Litton & Co. and of the co-
defendant’s liability on its bond, and that notwithstanding repeated demands made by the
plaintiff upon the defendants’, they failed and refused to pay the aforesaid amount.
"In its second cause of action the plaintiff alleges that on December 26, 1945, a contract was
entered into between the plaintiff and the defendants Litton & Co., and George Litton, its
managing agent or partner, whereby said defendants undertook to deliver to the plaintiff on or
before March 1, 1946, quantities of indelible pencils, lead pencils, bottles of ink, pen points,
chalks, clips, etc., with a total value of P25,979.55, subject to the terms and conditions of said
contract; that to guarantee and secure the faithful performance of that contract by Litton &
Co., the Central Surety Co., Inc., executed on January 3, 1946, a surety bond in favor of the
plaintiff in the sum of P4,700; and that the defendant Litton & Co., in violation of the terms
and conditions of said contract failed to deliver the articles called for on or before the
stipulated date, said articles to be used during the elections of April 23, 1946.
"The plaintiff further alleges that for such default and failure of the defendants, the plaintiff
was compelled to make open market purchases of said articles, thereby having suffered
damages and losses in the sum of P20,164.17, representing the difference between the price of
said articles purchased in the open market and the price stipulated in the contract; that the co-
defendant Central Surety Co., Inc., was duly notified of the failure of Litton & Co. to deliver
said articles, and its liability under its bond; and that notwithstanding demands made by the
plaintiffs upon said defendants, they refused to pay the aforesaid amount of P20,164.17.
"The plaintiff prays under the first cause of action that judgment be rendered in its favor and
against the defendant Litton & Co. ordering the latter to pay the sum of P176,243.41 with legal
interest thereon from the filing of the complaint until fully paid, and that out of said amount
the Central Surety Co., Inc., be ordered to pay jointly and severally with Litton & Co. the sum
of P35,904; and with respect to the second cause of action, the plaintiff prays that Litton & Co.
be ordered to pay to the plaintiff the sum of P20,164.17 with legal interest thereon from the
filing of the complaint and that out of said amount the sum of P4,700 be paid jointly and
severally by Litton & Co. and the Central Surety Co., Inc. The plaintiff further prays that in
default of Litton & Co. to pay the aforesaid amounts, George Litton personally be ordered to
pay the same as managing partner and/or agent of Litton & Co.
"In their joint answer, defendants Litton & Co., and George Litton allege that the contracts
mentioned in the complaint are not the real contracts between the parties and do not express
the real agreement between them; that it was agreed by and between the parties that the
defendants, Litton & Co. and/or George Litton, would deliver the padlocks and the supplies
called for in the two contracts provided the plaintiff should obtain shipping priority and the
necessary export license to bring said articles from the United States to the Philippines, which
terms and conditions were not embodied in the alleged contracts; that the defendant Central
Surety Co., Inc., executed the two surety bonds under the same terms and conditions; and that
the failure of said defendants to deliver the balance of the 96,000 padlocks and the stationery
and office supplies called for in the contracts was due to plaintiff’s failure to secure on time
shipping priority and export license and also to fortuitous events and force mojeure, beyond
the control of said defendants.
"The defendants further allege that the purchases of padlocks by the plaintiff in the open
market were made at exorbitant prices, much in excess of their ceiling prices which should not
be more than 70 per cent over the landed costs; that the defendants are not liable for the
alleged losses and damages resulting from said purchases, as their delay or failure to deliver
the padlocks was due to plaintiff’s fault and to circumstances beyond their control.
"By way of counterclaim the defendants Litton & Co. and/or George Litton allege that after
the elections of April 23, 1946, more specifically on May 11, 14, and 16, the defendants
delivered to the plaintiff 9,096 padlocks at P1.87 each, or with a total price of P17,009.52 and
that the plaintiff, notwithstanding repeated demands by said defendants, failed and refused to
pay said amount; and as additional counterclaim the said defendants allege that on various
dates in April and May, 1946, stationery and office supplies were delivered to the plaintiff at
the agreed price of P9,806.94, and that notwithstanding repeated demands upon the plaintiff, it
refused and failed to pay said amounts.
"The defendants Litton & Co. and George Litton pray that the complaint be dismissed and that
the plaintiff be ordered to pay to said defendants the sum of P17,009.52 under the first
counterclaim and the sum of P9,806.94 under the second counterclaim.
"The plaintiff, in its answer to the counterclaims, admits their existence and its liability under
the same, but alleges that the total amount of the counterclaims should be credited to
plaintiff’s claim against the defendants.
"In its answer the defendants Central Surety Co., Inc., admits the execution of the two surety
bonds above stated, but denies its liability under the same. It also alleges, as an affirmative
defense, that plaintiff’s cause of action is barred by the expiration of the period stipulated in
the bond. This defense was first urged in a motion to dismiss, which was denied upon the
grounds stated in the orders of August 30 and September 8, 1948. The answer of the Central
Surety Co., Inc., includes a cross-claim against the defendant George Litton for whatever
amount the plaintiff may collect from the Central Surety Co., Inc., in this case."
The first delivery made by Litton was on April 18, 1946, consisting of 34,200 padlocks which
were fully paid by the plaintiff. The latter, however, imposed upon Litton for his delayed
delivery a penalty equal to 1/10 of one per cent per day of the total value of said padlocks in
accordance with paragraph 4 of the "Important Conditions" appearing at the back of the
Contract, which reads as follows:
"4. Contractor’s failure to make delivery, when due, will authorize the Purchasing Agent to, in
his discretion, impose a penalty. If he decides to do so, either of the following penalties shall
be imposed: (a) to deduct for each day of delay in delivery after the period granted, a
liquidated damage in the amount of 1/10 of 1 per cent per day of the total value of the contract,
or, if the contract has been partially filled within the stipulated time, the total value of the
unfilled portion thereof; or (b) to make an open market purchase of the supplies that the
contractor failed to deliver and to charge to him the excess in price, if any. In either case, the
Government reserves the right to rescind the contract. The contractor hereby authorizes the
purchasing agent to deduct the value of the penalty imposed from any money due, or which
may become due, the contractor, or to recover from the contractor’s bond filed under this
contract, if there is any."
On April 20 and 22, 1946, Litton further delivered 2,000 boxes of paper clips costing P180.
AS no other deliveries were made, and under the authority contained in the above quoted
paragraph 4, the plaintiff purchased in the open market within a few days before the elections
the following:
Articles Quantity Amount Paid.
Padlocks 25,613 P224,216.72
Pencils, indelible 90,286 16,892.68
Pencils, lead 47,800 2,890.00
Pen points, Esterbrook 125,552 4,557.01
Ink, stamp pad 16,000 11,200.00
______________
TOTAL P259,366.41
The sum of P176,243.41, sought to be recovered under the first cause of action and the sum of
P20,164.17 claimed under the second cause of action respectively represent the difference
between the prices of the foregoing articles stipulated in Litton’s contract and the prices paid
by the plaintiff in the open market.
The trial court allowed the plaintiff’s claim as to both causes of action, but granted Litton’s
counterclaims in the total sum of P26,816.46 representing the unpaid price of padlocks and
stationery delivered to the plaintiff after the elections, and deducted also the sum of P2,391.47
which the plaintiff collected from Litton as penalty for delayed delivery (before the elections)
of 34,200 padlocks.
The principal issue, reduced in its simplest form, is whether, as contended by the plaintiff-
appellee, the defendant George Litton (whose business name is Litton & Co.) unconditionally
bound himself to supply and deliver to the plaintiff 96,000 padlocks and a quantity of
stationery and office supplies on or before March 1, 1946, or whether, as claimed by the
defendants, the contract was for George Litton to deliver the said articles subject to the
condition that the plaintiff would timely obtain the corresponding export license and shipping
priority.
The theory of the plaintiff is that Litton’s contract is evidenced by purchase order No. 1896,
dated December 22, 1945, for 96,000 padlocks at P1.87 each "Delivery - not later than March
1, 1946," and by purchase order No. 3826 for stationery and office supplies dated December
26, 1945, "Delivery - On or before March 1, 1946." Upon the other hand, Litton claims that
these two purchase orders do not represent the true agreement and that his bid (previously
accepted by the plaintiff) was conditioned by his letter dated December 12, 1945, and worded
as follows: "Reference to Circular Proposal No. 13 to be opened at 10 a.m., December 13,
1945, we enclose herewith two copies of our bid on the above proposal. For all items in which
we gave you a quotation, shipment will be made from the United States during the month of
January, 1946, provided we are able to obtain export license and shipping space and provided
further we are given the award within three (3) days from today. This will enable goods to
arrive in Manila for delivery during March." Litton’s defense is therefore that he is excused by
the plaintiff’s failure to obtain in due time the export license and shipping priority.
The trial court held that although the conditions specified in the letter of December 12 were
considered by the plaintiff in connection with its orders, it was still Litton’s sole obligation to
obtain the necessary export license and shipping space; and that although the plaintiff made
certain efforts to expedite the issuance of the necessary license, the same "were in the nature of
a friendly assistance to the defendants and can in no way be interpreted or construed as if the
plaintiff were the party bound to secure for itself the export license or shipping space."
We are convinced that George Litton undertook to deliver the padlocks and stationery in
question not later than March 1, 1946. It is significant that in the Circular Proposal No. 13
issued on November 27, 1945, to local dealers, calling for bids, it was expressly stated that the
articles were for election purposes, and the bidder was therefore required to "state the shortest
time of delivery, which should not be later than March 1, 1946. Deliveries made before March
1 will be preferred." It is then preposterous to suppose that delivery after the elections would
ever be contemplated or accepted. More significant is the fact that on December 15, 1945, or
subsequent to the letter of December 12, relied upon by Litton, and after he was informed by
the committee on award that his bid would be accepted if the condition mentioned in said
letter was eliminated, Litton wrote a note to the purchasing agent, stating as follows:
"Sir:
"We have the honor to inform you that the Padlocks, 1 5/8" X 1 5/8", rustless, Eagle brand, are
manufactured in the United States.
"For immediate shipment our principals have 30,000 pieces for the first delivery arriving in
Manila about the middle of February, and the balance of 66,000 not later than March 1, 1946.
"It is, however, understood that your Office will give us a letter certifying that the padlocks are
urgently needed by the Philippine Government so that the export license can be secured
without delay, thus making the first shipment of 30,000 arriving in Manila about the middle of
February, 1946.
"Please let us know immediately so we can notify our principals for immediate shipment as
above stated.
"Very truly yours,
"LITTON & COMPANY
"(Sgd.) JUAN S. CANLAS."
The foregoing letter shows that Litton merely expected the plaintiff to give a certification that
the padlocks were urgently needed by the Philippine Government so as to warrant the early
issuance of the license. Moreover, Litton subsequently filed two performance bonds, executed
by him as principal and the Central Surety Co., as surety. With reference to the padlocks, the
bond recited in part as follows:
"WHEREAS, the above bounden principal, on 22nd day of December, 1945, entered into a
Contract with the Division of Purchase and Supply, Department of Finance, Manila, to fully
and faithfully guarantee the delivery of 96,000 padlocks, . . . No. 13, Order No. 1896, said
delivery to be made not later than March 1, 1946.
"WHEREAS, said Division of Purchase and Supply requires said principal to give a good and
sufficient bond in the above stated sum to secure the full and faithful performance on his part
of said LITTON & COMPANY;
"Now, THEREFORE, if the principal shall well and truly perform and fulfill the undertakings,
covenants, terms, conditions, and agreements stipulated in said contract, then, this obligation
shall be null and void; otherwise it shall remain in full force and effect."
With reference to the stationery, the bond provided as follows:
"WHEREAS, the above bounden principal, on 26th day of December, 1945, entered into a
contract with the Division of Purchase and Supply, Department of Finance, Manila, to fully
and faithfully guarantee the delivery of the following:chanrob1es virtual 1aw library
192,000 Pcs. Pencils, indelible, hard, U. S. make.
64,000 Pcs. Pencils, lead, medium No. 2, w/ erasers, U. S. make.
16,000 Bots. Ink, stamp pad, violet, 2-oz. bottle U. S. make
16,000 Bots. Ink, stamp pad, violet, 2-oz. bottle U. S. make
128,000 Pcs. Chalks, white, enameled 1-gross to box, U. S. make.
128,000 Pcs. Pen points, Esterbrook No. 14, or equal, 1-gross to box, U. S. make.
8,000 Boxes Clips, paper Gem No. 1, 100 clips to box, U. S. make.
8,000 Cones Pins, office, No. 4, U. S. make.
strictly in accordance with Circular Proposal No. 13 Order No. 3826. Said delivery to be made
on or before March 1, 1946.
"WHEREAS, said Division of Purchase and Supply requires said principal to give a good and
sufficient bond in the above stated sum to secure the full and faithful performance on his part
of said LITTON & COMPANY:
"Now, THEREFORE, if the principal shall well and truly perform and fulfill all the
undertakings, covenants, terms, conditions, and agreements stipulated in said contract then,
this obligation shall be null and void; otherwise, it shall remain in full force and effect."
These bonds, prepared by the surety company on the basis of data furnished by Litton, made
express reference to and guaranteed the fulfillment of the contracts entered into on December
22 and 26, 1946, the very purchase orders Nos. 1896 and 3826; and under said bonds delivery
was to be made on or before March 1, 1946. This negatives the contention that the delivery of
the padlocks and stationery was subject to any contingency, much less to plaintiff’s ability to
secure export license and shipping priority.
Moreover, undoubtedly foreseeing his inability to meet the deadline, Litton wrote a letter to
the purchasing agent dated February 28, 1946, asking for an extension of time; and referring to
said letter he testified that "I asked for an extension because I could not deliver the goods on
March 1, 1946." Said extension, which was ignored by the purchasing agent, 1 was sought
under paragraph 2 of "Important Conditions" of the contracts.
It is true that the Philippine Government exerted some efforts 2 with a view to the granting by
the United States authorities of the necessary export license and shipping space, but the same
do not prove that it was plaintiff’s obligation to do so or that Litton’s duty to deliver the
articles on or before March 1, 1946 was conditional. Said efforts were merely in furtherance of
Litton’s letter of December 15, 1945 in which he asked the plaintiff to certify that the padlocks
were urgently needed by the Philippine Government so that the export license might be
secured speedily. Neither does the fact that the license was issued in the name of the plaintiff
show that the latter assumed the obligation of obtaining the same, the detail being undoubtedly
formal. As a matter of fact, it was the U. S. exporter Gindoff & Co., after failing to get a
license directly, that caused its issuance in the name of the Philippine Government. At any
rate, according to Litton’s letter of December 12, 1945, shipment would be made from the
United States during the month of January, 1946, provided he would obtain export license and
shipping space; and it is admitted in the brief for the appellants that all the padlocks and
stationery were placed in the New York docks in said month in spite of the delay in the
issuance of the license, with the result that Litton’s complaint about any delay on the part of
the plaintiff is immaterial. Again, even in said letter of December 12, Litton announced that,
when shipment was made in January, the goods would "arrive in Manila for delivery during
March, 1946." We may also add that, as regards the stationery, no export license was required.
Upon the whole, we are of the opinion that Litton’s contract with the plaintiff was
unconditional. Indeed, in paragraph 2 of the "Important conditions" appearing at the back of
the purchase orders, the following provision is made: "2. The stipulated delivery period shall
not be exceeded. However, should there be delay in delivery, due to an act of the Government,
to force majeure, or to a condition clearly beyond contractor’s control, the Purchasing Agent
may grant a reasonable time for extension, if applied before default is incurred. Deliveries
made within the extended period of time shall not be subject to any of the penalties herein
below provided." This makes Litton liable in all eventualities; and said clause is authorized by
article 1105 of the old Civil Code which provides that "outside of the cases mentioned in the
law and of those in which the obligation so declares, no one shall be responsible for events
which could not be foreseen, or which having been foreseen were unavoidable." The result is
that the appellants cannot invoke the delay in the issuance of the export license by the proper
authorities, the fact that the ships carrying the supplies were not allowed to berth at the piers,
or that one of the ships had to pass by Shanghai upon orders of the War Shipping Commission,
and another vessel was stranded on Bonin Islands.
The contention that paragraph 2 of the "conditions" contained at the back of the contracts is
contrary to law and public morals, because it makes Litton liable for any delay due even to an
act of the Government, is of no moment, since it is not pretended in this case that Litton’s
default was caused by such an act.
It is also argued that the election of the plaintiff to impose the penalty equivalent to 1/10 of
one per cent of the total value of the padlocks delivered on April 8, 1946, precluded the
plaintiff from imposing the other form of penalty, namely, to make open market purchases and
to charge to the contractor the corresponding difference in price. This argument is without
merit, because the first penalty is applicable to mere delay in delivery, and not to total failure
to deliver, whereas the second penalty may be imposed in either case. To adopt Litton’s theory
would deprive the plaintiff of its right to purchase in the open market the supplies which
Litton had failed to deliver.
Neither can we sustain the claim of Litton that there was mutual mistake on the part of the
parties, in that both did not foresee the impossibility of compliance for causes beyond their
control. Litton, an experienced businessman and aware of the difficulties and restrictions in
bringing U. S. goods to the Philippines at the time he entered into his contract with the
plaintiff, chose to bind himself to deliver the articles in question, undoubtedly in the
expectation of and in return for the profits that would accrue under the contract.
A faint attempt has been made to show that Litton was merely an agent or broker of the U. S.
exporter Gindoff & Co. There is absolutely no point in this aspect of the case, since in his bid,
contracts, and performance bonds, Litton appears to be the sole contracting party.
According to the records, four of the vessels carrying the stationery and padlocks arrived in
Manila on or before April 1, 1946, one vessel arrived in Manila on May 29, after deviating to
Shanghai upon order of the War Shipping Commission, and the last vessel, carrying a cargo of
padlocks, was stranded on Bonin Islands and its cargo was transferred to another vessel which
arrived in Manila five months later. At the time the plaintiff made purchases in the open
market two vessels, the SS Tarr, carrying stationery, and the SS Adrastus, loaded with
padlocks, were inside the breakwater ready for unloading, but due to lack of berthing space at
the piers, their cargo was unloaded and delivered to the plaintiff only after the elections. The
total price of the padlocks delivered to the plaintiff computed at P1.87 each, is P17,009.52,
and the total price of the stationery delivered to the plaintiff after the elections, is P9,806.94,
and these amounts have not been paid by the plaintiff which claims that they should be
deducted from the damages due from Litton. While Litton was not excused from performing
his obligation, on purely equitable considerations we hereby reduce the damages awarded by
the trial court by the sum of P90,000. This roughly represents the difference between the
stipulated unit price of P1.87 under Litton’s contract and the price paid in the open market by
the plaintiff for the quantity of padlocks delivered by Litton to and accepted by the plaintiff
after the elections, which articles were loaded in the SS. Adrastus which arrived in Manila on
April 1, but was able to berth only on May 5. We are influenced by the fact that the purchases
made by the plaintiff, at the time when a quantity of padlocks and stationery were inside the
breakwater ready for unloading, were at black market prices, or over the ceiling rates fixed by
the Government, in addition to the circumstance that the performance bonds required from
Litton were only in the sums of P35,904 and P4,700. Of course, under the contract, the
plaintiff was authorized to make open market purchases as a result of Litton’s default, and in
view of the attending urgency the plaintiff was compelled to pay higher prices; and Litton’s
criticism against said purchases is therefore not well taken. At any rate, Litton had not taken
any steps to protect himself or minimize his damages by buying in the open market at lower
prices than those paid by the plaintiff for the articles needed in the elections which Litton
failed to deliver on time.
The position of the surety company is dependent upon that of Litton. As a matter of fact, said
company had adopted Litton’s brief. What we have stated as to Litton is therefore decisive as
against the liability of the surety.
Wherefore, with the modification that Litton’s liability for damages is reduced by P90,000, the
appealed judgment is in all other respects affirmed. So ordered with costs against the
appellants.
Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo, Bautista Angelo and
Labrador, JJ., concur.
G.R. No. 169890             March 12, 2007
FELICIANO ESGUERRA, CANUTO ESGUERRA, JUSTA ESGUERRA,
ANGEL ESGUERRA, FIDELA ESGUERRA, CLARA ESGUERRA, and
PEDRO ESGUERRA, Petitioners,
vs.
VIRGINIA TRINIDAD, PRIMITIVA TRINIDAD, and THE REGISTER OF
DEEDS OF MEYCAUAYAN, BULACAN, Respondents.
DECISION
CARPIO MORALES, J.:
Involved in the present controversy are two parcels of land located in Camalig, Meycauayan,
Bulacan.
Felipe Esguerra and Praxedes de Vera (Esguerra spouses) were the owners of several parcels
of land in Camalig, Meycauayan, Bulacan – among them a 35,284-square meter parcel of land
covered by Tax Declaration No. 10374, half of which (17,642 square meters) they sold to their
grandchildren, herein petitioners Feliciano, Canuto, Justa, Angel, Fidela, Clara and Pedro, all
surnamed Esguerra; and a 23,989-square meter
parcel of land covered by Tax Declaration No. 12080, 23,489 square meters of which they also
sold to petitioners, and the remaining 500 square meters they sold to their other grandchildren,
the brothers Eulalio and Julian Trinidad (Trinidad brothers).
Also sold to the Trinidad brothers were a 7,048-square meter parcel of land covered by Tax
Declaration No. 9059, a 4,618-square meter parcel of land covered by Tax Declaration No.
12081, and a 768-square meter parcel of land covered by Tax Declaration No. 13989.
The Esguerra spouses executed the necessary Deed of Sale in favor of petitioners on August
11, 1937, and that in favor of the Trinidad brothers on August 17, 1937. Both documents were
executed before notary public Maximo Abaño.
Eulalio Trinidad later sold his share of the land to his daughters-respondents herein, via a
notarized Kasulatan ng Bilihang Tuluyan ng Lupa dated October 13, 1965. A portion of the
land consisting of 1,693 square meters was later assigned Lot No. 3593 during a cadastral
survey conducted in the late 1960s.
On respondents’ application for registration of title, the then Court of First Instance (CFI) of
Bulacan, by Decision of February 20, 1967, awarded Lot No. 3593 in their favor in Land
Registration Case No. N-323-V. Pursuant to the Decision, the Land Registration Commission
(LRC, now the Land Registration Authority [LRA]) issued Decree No. N-114039 by virtue of
which the Register of Deeds of Bulacan issued OCT No. 0-3631 in the name of respondents.
Meanwhile, under a notarized Bilihan ng Lupa dated November 10, 1958, petitioners sold to
respondents’ parents Eulalio Trinidad and Damiana Rodeadilla (Trinidad spouses) a portion of
about 5,000 square meters of the 23,489-square meter of land which they previously acquired
from the Esguerra spouses.
During the same cadastral survey conducted in the late 1960s, it was discovered that the about
5,000-square meter portion of petitioners’ parcel of land sold to the Trinidad spouses which
was assigned Lot No. 3591 actually measured 6,268 square meters.
In a subsequent application for registration of title over Lot No. 3591, docketed as Land
Registration Case No. N-335-V, the CFI, by Decision of August 21, 1972, awarded Lot No.
3591 in favor of Eulalio Trinidad. Pursuant to the Decision, the LRC issued Decree No. N-
149491 by virtue of which the Register of Deeds of Bulacan issued OCT No. 0-6498 in the
name of Trinidad.
Upon the death of the Trinidad spouses, Lot No. 3591 covered by OCT No. 0-6498 was
transmitted to respondents by succession.
Petitioners, alleging that upon verification with the LRA they discovered the issuance of the
above-stated two OCTs, filed on August 29, 1994 before the Regional Trial Court (RTC) of
Malolos, Bulacan two separate complaints for their nullification on the ground that they were
procured through fraud or misrepresentation.
In the first complaint, docketed as Civil Case No. 737-M-94, petitioners sought the
cancellation of OCT No. 0-3631.
In the other complaint, docketed as Civil Case No. 738-M-94, petitioners sought the
cancellation of OCT No. 0-6498.
Both cases were consolidated and tried before Branch 79 of the RTC which, after trial,
dismissed the cases by Joint Decision of May 15, 1997.
Their appeal with the Court of Appeals having been dismissed by Decision of February 28,
2005, a reconsideration of which was, by Resolution of October 3, 2005, denied, petitioners
filed the instant petition.
Petitioners fault the appellate court
1. . . . in misappreciating the fact that the act of the respondent Eulalio Trinidad in
acquiring the property from Felipe Esguerra constituted fraud.
2. . . . in the [i]nterpretation and application of the provisions of Article 1542 of the New
Civil Code.
3. . . . in ruling that there is prescription, res judicata, and violation of the non-[forum]
shopping.
In their Comment, respondents assailed the petition as lacking verification and certification
against forum shopping and failing to attach to it an affidavit of service and material portions
of the record in support thereof. Petitioners counter that the procedural deficiencies have been
mooted by the filing of a Compliance.
A check of the rollo shows that attached to the petition are an Affidavit of Service dated
November 21, 2005 and the appellate court’s Decision of February 28, 2005 and Resolution of
October 3, 2005; and that on January 16, 2006 or almost three months following the last day to
file the petition, petitioners submitted, not at their own instance, a Verification and Sworn
Certification on Non-Forum Shopping signed by petitioner Pedro Esguerra who cited honest
and excusable mistake behind the omission to submit the same.
This Court has strictly enforced the requirement of verification and certification, obedience to
which and to other procedural rules is needed if fair results are to be expected
therefrom. While exceptional cases have been considered to correct patent injustice
concomitant to a liberal application of the rules of procedure, there should be an effort on the
part of the party invoking liberality to advance a reasonable or meritorious explanation for his
failure to comply with the rules. In petitioners’ case, no such explanation has been advanced.
With regard to petitioners’ failure to attach material portions of the record in support of the
petition, this requirement is not a mere technicality but an essential requisite for the
determination of prima facie basis for giving due course to the petition. As a rule, a petition
which lacks copies of essential pleadings and portions of the case record may be dismissed.
Much discretion is left to the reviewing court, however, to determine the necessity for such
copies as the exact nature of the pleadings and portions of the case record which must
accompany a petition is not specified.
At all events, technicality aside, the petition must be denied.
It is settled that fraud is a question of fact and the circumstances constituting the same must be
alleged and proved in the court below.
In the present cases, as did the trial court, the appellate court found no fraud in respondents’
acquisition and registration of the land, viz:
. . . Appellant Pedro Esguerra even testified that he does not know how appellees were able to
secure a title over the lot in question and that they never sold Lot No. 3593 to Virginia
Trinidad since it is part of the whole lot of 23,489 square meters. The said testimony is a mere
conclusion on the part of appellants. On the other hand, the evidence shows that appellees
acquired title over the subject property by virtue of a deed of sale executed by their father
Eulalio Trinidad in their favor.
 xxxx
[T]hey failed to establish that appellees’ acquisition of the certificate of title is fraudulent. In
fact, in their two complaints, appellants acknowledged that appellees observed and took the
initial procedural steps in the registration of the land, thus ruling out fraud in the acquisition of
the certificate of title. . . .
Factual findings of the trial court, when affirmed by the Court of Appeals, are final, conclusive
and binding on this Court, which is not a trier of facts, hence, bereft of function under Rule 45
to examine and weigh the probative value of the evidence presented, its jurisdiction being
limited only to the review and revision of errors of law. Albeit there are exceptions to this rule,
the cases at bar do not fall thereunder, there being no showing that the trial and appellate
courts overlooked matters which, if considered, would alter their outcome.
Under the Torrens System, an OCT enjoys a presumption of validity, which correlatively
carries a strong presumption that the provisions of the law governing the registration of land
which led to its issuance have been duly followed. Fraud being a serious charge, it must be
supported by clear and convincing proof. Petitioners failed to discharge the burden of proof,
however.
On the questioned interpretation and application by the appellate court of Article 1542 of the
Civil Code reading:
In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price, although there be a
greater or less areas or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price; but
if, besides mentioning the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract, the vendor shall be bound to
deliver all that is included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the
price, in proportion to what is lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver what has been stipulated.
(Emphasis and underscoring supplied),
while petitioners admittedly sold Lot No. 3591 to the Trinidad spouses, they contend that what
they sold were only 5,000 square meters and not 6,268 square meters, and thus claim the
excess of 1,268 square meters.
In sales involving real estate, the parties may choose between two types of pricing agreement:
a unit price contract wherein the purchase price is determined by way of reference to a stated
rate per unit area (e.g., ₱1,000 per square meter), or a lump sum contract which states a full
purchase price for an immovable the area of which may be declared based on an estimate or
where both the area and boundaries are stated (e.g., ₱1 million for 1,000 square meters, etc.).
In Rudolf Lietz, Inc. v. Court of Appeals, the Court discussed the distinction:
. . . In a unit price contract, the statement of area of immovable is not conclusive and the price
may be reduced or increased depending on the area actually delivered. If the vendor delivers
less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be
stated in the contract or demand for the proportionate reduction of the purchase price if
delivery is not possible. If the vendor delivers more than the area stated in the contract, the
vendee has the option to accept only the amount agreed upon or to accept the whole area,
provided he pays for the additional area at the contract rate.
xxxx
In the case where the area of the immovable is stated in the contract based on an estimate, the
actual area delivered may not measure up exactly with the area stated in the contract.
According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump sum
and not at the rate of a certain sum for a unit of measure or number, there shall be no increase
or decrease of the price, although there be a greater or less areas or number than that stated in
the contract. . . .
xxxx
Where both the area and the boundaries of the immovable are declared, the area covered
within the boundaries of the immovable prevails over the stated area. In cases of conflict
between areas and boundaries, it is the latter which should prevail. What really defines a piece
of ground is not the area, calculated with more or less certainty, mentioned in its description,
but the boundaries therein laid down, as enclosing the land and indicating its limits. In a
contract of sale of land in a mass, it is well established that the specific boundaries stated in
the contract must control over any statement with respect to the area contained within its
boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose
the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as to the superficial area is
immaterial. Thus, the obligation of the vendor is to deliver everything within the boundaries,
inasmuch as it is the entirety thereof that distinguishes the determinate object. (Emphasis and
underscoring supplied)
The courts below correctly characterized the sale of Lot No. 3591 as one involving a lump
sum contract. The Bilihan ng Lupa shows that the parties agreed on the purchase price of
₱1,000.00 on a predetermined, albeit unsurveyed, area of 5,000 square meters and not on a
particular rate per unit area. As noted by the Court of Appeals, the identity of the realty was
sufficiently described as riceland:
It is clear from the afore-quoted Bilihan ng Lupa that what appellants sold to Eulalio was the
"bahaging palayan." Though measured as 5,000 square meters, more or less, such
measurement is only an approximation, and not an exact measurement. Moreover, we take
note of the fact that the said deed of sale mentioned the boundaries covering the whole area of
33,489 square meters, including the "bahaging palayan." Had appellants intended to sell only
a portion of the "bahaging palayan," they could have stated the specific area in the deed of
sale and not the entire "bahaging palayan" . . . .
In fine, under Article 1542, what is controlling is the entire land included within the
boundaries, regardless of whether the real area should be greater or smaller than that recited in
the deed. This is particularly true since the area of the land in OCT No. 0-6498 was described
in the deed as "humigit kumulang," that is, more or less.
A caveat is in order, however. The use of "more or less" or similar words in designating
quantity covers only a reasonable excess or deficiency. A vendee of land sold in gross or with
the description "more or less" with reference to its area does not thereby ipso facto take all risk
of quantity in the land.
Numerical data are not of course the sole gauge of unreasonableness of the excess or
deficiency in area. Courts must consider a host of other factors. In one case, the Court found
substantial discrepancy in area due to contemporaneous circumstances. Citing change in the
physical nature of the property, it was therein established that the excess area at the southern
portion was a product of reclamation, which explained why the land’s technical description in
the deed of sale indicated the seashore as its southern boundary, hence, the inclusion of the
reclaimed area was declared unreasonable.
In OCT No. 0-6498, the increase by a fourth of a fraction of the area indicated in the deed of
sale cannot be considered as an unreasonable excess. Most importantly, the circumstances
attendant to the inclusion of the excess area bare nothing atypical or significant to hint at
unreasonableness. It must be noted that the land was not yet technically surveyed at the time of
the sale. As vendors who themselves executed the Bilihan ng Lupa, petitioners may rightly be
presumed to have acquired a good estimate of the value and area of the bahaging palayan.
As for the last assigned error, the appellate court, in finding that the complaints were time-
barred, noted that when the complaints were filed in 1994, more than 27 years had elapsed
from the issuance of OCT No. 0-3631 and more than 20 years from the issuance of OCT No.
0-6498. The prescriptive period of one (1) year had thus set in.1awphi1.nét
Petitioners’ reliance on Agne v. Director of Lands is misplaced since the cancellation of title
was predicated not on the ground of fraud but on want of jurisdiction. Even assuming that
petitioners’ actions are in the nature of a suit for quieting of title, which is imprescriptible, the
actions still necessarily fail since petitioners failed to establish the existence of fraud.
A word on Republic Act No. 7160 which was raised by petitioners in their petition. It
expressly requires the parties to undergo a conciliation process under the Katarungang
Pambarangay, as a precondition to filing a complaint in court, non-compliance with this
condition precedent does not prevent a court of competent jurisdiction from exercising its
power of adjudication over a case unless the defendants object thereto. The objection should
be seasonably made before the court first taking cognizance of the complaint, and must be
raised in the Answer or in such other pleading allowed under the Rules of Court.
While petitioners admittedly failed to comply with the requirement of barangay conciliation,
they assert that respondents waived such objection when they failed to raise it in their Answer.
Contrary to petitioners’ claim, however, the records reveal that respondents raised their
objection in their Amended Answers filed in both cases.
IN FINE, it is a fundamental principle in land registration that a certificate of title serves as
evidence of an indefeasible and incontrovertible title to the property in favor of the person
whose name appears therein. Such indefeasibility commences after the lapse or expiration of
one year from the date of entry of the decree of registration when all persons are considered to
have a constructive notice of the title to the property. After the lapse of one year, therefore,
title to the property can no longer be contested. This system was so effected in order to quiet
title to land.
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 144225. June 17, 2003
SPOUSES GODOFREDO ALFREDO and CARMEN LIMON ALFREDO,
SPOUSES ARNULFO SAVELLANO and EDITHA B. SAVELLANO,
DANTON D. MATAWARAN, SPOUSES DELFIN F. ESPIRITU, JR. and
ESTELA S. ESPIRITU and ELIZABETH TUAZON, petitioners, vs. SPOUSES
ARMANDO BORRAS and ADELIA LOBATON BORRAS, Respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review assailing the Decision of the Court of Appeals dated 26
November 1999 affirming the decision of the Regional Trial Court of Bataan, Branch 4, in
Civil Case No. DH-256-94. Petitioners also question the Resolution of the Court of Appeals
dated 26 July 2000 denying petitioners motion for reconsideration.
The Antecedent Facts
A parcel of land measuring 81,524 square meters (Subject Land) in Barrio Culis, Mabiga,
Hermosa, Bataan is the subject of controversy in this case. The registered owners of the
Subject Land were petitioner spouses, Godofredo Alfredo (Godofredo) and Carmen Limon
Alfredo (Carmen). The Subject Land is covered by Original Certificate of Title No. 284 (OCT
No. 284) issued to Godofredo and Carmen under Homestead Patent No. V-69196.
On 7 March 1994, the private respondents, spouses Armando Borras (Armando) and Adelia
Lobaton Borras (Adelia), filed a complaint for specific performance against Godofredo and
Carmen before the Regional Trial Court of Bataan, Branch 4. The case was docketed as Civil
Case No. DH-256-94.
Armando and Adelia alleged in their complaint that Godofredo and Carmen mortgaged the
Subject Land for P7,000.00 with the Development Bank of the Philippines (DBP). To pay the
debt, Carmen and Godofredo sold the Subject Land to Armando and Adelia for P15,000.00,
the buyers to pay the DBP loan and its accumulated interest, and the balance to be paid in cash
to the sellers.
Armando and Adelia gave Godofredo and Carmen the money to pay the loan to DBP which
signed the release of mortgage and returned the owners duplicate copy of OCT No. 284 to
Godofredo and Carmen. Armando and Adelia subsequently paid the balance of the purchase
price of the Subject Land for which Carmen issued a receipt dated 11 March 1970. Godofredo
and Carmen then delivered to Adelia the owners duplicate copy of OCT No. 284, with the
document of cancellation of mortgage, official receipts of realty tax payments, and tax
declaration in the name of Godofredo. Godofredo and Carmen introduced Armando and
Adelia, as the new owners of the Subject Land, to the Natanawans, the old tenants of the
Subject Land. Armando and Adelia then took possession of the Subject Land.
In January 1994, Armando and Adelia learned that hired persons had entered the Subject Land
and were cutting trees under instructions of allegedly new owners of the Subject Land.
Subsequently, Armando and Adelia discovered that Godofredo and Carmen had re-sold
portions of the Subject Land to several persons.
On 8 February 1994, Armando and Adelia filed an adverse claim with the Register of Deeds of
Bataan. Armando and Adelia discovered that Godofredo and Carmen had secured an owners
duplicate copy of OCT No. 284 after filing a petition in court for the issuance of a new copy.
Godofredo and Carmen claimed in their petition that they lost their owners duplicate copy.
Armando and Adelia wrote Godofredo and Carmen complaining about their acts, but the latter
did not reply. Thus, Armando and Adelia filed a complaint for specific performance.
On 28 March 1994, Armando and Adelia amended their complaint to include the following
persons as additional defendants: the spouses Arnulfo Savellano and Editha B. Savellano,
Danton D. Matawaran, the spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, and Elizabeth
Tuazon (Subsequent Buyers). The Subsequent Buyers, who are also petitioners in this case,
purchased from Godofredo and Carmen the subdivided portions of the Subject Land. The
Register of Deeds of Bataan issued to the Subsequent Buyers transfer certificates of title to the
lots they purchased.
In their answer, Godofredo and Carmen and the Subsequent Buyers (collectively petitioners)
argued that the action is unenforceable under the Statute of Frauds. Petitioners pointed out that
there is no written instrument evidencing the alleged contract of sale over the Subject Land in
favor of Armando and Adelia. Petitioners objected to whatever parole evidence Armando and
Adelia introduced or offered on the alleged sale unless the same was in writing and subscribed
by Godofredo. Petitioners asserted that the Subsequent Buyers were buyers in good faith and
for value. As counterclaim, petitioners sought payment of attorneys fees and incidental
expenses.
Trial then followed. Armando and Adelia presented the following witnesses: Adelia, Jesus
Lobaton, Roberto Lopez, Apolinario Natanawan, Rolando Natanawan, Tomas Natanawan, and
Mildred Lobaton. Petitioners presented two witnesses, Godofredo and Constancia Calonso.
On 7 June 1996, the trial court rendered its decision in favor of Armando and Adelia. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs, the
spouses Adelia Lobaton Borras and Armando F. Borras, and against the defendant-spouses
Godofredo Alfredo and Carmen Limon Alfredo, spouses Arnulfo Sabellano and Editha B.
Sabellano, spouses Delfin F. Espiritu, Jr. and Estela S. Espiritu, Danton D. Matawaran and
Elizabeth Tuazon, as follows:
1. Declaring the Deeds of Absolute Sale of the disputed parcel of land (covered by OCT
No. 284) executed by the spouses Godofredo Alfredo and Camen Limon Alfredo in
favor of spouses Arnulfo Sabellano and Editha B. Sabellano, spouses Delfin F.
Espiritu, Danton D. Matawaran and Elizabeth Tuazon, as null and void;
2. Declaring the Transfer Certificates of Title Nos. T-163266 and T-163267 in the names
of spouses Arnulfo Sabellano and Editha B. Sabellano; Transfer Certificates of Title
Nos. T-163268 and 163272 in the names of spouses Delfin F. Espiritu, Jr. and Estela
S. Espiritu; Transfer Certificates of Title Nos. T-163269 and T-163271 in the name of
Danton D. Matawaran; and Transfer Certificate of Title No. T-163270 in the name of
Elizabeth Tuazon, as null and void and that the Register of Deeds of Bataan is hereby
ordered to cancel said titles;
3. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to
execute and deliver a good and valid Deed of Absolute Sale of the disputed parcel of
land (covered by OCT No. 284) in favor of the spouses Adelia Lobaton Borras and
Armando F. Borras within a period of ten (10) days from the finality of this decision;
4. Ordering defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to
surrender their owners duplicate copy of OCT No. 284 issued to them by virtue of the
Order dated May 20, 1992 of the Regional Trial Court of Bataan, Dinalupihan Branch,
to the Registry of Deeds of Bataan within ten (10) days from the finality of this
decision, who, in turn, is directed to cancel the same as there exists in the possession
of herein plaintiffs of the owners duplicate copy of said OCT No. 284 and, to restore
and/or reinstate OCT No. 284 of the Register of Deeds of Bataan to its full force and
effect;
5. Ordering the defendant-spouses Godofredo Alfredo and Carmen Limon Alfredo to
restitute and/or return the amount of the respective purchase prices and/or
consideration of sale of the disputed parcels of land they sold to their co-defendants
within ten (10) days from the finality of this decision with legal interest thereon from
date of the sale;
6. Ordering the defendants, jointly and severally, to pay plaintiff-spouses the sum
of P20,000.00 as and for attorneys fees and litigation expenses; and
7. Ordering defendants to pay the costs of suit.
Defendants counterclaims are hereby dismissed for lack of merit.
SO ORDERED.
Petitioners appealed to the Court of Appeals.
On 26 November 1999, the Court of Appeals issued its Decision affirming the decision of the
trial court, thus:
WHEREFORE, premises considered, the appealed decision in Civil Case No. DH-256-94 is
hereby AFFIRMED in its entirety. Treble costs against the defendants-appellants.
SO ORDERED.
On 26 July 2000, the Court of Appeals denied petitioners motion for reconsideration.
The Ruling of the Trial Court
The trial court ruled that there was a perfected contract of sale between the spouses Godofredo
and Carmen and the spouses Armando and Adelia. The trial court found that all the elements
of a contract of sale were present in this case. The object of the sale was specifically identified
as the 81,524-square meter lot in Barrio Culis, Mabigas, Hermosa, Bataan, covered by OCT
No. 284 issued by the Registry of Deeds of Bataan. The purchase price was fixed
at P15,000.00, with the buyers assuming to pay the sellers P7,000.00 DBP mortgage loan
including its accumulated interest. The balance of the purchase price was to be paid in cash to
the sellers. The last payment of P2,524.00 constituted the full settlement of the purchase price
and this was paid on 11 March 1970 as evidenced by the receipt issued by Carmen.
The trial court found the following facts as proof of a perfected contract of sale: (1) Godofredo
and Carmen delivered to Armando and Adelia the Subject Land; (2) Armando and Adelia
treated as their own tenants the tenants of Godofredo and Carmen; (3) Godofredo and Carmen
turned over to Armando and Adelia documents such as the owners duplicate copy of the title
of the Subject Land, tax declaration, and the receipts of realty tax payments in the name of
Godofredo; and (4) the DBP cancelled the mortgage on the Subject Property upon payment of
the loan of Godofredo and Carmen. Moreover, the receipt of payment issued by Carmen
served as an acknowledgment, if not a ratification, of the verbal sale between the sellers and
the buyers. The trial court ruled that the Statute of Frauds is not applicable because in this case
the sale was perfected.
The trial court concluded that the Subsequent Buyers were not innocent purchasers. Not one of
the Subsequent Buyers testified in court on how they purchased their respective lots. The
Subsequent Buyers totally depended on the testimony of Constancia Calonso (Calonso) to
explain the subsequent sale. Calonso, a broker, negotiated with Godofredo and Carmen the
sale of the Subject Land which Godofredo and Carmen subdivided so they could sell anew
portions to the Subsequent Buyers.
Calonso admitted that the Subject Land was adjacent to her own lot. The trial court pointed out
that Calonso did not inquire on the nature of the tenancy of the Natanawans and on who
owned the Subject Land. Instead, she bought out the tenants for P150,000.00. The buy out was
embodied in a Kasunduan. Apolinario Natanawan (Apolinario) testified that he and his wife
accepted the money and signed the Kasunduan because Calonso and the Subsequent Buyers
threatened them with forcible ejectment. Calonso brought Apolinario to the Agrarian Reform
Office where he was asked to produce the documents showing that Adelia is the owner of the
Subject Land. Since Apolinario could not produce the documents, the agrarian officer told him
that he would lose the case. Thus, Apolinario was constrained to sign the Kasunduan and
accept the P150,000.00.
Another indication of Calonsos bad faith was her own admission that she saw an adverse claim
on the title of the Subject Land when she registered the deeds of sale in the names of the
Subsequent Buyers. Calonso ignored the adverse claim and proceeded with the registration of
the deeds of sale.
The trial court awarded P20,000.00 as attorneys fees to Armando and Adelia. In justifying the
award of attorneys fees, the trial court invoked Article 2208 (2) of the Civil Code which
allows a court to award attorneys fees, including litigation expenses, when it is just and
equitable to award the same. The trial court ruled that Armando and Adelia are entitled to
attorneys fees since they were compelled to file this case due to petitioners refusal to heed
their just and valid demand.
The Ruling of the Court of Appeals
The Court of Appeals found the factual findings of the trial court well supported by the
evidence. Based on these findings, the Court of Appeals also concluded that there was a
perfected contract of sale and the Subsequent Buyers were not innocent purchasers.
The Court of Appeals ruled that the handwritten receipt dated 11 March 1970 is sufficient
proof that Godofredo and Carmen sold the Subject Land to Armando and Adelia upon
payment of the balance of the purchase price. The Court of Appeals found the recitals in the
receipt as sufficient to serve as the memorandum or note as a writing under the Statute of
Frauds. The Court of Appeals then reiterated the ruling of the trial court that the Statute of
Frauds does not apply in this case.
The Court of Appeals gave credence to the testimony of a witness of Armando and Adelia,
Mildred Lobaton, who explained why the title to the Subject Land was not in the name of
Armando and Adelia. Lobaton testified that Godofredo was then busy preparing to leave for
Davao. Godofredo promised that he would sign all the papers once they were ready. Since
Armando and Adelia were close to the family of Carmen, they trusted Godofredo and Carmen
to honor their commitment. Armando and Adelia had no reason to believe that their contract of
sale was not perfected or validly executed considering that they had received the duplicate
copy of OCT No. 284 and other relevant documents. Moreover, they had taken physical
possession of the Subject Land.
The Court of Appeals held that the contract of sale is not void even if only Carmen signed the
receipt dated 11 March 1970. Citing Felipe v. Heirs of Maximo Aldon, the appellate court
ruled that a contract of sale made by the wife without the husbands consent is not void but
merely voidable. The Court of Appeals further declared that the sale in this case binds the
conjugal partnership even if only the wife signed the receipt because the proceeds of the sale
were used for the benefit of the conjugal partnership. The appellate court based this conclusion
on Article 161 of the Civil Code.
The Subsequent Buyers of the Subject Land cannot claim that they are buyers in good faith
because they had constructive notice of the adverse claim of Armando and Adelia. Calonso,
who brokered the subsequent sale, testified that when she registered the subsequent deeds of
sale, the adverse claim of Armando and Adelia was already annotated on the title of the
Subject Land. The Court of Appeals believed that the act of Calonso and the Subsequent
Buyers in forcibly ejecting the Natanawans from the Subject Land buttresses the conclusion
that the second sale was tainted with bad faith from the very beginning.
Finally, the Court of Appeals noted that the issue of prescription was not raised in the Answer.
Nonetheless, the appellate court explained that since this action is actually based on fraud, the
prescriptive period is four years, with the period starting to run only from the date of the
discovery of the fraud. Armando and Adelia discovered the fraudulent sale of the Subject Land
only in January 1994. Armando and Adelia lost no time in writing a letter to Godofredo and
Carmen on 2 February 1994 and filed this case on 7 March 1994. Plainly, Armando and
Adelia did not sleep on their rights or lose their rights by prescription.
The Court of Appeals sustained the award of attorneys fees and imposed treble costs on
petitioners.
The Issues
Petitioners raise the following issues:
I and Adelia was a perfected contract. A contract is perfected once there is consent of the
Whether the alleged sale of the Subject Land in favor of Armando and Adelia is valid and
enforceable, where (1) it was orally entered into and not in writing; (2) Carmen did not
obtain the consent and authority of her husband, Godofredo, who was the sole owner of
the Subject Land in whose name the title thereto (OCT No. 284) was issued; and (3) it was
entered into during the 25-year prohibitive period for alienating the Subject Land without
the approval of the Secretary of Agriculture and Natural Resources.
II
Whether the action to enforce the alleged oral contract of sale brought after 24 years from
its alleged perfection had been barred by prescription and by laches.
III
Whether the deeds of absolute sale and the transfer certificates of title over the portions of
the Subject Land issued to the Subsequent Buyers, innocent purchasers in good faith and
for value whose individual titles to their respective lots are absolute and indefeasible, are
valid.
IV
Whether petitioners are liable to pay Armando and Adelia P20,0000.00 as attorneys fees
and litigation expenses and the treble costs, where the claim of Armando and Adelia is
clearly unfounded and baseless.
V
Whether petitioners are entitled to the counterclaim for attorneys fees and litigation
expenses, where they have sustained such expenses by reason of institution of a clearly
malicious and unfounded action by Armando and Adelia.
The Courts Ruling
The petition is without merit.
In a petition for review on certiorari under Rule 45, this Court reviews only errors of law and
not errors of facts. The factual findings of the appellate court are generally binding on this
Court. This applies with greater force when both the trial court and the Court of Appeals are in
complete agreement on their factual findings. In this case, there is no reason to deviate from
the findings of the lower courts. The facts relied upon by the trial and appellate courts are
borne out by the record. We agree with the conclusions drawn by the lower courts from these
facts.
Validity and Enforceability of the Sale
The contract of sale between the spouses Godofredo and Carmen and the spouses Armando
contracting parties on the object certain and on the cause of the obligation. In the instant case,
the object of the sale is the Subject Land, and the price certain is P15,000.00. The trial and
appellate courts found that there was a meeting of the minds on the sale of the Subject Land
and on the purchase price of P15,000.00. This is a finding of fact that is binding on this Court.
We find no reason to disturb this finding since it is supported by substantial evidence.
The contract of sale of the Subject Land has also been consummated because the sellers and
buyers have performed their respective obligations under the contract. In a contract of sale, the
seller obligates himself to transfer the ownership of the determinate thing sold, and to deliver
the same, to the buyer who obligates himself to pay a price certain to the seller. In the instant
case, Godofredo and Carmen delivered the Subject Land to Armando and Adelia, placing the
latter in actual physical possession of the Subject Land. This physical delivery of the Subject
Land also constituted a transfer of ownership of the Subject Land to Armando and
Adelia. Ownership of the thing sold is transferred to the vendee upon its actual or constructive
delivery. Godofredo and Carmen also turned over to Armando and Adelia the documents of
ownership to the Subject Land, namely the owners duplicate copy of OCT No. 284, the tax
declaration and the receipts of realty tax payments.
On the other hand, Armando and Adelia paid the full purchase price as evidenced by the
receipt dated 11 March 1970 issued by Carmen. Armando and Adelia fulfilled their obligation
to provide the P7,000.00 to pay the D
The trial and appellate courts correctly refused to apply the Statute of Frauds to this case. The
Statute of Frauds provides that a contract for the sale of real property shall be unenforceable
unless the contract or some note or memorandum of the sale is in writing and subscribed by
the party charged or his agent. The existence of the receipt dated 11 March 1970, which is a
memorandum of the sale, removes the transaction from the provisions of the Statute of Frauds.
The Statute of Frauds applies only to executory contracts and not to contracts either partially
or totally performed. Thus, where one party has performed ones obligation, oral evidence will
be admitted to prove the agreement. In the instant case, the parties have consummated the sale
of the Subject Land, with both sellers and buyers performing their respective obligations under
the contract of sale. In addition, a contract that violates the Statute of Frauds is ratified by the
acceptance of benefits under the contract. Godofredo and Carmen benefited from the contract
because they paid their DBP loan and secured the cancellation of their mortgage using the
money given by Armando and Adelia. Godofredo and Carmen also accepted payment of the
balance of the purchase price.
Godofredo and Carmen cannot invoke the Statute of Frauds to deny the existence of the verbal
contract of sale because they have performed their obligations, and have accepted benefits,
under the verbal contract. Armando and Adelia have also performed their obligations under
the verbal contract. Clearly, both the sellers and the buyers have consummated the verbal
contract of sale of the Subject Land. The Statute of Frauds was enacted to prevent fraud. This
law cannot be used to advance the very evil the law seeks to prevent.
Godofredo and Carmen also claim that the sale of the Subject Land to Armando and Adelia is
void on two grounds. First, Carmen sold the Subject Land without the marital consent of
Godofredo. Second, the sale was made during the 25-year period that the law prohibits the
alienation of land grants without the approval of the Secretary of Agriculture and Natural
Resources.
These arguments are without basis.
The Family Code, which took effect on 3 August 1988, provides that any alienation or
encumbrance made by the husband of the conjugal partnership property without the consent of
the wife is void. However, when the sale is made before the effectivity of the Family Code, the
applicable law is the Civil Code.
Article 173 of the Civil Code provides that the disposition of conjugal property without the
wifes consent is not void but merely voidable. Article 173 reads:
The wife may, during the marriage, and within ten years from the transaction questioned, ask
the courts for the annulment of any contract of the husband entered into without her consent,
when such consent is required, or any act or contract of the husband which tends to defraud
her or impair her interest in the conjugal partnership property. Should the wife fail to exercise
this right, she or her heirs, after the dissolution of the marriage, may demand the value of
property fraudulently alienated by the husband.
In Felipe v. Aldon, we applied Article 173 in a case where the wife sold some parcels of land
belonging to the conjugal partnership without the consent of the husband. We ruled that the
contract of sale was voidable subject to annulment by the husband. Following petitioners
argument that Carmen sold the land to Armando and Adelia without the consent of Carmens
husband, the sale would only be voidable and not void.
However, Godofredo can no longer question the sale. Voidable contracts are susceptible of
ratification. Godofredo ratified the sale when he introduced Armando and Adelia to his tenants
as the new owners of the Subject Land. The trial court noted that Godofredo failed to deny
categorically on the witness stand the claim of the complainants witnesses that Godofredo
introduced Armando and Adelia as the new landlords of the tenants. That Godofredo and
Carmen allowed Armando and Adelia to enjoy possession of the Subject Land for 24 years is
formidable proof of Godofredos acquiescence to the sale. If the sale was truly unauthorized,
then Godofredo should have filed an action to annul the sale. He did not. The prescriptive
period to annul the sale has long lapsed. Godofredos conduct belies his claim that his wife sold
the Subject Land without his consent.
Moreover, Godofredo and Carmen used most of the proceeds of the sale to pay their debt with
the DBP. We agree with the Court of Appeals that the sale redounded to the benefit of the
conjugal partnership. Article 161 of the Civil Code provides that the conjugal partnership shall
be liable for debts and obligations contracted by the wife for the benefit of the conjugal
partnership. Hence, even if Carmen sold the land without the consent of her husband, the sale
still binds the conjugal partnership.
Petitioners contend that Godofredo and Carmen did not deliver the title of the Subject Land to
Armando and Adelia as shown by this portion of Adelias testimony on cross-examination:
Q -- No title was delivered to you by Godofredo Alfredo?
A -- I got the title from Julie Limon because my sister told me.
Petitioners raise this factual issue for the first time. The Court of Appeals could have passed
upon this issue had petitioners raised this earlier. At any rate, the cited testimony of Adelia
does not convincingly prove that Godofredo and Carmen did not deliver the Subject Land to
Armando and Adelia. Adelias cited testimony must be examined in context not only with her
entire testimony but also with the other circumstances.
Adelia stated during cross-examination that she obtained the title of the Subject Land from
Julie Limon (Julie), her classmate in college and the sister of Carmen. Earlier, Adelias own
sister had secured the title from the father of Carmen. However, Adelias sister, who was about
to leave for the United States, gave the title to Julie because of the absence of the other
documents. Adelias sister told Adelia to secure the title from Julie, and this was how Adelia
obtained the title from Julie.
It is not necessary that the seller himself deliver the title of the property to the buyer because
the thing sold is understood as delivered when it is placed in the control and possession of the
vendee. To repeat, Godofredo and Carmen themselves introduced the Natanawans, their
tenants, to Armando and Adelia as the new owners of the Subject Land. From then on,
Armando and Adelia acted as the landlords of the Natanawans. Obviously, Godofredo and
Carmen themselves placed control and possession of the Subject Land in the hands of
Armando and Adelia.
Petitioners invoke the absence of approval of the sale by the Secretary of Agriculture and
Natural Resources to nullify the sale. Petitioners never raised this issue before the trial court or
the Court of Appeals. Litigants cannot raise an issue for the first time on appeal, as this would
contravene the basic rules of fair play, justice and due process. However, we will address this
new issue to finally put an end to this case.
The sale of the Subject Land cannot be annulled on the ground that the Secretary did not
approve the sale, which was made within 25 years from the issuance of the homestead title.
Section 118 of the Public Land Act (Commonwealth Act No. 141) reads as follows:
SEC. 118. Except in favor of the Government or any of its branches, units, or institutions or
legally constituted banking corporation, lands acquired under free patent or homestead
provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of the issuance of the patent
or grant.
xxx
No alienation, transfer, or conveyance of any homestead after 5 years and before twenty-five
years after the issuance of title shall be valid without the approval of the Secretary of
Agriculture and Commerce, which approval shall not be denied except on constitutional and
legal grounds.
A grantee or homesteader is prohibited from alienating to a private individual a land grant
within five years from the time that the patent or grant is issued. A violation of this prohibition
renders a sale void. This prohibition, however, expires on the fifth year. From then on until the
next 20 years the land grant may be alienated provided the Secretary of Agriculture and
Natural Resources approves the alienation. The Secretary is required to approve the alienation
unless there are constitutional and legal grounds to deny the approval. In this case, there are no
apparent constitutional or legal grounds for the Secretary to disapprove the sale of the Subject
Land.
The failure to secure the approval of the Secretary does not ipso facto make a sale void. The
absence of approval by the Secretary does not nullify a sale made after the expiration of the 5-
year period, for in such event the requirement of Section 118 of the Public Land Act becomes
merely directory or a formality. The approval may be secured later, producing the effect of
ratifying and adopting the transaction as if the sale had been previously authorized. As held
in Evangelista v. Montano:
Section 118 of Commonwealth Act No. 141, as amended, specifically enjoins that the
approval by the Department Secretary "shall not be denied except on constitutional and legal
grounds." There being no allegation that there were constitutional or legal impediments to the
sales, and no pretense that if the sales had been submitted to the Secretary concerned they
would have been disapproved, approval was a ministerial duty, to be had as a matter of course
and demandable if refused. For this reason, and if necessary, approval may now be applied for
and its effect will be to ratify and adopt the transactions as if they had been previously
authorized. (Emphasis supplied)
Action Not Barred by Prescription and Laches
Petitioners insist that prescription and laches have set in. We disagree.
The Amended Complaint filed by Armando and Adelia with the trial court is captioned as one
for Specific Performance. In reality, the ultimate relief sought by Armando and Adelia is the
reconveyance to them of the Subject Land. An action for reconveyance is one that seeks to
transfer property, wrongfully registered by another, to its rightful and legal owner. The body
of the pleading or complaint determines the nature of an action, not its title or heading. Thus,
the present action should be treated as one for reconveyance.
Article 1456 of the Civil Code provides that a person acquiring property through fraud
becomes by operation of law a trustee of an implied trust for the benefit of the real owner of
the property. The presence of fraud in this case created an implied trust in favor of Armando
and Adelia. This gives Armando and Adelia the right to seek reconveyance of the property
from the Subsequent Buyers.
To determine when the prescriptive period commenced in an action for reconveyance,
plaintiffs possession of the disputed property is material. An action for reconveyance based on
an implied trust prescribes in ten years. The ten-year prescriptive period applies only if there is
an actual need to reconvey the property as when the plaintiff is not in possession of the
property. However, if the plaintiff, as the real owner of the property also remains in possession
of the property, the prescriptive period to recover title and possession of the property does not
run against him. In such a case, an action for reconveyance, if nonetheless filed, would be in
the nature of a suit for quieting of title, an action that is imprescriptible.
In this case, the appellate court resolved the issue of prescription by ruling that the action
should prescribe four years from discovery of the fraud. We must correct this erroneous
application of the four-year prescriptive period. In Caro v. Court of Appeals, we explained
why an action for reconveyance based on an implied trust should prescribe in ten years. In that
case, the appellate court also erroneously applied the four-year prescriptive period. We
declared in Caro:
We disagree. The case of Liwalug Amerol, et al. v. Molok Bagumbaran, G.R. No. L-33261,
September 30, 1987,154 SCRA 396 illuminated what used to be a gray area on the prescriptive
period for an action to reconvey the title to real property and, corollarily, its point of reference:
xxx It must be remembered that before August 30, 1950, the date of the effectivity of the new
Civil Code, the old Code of Civil Procedure (Act No. 190) governed prescription. It provided:
SEC. 43. Other civil actions; how limited.- Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action accrues:
xxx xxx xxx
3. Within four years: xxx An action for relief on the ground of fraud, but the right of action in
such case shall not be deemed to have accrued until the discovery of the fraud;
xxx xxx xxx
In contrast, under the present Civil Code, we find that just as an implied or constructive trust is
an offspring of the law (Art. 1456, Civil Code), so is the corresponding obligation to reconvey
the property and the title thereto in favor of the true owner. In this context, and vis-a-vis
prescription, Article 1144 of the Civil Code is applicable.
Article 1144. The following actions must be brought within ten years from the time the right
of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
xxx
(Emphasis supplied).
An action for reconveyance based on an implied or constructive trust must perforce
prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very
recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action
for reconveyance based on an implied or constructive trust prescribes in ten years from the
issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin
vs. Medalla which states that the prescriptive period for a reconveyance action is four years.
However, this variance can be explained by the erroneous reliance on Gerona vs. de Guzman.
But in Gerona, the fraud was discovered on June 25,1948, hence Section 43(3) of Act No. 190,
was applied, the new Civil Code not coming into effect until August 30, 1950 as mentioned
earlier. It must be stressed, at this juncture, that article 1144 and article 1456, are new
provisions. They have no counterparts in the old Civil Code or in the old Code of Civil
Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period
for an action for reconveyance of title of real property acquired under false pretenses.
An action for reconveyance has its basis in Section 53, paragraph 3 of Presidential Decree No.
1529, which provides:
In all cases of registration procured by fraud, the owner may pursue all his legal and equitable
remedies against the parties to such fraud without prejudice, however, to the rights of any
innocent holder of the decree of registration on the original petition or application, xxx
This provision should be read in conjunction with Article 1456 of the Civil Code, which
provides:
Article 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.
The law thereby creates the obligation of the trustee to reconvey the property and the title
thereto in favor of the true owner. Correlating Section 53, paragraph 3 of Presidential Decree
No. 1529 and Article 1456 of the Civil Code with Article 1144(2) of the Civil Code, supra, the
prescriptive period for the reconveyance of fraudulently registered real property is ten (10)
years reckoned from the date of the issuance of the certificate of title xxx (Emphasis supplied)
Following Caro, we have consistently held that an action for reconveyance based on an
implied trust prescribes in ten years. We went further by specifying the reference point of the
ten-year prescriptive period as the date of the registration of the deed or the issuance of the
title.
Had Armando and Adelia remained in possession of the Subject Land, their action for
reconveyance, in effect an action to quiet title to property, would not be subject to
prescription. Prescription does not run against the plaintiff in actual possession of the disputed
land because such plaintiff has a right to wait until his possession is disturbed or his title is
questioned before initiating an action to vindicate his right. His undisturbed possession gives
him the continuing right to seek the aid of a court of equity to determine the nature of the
adverse claim of a third party and its effect on his title.
Armando and Adelia lost possession of the Subject Land when the Subsequent Buyers forcibly
drove away from the Subject Land the Natanawans, the tenants of Armando and Adelia.
[51 This created an actual need for Armando and Adelia to seek reconveyance of the Subject
Land. The statute of limitation becomes relevant in this case. The ten-year prescriptive period
started to run from the date the Subsequent Buyers registered their deeds of sale with the
Register of Deeds.
The Subsequent Buyers bought the subdivided portions of the Subject Land on 22 February
1994, the date of execution of their deeds of sale. The Register of Deeds issued the transfer
certificates of title to the Subsequent Buyers on 24 February 1994. Armando and Adelia filed
the Complaint on 7 March 1994. Clearly, prescription could not have set in since the case was
filed at the early stage of the ten-year prescriptive period.
Neither is the action barred by laches. We have defined laches as the failure or neglect, for an
unreasonable time, to do that which, by the exercise of due diligence, could or should have
been done earlier.[52 It is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has abandoned it or declined
to assert it. Armando and Adelia discovered in January 1994 the subsequent sale of the Subject
Land and they filed this case on 7 March 1994. Plainly, Armando and Adelia did not sleep on
their rights.
Validity of Subsequent Sale of Portions of the Subject Land
Petitioners maintain that the subsequent sale must be upheld because the Subsequent Buyers,
the co-petitioners of Godofredo and Carmen, purchased and registered the Subject Land in
good faith. Petitioners argue that the testimony of Calonso, the person who brokered the
second sale, should not prejudice the Subsequent Buyers. There is no evidence that Calonso
was the agent of the Subsequent Buyers and that she communicated to them what she knew
about the adverse claim and the prior sale. Petitioners assert that the adverse claim registered
by Armando and Adelia has no legal basis to render defective the transfer of title to the
Subsequent Buyers.
We are not persuaded. Godofredo and Carmen had already sold the Subject Land to Armando
and Adelia. The settled rule is when ownership or title passes to the buyer, the seller ceases to
have any title to transfer to any third person. If the seller sells the same land to another, the
second buyer who has actual or constructive knowledge of the prior sale cannot be a registrant
in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to
the second buyer, the first buyer may seek reconveyance of the property subject of the sale.
Thus, to merit protection under the second paragraph of Article 1544 of the Civil Code, the
second buyer must act in good faith in registering the deed. In this case, the Subsequent
Buyers good faith hinges on whether they had knowledge of the previous sale. Petitioners do
not dispute that Armando and Adelia registered their adverse claim with the Registry of Deeds
of Bataan on 8 February 1994. The Subsequent Buyers purchased their respective lots only on
22 February 1994 as shown by the date of their deeds of sale. Consequently, the adverse claim
registered prior to the second sale charged the Subsequent Buyers with constructive notice of
the defect in the title of the sellers, Godofredo and Carmen.
It is immaterial whether Calonso, the broker of the second sale, communicated to the
Subsequent Buyers the existence of the adverse claim. The registration of the adverse claim on
8 February 1994 constituted, by operation of law, notice to the whole world. From that date
onwards, the Subsequent Buyers were deemed to have constructive notice of the adverse claim
of Armando and Adelia. When the Subsequent Buyers purchased portions of the Subject Land
on 22 February 1994, they already had constructive notice of the adverse claim registered
earlier. Thus, the Subsequent Buyers were not buyers in good faith when they purchased their
lots on 22 February 1994. They were also not registrants in good faith when they registered
their deeds of sale with the Registry of Deeds on 24 February 1994.
The Subsequent Buyers individual titles to their respective lots are not absolutely indefeasible.
The defense of indefeasibility of the Torrens Title does not extend to a transferee who takes
the certificate of title with notice of a flaw in his title. The principle of indefeasibility of title
does not apply where fraud attended the issuance of the titles as in this case.
Attorneys Fees and Costs
We sustain the award of attorneys fees. The decision of the court must state the grounds for
the award of attorneys fees. The trial court complied with this requirement. We agree with the
trial court that if it were not for petitioners unjustified refusal to heed the just and valid
demands of Armando and Adelia, the latter would not have been compelled to file this action.
The Court of Appeals echoed the trial courts condemnation of petitioners fraudulent
maneuverings in securing the second sale of the Subject Land to the Subsequent Buyers. We
will also not turn a blind eye on petitioners brazen tactics. Thus, we uphold the treble costs
imposed by the Court of Appeals on petitioners.
WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. Treble
costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Ynares-Santiago, and Azcuna, JJ., concur.
G.R. No. 133895           October 2, 2001
ZENAIDA M. SANTOS, petitioner,
vs.
CALIXTO SANTOS, ALBERTO SANTOS, ROSA SANTOS-CARREON and
ANTONIO SANTOS, respondents.
QUISUMBING, J.:
This petition for review seeks to annul and set aside the decision date March 10, 1998 of the
Court of Appeals that affirmed the decision of the Regional Trial Court of Manila, Branch 48,
dated March 17, 1993. Petitioner also seeks to annul the resolution that denied her motion for
reconsideration.
Petitioner Zenaida M. Santos is the widow of Salvador Santos, a brother of private
respondents Calixto, Alberto, Antonio, all surnamed Santos and Rosa Santos-Carreon.
The spouses Jesus and Rosalia Santos owned a parcel of land registered under TCT No. 27571
with an area of 154 square meters, located at Sta. Cruz Manila. On it was a four-door
apartment administered by Rosalia who rented them out. The spouses had five children,
Salvador, Calixto, Alberto, Antonio and Rosa.
On January 19, 1959, Jesus and Rosalia executed a deed of sale of the properties in favor of
their children Salvador and Rosa. TCT No. 27571 became TCT No. 60819. Rosa in turn sold
her share to Salvador on November 20, 1973 which resulted in the issuance of a new TCT No.
113221. Despite the transfer of the property to Salvador, Rosalia continued to lease receive
rentals form the apartment units.1âwphi1.nêt
On November 1, 1979, Jesus died. Six years after or on January 9, 1985, Salvador died,
followed by Rosalia who died the following month. Shortly after, petitioner Zenaida, claiming
to be Salvador's heir, demanded the rent from Antonio Hombrebueno, a tenant of Rosalia.
When the latter refused to pay, Zenaida filed and ejectment suit against him with the
Metropolitan Trial Court of Manila, Branch 24, which eventually decided in Zenaida's favor.
On January 5, 1989, private respondents instituted an action for reconveyance of property with
preliminary injunction against petitioner in the Regional Trial Court of Manila, where they
alleged that the two deeds of sale executed on January 19, 1959 and November 20, 1973 were
simulated for lack of consideration. They were executed to accommodate Salvador in
generation funds for his business and providing him with greater business flexibility.
In her Answer, Zenaida denied the material allegations in the complaint as special and
affirmative defenses, argued that Salvador was the registered owner of the property, which
could only be subjected to encumbrances or liens annotated on the title; that the respondents'
right to reconveyance was already barred by prescription and laches; and that the complaint
state no cause of action.
On March 17, 1993, the trial court decided in private respondents' favor, thus: WHEREFORE, finding no reversible error in the decision appealed from, the same is
hereby AFFIRMED. No pronouncement as to costs.
WHEREFORE, viewed from all the foregoing considerations, judgment is hereby made in
favor of the plaintiffs and against the defendants: SO ORDERED.

a) Declaring Exh. "B", the deed of sale executed by Rosalia Santos and Jesus Santos on Hence, this petition where petitioner avers that the Court of Appeals erred in:
January 19, 1959, as entirely null and void for being fictitious or stimulated and inexistent
and without any legal force and effect: I.

b) Declaring Exh. "D", the deed of sale executed by Rosa Santos in favor of Salvador … HOLDING THAT THE OWNERSHIP OVER THE LITIGATED PROPERTY BY
Santos on November 20, 1973, also as entirely null and void for being likewise fictitious THE LATE HUSBAND OF DEFENDANT-APPELLANT WAS AFFECTED BY HIS
or stimulated and inexistent and without any legal force and effect; FAILURE TO EXERCISE CERTAIN ATTRIBUTES OF OWNERSHIP.

c) Directing the Register of Deeds of Manila to cancel Transfer Certificate of Title No. T- II.
113221 registered in the name of Salvador Santos, as well as, Transfer Certificate of Title
No. 60819 in the names of Salvador Santos, Rosa Santos, and consequently thereafter,
reinstating with the same legal force and effect as if the same was not cancelled, and which …HOLDING THAT DUE EXECUTION OF A PUBLIC INSTRUMENT IS NOT
shall in all respects be entitled to like faith and credit; Transfer Certificate of Title No. T- EQUIVALENT TO DELIVERY OF THE LAND IN DISPUTE.
27571 registered in the name of Rosalia A. Santos, married to Jesus Santos, the same to be
partitioned by the heirs of the said registered owners in accordance with law; and III.

d) Making the injunction issued in this case permanent. …NOT FINDING THAT THE CAUSE OF ACTION OF ROSALIA SANTOS HAD
PRESCRIBED AND/OR BARRED BY LACHES.
Without pronouncement as to costs.
IV.
SO OREDERED.
… IGNORING PETITIONER'S ALLEGATION TO THE EFFECT THAT PLAINTIFF
The trial court reasoned that notwithstanding the deeds of sale transferring the property to DR. ROSA [S.] CARREON IS NOT DISQUALIFIED TO TESTIFY AS TO THE
Salvador, the spouses Rosalia and Jesus continued to possess the property and to exercise QUESTIONED DEEDS OF SALE CONSIDERING THAT SALVADOR SANTOS HAS
rights of ownership not only by receiving the monthly rentals, but also by paying the realty LONG BEEN DEAD.
taxes. Also, Rosalia kept the owner's duplicate copy of the title even after it was already in the
name of Salvador. Further, the spouses had no compelling reason in 1959 to sell the property In this petition, we are asked to resolve the following:
and Salvador was not financially capable to purchase it. The deeds of sale were therefore
fictitious. Hence, the action to assail the same does not prescribe. 1. Are payments of realty taxes and retention of possession indications of continued
ownership by the original owners?
Upon appeal, the Court of Appeals affirmed the trial court's decision dated March 10, 1998. It
held that in order for the execution of a public instrument to effect tradition, as provided in 2. Is a sale through a public instrument tantamount to delivery of the thing sold?
Article 1498 of the Civil Code, the vendor shall have had control over the thing sold, at the
moment of sale. It was not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. The subject deeds of sale did not 3. Did the cause of action of Rosalia Santos and her heirs prescribe?
confer upon Salvador the ownership over the subject property, because even after the sale, the
original vendors remained in dominion, control, and possession thereof. The appellate court 4. Can petitioner invoke the "Dead Man's Statute?"
further said that if the reason for Salvador's failure to control and possess the property was due
to his acquiescence to his mother, in deference to Filipino custom, petitioner, at least, should
On the first issue, petitioner contends that the Court of Appeals erred in holding that despite
have shown evidence to prove that her husband declared the property for tax purposes in his
the deeds of sale in Salvador's favor, Jesus and Rosalia still owned the property because the
name or paid the land taxes, acts which strongly indicate control and possession. The appellate
spouses continued to pay the realty taxes and possess the property. She argues that tax
court disposed:
declarations are not conclusive evidence of ownership when not supported by evidence. She
avers that Salvador allowed his mother to possess the property out of respect to her in
accordance with Filipino values.
It is true that neither tax receipts nor declarations of ownership for taxation purposes constitute
sufficient proof of ownership. They must be supported by other effective proofs. These
requisite proofs we find present in this case. As admitted by petitioner, despite the sale, Jesus
and Rosalia continued to possess and administer the property and enjoy its fruits by leasing it
to third persons. Both Rosa and Salvador did not exercise any right of ownership over
it. Before the second deed of sale to transfer her ½ share over the property was executed by
Rosa, Salvador still sought she permission of his mother. Further, after Salvador registered the
property in his name, he surrendered the title to his mother. These are clear indications that
ownership still remained with the original owners. In Serrano vs. CA, 139 SCRA 179, 189
(1985), we held that the continued collection of rentals from the tenants by the seller of realty
after execution of alleged deed of sale is contrary to the notion of ownership.
Petitioner argues that Salvador, in allowing her mother to use the property even after the sale,
did so out of respect for her and out of generosity, a factual matter beyond the province of this
Court. Significantly, in Alcos vs. IAC 162 SCRA 823, 837 (1988), we noted that the buyer's
immediate possession and occupation of the property corroborated the truthfulness and
authenticity of the deed of sale. Conversely, the vendor's continued possession of the property
makes dubious the contract of sale between the parties.
On the second issue, is a sale through a public instrument tantamount to delivery of the thing
sold? Petitioner in her memorandum invokes Article 1477 of the Civil Code which provides
that ownership of the thing sold is transferred to the vendee upon its actual or constructive
delivery. Article 1498, in turn, provides that when the sale is made through a public
instrument, its execution is equivalent to the delivery of the thing subject of the contract.
Petitioner avers that applying said provisions to the case, Salvador became the owner of the
subject property by virtue of the two deeds of sale executed in his favor.
Nowhere in the Civil Code, however, does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession. The Code merely said that the execution
shall be equivalent to delivery. The presumption can be rebutted by clear and convincing
evidence. Presumptive delivery can be negated by the failure of the vendee to take actual
possession of the land sold.
In Danguilan vs. IAC, 168 SCRA 22, 32 (1988), we held that for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold. When
there is no impediment to prevent the thing sold from converting to tenancy of the purchaser
by the sole will of the vendor, symbolic delivery through the execution of a public instrument
is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot
have the enjoyment and material tenancy nor make use of it himself or through another in his
name, then delivery has not been effected.
As found by both the trial and appellate courts and amply supported by the evidence on record,
Salvador was never placed in control of the property. The original sellers retained their control
and possession. Therefore, there was no real transfer of ownership.
Moreover, in Norkis Distributors, Inc. vs. CA, 193 SCRA 694, 698-699 (1991), citing the land
case of Abuan vs. Garcia, 14 SCRA 759 (1965), we held that the critical factor in the different
modes of effecting delivery, which gives legal effect to the act is the actual intention of the
vendor to deliver, and its acceptance by the vendee. Without that intention, there is no
tradition. In the instant case, although the spouses Jesus and Rosalia executed a deed of sale,
they did not deliver the possession and ownership of the property to Salvador and Rosa. They
agreed to execute a deed of sale merely to accommodate Salvador to enable him to generate
funds for his business venture.
On the third issue, petitioner argues that from the date of the sale from Rosa to Salvador on
November 20, 1973, up to his death on January 9, 1985, more or less twelve years had lapsed,
and from his death up to the filing of the case for reconveyance in the court a quo on January
5, 1989, four years had lapsed. In other words, it took respondents about sixteen years to file
the case below. Petitioner argues that an action to annul a contract for lack of consideration
prescribes in ten years and even assuming that the cause of action has not prescribed,
respondents are guilty of laches for their inaction for a long period of time.
Has respondents' cause of action prescribed? In Lacsamana vs. CA, 288 SCRA 287, 292
(1998), we held that the right to file an action for reconveyance on the ground that the
certificate of title was obtained by means of a fictitious deed of sale is virtually an action for
the declaration of its nullity, which does not prescribe. This applies squarely to the present
case. The complaint filed by respondent in the court a quo was for the reconveyance of the
subject property to the estate of Rosalia since the deeds of sale were simulated and fictitious.
The complaint amounts to a declaration of nullity of a void contract, which is imprescriptible.
Hence, respondents' cause of action has not prescribed.
Neither is their action barred by laches. The elements of laches are: 1) conduct on the part of
the defendant, or of one under whom he claims, giving rise to the situation of which the
complaint seeks a remedy; 2) delay in asserting the complainant's rights, the complainant
having had knowledge or notice of the defendant's conduct as having been afforded an
opportunity to institute a suit; 3) lack of knowledge or notice on the part of the defendant that
the complainant would assert the right in which he bases his suit; and 4) injury or prejudice to
the defendant in the event relief is accorded to the complainant, or the suit is not held
barred. These elements must all be proved positively. The conduct which caused the complaint
in the court a quo was petitioner's assertion of right of ownership as heir of Salvador. This
started in December 1985 when petitioner demanded payment of the lease rentals from
Antonio Hombrebueno, the tenant of the apartment units. From December 1985 up to the
filing of the complaint for reconveyance on January 5, 1989, only less than four years had
lapsed which we do not think is unreasonable delay sufficient to bar respondents' cause of
action. We likewise find the fourth element lacking. Neither petitioner nor her husband made
considerable investments on the property from the time it was allegedly transferred to the
latter. They also did not enter into transactions involving the property since they did not claim
ownership of it until December 1985. Petitioner stood to lose nothing. As we held in the same
case of Lacsamana vs. CA, cited above, the concept of laches is not concerned with the lapse
of time but only with the effect of unreasonble lapse. In this case, the alleged 16 years of
respondents' inaction has no adverse effect on the petitioner to make respondents guilty of
laches.
Lastly, petitioner in her memorandum seeks to expunge the testimony of Rosa Santos-Carreon
before the trial court in view of Sec. 23, Rule 130 of the Revised Rules of Court, otherwise
known as the "Dead Man's Statute." It is too late for petitioner, however, to invoke said rule.
The trial court in its order dated February 5, 1990, denied petitioner's motion to disqualify
respondent Rosa as a witness. Petitioner did not appeal therefrom. Trial ensued and Rosa
testified as a witness for respondents and was cross-examined by petitioner's counsel. By her
failure to appeal from the order allowing Rosa to testify, she waived her right to invoke the
dean man's statute. Further, her counsel cross-examined Rosa on matters that occurred during
Salvadors' lifetime. In Goñi vs. CA, 144 SCRA 222, 231 (1986) we held that protection under
the dead man's statute is effectively waived when a counsel for a petitioner cross-examines a
private respondent on matters occurring during the deceased's lifetime. The Court of appeals
cannot be faulted in ignoring petitioner on Rosa's disqualification.1âwphi1.nêt
WHEREFORE, the instant petition is DENIED. The assailed decision dated March 10, 1998
of the Court of Appeals, which sustained the judgment of the Regional Trial Court dated
March 17, 1993, in favor of herein private respondents, is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Bellosillo, Mendoza, Buena, De Leon, Jr., JJ., concur.
G.R. No. 156033 October 20, 2005
EXPRESSCREDIT* FINANCING CORPORATION, Petitioner,
vs.
SPS. MORTON AND JUANITA VELASCO, Respondents.
DECISION
QUISUMBING, J.:
Before us is a Petition for Review on Certiorari under Rule 45 appealing the Decision dated
August 20, 2002 and the Resolution dated November 12, 2002 of the Court of Appeals in CA-
G.R. CV No. 56491, entitled "Juanita Velasco v. Sps. Jesus V. Garcia." The assailed Decision
reversed the Decision of the Regional Trial Court of Quezon City, Branch 101, in Civil Case
No. Q-90-7037, while the assailed Resolution denied petitioner’s Motion for Reconsideration.
The antecedent facts are as follows:
On May 25, 1988, respondents purchased on installment, from spouses Jesus and Lorelei
Garcia ("Garcia spouses"), a house and lot in Quezon City, covered by Transfer Certificate of
Title No. 3250 in the name of Jesus Garcia.
In July 1988, a Deed of Absolute Sale was executed whereby the Garcia spouses bound
themselves to deliver the title of the property purchased, free from all liens and encumbrances
within 15 days from full payment. Respondents were thereafter informed by the Garcia
spouses that since the house on the property was still under construction, the lot was still
covered by the mother title and had no separate title as yet. They promised to give the title
after the construction was completed.
In August 1988, the keys to the property were delivered to the respondents. They moved in,
applied for a telephone connection, and insured the house. When respondents followed up on
the title, the Garcia spouses told them that since the Quezon City Hall was razed by a fire in
June, the title had to be reconstituted, so their separate title could not yet be delivered to them.
Because the Garcia spouses would not deliver the title despite repeated demands, respondents
went to the Register of Deeds in Quezon City and discovered that the Garcia spouses had
mortgaged the property to petitioner, Expresscredit Financing Corporation, for ₱250,000 on
June 15, 1989, or more than a year after the property was sold to them.
On October 23, 1990, the respondents filed a case for Quieting of Title and Specific
Performance against the Garcia spouses before the court a quo, whereby they caused
registration of a notice of lis pendens on the title, attaching thereto a copy of their complaint
stating that they have been the owners of the said property since May 25, 1988. The Garcia
spouses were subsequently declared in default for failing several times to appear in court
despite notice.
On October 7, 1992, petitioner foreclosed on the property in defiance of the notice of lis
pendens and the Writ of Preliminary Injunction issued by the lower court, enjoining petitioner
from selling or in any manner disposing of the property without permission from the court.
Petitioner sold the property in a public auction where petitioner was the highest bidder. Due to
the failure of the Garcia spouses to redeem the property, petitioner thereafter executed an
Affidavit of Consolidation and secured Certificate of Title No. 69049 in its name.
On March 1, 1996, the Regional Trial Court rendered its Decision, stating as follows:
Under the foregoing circumstances, there is no need for the defendant corporation to go
beyond the title itself because the title is in the name of defendant Garcia and it was defendant
Garcia who offered the title as collateral to the loan agreement. But nonetheless, defendant
corporation went beyond the certificate of title by conducting an [ocular] inspection of the
property. Surely, defendant corporation could never have accepted the property as a collateral
to the loan of defendant spouses Garcia had there been any knowledge of any encumbrance
over the same, much more that the title thereto had been transferred and sold. The defendant
corporation’s failure to make further inquiry apart from the ocular inspection, concerning the
rights of herein plaintiffs who were in possession of the property thru their caretakers is not
fatal because it relied on the title on the property which is in the name of Garcia and it was
Garcia himself who is the registered owner of the land and not someone else claiming the right
from Garcia.
Clearly then, under the foregoing circumstances, defendant [Expresscredit] Financing
Corporation is an innocent purchaser and is, therefore, in good faith.
The Court, however, recognized the rights pertaining to herein plaintiffs, only said rights are
subservient to that of defendant corporation. Plaintiffs, based on the evidence, both testimonial
and documentary, adduced in Court are likewise considered as innocent purchasers of the
subject property. Had they registered the Deed of Sale executed between them and Spouses
Garcia, they [would] have, undoubtedly, a preferential right over the property.
Plaintiffs spouses [deserve] to be reimbursed of whatever amount they have [spent] for the
purchase of the property sold to them by the Garcia spouses. Considering the predicament of
herein plaintiffs, and the fact that they were the first to buy the properties, were it not for their
failure to register the sale before the Registry of Property, defendant corporation is hereby
enjoined to REIMBURSE plaintiffs of the amount spent for the purchase of the 37.50 square
meters of a parcel of residential land, Lot 6-B-1, Subdivision plan PSD 342248, situated in the
district of Diliman, Quezon City and formerly covered by TCT No. 3250 now TCT No. 69049,
Registry of Deeds, Quezon City, with right of recovery from co-defendants, spouses Garcia.
WHEREFORE, premises above considered, the above-entitled case filed against defendant
[Expresscredit] Financing Corporation is hereby ordered DISMISSED for lack of merit.
Counterclaims filed by defendant [Expresscredit] Financing Corporation against herein
plaintiffs are likewise ordered DISMISSED.
No pronouncement as to the costs of the suit.
SO ORDERED.
The spouses Velasco, herein respondents, then filed an appeal before the Court of Appeals
alleging that the court a quo erred in (1) not declaring Expresscredit Financing Corporation as
an incumbrancer in bad faith such that it did not acquire good title as against them and (2) not
incorporating in the dispositive portion of the decision, an order to Expresscredit Financing
Corporation to reimburse the money they paid.
The Court of Appeals reversed the Decision of the trial court as follows:
WHEREFORE, the Decision of the lower court is hereby REVERSED and SET ASIDE.
Accordingly:
1. Appellants Juanita and Morton Velasco are declared purchaser for value and in good faith
with respect to the subject property;
2. The Deed of Mortgage, Sheriff’s Certificate of Sale, Affidavit of Consolidation in favor of
appellee [Expresscredit], and the Transfer Certificate of Title No. 69049 in the name of
[Expresscredit], are hereby declared of no force and effect;
3. Defendants Jesus and Lorelei Garcia are hereby ordered to pay to appellants Velasco the
amount of P40,000 as moral damages, P15,000 as attorney’s fees; and P10,000 as litigation
expenses.
Costs against appellee.
SO ORDERED.
Before us, petitioner raises the following issues:
I. THE APPELLATE COURT COMMITTED GRAVE ERROR IN REVERSING THE
DECISION OF THE LOWER COURT.
II. THE APPELLATE COURT COMMITTED GRAVE ABUSE OF DISCRETION AND
ERROR IN HOLDING SUPREME, AN UNREGISTERED DEED OF ABSOLUTE SALE
OVER A REGISTERED REAL ESTATE MORTGAGE.
III. THE APPELLATE COURT ERRED IN VOIDING THE SALE ON PUBLIC AUCTION
AS A RESULT OF THE EXTRA JUDICIAL PETITION FOR FORECLOSURE OF
MORTGAGE.
The main issue is, Who has preferential right over the property, the respondents who acquired
it through prior purchase or the petitioner who acquired the same in a foreclosure sale as the
highest bidder?
Petitioner alleges that this is a clear case of a double sale. The first sale is the unregistered sale
of the property covered by TCT No. 3250 by the Garcia spouses to the respondents; the second
is the sale during the foreclosure proceedings by the Ex-Officio Sheriff in favor of the
petitioner as the winning bidder.
Article 1544 of the Civil Code is the rule on double sale. It provides:
...
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.
An "innocent purchaser for value" or any equivalent phrase shall be deemed to include, under
the Torrens System, the innocent lessee, mortgagee, and other encumbrancer for value.
In Bautista v. Court of Appeals, we held that where the thing sold twice is an immovable, the
one who acquires it and first registers it in the Registry of Property, in good faith, shall be the
owner.
Who then can be considered a purchaser in good faith?
In the early case of Leung Yee v. F.L. Strong Machinery Co. and Williamson, we explained
good faith in this wise:
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 capable of being ascertained only from the acts of one claiming
its presence, for it is a condition of the mind which can only be judged by actual or fancied
token or signs.
As shown by the evidence, the property had already been sold by the Garcia spouses to the
respondents on May 25, 1988. The respondents immediately took possession, applied for a
telephone line, and insured the property with Pioneer Insurance in September 1988. When the
same land was mortgaged by the Garcia spouses, respondents have been, since May 25, 1988
in actual, physical, continuous and uninterrupted possession.
Petitioner justifies its acquisition of the property by saying that when it was mortgaged, the
previous sale of the land was not annotated on the title and so its purchase was in good faith.
To fulfill the requirement of good faith, it is imperative for a mortgagee of the land, in the
possession of persons not the mortgagor, to inquire and investigate into the rights or title of
those in possession. It is true that a person dealing with the owner of registered land is not
bound to go beyond the certificate of title. He may rely on the notices of the encumbrances on
the property annotated on the certificate of title or absence of any annotation. However, we
note that the Garcia spouses are unlike other mortgagors. They are in the business of
constructing and selling townhouses and are past masters in real estate transactions. Further,
petitioner is in the business of extending credit to the public, including real estate loans. In
both these businesses, it devolves upon both, greater charge than ordinary buyers or
encumbrancers for value, who are not in such venture. It is standard in their business, as a
matter of due diligence required of banks and financing companies, to ascertain whether the
property being offered as security for the debt has already been sold to another to prevent
injury to prior innocent buyers. They also have the resources to ascertain any encumbrances
over the properties they are dealing with.
According to respondents’ witness, Conchita Cotoner, on the second week of June 1989, two
credit investigators of petitioner visited the subject property to investigate concerning the
occupants on the property. They were promptly informed by the witness, who was the
caretaker of the property, that the same had been sold to respondents by the Garcia spouses in
May of 1988. Clearly, petitioner, through its agents, had been informed of the earlier sale of
the subject property to the respondents. Since the Garcia spouses no longer had the right to
alienate the property, no valid mortgage was ever constituted on it. Since the mortgage
contract was void, the foreclosure of the property was ineffectual as well. Sadly, petitioner,
despite having knowledge of the unregistered sale still accepted the mortgage and to our mind,
in bad faith, purchased the same at the foreclosure sale.
A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard
and claim that he acted in good faith under the belief that there was no defect in the title of the
vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to
the possibility of the existence of a defect in his vendor’s title, will not make him an innocent
purchaser for value, if it afterwards develops that the title was in fact defective, and it appears
that he had such notice of the defect as would have led to its discovery had he acted with that
measure of precaution which may reasonably be required of a prudent man in a like situation.
Good faith or the lack of it, is a question of intention; but in ascertaining the intention, courts
are necessarily controlled by the evidence as to the conduct and outward acts by which alone
the inward motive may, with safety, be determined.
Indeed, where the land sold in auction sale was registered under the Torrens System, the
purchaser at the execution sale acquired such rights, title and interest of the judgment debtor as
appearing on the certificate of title issued on the property, subject to no liens, encumbrances or
burdens that were not noted thereon. Petitioner’s claim that it purchased the property at an
auction sale is of no moment. In this case, particular circumstances constrain us to rule that
petitioner was neither a mortgagee nor a purchaser in good faith and as such, could not acquire
good title to the property as against the former transferee.
WHEREFORE, the assailed Decision dated August 20, 2002 and Resolution dated November
12, 2002 of the Court of Appeals in CA-G.R. CV No. 56491 are AFFIRMED.
SO ORDERED.
G.R. No. 166913             October 5, 2007
SPOUSES MARIANO S. TANGLAO and CORAZON M.
TANGLAO, petitioners,
vs.
SPOUSES CORAZON S. PARUNGAO and LORENZO G. PARUNGAO
(deceased), substituted by LAWRENCE S. PARUNGAO, MARY CHRISTINE
PARUNGAO-CURUTCHET, LORDBERT S. PARUNGAO, LODELBERTO
S. PARUNGAO and MA. CECILIA PARUNGAO-HERNANDEZ, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari seeking to reverse the
Decision of the Court of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP
No. 78079.
The facts of the case are:
In 1992, spouses Lorenzo and Corazon Parungao, respondents, purchased from Spring Homes
Subdivision (Spring Homes) Lot Nos. 1, 2, 3, and 4 with a total area of 486 square meters (sq.
m.) at P1,350.00 per sq. m. or a total price of P656,100.00. In addition, they also bought Lot
Nos. 7, 8, and 9 with a total area of 457 sq. m. at P1,550.00 per sq. m. or a total price
of P708,360.00. All these lots are located at Block VI, Phase II-C, Spring Homes, Barangay
Culiat, Calamba City, Laguna. Respondents made a down payment of P536,000.00, leaving a
balance of P828,450.00, exclusive of interest.
Sometime in November 1992, respondents introduced improvements on the lots consisting of
a concrete perimeter fence with cyclone wires on top, a heavy steel gate, and two fish breeding
buildings, all at a cost of P945,000.00. They also elevated the ground level of the lots by
filling them with earth and "adobe."
Under the terms of the Contracts to Sell signed by respondents and Spring Homes, the balance
of P828,450.00 was to be paid by them within one year from its execution; and that should
they apply for a loan as payment for the balance, they would continue to pay the monthly
installment until their obligation is fully paid.
Respondents failed to pay the installments. They also failed to secure a loan because Spring
Homes refused to deliver to them the Transfer Certificates of Title (TCTs) covering the lots
required in their application for a loan secured by a real estate mortgage. Apparently,
respondents had requested Spring Homes to furnish them copies of the Contracts to Sell, the
TCTs, receipts of real estate taxes paid, tax declarations, and the survey and vicinity plans of
the lots they purchased. However, Roy Madamba, salesman-representative of Spring Homes,
gave respondents only copies of the Contracts to Sell. But respondents returned these copies to
Spring Homes for correction of the lot numbers and the names of the vendees.
On April 11, 1997, Spring Homes executed two separate Deeds of Absolute Sale in favor of
spouses Mariano and Corazon Tanglao, petitioners, wherein the former sold to the latter two
lots covered by TCT Nos. T-268566 and T-268572. Hence, the said TCTs were cancelled and
in lieu thereof, TCT Nos. T-393365 and T-3377723 were issued in the names of petitioners. It
turned out that the lots sold to them were among the lots previously sold to respondents.
In a letter dated September 15, 1997, respondents demanded that Spring Homes deliver to
them the corrected Contracts to Sell, as well as the TCTs covering the lots they purchased.
Meanwhile, petitioners took possession of the two lots they bought. They forcibly opened the
steel gate as well as the doors of the buildings and entered the premises.
When informed of these events, respondents demanded an explanation from Spring Homes.
Bertha Pasic, its treasurer, apologized and promised she would settle the matter with
petitioners. However, the controversy was not settled.
On July 15, 1999, respondents filed with the Housing and Land Use Regulatory Board
(HLURB), Regional Office No. 1V a complaint for annulment of deed of sale and/or return of
investment for the seven (7) lots and costs of improvements, plus interest and damages,
docketed as HLURB Case No. R-1V6-08199-1104. Impleaded as respondents were Spring
Homes, Berta Pasic, Felipa Messiah, and petitioners.
Despite notice, Spring Homes, Pasic, and Messiah did not file their respective answers to the
complaint, nor did they appear during the hearings.
On October 3, 2000, HLURB Arbiter Gregorio L. Dean rendered a Decision, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaint filed against respondents Felipa Messiah and Spouses
Tanglao for lack of merit;
2. Ordering respondent Spring Homes to pay complainants:
a) Php536,000.00 by way of refund of payments with 12% interest per annum to
commence from August 11, 1999;
b) Php935,000.00 as actual damages; and
c) Php20,000.00 as attorney’s fees..
3. Ordering respondents Spring Homes Subdivision Co., Inc., and Bertha Pasic, jointly and
severally, to pay complainant the sum of Php20,000.00 as moral damages and to pay this
Board the sum of Php10,000.00 as administrative fine.
IT IS SO ORDERED.
Dissatisfied with the ruling, respondents filed a petition for review with the HLURB Board of
Commissioners, docketed as HLURB Case No. REM-A-001211-0272.
On August 24, 2001, the HLURB Board of Commissioners rendered its Judgment reversing
the Arbiter’s Decision and granting the petition for review, thus:
WHEREFORE, premises considered, the petition for review is granted. The decision of
the office below is set aside and a new decision is rendered as follows:
1. Declaring as valid and subsisting the contract to sell between complainants and
respondent Spring Homes;
2. Directing complainants to immediately update their account and directing respondent
Spring Homes to accept payment and to deliver title to complainants upon full payment of
the purchases price;
3. Declaring as invalid the deed of absolute sale in favor of the spouses Tanglao over the
subject lots and directing the cancellation of respondent spouses TCTs Nos. T-268566 and
T-268572 of the Registry of Deeds for Calamba, Laguna and its reversion to respondent
Spring Homes;
4. Directing respondent Spring Homes to refund to respondent spouses Tanglao all the
amounts paid by the latter in connection with the sale of the subject lots to the latter with
12% interest reckoned from the date of the sale;
5. Directing respondent Spring Homes to pay administrative fine of P10,000.00 for
unsound business practice.
 SO ORDERED.
The HLURB Board of Commissioners found that at the time of the sale of the two lots in
question to petitioners, the contracts between respondents and Spring Homes were still
subsisting. Moreover, the fence and existing structures erected on the premises should have
forewarned petitioners that there are adverse claimants of the two lots.
Petitioners filed a motion for reconsideration, but this was denied by the HLURB Board of
Commissioners in a Resolution promulgated on February 22, 2002.
Petitioners then filed an appeal with the Office of the President, docketed as O.P. Case No. 02-
C-099. But in its Decision dated March 12, 2003, the Office of the President dismissed their
appeal and affirmed the Decision of the HLURB Board of Commissioners.
Petitioners’ motion for reconsideration was also denied by the said Office in its Order dated
June 18, 2003.
Eventually, petitioners filed with the Court of Appeals a petition for review under Rule 43 of
the 1997 Rules of Civil Procedure, as amended.
On January 31, 2004, the Court of Appeals rendered its Decision dismissing the petition, thus:
WHEREFORE, premises considered, the petition for review is DENIED DUE COURSE
and ordered DISMISSED. The Decision dated 12 March 2003 of the Office of the
President which affirmed the Decision of the HLURB Board of Commissioners (Third
Division) dated 24 August 2001 reversing the 03 October 2000 Decision of Housing and
Land Use Arbiter Gerardo L. Dean and the Order dated 18 June 2003 of the Office of the
President denying the motion for reconsideration are hereby AFFIRMED. Costs against
petitioners Sps. Mariano S. Tanglao and Corazon M. Tanglao.
SO ORDERED.
The Court of Appeals held that there was a perfected contract to sell between respondents and
Spring Homes as early as 1992. As this contract was subsisting at the time of the second sale,
respondents have a superior right over the lots in question.
The only issue for our resolution is who between the petitioners and respondents have the right
of ownership over the two lots in controversy.
The ownership of immovable property sold to two different persons at different times is
governed by Article 1544 of the Civil Code,2 which 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 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 possession and, in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
In double sales of immovable property, the governing principle is prius tempore, prius
jure (first in time, stronger in right). Thus, in Payongayong v. Court of Appeals, this Court
held that under Article 1544, preferential rights shall be accorded to: (1) the person acquiring
it who in good faith first recorded it in the Registry of Property, (2) in default thereof to the
person who in good faith was first in possession, and (3) in default thereof, to the person who
presents the oldest title, provided there is good faith. In all of these cases, good faith is
essential, being the basic premise of the preferential rights granted to the person
claiming ownership of the immovable.
In Occeña v. Esponilla, this Court, speaking through then Associate Justice (now Chief
Justice) Reynato S. Puno, laid down the following rules in the application of Article 1544: (1)
Knowledge by the first buyer of the second sale cannot defeat the first buyer’s rights except
when the second buyer first registers in good faith the second sale; and (2) Knowledge gained
by the second buyer of the first sale defeats his rights even if he is first to register, since such
knowledge taints his registration with bad faith. Differently put, the act of registration by the
second buyer must be coupled with good faith, meaning, the registrant must have no
knowledge of the defect or lack of title of his vendor or must not have been aware of facts
which should put him upon such inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor.
Applying the foregoing doctrines, the pivotal question before us is whether petitioners, the
second buyers, are purchasers in good faith.
A purchaser in good faith or innocent purchaser for value is one who buys property and pays a
full and fair price for it at the time of the purchase or before any notice of some other person’s
claim on or interest in it. The burden of proving the status of a purchaser in good faith lies
upon him who asserts that status and it is not sufficient to invoke the ordinary presumption of
good faith, that is, that everyone is presumed to have acted in good faith.
In the instant case, the HLURB Arbiter, the HLURB Commission, the Office of the President,
and the Court of Appeals found that at the time of the second sale to petitioners by Spring
Homes, there were already occupants and improvements on the two lots in question. These
facts should have put petitioners on their guard. Settled is the rule that a buyer of real
property in possession of persons other than the seller must be wary and should
investigate the rights of those in possession, for without such inquiry the buyer can
hardly be regarded as a buyer in good faith and cannot have any right over the property.
As the petitioners cannot be considered buyers in good faith, they cannot rely upon the
indefeasibility of their TCTs in view of the doctrine that the defense of indefeasibility of a
torrens title does not extend to transferees who take the certificate of title in bad faith.
Considering that respondents who, in good faith, were first in possession of the subject lots,
we rule that the ownership thereof pertains to them.
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals (Fifteenth
Division) dated January 31, 2005 in CA-G.R. SP No. 78079 is AFFIRMED in toto. Costs
against the petitioners.
SO ORDERED.
Puno, C.J., Chairperson, Corona, Azcuna, Garcia, JJ., concur.
G.R. No. 129760 December 29, 1998
RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA
JOSE, respondents.
MARTINEZ, J.:
This petition for review on certiorari seeks to annul and set aside the Decision of the Court of
Appeals (CA) dated July 7, 1997 in CA-G.R. No. CV No. 44706 entitled "Ricardo Cheng,
plaintiff-appellee vs. Ramon B. Genato, defendant-appellant, Ernesto R. Da Jose &
Socorro B. Da Jose, Intervenors-Appellants" which reversed the ruling of the Regional
Trial Court, Branch 96 of Quezon City dated January 18, 1994. The dispositive portion
of the CA Decision reads:
WHEREFORE, based on the foregoing, appealed decision is hereby REVERSED and
SET ASIDE and judgment is rendered ordering;
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellant's Affidavit to Annul
Contract to Sell and plaintiff-appellee's Notice of Adverse Claim in the subject
TCT's, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the purchase
price pursuant to their agreement with the defendant-appellant to suspend
encashment of the three post-dated checks issued since 1989.
4. Ordering the execution by the defendant-appellant Genato of the Deed of Absolute
Sale over the subject two lots covered by TCT No. T-76.196 (M) and TCT No. T-
76.197 (M) in favor of intervenors-appellants Spouses Da Jose;
5. The return by defendant-appellant Genato of the P50,000.00 paid to him by the
plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee Cheng of moral damages to herein intervenors-
appellants Da Jose of P100,000.00, exemplary damages of P50,000.00, attorney's fees
of P50,000.00, and costs of suit; and to defendant-appellant, of P100,000.00 in
exemplary damages, P50,000.00 in attorney's fees. The amounts payable to the
defendant-appellant may be compensated by plaintiff appellee with the amount
ordered under the immediately foregoing paragraph which defendant-appellant has
to pay the plaintiff-appellee.
SO ORDERED.
The antecedents of the case are as follows:
Respondent Ramon B. Genato (Genato) is the owner of two parcels of land located at
Paradise Farms, San Jose del Monte, Bulacan covered by TCT No. T-76.196 (M) and
TCT No. T-76.197 (M) with an aggregate area of 35,821square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with respondent-
spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose spouses) over the above-
mentioned two parcels of land. The agreement culminated in the execution of a contract
to sell for which the purchase price was P80.00 per square meter. The contract was in a
public instrument and was duly annotated at the back of the two certificates of title on
the same day. Clauses 1and 3 thereof provide:
1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine Currency
per square meter, of which the amount of FIFTY THOUSAND (P50,000.00) PESOS
shall be paid by the VENDEE to the VENDOR as partial down payment at the time
of execution of this Contract to Sell.
x x x           x x x          x x x
3. That the VENDEE, Thirty (30) DAYS after the execution of this contract, and only
after having satisfactorily verified and confirmed the truth and authenticity of
documents, and that no restrictions, limitations, and developments imposed on
and/or affecting the property subject of this contract shall be detrimental to his
interest, the VENDEE shall pay to the VENDOR, NINE HUNDRED FIFTY
THOUSAND (P950,00.00) PESOS. Philippine Currency, representing the full
payment of the agreed Down Payment, after which complete possession of the
property shall be given to the VENDEE to enable him to prepare the premises and
any development therein.
On October 4, 1989, the Da Jose spouses, not having finished verifying the titles
mentioned in clause 3 as aforequoted, asked for and was granted by respondent Genato
an extension of another 30 days — or until November 5, 1989. However, according to
Genato, the extension was granted on condition that a new set of documents is made
seven (7) days from October 4, 1989. This was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due notice to the
Da Jose spouses, Genato executed an Affidavit to Annul the Contract to Sell, on October
13, 1989. Moreover, no annotation of the said affidavit at the back of his titles was made
right away. The affidavit contained, inter alia, the following paragraphs;
x x x           x x x          x x x
That it was agreed between the parties that the agreed downpayment of P950,000.00
shall be paid thirty (30) days after the execution of the Contract, that is on or before
October 6, 1989;
The supposed VENDEES failed to pay the said full downpayment even up to this
writing, a breach of contract;
That this affidavit is being executed to Annul the aforesaid Contract to Sell for the
vendee having committed a breach of contract for not having complied with the
obligation as provided in the Contract to Sell;
On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to Genato's
residence and expressed interest in buying the subject properties. On that occasion,
Genato showed to Ricardo Cheng copies of his transfer certificates of title and the
annotations at the back thereof of his contract to sell with the Da Jose spouses. Genato
also showed him the aforementioned Affidavit to Annul the Contract to Sell which has
not been annotated at the back of the titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the assurance
by Genato that the previous contract with the Da Jose spouses will be annulled for which
Genato issued a handwritten receipt (Exh. "D"), written in this wise:
10/24/89
Received from Ricardo Cheng the Sum of Fifty Thousand Only (P50.000-) as
partial for T-76196 (M) T-76197 (M) area 35.821 Sq.m. Paradise Farm, Gaya-
Gaya, San Jose Del Monte P70/m2 Bulacan plus C. G. T. etc. Check # 470393
(SGD.) Ramon B. Genato
10/24/89
On October 25, 1989, Genato deposited Cheng's check. On the same day, Cheng called
up Genato reminding him to register the affidavit to annul the contract to sell.
The following day, or on October 26, 1989, acting on Cheng's request, Genato caused the
registration of the Affidavit to Annul the Contract to Sell in the Registry of Deeds,
Meycauayan, Bulacan as primary entry No. 262702.
While the Da Jose spouses were at the Office of the Registry of Deeds of Meycauayan,
Bulacan on October 27, 1989, they met Genato by coincidence. It was only then that the
Da Jose spouses discovered about the affidavit to annul their contract. The latter were
shocked at the disclosure and protested against the rescission of their contract. After
being reminded that he (Genato) had given them (Da Jose spouses) an additional 30-day
period to finish their verification of his titles, that the period was still in effect, and that
they were willing and able to pay the balance of the agreed down payment, later on in the
day, Genato decided to continue the Contract he had with them. The agreement to
continue with their contract was formalized in a conforme letter dated October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue his
contract with the Da Jose spouses and the return of Cheng's P50,000.00 check.
Consequently, on October 30, 1989, Cheng's lawyer sent a letter to Genato demanding
compliance with their agreement to sell the property to him stating that the contract to
sell between him and Genato was already perfected and threatening legal action.
On November 2, 1989, Genato sent a letter to Cheng (Exh. "6") enclosing a BPI
Cashier's Check for P50,000.00 and expressed regret for his inability to "consummate
his transaction" with him. After having received the letter of Genato on November 4,
1989, Cheng, however, returned the said check to the former via RCPI telegram dated
November 6, 1989, reiterating that "our contract to sell your property had already been
perfected."
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of adverse claim and
had it annotated on the subject TCT's.
On the same day, consistent with the decision of Genato and the Da Jose spouses to
continue with their Contract to Sell of September 6, 1989, the Da Jose spouses paid
Genato the complete down payment of P950,000.00 and delivered to him three (3)
postdated checks (all dated May 6, 1990, the stipulated due date) in the total amount of
P1,865,680.00 to cover full payment of the balance of the agreed purchase price.
However, due to the filing of the pendency of this case, the three (3) postdated checks
have not been encashed.
On December 8, 1989, Cheng instituted a complaint for specific performance to compel
Genato to execute a deed of sale to him of the subject properties plus damages and
prayer for preliminary attachment. In his complaint, Cheng averred that the P50,000.00
check he gave was a partial payment to the total agreed purchase price of the subject
properties and considered as an earnest money for which Genato acceded. Thus, their
contract was already perfected.
In Answer thereto, Genato alleged that the agreement was only a simple receipt of an
option-bid deposit, and never stated that it was a partial payment, nor is it an earnest
money and that it was subject to condition that the prior contract with the Da Jose
spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention, asserted that they have a superior
right to the property as first buyers. They alleged that the unilateral cancellation of the
Contract to Sell was without effect and void. They also cited Cheng's bad faith as a buyer
being duly informed by Genato of the existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by Genato to
Cheng unerringly meant a sale and not just a priority or an option to buy. It cannot be
true that the transaction was subjected to some condition or reservation, like the priority
in favor of the Da Jose spouses as first buyer because, if it were otherwise, the receipt
would have provided such material condition or reservation, especially as it was Genato
himself who had made the receipt in his own hand. It also opined that there was a valid
rescission of the Contract to Sell by virtue of the Affidavit to Annul the Contract to Sell.
Time was of the essence in the execution of the agreement between Genato and Cheng,
under this circumstance demand, extrajudicial or judicial, is not necessary. It falls under
the exception to the rule provided in Article 1169 of the Civil Code. The right of Genato
to unilaterally rescind the contract is said to be under Article 1191 of the Civil Code.
Additionally, after reference was made to the substance of the agreement between
Genato and the Da Jose spouses, the lower court also concluded that Cheng should be
preferred over the intervenors-Da Jose spouses in the purchase of the subject properties.
Thus, on January 18, 1994 the trial court rendered its decision the decretal portion of
which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between defendant
Ramon Genato, as vendor, and intervenors Spouses Ernesto and Socorro Da Jose, as
vendees, resolved and rescinded in accordance with Art. 1191, Civil Code, by virtue
of defendant's affidavit to annul contract to sell dated October 13, 1989 and as the
consequence of intervenors' failure to execute within seven (7) days from October 4,
1989 another contract to sell pursuant to their mutual agreement with defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00, plus
interest at the legal rate from November 2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated checks
immediately upon finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff Ricardo
Cheng, as vendee, a deed of conveyance and sale of the real properties described and
covered in Transfer Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the
Registry of Deeds of Bulacan, Meycauayan Branch, at the rate of P70.000/square
meter, less the amount of P50,000.00 alreaddy paid to defendant, which is considered
as part of the purchase price, with the plaintiff being liable for payment of the capital
gains taxes and other expenses of the transfer pursuant to the agreement to sell dated
October 24, 1989; and
5 Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorney's fees, to plaintiff;
d/ P20,000.00, as and for attorney's fees, to intervenors; and
e/ Cost of the suit.
x x x           x x x          x x x
Not satisfied with the aforesaid decision, herein respondents Ramon Genato and Da Jose
spouses appealed to the court a quo which reversed such judgment and ruled that the
prior contract to sell in favor of the Da Jose spouses was not validly rescinded; that the
subsequent contract to sell between Genato and Cheng, embodied in the handwritten
receipt, was without force and effect due to the failure to rescind the prior contract; and
that Cheng should pay damages to the respondents herein being found to be in bad faith.
Hence this petition.
This petition for review, assails the Court of Appeals' Decision on the following grounds:
(1) that the Da Jose spouses' Contract to Sell has been validly rescinded or resolved; (2)
that Ricardo Cheng's own contract with Genato was not just a contract to sell but one of
conditional contract of sale which gave him better rights, thus precluding the application
of the rule on double sales under Article 1544, Civil Code; and (3) that, in any case, it
was error to hold him liable for damages.
The petition must be denied for failure to show that the Court of Appeals committed a
reversible error which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that there was
no valid and effective rescission or resolution of the Da Jose spouses Contract to Sell,
contrary to petitioner's contentions and the trial court's erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory
force. It is one where the happening of the event gives rise to an obligation. Thus, for its
non-fulfillment there will be no contract to speak of, the obligor having failed to perform
the suspensive condition which enforces a juridical relation. In fact with this
circumstance, there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. Emphasis should be made that the
breach contemplated in Article 1191 of the New Civil Code is the obligor's failure to
comply with an obligation already extant, not a failure of a condition to render binding
that obligation.
Obviously, the foregoing jurisprudence cannot be made to apply to the situation in the
instant case because no default can be ascribed to the Da Jose spouses since the 30-day
extension period has not yet expired. The Da Jose spouses' contention that no further
condition was agreed when they were granted the 30-days extension period from October
7, 1989 in connection with clause 3 of their contract to sell dated September 6, 1989
should be upheld for the following reason, to wit; firstly, If this were not true, Genato
could not have been persuaded to continue his contract with them and later on agree to
accept the full settlement of the purchase price knowing fully well that he himself
imposed such sine qua non condition in order for the extension to be valid; secondly,
Genato could have immediately annotated his affidavit to annul the contract to sell on his
title when it was executed on October 13, 1989 and not only on October 26, 1989 after
Cheng reminded him of the annotation; thirdly, Genato could have sent at least a notice
of such fact, there being no stipulation authorizing him for automatic rescission, so as to
finally clear the encumbrance on his titles and make it available to other would be
buyers. It likewise settles the holding of the trial court that Genato "needed money
urgently."
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as claimed by
Genato, in their Contract to Sell, the execution by Genato of the affidavit to annul the
contract is not even called for. For with or without the aforesaid affidavit their non-
payment to complete the full downpayment of the purchase price ipso facto avoids their
contract to sell, it being subjected to a suspensive condition. When a contract is subject to
a suspensive condition, its birth or effectivity can take place only if and when the event
which constitutes the condition happens or is fulfilled. If the suspensive condition does
not take place, the parties would stand as if the conditional obligation had never existed.
Nevertheless, this being so Genato is not relieved from the giving of a notice, verbal or
written, to the Da Jose spouses for his decision to rescind their contract. In many
cases, even though we upheld the validity of a stipulation in a contract to sell authorizing
automatic rescission for a violation of its terms and conditions, at least a written notice
must be sent to the defaulter informing him of the same. The act of a party in treating a
contract as cancelled should be made known to the other. For such act is always
provisional. It is always subject to scrutiny and review by the courts in case the alleged
defaulter brings the matter to the proper courts. In University of the Philippines vs. De
Los Angeles, this Court stressed and we quote:
In other words, the party who deems the contract violated may consider it resolved
or rescinded, and act accordingly, without previous court action, but it proceeds at its
own risk. For it is only the final judgment of the corresponding court that will
conclusively and finally settle whether the action taken was or was not correct in law.
But the law definitely does not require that the contracting party who believes itself
injured must first file suit and wait for a judgment before taking extrajudicial steps
to protect its interest. Otherwise, the party injured by the other's breach will have to
passively sit and watch its damages accumulate during the pendency of the suit until
the final judgment of rescission is rendered when the law itself requires that he
should exercise due diligence to minimize its own damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at bat, in order
to avoid and prevent the defaulting party from assuming the offer as still in effect due to
the obligee's tolerance for such non-fulfillment. Resultantly, litigations of this sort shall
be prevented and the relations among would-be parties may be preserved. Thus, Ricardo
Cheng's contention that the Contract to Sell between Genato and the Da Jose spouses
was rescinded or resolved due to Genato's unilateral rescission finds no support in this
case.
Anent the issue on the nature of the agreement between Cheng and Genato, the records
of this case are replete with admissions that Cheng believed it to be one of a Contract to
Sell and not one of Conditional Contract of Sale which he, in a transparent turn-around,
now pleads in this Petition. This ambivalent stance of Cheng is even noted by the
appellate court, thus:
At the outset, this Court notes that plaintiff-appellee was inconsistent in
characterizing the contract he allegedly entered into. In his complaint. Cheng alleged
that the P50,000.00 down payment was earnest money. And next, his testimony was
offered to prove that the transaction between him and Genato on October 24, 1989
was actually a perfected contract to sell.
Settled is the rule that an issue which was not raised during the trial in the court below
cannot be raised for the first time on appeal. Issues of fact and arguments not adequately
brought to the attention of the trial court need not be and ordinarily will not be
considered by a reviewing court as they cannot be raised for the first time on appeal. In
fact, both courts below correctly held that the receipt which was the result of their
agreement, is a contract to sell. This was, in fact Cheng's contention in his pleadings
before said courts. This patent twist only operates against Cheng's posture which is
indicative of the weakness of his claim.
But even if we are to assume that the receipt, Exh. "D," is to be treated as a conditional
contract of sale, it did not acquire any obligatory force since it was subject to suspensive
condition that the earlier contract to sell between Genato and the Da Jose spouses should
first be cancelled or rescinded — a condition never met, as Genato, to his credit, upon
realizing his error, redeemed himself by respecting and maintaining his earlier contract
with the Da Jose spouses. In fact, a careful reading of the receipt, Exh. "D," alone would
not even show that a conditional contract of sale has been entered by Genato and Cheng.
When the requisites of a valid contract of sale are lacking in said receipt, therefore the
"sale" is neither valid or enfoceable.
To support his now new theory that the transaction was a conditional contract of sale,
petitioner invokes the case of Coronel vs. Court of Appeals as the law that should govern
their Petition. We do not agree. Apparently, the factual milieu in Coronel is not on all
fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to transfer title
to the buyer which petitioner themselves admitted in their pleading. The agreement of
the parties therein was definitively outlined in the "Receipt of Down Payment" both as to
property, the purchase price, the delivery of the seller of the property and the manner of
the transfer of title subject to the specific condition that upon the transfer in their names
of the subject property the Coronels will execute the deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. "D," alone
such kind of circumstances cannot be ascertained without however resorting to the
exceptions of the Rule on Parol Evidence.
To our mind, the trial court and the appellate court correctly held that the agreement
between Genato and Cheng is a contract to sell, which was, in fact, petitioner connection
in his pleadings before the said courts. Consequently, both to mind, which read:
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 possession; and in the absence thereof, to the person who presents
he oldest title, provided there is good faith.
However, a meticulous reading of the aforequoted provision shows that said law is not
apropos to the instant case. This provision connotes that the following circumstances
must concur:
(a) The two (or more) sales transactions in issue must pertain to exactly the same
subject matter, and must be valid sales transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the subject
matter must each have bought from the very same seller.
These situations obviously are lacking in a contract to sell for neither a transfer of
ownership nor a sales transaction has been consummated. The contract to be binding
upon the obligee or the vendor depends upon the fulfillment or non-fulfillment of an
event.
Notwithstanding this contrary finding with the appellate court, we are of the view that
the governing principle of Article 1544, Civil Code, should apply in this situation.
Jurisprudence teaches us that the governing principle is PRIMUS TEMPORE,
PORTIOR JURE (first in time, stronger in right). For not only was the contract between
herein respondents first in time; it was also registered long before petitioner's intrusion
as a second buyer. This principle only applies when the special rules provided in the
aforcited article of the Civil Code do not apply or fit the specific circumstances
mandated under said law or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be able to
displace the first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in ignorance of the
first sale and of the first buyer's rights) from the time of acquisition until title is
transferred to him by registration or failing registration, by delivery of possession;
(2) the second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law.
Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as first buyers, of
the new agreement between Cheng and Genato will not defeat their rights as first buyers
except where Cheng, as second buyer, registers or annotates his transaction or
agreement on the title of the subject properties in good faith ahead of the Da Jose
spouses. Moreover, although the Da Jose spouses, as first buyers, knew of the second
transaction it will not bar them from availing of their rights granted by law, among
them, to register first their agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first transaction between the Da Jose
spouses and Genato defeats his rights even if he is first to register the second transaction,
since such knowledge taints his prior registration with bad faith.
"Registration", as defined by Soler and Castillo, means any entry made in the books of
the registry, including both registration in its ordinary and strict sense, and cancellation,
annotation, and even marginal notes. In its strict acceptation, it is the entry made in the
registry which records solemnly and permanently the right of ownership and other real
rights. We have ruled before that when a Deed of Sale is inscribed in the registry of
property on the original document itself, what was done with respect to said entries or
annotations and marginal notes amounted to a registration of the sale. In this light, we
see no reason why we should not give priority in right the annotation made by the Da
Jose spouses with respect to their Contract to Sell dated September 6, 1989.
Moreover, registration alone in such cases without good faith is not sufficient. Good faith
must concur with registration for such prior right to be enforceable. In the instant case,
the annotation made by the Da Jose spouses on the titles of Genato of their "Contract To
Sell" more than satisfies this requirement. Whereas in the case of Genato's agreement
with Cheng such is unavailing. For even before the receipt, Exh. "D," was issued to
Cheng information of such pre-existing agreement has been brought to his knowledge
which did not deter him from pursuing his agreement with Genato. We give credence to
the factual finding of the appellate court that "Cheng himself admitted that it was he
who sought Genato in order to inquire about the property and offered to buy the
same. And since Cheng was fully aware, or could have been if he had chosen to inquire,
of the rights of the Da Jose spouses under the Contract to Sell duly annotated on the
transfer certificates of titles of Genato, it now becomes unnecessary to further elaborate
in detail the fact that he is indeed in bad faith in entering into such agreement. As we
have held in Leung Yee vs. F.L. Strong Machinery Co.:
One who purchases real estate with knowledge of a defect . . . of title in his vendor
cannot claim that he has acquired title thereto in good faith as against . . . . 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. A purchaser
cannot close his eyes to facts which should put a reasonable man upon his guard, and
then claim that he acted in good faith under the belief that there was no defect in the
title of the vendor. His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor's title,
will not make him an innocent purchaser for value, if it afterwards develops that the
title was in fact defective, and it appears that he had such notice of the defect as
would have led to its discovery had he acted with that measure of precaution which
may reasonably be required of a prudent man in a like situation. Good faith, or lack
of it, is in its last analysis a question of intention; but in ascertaining the intention by
which one is actuated on a given occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may
 with safety, be determined. So it is that "the honesty of intention," "the honest lawful
intent," which constitutes good faith implies a "freedom from knowledge and
circumstances which ought to put a person on inquiry," and so it is that proof of such
knowledge overcomes the presumption of good faith in which the courts always
indulge in the absence of the proof to the contrary. "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 judge of by actual or fancied tokens or signs." (Wilder vs.
Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet,
Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs.
Bromely, 119 Mich., 8, 10, 17.) (Emphasis ours)
Damages were awarded by the appellate court on the basis of its finding that petitioner
"was in bad faith when he filed the suit for specific performance knowing fully well that
his agreement with Genato did not push through. Such bad faith, coupled with his
wrongful interference with the contractual relations between Genato and the Da Jose
spouses, which culminated in his filing of the present suit and thereby creating what the
counsel for the respondents describes as "a prolonged and economically unhealthy
gridlock on both the land itself and the respondents' rights provides ample basis for the
damages awarded. Based on these overwhelming evidence of bad faith on the part of
herein petitioner Ricardo Cheng, we find that the award of damages made by the
appellate court is in order.
WHEREFORE, premises considered, the instant petition for review is DENIED and the
assailed decision is hereby AFFIRMED EN TOTO.
SO ORDERED.
Belosillo, Puno and Mendoza, JJ., concur.
AGRICULTURAL AND HOME EXTENSION DEVELOPMENT GROUP,
represented by Nicasio D. Sanchez, Sr., substituted by Milagros S.
Bucu, Petitioner, v. COURT OF APPEALS, and LIBRADO
CABAUTAN, Respondents.
Gideon C. Bondoc for Petitioner.
Balgos & Perez for Private Respondent.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; SALE; RULE IN CASE OF DOUBLE SALE;
APPLICATION IN CASE AT BAR. — Under Article 1544 of the Civil Code of the
Philippines: Art. 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession thereof in
good faith, if it should be movable property. Should it be immovable property, the ownership
shall belong to the person acquiring it who in good faith first recorded it in the Registry of
Property. Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith. It is not disputed that the first sale to Gundran was not
registered while the second sale to Cabautan was registered. Following the above-quoted
provision, the courts below were justified in according preferential rights to the private
respondent, who had registered the sale in his favor, as against the petitioner’s co-venturer
whose right to the same property had not been recorded.
2. ID.; ID.; ID.; PURCHASER IN GOOD FAITH; DEFINED. — A purchaser in good faith is
defined as "one who buys the 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."
3. ID.; ID.; ID.; ID.; SALE OF PROPERTY REGISTERED UNDER THE TORRENS
SYSTEM; EFFECT OF NOTICE OF LIS PENDENS ANNOTATED ON THE
CERTIFICATE. — The petitioner claims, however, that Cabautan was a purchaser in bad
faith because he was fully aware of the notices of lis pendens at the back of TCT No. 287416
and of the earlier sale of the land to Gundran. An examination of TCT No. 287416 discloses
no annotation of any sale, lien, encumbrance or adverse claim in favor of Gundran or the
petitioner. Well-settled is the rule that when the property sold is registered under the Torrens
system, registration is the operative act to convey or affect the land insofar as third persons are
concerned. Thus, a person dealing with registered land is only charged with notice of the
burdens on the property which are noted on the register or certificate of title. While it is true
that notices of lis pendens in favor of other persons were earlier inscribed on the title, these did
not have the effect of establishing a lien or encumbrance on the property affected. Their only
purpose was to give notice to third persons and to the whole world that any interest they might
acquire in the property pending litigation would be subject to the result of the suit.
DECISION
CRUZ, J.:
We are asked again to determine who as between two successive purchasers of the same land
should be recognized as its owner. The answer is simple enough. But we must first, as usual,
plow through some alleged complications.
The pertinent background facts are as follows:
On March 29, 1972, the spouses Andres Diaz and Josefa Mia sold to Bruno Gundran a 19-
hectare parcel of land in Las Piñas, Rizal, covered by TCT No. 287416. The owner’s duplicate
copy of the title was turned over to Gundran. However, he did not register the Deed of
Absolute Sale because he said he was advised in the Office of the Register of Deeds of Pasig
of the existence of notices of lis pendens on the title.
On November 20, 1972, Gundran and the herein petitioner, Agricultural and Home
Development Group, entered into a Joint Venture Agreement for the improvement and
subdivision of the land. This agreement was also not annotated on the title.
On August 30, 1976, the spouses Andres Diaz and Josefa Mia again entered into another
contract of sale of the same property with Librado Cabautan, the herein private Respondent.
On September 3, 1976, by virtue of an order of the Court of First Instance of Rizal, a new
owner’s copy of the certificate of title was issued to the Diaz spouses, who had alleged the loss
of their copy. On that same date, the notices of lis pendens annotated on TCT No. 287416
were canceled and the Deed of Sale in favor of private respondent Cabautan was recorded. A
new TCT No. S-33850/T-172 was thereupon issued in his name in lieu of the canceled TCT
No. 287416.
On March 14, 1977, Gundran instituted an action for reconveyance before the Court of First
Instance of Pasay City * against Librado Cabautan and Josefa Mia seeking, among others, the
cancellation of TCT No. 33850/T-172 and the issuance of a new certificate of title in his name.
On August 31, 1977, the petitioner, represented by Nicasio D. Sanchez, Sr., filed a complaint
in intervention with substantially the same allegations and prayers as that in Gundran’s
complaint.
In a decision dated January 12, 1987, Gundran’s complaint and petitioner’s complaint in
intervention were dismissed for lack of merit. So was the private respondent’s counterclaims,
for insufficiency of evidence.
Upon appeal, this decision was affirmed by the respondent Court of Appeals, with the
modification that Josefa Mia was ordered to pay Gundran the sum of P90,000.00, with legal
interest from September 3, 1976, plus the costs of suit.
Under Article 1544 of the Civil Code of the Philippines:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should
be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
It is not disputed that the first sale to Gundran was not registered while the second sale to
Cabautan was registered.
Following the above-quoted provision, the courts below were justified in according
preferential rights to the private respondent, who had registered the sale in his favor, as against
the petitioner’s co-venturer whose right to the same property had not been recorded.
The petitioner claims, however, that Cabautan was a purchaser in bad faith because he was
fully aware of the notices of lis pendens at the back of TCT No. 287416 and of the earlier sale
of the land to Gundran.
A purchaser in good faith is defined as "one who buys the 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."
An examination of TCT No. 287416 discloses no annotation of any sale, lien, encumbrance or
adverse claim in favor of Gundran or the petitioner. Well-settled is the rule that when the
property sold is registered under the Torrens system, registration is the operative act to convey
or affect the land insofar as third persons are concerned. Thus, a person dealing with registered
land is only charged with notice of the burdens on the property which are noted on the register
or certificate of title.
While it is true that notices of lis pendens in favor of other persons were earlier inscribed on
the title, these did not have the effect of establishing a lien or encumbrance on the property
affected. Their only purpose was to give notice to third persons and to the whole world that
any interest they might acquire in the property pending litigation would be subject to the result
of the suit.
Cabautan took this risk. Significantly, three days after the execution of the deed of sale in his
favor, the notices of lis pendens were canceled by virtue of the orders of the Court of First
Instance of Rizal, Branch 23, dated April 1, 1974, and April 4, 1974. Cabautan therefore
acquired the land free of any liens or encumbrances and so could claim to be a purchaser in
good faith and for value.
The petitioner insists that it was already in possession of the disputed property when Cabautan
purchased it and that he could not have not known of that possession. Such knowledge should
belie his claim that he was an innocent purchaser for value. However, the courts below found
no evidence of the alleged possession, which we must also reject in deference to this factual
finding.
The petitioner’s reliance on Casis v. Court of Appeals is misplaced.
The issue at bar is whether private respondent Cabautan is an innocent purchaser for value and
so entitled to the priority granted under Article 1544 of the Civil Code. The Casis case, on the
other hand, involved the issues of whether or not: 1) certiorari was the proper remedy of the
petitioner: 2) the previous petition for certiorari which originated from the quieting of title
case was similar to and, hence, a bar to the petition for certiorari arising from the forcible
entry case; and 3) the court a quo committed grave abuse of discretion amounting to lack or
excess of jurisdiction in issuing the order which dissolved the restraining order issued in
connection with the ejectment case. The Court was not called upon in that case to determine
who as between the two purchasers of the subject property should be preferred.
The petitioner invokes the ruling of the lower court in that case to the effect that the
registration of the sale in favor of the second purchaser and the issuance of a new certificate of
title in his favor did not in any manner vest in him any right of possession and ownership over
the subject property because the seller, by reason of their prior sale, had already lost whatever
right or interest she might have had in the property at the time the second sale was made.
This excerpt was included in the ponencia only as part of the narration of the background facts
and was not thereby adopted as a doctrine of the Court. It was considered only for the purpose
of ascertaining if the court below had determined the issue of the possession of the subject
property pending resolution of the question of ownership. Obviously, the Court could not have
adopted that questionable ruling as it would clearly militate against the provision of Article
1544.
Worthy of note at this juncture is the observation of Justice Edgardo L. Paras, to wit:
True, no one can sell what he does not own, but this is merely the general rule. Is Art. 1544
then an exception to the general rule? In a sense, yes, by reason of public convenience (See
Aitken v. Lao, 36 Phil. 510); in still another sense, it really reiterates the general rule in that
insofar as innocent third persons are concerned, the registered owner (in the case of real
property) is still the owner, with power of disposition.
The language of Article 1544 is clear and unequivocal. In light of its mandate and of the facts
established in this case, we hold that ownership must be recognized in the private respondent,
who bought the property in good faith and, as an innocent purchaser for value, duly and
promptly registered the sale in his favor.
WHEREFORE, the petition is DENIED and the questioned decision AFFIRMED in toto, with
costs against the petitioner.
SO ORDERED.
Griño-Aquino, Medialdea and Bellosillo, JJ., concur.
G.R. No. 179641               February 9, 2011
DOLORITA C. BEATINGO, Petitioner,
vs.
LILIA BU GASIS, Respondent.
DECISION
NACHURA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Court of Appeals (CA) Resolutions dated June 27, 2007 and August 13, 2007 in CA-G.R.
CEB-CV No. 01624.
This petition stemmed from the following facts:
Petitioner Dolorita Beatingo filed a Complaint for Annulment and Cancellation of Sale,
Reconveyance, Delivery of Title and Damages against respondent Lilia Bu Gasis before the
Regional Trial Court (RTC) of Iloilo City. The case was raffled to Branch 31 and docketed as
Civil Case No. 00-26171.
Petitioner alleged that, on May 19, 1998, she bought a piece of land, denominated as Lot No.
7219 (hereafter referred to as the subject property), from Flora G. Gasis (Flora). The subject
property was registered in the name of Flora’s predecessor-in-interest. The sale was evidenced
by a notarized Deed of Absolute Sale. On October 18, 1999, petitioner went to the Register of
Deeds to have the sale registered. She, however, failed to obtain registration as she could not
produce the owner’s duplicate certificate of title. She, thus, filed a petition for the issuance of
the owner’s duplicate certificate of title but was opposed by respondent, claiming that she was
in possession of the Original Certificate of Title (OCT) as she purchased the subject property
from Flora on January 27, 1999, as evidenced by a Deed of Sale. This prompted petitioner to
file the Complaint, insisting that she is the rightful owner of the subject property. She also
maintained that respondent had been keeping the OCT despite knowledge that petitioner is the
rightful owner. She further accused respondent of inducing Flora to violate the contract with
her, which caused her damage, prejudice, mental anguish, and serious anxiety.
On the other hand, respondent claimed that she purchased the subject property from Flora
without knowledge of the prior sale of the same subject property to petitioner, which makes
her an innocent purchaser for value. Respondent denied having induced Flora to violate her
contract with petitioner as she never knew the existence of the alleged first contract. Lastly,
respondent declared that, upon payment of the purchase price, she immediately occupied the
subject property and enjoyed its produce.
On December 29, 2005, the RTC rendered a decision, the dispositive portion of which reads:
WHEREFORE, on the basis of the testimonial and documentary evidence, the court finds that
preponderant evidence has been established by the defendant as against the plaintiff, hence,
JUDGMENT is therefore rendered in favor of the defendant.
Consequently, the complaint is DISMISSED and the defendant is hereby declared to be the
lawful owner of the property in question. Further the plaintiff is hereby ordered to pay the
defendant ₱30,000.00 in attorney’s fees, litigation expenses of ₱10,000.00 and the costs of the
suit.
SO ORDERED.
The RTC considered the controversy as one of double sale and, in resolving the issues raised
by the parties, it applied the rules laid down in Article 1544 of the Civil Code. As opposed to
petitioner’s admission that she did not pay the purchase price in full and that she did not
acquire possession of the subject property because of the presence of tenants on it, the court
gave more weight to respondent’s evidence showing that she immediately acquired possession
of the subject property and enjoyed its produce upon full payment of the purchase price. Since
the two sales – that of petitioner and that of respondent – were not registered with the Registry
of Property, the RTC held that whoever was in possession had the better right. Hence, it
decided in favor of respondent.
Aggrieved, petitioner filed a Motion for New Trial and Reconsideration on the ground that she
was in possession of the subject property actually and constructively. The motion, however,
was denied by the RTC in an Order dated April 5, 2006.
Undaunted, petitioner elevated the matter to the CA via a Notice of Appeal. On December 20,
2006, the CA required petitioner to file an Appellant’s Brief within forty-five (45) days from
receipt of the notice.
However, due to pressures of work in equally important cases with other clients, counsel for
petitioner requested for an extension of ninety (90) days within which to file the brief.
In a Resolution dated March 9, 2007, the CA granted the motion. The Resolution is quoted
below for easy reference:
As prayed for, the plaintiff-appellant is hereby granted the maximum extension of ninety (90)
days from 19 February 2007 or until 20 May 2007, within which to file an Appellant’s Brief.
Instead of filing the Appellant’s Brief within the extended period, petitioner twice moved for
extension of time to file the brief, covering an additional period of sixty (60) days for the same
reasons as those raised in the first motion for extension.
In a Resolution dated June 27, 2007, the CA denied the motions for extension to file brief.
Thus, for failure to file the Appellant’s Brief, the appellate court dismissed the appeal. In a
Resolution dated August 13, 2007, the CA denied petitioner’s motion for reconsideration.
Hence, the instant petition on the following grounds:
A. THE RESPONDENT COURT OF APPEALS ERRED IN NOT REVIEWING ON
THE MERITS THE APPEAL OF THE PETITIONER, CONSIDERING THAT, THE
DECISION OF THE REGIONAL TRIAL COURT OF ILOILO IS SO HORENDOUSLY
WRONG WHEN THE SAID COURT DECIDED IN FAVOR OF THE PRIVATE
RESPONDENT, WHICH IF NOT REVIEWED, OR REVERSED, WILL CAUSE
INJUSTICE TO TRIUMPH AS AGAINST WHAT IS RIGHT AND LEGAL,
SACRIFICING SUBSTANTIAL JUSTICE IN FAVOR OF TECHNICALITIES,
CONSIDERING THAT:
a. Petitioner was the first buyer of the property while the private respondent is only the
second buyer;
b. It is petitioner who is in possession of the said property and that;
c. Private respondent was not able to have her own deed of sale registered with the
Register of Deeds;
B. THE RESPONDENT COURT OF APPEALS SHOULD HAVE EXERCISED ITS
DISCRETION, IN FAVOR OF SUBSTANTIAL JUSTICE, BY ADMITTING THE
APPELLANT’S BRIEF OF THE PETITIONER TAKING INTO CONSIDERATION
THAT PETITIONER IN GOOD FAITH HAS FILED THE NEEDED MOTIONS FOR
EXTENSIONS (sic) TO FILE BRIEF, AND THE BRIEF WAS IN FACT FILED
WITHIN THE PERIOD OF THE REQUESTED EXTENSIONS.
Petitioner insists that the appeal should not have been dismissed because her failure to file the
Appellant’s Brief was not deliberate and intended for delay. She claims that prior to the
expiration of the 90-day extension within which to file the brief, she again asked for two more
extensions. She explains that the counsel could not prepare the Appellant’s Brief because the
law firm was swamped with numerous cases and election related problems which needed his
attention.
We find petitioner’s arguments bereft of merit.
Section 7, Rule 44 of the Rules of Court provides:
Sec. 7. Appellant’s Brief. – It shall be the duty of the appellant to file with the court, within
forty-five (45) days from receipt of the notice of the clerk that all the evidence, oral and
documentary, are attached to the record, seven (7) copies of his legibly typewritten,
mimeographed or printed brief, with proof of service of two (2) copies thereof upon the
appellee.
In a Resolution dated December 20, 2006, the CA required petitioner to file the Appellant’s
Brief. The notice was received by petitioner on January 5, 2007. However, instead of filing the
required brief, petitioner requested for additional time to prepare "due to pressures of work in
equally important cases, plus court appearances, preparation of memoranda, conference with
other clients." The CA granted the request and specifically stated that the same was the
maximum extension. This notwithstanding, instead of complying with the court’s directive,
petitioner again filed two motions for extension, for a total period of sixty (60) days. This
time, the CA denied the motions and eventually dismissed the appeal in accordance with
Section 1(e), Rule 50 of the Rules of Court.
Evidently, petitioner’s counsel was negligent in failing to file the required brief not only
within 45 days from receipt of the notice but also within the extended period of ninety (90)
days granted by the appellate court. He, however, explains that he could not comply with the
court’s directive because he had to attend to other cases that he considered more important and
urgent than the instant case. Regrettably, such excuse is unacceptable. An attorney is bound to
protect his client’s interest to the best of his ability and with utmost diligence. Failure to file
brief certainly constitutes inexcusable negligence, more so if the delay results in the dismissal
of the appeal. Every member of the Bar should always bear in mind that every case that a
lawyer accepts deserves his full attention, diligence, skill, and competence, regardless of its
importance, whether he accepts it for a fee or for free. Unfortunately, petitioner is bound by
the negligence of her counsel.
The failure to file the Appellant’s Brief, though not jurisdictional, results in the abandonment
of the appeal which may be the cause for its dismissal. It is true that it is not the ministerial
duty of the CA to dismiss the appeal. The appellate court has the discretion to do so, and such
discretion must be a sound one, to be exercised in accordance with the tenets of justice and fair
play, having in mind the circumstances obtaining in each case.
The question of whether or not to sustain the dismissal of an appeal due to petitioner’s failure
to file the Appellant’s Brief had been raised before this Court in a number of cases. In some of
these cases, we relaxed the Rules and allowed the belated filing of the Appellant’s Brief. In
other cases, however, we applied the Rules strictly and considered the appeal abandoned,
which thus resulted in its eventual dismissal. In Government of the Kingdom of Belgium v.
Court of Appeals, we revisited the cases which we previously decided and laid down the
following guidelines in confronting the issue of non-filing of the Appellant’s Brief:
(1) The general rule is for the Court of Appeals to dismiss an appeal when no appellant’s
brief is filed within the reglementary period prescribed by the rules;
(2) The power conferred upon the Court of Appeals to dismiss an appeal is discretionary
and directory and not ministerial or mandatory;
 (3) The failure of an appellant to file his brief within the reglementary period does not
have the effect of causing the automatic dismissal of the appeal;
(4) In case of late filing, the appellate court has the power to still allow the appeal;
however, for the proper exercise of the court’s leniency[,] it is imperative that:
(a) the circumstances obtaining warrant the court’s liberality;
(b) that strong considerations of equity justify an exception to the procedural rule in
the interest of substantial justice;
(c) no material injury has been suffered by the appellee by the delay;
(d) there is no contention that the appellee’s cause was prejudiced;
(e) at least there is no motion to dismiss filed.
(5) In case of delay, the lapse must be for a reasonable period; and
(6) Inadvertence of counsel cannot be considered as an adequate excuse as to call for the
appellate court’s indulgence except:
(a) where the reckless or gross negligence of counsel deprives the client of due process
of law;
(b) when application of the rule will result in outright deprivation of the client’s liberty
or property; or
(c) where the interests of justice so require.
In this case, we find no reason to disturb the appellate court’s exercise of sound discretion in
dismissing the appeal. We must emphasize that the right to appeal is not a natural right but a
statutory privilege, and it may be exercised only in the manner and in accordance with the
provisions of law. The Court cannot say that the issues being raised by petitioner are of such
importance that would justify the appellate court to exempt her from the general rule, and give
due course to her appeal despite the late filing of her Appellant’s Brief.
Nevertheless, in our desire to put an end to the present controversy, we have carefully perused
the records of this case and reached the conclusion that the decision dated December 29, 2005
of the RTC is in perfect harmony with law and jurisprudence.
The present controversy is a clear case of double sale, where the seller sold one property to
different buyers, first to petitioner and later to respondent. In determining who has a better
right, the guidelines set forth in Article 1544 of the Civil Code apply. Article 1544 states:
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 possession; and, in the absence thereof, to the person who presents the oldest title,
provided there is good faith.
Admittedly, the two sales were not registered with the Registry of Property. Since there was
no inscription, the next question is who, between petitioner and respondent, first took
possession of the subject property in good faith. As aptly held by the trial court, it was
respondent who took possession of the subject property and, therefore, has a better right.
Petitioner insists that, upon the execution of the public instrument (the notarized deed of sale),
she already acquired possession thereof, and thus, considering that the execution thereof took
place ahead of the actual possession by respondent of the subject property, she has a better
right.
We do not agree.
Indeed, the execution of a public instrument shall be equivalent to the delivery of the thing that
is the object of the contract. However, the Court has held that the execution of a public
instrument gives rise only to a prima facie presumption of delivery. It is deemed negated by
the failure of the vendee to take actual possession of the land sold.
In this case, though the sale was evidenced by a notarized deed of sale, petitioner admitted that
she refused to make full payment on the subject property and take actual possession thereof
because of the presence of tenants on the subject property. Clearly, petitioner had not taken
possession of the subject property or exercised acts of dominion over it despite her assertion
that she was the lawful owner thereof.
Respondent, on the other hand, showed that she purchased the subject property without
knowledge that it had been earlier sold by Flora to petitioner. She had reason to believe that
there was no defect in her title since the owner’s duplicate copy of the OCT was delivered to
her by the seller upon full payment of the purchase price. She then took possession of the
subject property and exercised acts of ownership by collecting rentals from the tenants who
were occupying it.
Hence, the RTC is correct in declaring that respondent has a better right to the subject
property.
WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Court of
Appeals Resolutions dated June 27, 2007 and August 13, 2007 in CA-G.R. CEB-CV No.
01624 are AFFIRMED.
SO ORDERED.
G.R. No. 91029             February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
Jose D. Palma for petitioner.
Public Attorney's Office for private respondent.
GRIÑO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals (Seventeenth
Division) in CA-G.R. No. 09149, affirming with modification the judgment of the Regional
Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in
Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific
performance of a contract of sale with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha
motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its
Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought from
the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with
Engine No. L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the
Norkis showroom. The price of P7,500.00 was payable by means of a Letter of Guaranty from
the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis' Branch
Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the
motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan,
Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch
Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of
sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his
conformity with the terms of the sale. In the meantime, however, the motorcycle remained in
Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation Commission
in the name of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by
the Land Transportation Commission on November 6, 1979 (Exh. 2-b). The registration fees
were paid by him, evidenced by an official receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was
allegedly the agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August 2, 1984).
The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-
Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p.
12, Rollo). The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros
Occidental. An investigation conducted by the DBP revealed that the unit was being driven by
a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck
(p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to
Norkis in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in
March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and demanded the delivery of
the motorcycle. When Norkis could not deliver, he filed an action for specific performance
with damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental,
Sixth (6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He
alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him
damages.
Norkis answered that the motorcycle had already been delivered to private respondent before
the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in
favor of private respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants.
The defendants are ordered to pay solidarity to the plaintiff the present value of the
motorcycle which was totally destroyed, plus interest equivalent to what the Kabankalan
Sub-Branch of the Development Bank of the Philippines will have to charge the plaintiff
on fits account, plus P50.00 per day from February 3, 1980 until full payment of the said
present value of the motorcycle, plus P1,000.00 as exemplary damages, and costs of the
litigation. In lieu of paying the present value of the motorcycle, the defendants can deliver
to the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the one
which was totally destroyed in their possession last February 3, 1980. (pp. 28-29, Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but
deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from February 3,
1980 until payment of the present value of the damaged vehicle" (p35, Rollo). The Court of
Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The answer to
this question would depend on whether there had already been a transfer of ownership of the
motorcycle to private respondent at the time it was destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that
is, even before the ownership is transferred to the vendee, the risk of loss is shifted from
the vendor to the vendee. Under Art. 1262, the obligation of the vendor to deliver
a determinate thing becomes extinguished if the thing is lost by fortuitous event (Art.
1174), that is, without the fault or fraud of the vendor and before he has incurred in delay
(Art. 11 65, par. 3). If the thing sold is generic, the loss or destruction does not extinguish
the obligation (Art. 1263). A thing is determinate when it is particularly designated or
physically segregated from all others of the same class (Art. 1460). Thus, the vendor
becomes released from his obligation to deliver the determinate thing sold while the
vendee's obligation to pay the price subsists. If the vendee had paid the price in advance
 the vendor may retain the same. The legal effect, therefore, is that the vendee assumes the
risk of loss by fortuitous event (Art. 1262) after the perfection of the contract to the time of
delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that
there was constructive delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120
(Exh. 1) in the name of the private respondent and the affixing of his signature thereon; (2) the
registration of the vehicle on November 6, 1979 with the Land Transportation Commission in
private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for
payment of registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the issuance of a
sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is
nothing more than a detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether constructive or actual,
be coupled with the intention of delivering the thing. The act, without the intention, is
insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent, Norkis did
not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution
of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The
Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a
chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's
loan. If Norkis would not accede to that arrangement, DBP would not approve private
respondent's loan application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery, which gives
legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the
vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is "placed in the hands and possession of the vendee."
(Civil Code, Art. 1462). It is true that the same article declares that the execution of a
public instrument is equivalent to the delivery of the thing which is the object of the
contract, but, in order that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold that, at the
moment of the sale, its material delivery could have been made. It is not enough to confer
upon the purchaser the ownership and the right of possession. The thing sold must be
placed in his control. When there is no impediment whatever to prevent the thing sold
passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and material
tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction
yields to reality-the delivery has riot been effects .(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice
dated September 20, 1979 (Exh. B) and the registration of the vehicle in the name of plaintiff-
appellee (private respondent) with the Land Registration Commission (Exhibit C) was not to
transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with
the requirements of the Development Bank of the Philippines for processing private
respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was
released and before he even paid Norkis, the motorcycle had already figured in an accident
while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or
relative of private respondent. The latter's supposed relative, who allegedly took possession of
the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3,
1980. Norkis' claim that Julian Nepales was acting as Alberto's agent when he allegedly took
delivery of the motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto
denied having authorized Julian Nepales to get the motorcycle from Norkis Distributors or to
enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6,
1985). This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express assumption
of risk by the buyer, the things sold remain at seller's risk until the ownership thereof is
transferred to the buyer," is applicable to this case, for there was neither an actual nor
constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller,
Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This
is in accordance with the well-known doctrine of res perit domino.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R.
No. 09149, we deny the petition for review and hereby affirm the appealed decision, with
costs against the petitioner.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
G.R. No. 162822 August 25, 2005
JAIME GUINHAWA, Petitioners,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
CALLEJO, SR., J.:
Jaime Guinhawa was engaged in the business of selling brand new motor vehicles, including
Mitsubishi vans, under the business name of Guinrox Motor Sales. His office and display
room for cars were located along Panganiban Avenue, Naga City. He employed Gil Azotea as
his sales manager.
On March 17, 1995, Guinhawa purchased a brand new Mitsubishi L-300 Versa Van with
Motor No. 4D56A-C8929 and Serial No. L069WQZJL-07970 from the Union Motors
Corporation (UMC) in Paco, Manila. The van bore Plate No. DLK 406. Guinhawa’s driver,
Leopoldo Olayan, drove the van from Manila to Naga City. However, while the van was
traveling along the highway in Labo, Daet, Camarines Norte, Olayan suffered a heart attack.
The van went out of control, traversed the highway onto the opposite lane, and was ditched
into the canal parallel to the highway. The van was damaged, and the left front tire had to be
replaced.
The incident was reported to the local police authorities and was recorded in the police
blotter. The van was repaired and later offered for sale in Guinhawa’s showroom.
Sometime in October 1995, the spouses Ralph and Josephine Silo wanted to buy a new van for
their garment business; they purchased items in Manila and sold them in Naga City. They went
to Guinhawa’s office, and were shown the L-300 Versa Van which was on display. The couple
inspected its interior portion and found it beautiful. They no longer inspected the under chassis
since they presumed that the vehicle was brand new. Unaware that the van had been damaged
and repaired on account of the accident in Daet, the couple decided to purchase the van for
₱591,000.00. Azotea suggested that the couple make a downpayment of ₱118,200.00, and pay
the balance of the purchase price by installments via a loan from the United Coconut Planters
Bank (UCPB), Naga Branch, with the L-300 Versa Van as collateral. Azotea offered to make
the necessary arrangements with the UCPB for the consummation of the loan transaction. The
couple agreed. On November 10, 1995, the spouses executed a Promissory Note for the
amount of ₱692,676.00 as payment of the balance on the purchase price, and as evidence of
the chattel mortgage over the van in favor of UCPB.
On October 11, 1995, the couple arrived in Guinhawa’s office to take delivery of the van.
Guinhawa executed the deed of sale, and the couple paid the ₱161,470.00 downpayment, for
which they were issued Receipt No. 0309. They were furnished a Service Manual which
contained the warranty terms and conditions. Azotea instructed the couple on how to start the
van and to operate its radio. Ralph Silo no longer conducted a test drive; he and his wife
assumed that there were no defects in the van as it was brand new.
On October 12, 1995, Josephine Silo, accompanied by Glenda Pingol, went to Manila on
board the L-300 Versa Van, with Glenda’s husband, Bayani Pingol III, as the driver. Their trip
to Manila was uneventful. However, on the return trip to Naga from Manila on October 15 or
16, 1995, Bayani Pingol heard a squeaking sound which seemed to be coming from
underneath the van. They were in Calauag, Quezon, where there were no humps along the
road. Pingol stopped the van in Daet, Camarines Norte, and examined the van underneath, but
 
found no abnormalities or defects.But as he drove the van to Naga City, the squeaking sound
persisted.
Believing that the van merely needed grease, Pingol stopped at a Shell gasoline station where
it was examined. The mechanic discovered that some parts underneath the van had been
welded. When Pingol complained to Guinhawa, the latter told him that the defects were mere
factory defects. As the defects persisted, the spouses Silo requested that Guinhawa change the
van with two Charade-Daihatsu vehicles within a week or two, with the additional costs to be
taken from their downpayment. Meanwhile, the couple stopped paying the monthly
amortization on their loan, pending the replacement of the van. Guinhawa initially agreed to
the couple’s proposal, but later changed his mind and told them that he had to sell the van first.
The spouses then brought the vehicle to the Rx Auto Clinic in Naga City for examination.
Jesus Rex Raquitico, Jr., the mechanic, examined the van and discovered that it was the left
front stabilizer that was producing the annoying sound, and that it had been repaired. Raquitico
prepared a Job Order containing the following notations and recommendations:
1. CHECK UP SUSPENSION (FRONT)
2. REPLACE THE ROD END
3. REPLACE BUSHING
NOTE: FRONT STEP BOARD HAS BEEN ALREADY DAMAGED AND REPAIRED.
NOTE: FRONT LEFT SUSPENSION MOUNTING IS NOT ON SPECIFIED
ALIGNMENT/MEASUREMENT
Josephine Silo filed a complaint for the rescission of the sale and the refund of their money
before the Department of Trade and Industry (DTI). During the confrontation between her and
Guinhawa, Josephine learned that Guinhawa had bought the van from UMC before it was sold
to them, and after it was damaged in Daet. Subsequently, the spouses Silo withdrew their
complaint from the DTI.
On February 14, 1996, Josephine Silo filed a criminal complaint for violation of paragraph 1,
Article 318 of the Revised Penal Code against Guinhawa in the Office of the City Prosecutor
of Naga City. After the requisite investigation, an Information was filed against Guinhawa in
the Municipal Trial Court (MTC) of Naga City. The inculpatory portion reads:
The undersigned Assistant Prosecutor of Naga City accuses Jaime Guinhawa of the crime of
OTHER DECEITS defined and penalized under Art. 318, par. 1 of the Revised Penal Code,
committed as follows:
"That on or about October 11, 1995, in the City of Naga, Philippines, and within the
jurisdiction of this Honorable Court, the said accused, being a motor vehicle dealer using the
trade name of Guinhawa Motor Sales at Panganiban Avenue, Naga City, and a dealer of brand
new cars, by means of false pretenses and fraudulent acts, did then and there willfully,
unlawfully and feloniously defraud private complainant, JOSEPHINE P. SILO, as follows:
said accused by means of false manifestations and fraudulent representations, sold to said
private complainant, as brand new, an automobile with trade name L-300 Versa Van colored
beige and the latter paid for the same in the amount of ₱591,000.00, when, in truth and in fact,
the same was not brand new because it was discovered less than a month after it was sold to
said Josephine P. Silo that said L-300 Versa Van had defects in the underchassis and stepboard
and repairs had already been done thereat even before said sale, as was found upon check-up
by an auto mechanic; that private complainant returned said L-300 Versa Van to the accused
and demanded its replacement with a new one or the return of its purchase price from said
accused but despite follow-up demands no replacement was made nor was the purchase price
returned to private complainant up to the present to her damage and prejudice in the amount of
₱591,000.00, Philippine Currency, plus other damages that may be proven in court."
Guinhawa testified that he was a dealer of brand new Toyota, Mazda, Honda and Mitsubishi
cars, under the business name Guinrox Motor Sales. He purchased Toyota cars from Toyota
Philippines, and Mitsubishi cars from UMC in Paco, Manila. He bought the van from the UMC
in March 1995, but did not use it; he merely had it displayed in his showroom in Naga City. He
insisted that the van was a brand new unit when he sold it to the couple. The spouses Silo
bought the van and took delivery only after inspecting and taking it for a road tests. His sales
manager, Azotea, informed him sometime in November 1995 that the spouses Silo had
complained about the defects under the left front portion of the van. By then, the van had a
kilometer reading of 4,000 kilometers. He insisted that he did not make any false statement or
fraudulent misrepresentation to the couple about the van, either before or simultaneous with its
purchase. He posited that the defects noticed by the couple were not major ones, and could be
repaired. However, the couple refused to have the van repaired and insisted on a refund of
their payment for the van which he could not allow. He then had the defects repaired by the
UMC. He claimed that the van was never involved in any accident, and denied that his driver,
Olayan, met an accident and sustained physical injuries when he drove the van from Manila to
Naga City. He even denied meeting Bayani Pingol.
The accused claimed that the couple filed a Complaint against him with the DTI on January 25,
1996, only to withdraw it later. The couple then failed to pay the amortizations for the van,
which caused the UCPB to file a petition for the foreclosure of the chattel mortgage and the
sale of the van at public auction.
Azotea testified that he had been a car salesman for 16 years and that he sold brand new vans.
Before the couple took delivery of the vehicle, Pingol inspected its exterior, interior, and
underside, and even drove it for the couple. He was present when the van was brought to the
Rx Auto Clinic, where he noticed the dent on its front side. He claimed that the van never
figured in any vehicular accident in Labo, Daet, Camarines Norte on March 17, 1995. In fact,
he declared, he found no police record of a vehicular accident involving the van on the said
date. He admitted that Olayan was their driver, and was in charge of taking delivery of cars
purchased from the manufacturer in Manila.
On November 6, 2001, the trial court rendered judgment convicting Guinhawa. The fallo of
the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the accused,
JAIME GUINHAWA, guilty of the crime of Other Deceits defined and penalized under Art.
318(1) of the Revised Penal Code, the prosecution having proven the guilt of the accused
beyond reasonable doubt and hereby imposes upon him the penalty of imprisonment from 2
months and 1 day to 4 months of Arresto Mayor and a fine of One Hundred Eighty Thousand
Seven Hundred and Eleven Pesos (₱180,711.00) the total amount of the actual damages
caused to private complainant.
As to the civil aspect of this case which have been deemed instituted with this criminal case,
Articles 2201 and 2202 of the Civil Code provides:
"Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in
good faith is liable shall be those that are the natural and probable consequences of the breach
of the obligation, and which the parties have foreseen or could have reasonably foreseen at the
time the obligation was constituted.
"In case of fraud, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non-performance of the obligation."
"Art. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are
the natural and probable consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have reasonably been foreseen by
the defendant."
Thus, accused is condemned to pay actual damages in the amount of One Hundred Eighty
Thousand Seven Hundred and Eleven Pesos (Php180,711.00), which represents the 20%
downpayment and other miscellaneous expenses paid by the complainant plus the amount of
Nineteen Thousand Two Hundred Forty-One (Php19,241.00) Pesos, representing the 1st
installment payment made by the private complainant to the bank. Accused is, likewise,
ordered to pay moral damages in the amount of One Hundred Thousand Pesos
(Php100,000.00) in view of the moral pain suffered by the complainant; for exemplary
damages in the amount of Two Hundred Thousand Pesos (Php200,000.00) to serve as
deterrent for those businessmen similarly inclined to take undue advantage over the public’s
innocence. As for attorney’s fees, the reasonable amount of One Hundred Thousand Pesos
(Php100,000.00) is hereby awarded.
SO ORDERED.
The trial court declared that the accused made false pretenses or misrepresentations that the
van was a brand new one when, in fact, it had figured in an accident in Labo, Daet, Camarines
Norte, and sustained serious damages before it was sold to the private complainant.
Guinhawa appealed the decision to the Regional Trial Court (RTC) of Naga City, Branch 19,
in which he alleged that:
1. The lower court erred in its finding that the repair works on the left front portion and
underchassis of the van was the result of the accident in Labo, Camarines Norte, where its
driver suffered an attack of hypertension.
2. The lower court erred in its four (4) findings of fact that accused-appellant made
misrepresentation or false pretenses "that the van was a brand new car," which constituted
deceit as defined in Article 318, paragraph 1 of the Revised Penal Code.
3. The lower court erred in finding accused-appellant civilly liable to complainant Josephine
Silo. But, even if there be such liability, the action therefor has already prescribed and the
amount awarded was exhorbitant, excessive and unconscionable.
Guinhawa insisted that he never talked to the couple about the sale of the van; hence, could
not have made any false pretense or misrepresentation.
On August 1, 2002, the RTC affirmed the appealed judgment.
Guinhawa filed a petition for review with the Court of Appeals (CA), where he averred that:
 I III
THE COURT A QUO ERRED IN CONVICTING PETITIONER OF THE CRIME OF
OTHER DECEITS AND SENTENCING HIM TO SUFFER IMPRISONMENT OF TWO
MONTHS AND ONE DAY TO FOUR MONTHS OF ARRESTO MAYOR AND TO PAY
FINE IN THE AMOUNT OF ₱180,711.00.
II
THE COURT A QUO ERRED IN ORDERING PETITIONER TO PAY PRIVATE
COMPLAINANT ₱180,711.00 AS DOWNPAYMENT, ₱19,241.00 AS FIRST
INSTALLMENT WITH UCPB NAGA, ₱100,000.00 AS MORAL DAMAGES, ₱200,000.00
AS EXEMPLARY DAMAGES AND ₱100,000.00 AS ATTORNEY’S FEES.
On January 5, 2004, the CA rendered judgment affirming with modification the decision of the
RTC. The fallo of the decision reads:
WHEREFORE, premises considered, the instant petition is hereby partially granted insofar as
the following are concerned: a) the award of moral damages is hereby REDUCED to
₱10,000.00 and b) the award of attorney’s fees and exemplary damages are
hereby DELETED for lack of factual basis. In all other respects, We affirm the decision under
review.
Costs against petitioner.
SO ORDERED.
The CA ruled that the private complainant had the right to assume that the van was brand new
because Guinhawa held himself out as a dealer of brand new vans. According to the appellate
court, the act of displaying the van in the showroom without notice to any would-be buyer that
it was not a brand new unit was tantamount to deceit. Thus, in concealing the van’s true
condition from the buyer, Guinhawa committed deceit.
The appellate court denied Guinhawa’s motion for reconsideration, prompting him to file the
present petition for review on certiorari, where he contends:
I of the MTC. The petitioner was correctly charged and convicted, since he falsely claimed that
THE COURT A QUO ERRED IN NOT HOLDING THAT THE INFORMATION
CHARGED AGAINST PETITIONER DID NOT INFORM HIM OF A CHARGE OF
OTHER DECEITS.
II
THE COURT A QUO ERRED IN HOLDING THAT PETITIONER EMPLOYED FRAUD
OR DECEIT AS DEFINED UNDER ARTICLE 318, REVISED PENAL CODE.
THE COURT A QUO ERRED IN NOT CONSIDERING THE CIRCUMSTANCES
POINTING TO THE INNOCENCE OF THE PETITIONER.
The issues for resolution are (1) whether, under the Information, the petitioner was charged of
other deceits under paragraph 1, Article 318 of the Revised Penal Code; and (2) whether the
respondent adduced proof beyond reasonable doubt of the petitioner’s guilt for the crime
charged.
The petitioner asserts that based on the allegations in the Information, he was charged
with estafa through false pretenses under paragraph 2, Article 315 of the Revised Penal Code.
Considering the allegation that the private complainant was defrauded of ₱591,000.00, it is the
RTC, not the MTC, which has exclusive jurisdiction over the case. The petitioner maintains
that he is not estopped from assailing this matter because the trial court’s lack of jurisdiction
can be assailed at any time, even on appeal, which defect cannot even be cured by the
evidence adduced during the trial. The petitioner further avers that he was convicted of other
deceits under paragraph 1, Article 318 of the Revised Penal Code, a crime for which he was
not charged; hence, he was deprived of his constitutional right to be informed of the nature of
the charge against him. And in any case, even if he had been charged of other deceits under
paragraph 1 of Article 318, the CA erred in finding him guilty. He insists that the private
complainant merely assumed that the van was brand new, and that he did not make any
misrepresentation to that effect. He avers that deceit cannot be committed by concealment, the
absence of any notice to the public that the van was not brand new does not amount to deceit.
He posits that based on the principle of caveat emptor, if the private complainant purchased
the van without first inspecting it, she must suffer the consequences. Moreover, he did not
attend to the private complainant when they examined the van; thus, he could not have
deceived them.
The petitioner maintains that, absent evidence of conspiracy, he is not criminally liable for any
representation Azotea may have made to the private complainant, that the van was brand new.
He insists that the respondent was estopped from adducing evidence that the vehicle was
involved in an accident in Daet, Camarines Norte on March 17, 1995, because such fact was
not alleged in the Information.
In its comment on the petition, the Office of the Solicitor General avers that, as gleaned from
the material averments of the Information, the petitioner was charged with other deceits under
paragraph 1, Article 318 of the Revised Penal Code, a felony within the exclusive jurisdiction
the vehicle was brand new when he sold the same to the private complainant. The petitioner’s
concealment of the fact that the van sustained serious damages as an aftermath of the accident
in Daet, Camarines Norte constituted deceit within the meaning of paragraph 1 of Article 318.
The Information filed against the petitioner reads:
That on or about October 11, 1995, in the City of Naga, Philippines, and within the
jurisdiction of this Honorable Court, the said accused, being a motor vehicle dealer using the
trade name of Guinhawa Motor Sales at Panganiban Avenue, Naga City, and dealer of brand
new cars, by means of false pretenses and fraudulent acts, did then and there, willfully,
unlawfully and feloniously defraud private complainant, JOSEPHINE P. SILO, as follows:
said accused by means of false manifestations and fraudulent representations, sold to said
private complainant, as brand new, an automobile with trade name L-300 Versa Van colored
beige and the latter paid for the same in the amount of ₱591,000.00, when, in truth and in fact,
the same was not brand new because it was discovered less than a month after it was sold to
said Josephine P. Silo that said L-300 Versa Van had defects in the underchassis and stepboard
and repairs have already been done thereat even before said sale, as was found upon check-up
by an auto mechanic; that private complainant returned said L-300 Versa Van to the accused
and demanded its replacement with a new one or the return of its purchase price from said
accused but despite follow-up demands no replacement was made nor was the purchase price
returned to private complainant up to the present to her damage and prejudice in the amount of
₱591,000.00, Philippine Currency, plus other damages that may be proven in court.
CONTRARY TO LAW.
Section 6, Rule 110 of the Rules of Criminal Procedure requires that the Information must
allege the acts or omissions complained of as constituting the offense:
SEC. 6. Sufficiency of complaint or information. – A complaint or information is sufficient if it
states the name of the accused; the designation of the offense given by the statute; the acts or
omissions complained of as constituting the offense; the name of the offended party; the
approximate date of the commission of the offense; and the place where the offense was
committed.
When an offense is committed by more than one person, all of them shall be included in the
complaint or information.
The real nature of the offense charged is to be ascertained by the facts alleged in the body of
the Information and the punishment provided by law, not by the designation or title or caption
given by the Prosecutor in the Information. The Information must allege clearly and accurately
the elements of the crime charged.
As can be gleaned from its averments, the Information alleged the essential elements of the
crime under paragraph 1, Article 318 of the Revised Penal Code.
The false or fraudulent representation by a seller that what he offers for sale is brand new
(when, in fact, it is not) is one of those deceitful acts envisaged in paragraph 1, Article 318 of
the Revised Penal Code. The provision reads:
Art. 318. Other deceits. – The penalty of arresto mayor and a fine of not less than the amount
of the damage caused and not more than twice such amount shall be imposed upon any person
who shall defraud or damage another by any other deceit not mentioned in the preceding
articles of this chapter.
This provision was taken from Article 554 of the Spanish Penal Code which provides:
El que defraudare o perjudicare a otro, usando de cualquier engaño que no se halle
expresado en los artículos anteriores de esta sección, será castigado con una multa del tanto
al duplo del perjuicio que irrogare; y en caso de reincidencia, con la del duplo y arresto
mayor en su grado medio al máximo.
For one to be liable for "other deceits" under the law, it is required that the prosecution must
prove the following essential elements: (a) false pretense, fraudulent act or pretense other than
those in the preceding articles;
(b) such false pretense, fraudulent act or pretense must be made or executed prior to or
simultaneously with the commission of the fraud; and (c) as a result, the offended party
suffered damage or prejudice. It is essential that such false statement or fraudulent
representation constitutes the very cause or the only motive for the private complainant to part
with her property.
The provision includes any kind of conceivable deceit other than those enumerated in Articles
315 to 317 of the Revised Penal Code. It is intended as the catchall provision for that purpose
with its broad scope and intendment.
Thus, the petitioner’s reliance on paragraph 2(a), Article 315 of the Revised Penal Code is
misplaced. The said provision reads:
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
(a) By using fictitious name, or falsely pretending to possess power, influence, qualifications,
property, credit, agency, business or imaginary transactions; or by means of other similar
deceits.
The fraudulent representation of the seller, in this case, that the van to be sold is brand new, is
not the deceit contemplated in the law. Under the principle of ejusdem generis, where a
statement ascribes things of a particular class or kind accompanied by words of a generic
character, the generic words will usually be limited to things of a similar nature with those
particularly enumerated unless there be something in the context to the contrary.
Jurisdiction is conferred by the Constitution or by law. It cannot be conferred by the will of the
parties, nor diminished or waived by them. The jurisdiction of the court is determined by the
averments of the complaint or Information, in relation to the law prevailing at the time of the
filing of the criminal complaint or Information, and the penalty provided by law for the crime
charged at the time of its commission.
Section 32 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, provides that
the MTC has exclusive jurisdiction over offenses punishable with imprisonment not exceeding
six years, irrespective of the amount of the fine:
Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Criminal Cases. – Except in cases falling within the exclusive original
jurisdiction of Regional Trial Courts and of the Sandiganbayan, the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over all violations of city or municipal ordinances
committed within their respective territorial jurisdiction; and
(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not
exceeding six (6) years irrespective of the amount of fine, and regardless of other imposable
accessory or other penalties, including the civil liability arising from such offenses or
predicated thereon, irrespective of kind, nature, value or amount thereof: Provided, however,
That in offenses involving damage to property through criminal negligence, they shall have
exclusive original jurisdiction thereof.
Since the felony of other deceits is punishable by arresto mayor, the MTC had exclusive
jurisdiction over the offense lodged against the petitioner.
On the merits of the petition, the Court agrees with the petitioner’s contention that there is no
evidence on record that he made direct and positive representations or assertions to the private
complainant that the van was brand new. The record shows that the private complainant and
her husband Ralph Silo were, in fact, attended to by Azotea. However, it bears stressing that
the representation may be in the form of words, or conduct resorted to by an individual to
serve as an advantage over another. Indeed, as declared by the CA based on the evidence on
record:
Petitioner cannot barefacedly claim that he made no personal representation that the herein
subject van was brand new for the simple reason that nowhere in the records did he ever refute
the allegation in the complaint, which held him out as a dealer of brand new cars. It has thus
become admitted that the petitioner was dealing with brand new vehicles – a fact which, up to
now, petitioner has not categorically denied. Therefore, when private complainant went to
petitioner’s showroom, the former had every right to assume that she was being sold brand
new vehicles there being nothing to indicate otherwise. But as it turned out, not only did
private complainant get a defective and used van, the vehicle had also earlier figured in a road
accident when driven by no less than petitioner’s own driver.
Indeed, the petitioner and Azotea obdurately insisted in the trial court that the van was brand
new, and that it had never figured in vehicular accident. This representation was accentuated
by the fact that the petitioner gave the Service Manual to the private complainant, which
manual
contained the warranty terms and conditions, signifying that the van was "brand new."
Believing this good faith, the private complainant decided to purchase the van for her buy-and-
sell and garment business, and even made a downpayment of the purchase price.
As supported by the evidence on record, the van was defective when the petitioner sold it to
the private complainant. It had ditched onto the shoulder of the highway in Daet, Camarines
Norte on its way from Manila to Naga City. The van was damaged and had to be repaired; the
rod end and bushing had to be replaced, while the left front stabilizer which gave out a
persistent annoying sound was repaired. Some parts underneath the van were even welded
together. Azotea and the petitioner deliberately concealed these facts from the private
complainant when she bought the van, obviously so as not to derail the sale and the profit from
the transaction.
The CA is correct in ruling that fraud or deceit may be committed by omission. As the Court
held in People v. Balasa:
Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all
acts, omissions, and concealment involving a breach of legal or equitable duty, trust, or
confidence justly reposed, resulting in damage to another, or by which an undue and
unconscientious advantage is taken of another. It is a generic term embracing all multifarious
means which human ingenuity can device, and which are resorted to by one individual to
secure an advantage over another by false suggestions or by suppression of truth and includes
all surprise, trick, cunning, dissembling and any unfair way by which another is cheated. On
the other hand, deceit is the false representation of a matter of fact whether by words or
conduct, by false or misleading allegations, or by concealment of that which should have been
disclosed which deceives or is intended to deceive another so that he shall act upon it to his
legal injury.
It is true that mere silence is not in itself concealment. Concealment which the law denounces
as fraudulent implies a purpose or design to hide facts which the other party sought to know.
Failure to reveal a fact which the seller is, in good faith, bound to disclose may generally be
classified as a deceptive act due to its inherent capacity to deceive. Suppression of a material
fact which a party is bound in good faith to disclose is equivalent to a false representation.
Moreover, a representation is not confined to words or positive assertions; it may consist as
well of deeds, acts or artifacts of a nature calculated to mislead another and thus allow the
fraud-feasor to obtain an undue advantage.
Fraudulent nondisclosure and fraudulent concealment are of the same genre. Fraudulent
concealment presupposes a duty to disclose the truth and that disclosure was not made when
opportunity to speak and inform was presented, and that the party to whom the duty of
disclosure, as to a material fact was due, was induced thereby to act to his injury.
Article 1389 of the New Civil Code provides that failure to disclose facts when there is a duty
to reveal them constitutes fraud. In a contract of sale, a buyer and seller do not deal from equal
bargaining positions when the latter has knowledge, a material fact which, if communicated to
the buyer, would render the grounds unacceptable or, at least, substantially less desirable. If, in
a contract of sale, the vendor knowingly allowed the vendee to be deceived as to the thing sold
in a material matter by failing to disclose an intrinsic circumstance that is vital to the contract,
knowing that the vendee is acting upon the presumption that no such fact exists, deceit is
accomplished by the suppression of the truth.
In the present case, the petitioner and Azotea knew that the van had figured in an accident, was
damaged and had to be repaired. Nevertheless, the van was placed in the showroom, thus
making it appear to the public that it was a brand new unit. The petitioner was mandated to
reveal the foregoing facts to the private complainant. But the petitioner and Azotea even
obdurately declared when they testified in the court a quo that the vehicle did not figure in an
accident, nor had it been repaired; they maintained that the van was brand new, knowing that
the private complainant was going to use it for her garment business. Thus, the private
complainant bought the van, believing it was brand new.
Significantly, even when the petitioner was apprised that the private complainant had
discovered the van’s defects, the petitioner agreed to replace the van, but changed his mind
and insisted that it must be first sold.
The petitioner is not relieved of his criminal liability for deceitful concealment of material
facts, even if the private complainant made a visual inspection of the van’s interior and
exterior before she agreed to buy it and
failed to inspect its under chassis. Case law has it that where the vendee made only a partial
investigation and relies, in part, upon the representation of the vendee, and is deceived by such
representation to his injury, he may maintain an action for such deceit. The seller cannot be
heard to say that the vendee should not have relied upon the fraudulent concealment; that
negligence, on the part of the vendee, should not be a defense in order to prevent the vendor
from unjustifiably escaping with the fruits of the fraud.
In one case, the defendant who repainted an automobile, worked it over to resemble a new one
and delivered it to the plaintiff was found to have warranted and represented that the
automobile being sold was new. This was found to be "a false representation of an existing
fact; and, if it was material and induced the plaintiff to accept something entirely different
from that which he had contracted for, it clearly was a fraud which, upon its discovery and a
tender of the property back to the seller, [it] entitled the plaintiff to rescind the trade and
recover the purchase money."
On the petitioner’s insistence that the private complainant was proscribed from charging him
with estafa based on the principle of caveat emptor, case law has it that this rule only requires
the purchaser to exercise such care and attention as is usually exercised by ordinarily prudent
men in like business affairs, and only applies to defects which are open and patent to the
service of one exercising such care. In an avuncular case, it was held that:
… The rule of caveat emptor, like the rule of sweet charity, has often been invoked to cover a
multitude of sins; but we think its protecting mantle has never been stretched to this extent. It
can only be applied where it is shown or conceded that the parties to the contract stand on
equal footing and have equal knowledge or equal means of knowledge and there is no relation
of trust or confidence between them. But, where one party undertakes to sell to another
property situated at a distance and of which he has or claims to have personal knowledge and
of which the buyer knows nothing except as he is informed by the seller, the buyer may
rightfully rely on the truth of the seller’s representations as to its kind, quality, and value made
in the course of negotiation for the purpose of inducing the purchase. If, in such case, the
representations prove to be false, neither law nor equity will permit the seller to escape
responsibility by the plea that the buyer ought not to have believed him or ought to have
applied to other sources to ascertain the facts. …
It bears stressing that Azotea and the petitioner had every opportunity to reveal to the private
complainant that the van was defective. They resolved to maintain their silence, to the
prejudice of the private complainant, who was a garment merchant and who had no special
knowledge of parts of motor vehicles. Based on the surrounding circumstances, she relied on
her belief that the van was brand new. In fine, she was the innocent victim of the petitioner’s
fraudulent nondisclosure or concealment.
The petitioner cannot pin criminal liability for his fraudulent omission on his general manager,
Azotea. The two are equally liable for their collective fraudulent silence. Case law has it that
wherever the doing of a
certain act or the transaction of a given affair, or the performance of certain business is
confided to an agent, the authority to so act will, in accordance with a general rule often
referred to, carry with it by implication the authority to do all of the collateral acts which are
the natural and ordinary incidents of the main act or business authorized.
The MTC sentenced the petitioner to suffer imprisonment of from two months and one day, as
minimum, to four months of arresto mayor, as maximum. The CA affirmed the penalty
imposed by the trial court. This is erroneous. Section 2 of Act 4103, as amended, otherwise
known as the Indeterminate Sentence Law, provides that the law will not apply if the
maximum term of imprisonment does not exceed one year:
SEC. 2. This Act shall not apply to persons convicted of offenses punished with death penalty
or life-imprisonment; to those convicted of treason, conspiracy or proposal to commit treason;
to those convicted of misprision of treason, rebellion, sedition or espionage; to those convicted
of piracy; to those who are habitual delinquents; to those who shall have escaped from
confinement or evaded sentence; to those who having been granted conditional pardon by the
Chief Executive shall have violated the terms thereof; to those whose maximum term of
imprisonment does not exceed one year, not to those already sentenced by final judgment at
the time of approval of this Act, except as provided in Section 5 hereof. (As amended by Act
No. 4225.)
In this case, the maximum term of imprisonment imposed on the petitioner was four months
and one day of arresto mayor. Hence, the MTC was proscribed from imposing an
indeterminate penalty on the petitioner. An indeterminate penalty may be imposed if the
minimum of the penalty is one year or less, and the maximum exceeds one year. For example,
the trial court may impose an indeterminate penalty of six months of arresto mayor, as
minimum, to two years and four months of prision correccional, as maximum, since the
maximum term of imprisonment it imposed exceeds one year. If the trial court opts to impose
a penalty of imprisonment of one year or less, it should not impose an indeterminate penalty,
but a straight penalty of one year or less instead. Thus, the petitioner may be sentenced to a
straight penalty of one year, or a straight penalty of less than one year, i.e., ten months or
eleven months. We believe that considering the attendant circumstances, a straight penalty of
imprisonment of six months is reasonable.
Conformably with Article 39 in relation to paragraph 3, Article 38 of the Revised Penal Code,
the petitioner shall suffer subsidiary imprisonment if he has no property with which to pay the
penalty of fine.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The assailed Decision
and Resolution are AFFIRMED WITH MODIFICATION. Considering the surrounding
circumstances of the case, the petitioner is hereby sentenced to suffer a straight penalty of six
(6) months imprisonment. The petitioner shall suffer subsidiary imprisonment in case of
insolvency.
Costs against the petitioner.
SO ORDERED.
JAIME D. ANG, Petitioner, G.R. No. 177874

- versus - Present:
COURT OF APPEALS AND BRUNO QUISUMBING, J., Chairperson,
SOLEDAD, Respondents.
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
Promulgated:
September 29, 2008
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
Under a "car-swapping" scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi
GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale dated July
28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by
Deed of Absolute Sale of even date. As Ang’s car was of a later model, Soledad paid him an
additional P55,000.00.
Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale through Far
Eastern Motors, a second-hand auto display center. The vehicle was eventually sold to a
certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale dated August 14,
1992. Before the deed could be registered in Bugash’s name, however, the vehicle was seized
by virtue of a writ of replevin dated January 26, 1993 issued by the Cebu City Regional Trial
Court (RTC), Branch 21 in Civil Case No. CEB-13503, "BA Finance Corporation vs. Ronaldo
and Patricia Panes," on account of the alleged failure of Ronaldo Panes, the owner of the
vehicle prior to Soledad, to pay the mortgage debt constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the amount of P62,038.47 on
March 23, 1993. Soledad refused to reimburse the said amount, despite repeated demands,
drawing Ang to charge him for Estafa with abuse of confidence before the Office of the City
Prosecutor, Cebu City. By Resolution of July 15, 1993, the City Prosecutor’s Office dismissed
the complaint for insufficiency of evidence, drawing Ang to file on November 9, 1993 the
first of three successive complaints for damages against Soledad before the RTC of Cebu City
where it was docketed as Civil Case No. Ceb-14883.
Branch 19 of the Cebu City RTC, by Order dated May 4, 1995, dismissed Civil Case No. Ceb-
14883 for failure to submit the controversy to barangay conciliation.
Ang thereafter secured a certification to file action and again filed a complaint for
damages, docketed as Ceb-17871, with the RTC of Cebu City, Branch 14 which dismissed it,
by Order dated March 27, 1996, on the ground that the amount involved is not within its
jurisdiction.
Ang thereupon filed on July 15, 1996 with the Municipal Trial Court in Cities (MTCC) a
complaint, docketed as R-36630, the subject of the instant petition.
After trial, the MTCC dismissed the complaint on the ground of prescription, vìz:
It appearing that the Deed of Sale to plaintiff o[f] subject vehicle was dated and executed on
28 July 1992, the complaint before the Barangay terminated 21 September 1995 per
Certification to File Action attached to the Complaint, and this case eventually was filed with
this Court on 15 July 1996, this action has already been barred since more than six (6) months
elapsed from the delivery of the subject vehicle to the plaintiff buyer to the filing of this
action, pursuant to the aforequoted Article 1571." (Emphasis and underscoring supplied)
His motion for reconsideration having been denied, Ang appealed to the RTC, Branch 7 of
which affirmed the dismissal of the complaint, albeit it rendered judgment in favor of Ang "for
the sake of justice and equity, and in consonance with the salutary principle of non-enrichment
at another’s expense." The RTC ratiocinated:
xxxx
[I]t was error for the Court to rely on Art. 1571 of the Civil Code to declare the action as
having prescribed, since the action is not one for the enforcement of the warranty against
hidden defects. Moreover, Villostas vs. Court of Appeals declared that the six-month
prescriptive period for a redhibitory action applies only to implied warranties. There is here
an express warranty. If at all, what applies is Art. 1144 of the Civil Code, the general law
on prescription, which states, inter alia, that actions ‘upon a written contract’ prescribes
in ten (10) years [Engineering & Machinery Corporation vs. Court of Appeals, G.R. No.
52267, January 24, 1996].
More appropriate to the discussion would be defendant’s warranty against eviction, which he
explicitly made in the Deed of Absolute Sale: I hereby covenant my absolute ownership to
(sic) the above-described property and the same is free from all liens and encumbrances and I
will defend the same from all claims or any claim whatsoever…"
Still the Court finds that plaintiff cannot recover under this warranty. There is no
showing of compliance with the requisites.
xxxx
Nonetheless, for the sake of justice and equity, and in consonance with the
salutary principle of non-enrichment at another’s expense, defendant should reimburse
plaintiff the P62,038.47 which on March 23, 1993 he paid BA Finance Corporation to release
the mortgage on the car. (Emphasis and underscoring supplied)
The RTC thus disposed as follows:
Wherefore, judgment is rendered directing defendant to pay plaintiff P62,038.47, the amount
the latter paid BA Finance Corporation to release the mortgage on the vehicle, with interest at
the legal rate computed from March 23, 1993. Except for this, the judgment in the decision of
the trial court, dated October 8, 2001 dismissing the claims of plaintiff is affirmed."
(Underscoring supplied)
Soledad’s Motion for Reconsideration was denied by Order of December 12, 2002, hence, he
elevated the case to the Court of Appeals, Cebu City.
The appellate court, by the challenged Decision of August 30, 2006, noting the sole issue to be
resolved whether the RTC erred in directing Soledad to pay Ang the amount the latter paid to
BA Finance plus legal interest, held that, following Goodyear Phil., Inc. v. Anthony Sy, Ang
"cannot anymore seek refuge under the Civil Code provisions granting award of damages for
breach of warranty against eviction for the simple fact that three years and ten months have
lapsed from the execution of the deed of sale in his favor prior to the filing of the instant
complaint." It further held:
It bears to stress that the deed of absolute sale was executed on July 28, 1992, and the instant
complaint dated May 15, 1996 was received by the MTCC on July 15, 1996.
While it is true that someone unjustly enriched himself at the expense of herein respondent, we
agree with petitioner (Soledad) that it is not he.
The appellate court accordingly reversed the RTC decision and denied the petition.
By Resolution of April 25, 2007, the appellate court denied Ang’s motion for reconsideration,
it further noting that when Ang settled the mortgage debt to BA Finance, he did so voluntarily
in order to resell the vehicle, hence, Soledad did not benefit from it as he was unaware of the
mortgage constituted on the vehicle by the previous owner.
The appellate court went on to hold that Soledad "has nothing to do with the transaction
anymore; his obligation ended when he delivered the subject vehicle to the respondent upon
the perfection of the contract of sale." And it reiterated its ruling that the action, being one
arising from breach of warranty, had prescribed, it having been filed beyond the 6-month
prescriptive period.
The appellate court brushed aside Ang’s contention that Soledad was the proximate cause of
the loss due to the latter’s failure to thoroughly examine and verify the registration and
ownership of the previous owner of the vehicle, given that Ang is engaged in the business of
buying and selling second-hand vehicles and is therefore expected to be cautious in protecting
his rights under the circumstances.
Hence, the present recourse – petition for review on certiorari, Ang maintaining that his cause
of action had not yet prescribed when he filed the complaint and he should not be blamed for
paying the mortgage debt.
To Ang, the ruling in Goodyear v. Sy is not applicable to this case, there being an express
warranty in the herein subject Deed of Absolute Sale and, therefore, the action based thereon
prescribes in ten (10) years following Engineering & Machinery Corp. v. CA which held that
where there is an express warranty in the contract, the prescriptive period is the one specified
in the contract or, in the absence thereof, the general rule on rescission of contract.
Ang likewise maintains that he should not be blamed for paying BA Finance and should thus
be entitled to reimbursement and damages for, following Carrascoso, Jr. v. Court of
Appeals, in case of breach of an express warranty, the seller is liable for damages provided
that certain requisites are met which he insists are present in the case at bar.
The resolution of the sole issue of whether the complaint had prescribed hinges on a
determination of what kind of warranty is provided in the Deed of Absolute Sale subject of the
present case.
A warranty is a statement or representation made by the seller of goods, contemporaneously
and as part of the contract of sale, having reference to the character, quality or title of the
goods, and by which he promises or undertakes to insure that certain facts are or shall be as he
then represents them.
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code defines
express warranty as follows:
"Art. 1546. Any affirmation of fact or any promise by the seller relating to the thing is an
express warranty if the natural tendency of such affirmation or promise is to induce the
buyer to purchase the same, and if the buyer purchases the thing relying thereon. No
affirmation of the value of the thing, nor any statement purporting to be a statement of the
seller’s opinion only, shall be construed as a warranty, unless the seller made such affirmation
or statement as an expert and it was relied upon by the buyer."(Emphasis and underscoring
supplied)
On the other hand, an implied warranty is that which the law derives by application
or inference from the nature of the transaction or the relative situation or circumstances of the
parties, irrespective of any intention of the seller to create it. Among the implied warranty
provisions of the Civil Code are: as to the seller’s title (Art. 1548), against hidden defects and
encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction
(Art. 1548).
The earlier cited ruling in Engineering & Machinery Corp. states that "the prescriptive period
for instituting actions based on a breach of express warranty is that specified in the contract,
and in the absence of such period, the general rule on rescission of contract, which
is four years (Article 1389, Civil Code)."
As for actions based on breach of implied warranty, the prescriptive period is, under Art. 1571
(warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the date of delivery of the thing sold.
The following provision of the Deed of Absolute Sale reflecting the kind of warranty made by
Soledad reads:
xxxx
I hereby covenant my absolute ownership to (sic) the above-described property and the
same is free from all liens and encumbrances and I will defend the same from all claims
or any claim whatsoever; will save the vendee from any suit by the government of the
Republic of the Philippines.
x x x x (Emphasis supplied)
In declaring that he owned and had clean title to the vehicle at the time the Deed of Absolute
Sale was forged, Soledad gave an implied warranty of title. In pledging that he "will defend
the same from all claims or any claim whatsoever [and] will save the vendee from any suit by
the government of the Republic of the Philippines," Soledad gave a warranty against eviction.
Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot
recover from Soledad the amount he paid BA Finance. For, as the appellate court observed,
Ang settled the mortgage debt on his own volition under the supposition that he would resell
the car. It turned out
that he did pay BA Finance in order to avoid returning the payment made by the ultimate
buyer Bugash. It need not be stressed that Soledad did not benefit from Ang’s paying BA
Finance, he not being the one who mortgaged the vehicle, hence, did not benefit from the
proceeds thereof.
WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED.
SO ORDERED.

Given Ang’s business of buying and selling used vehicles, he could not have merely relied on
Soledad’s affirmation that the car was free from liens and encumbrances. He was expected to
have thoroughly verified the car’s registration and related documents.
Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to file a
breach thereof is six months after the delivery of the vehicle, following Art. 1571. But even if
the date of filing of the action is reckoned from the date petitioner instituted his first complaint
for damages on November 9, 1993, and not on July 15, 1996 when he filed the complaint
subject of the present petition, the action just the same had prescribed, it having been filed 16
months after July 28, 1992, the date of delivery of the vehicle.
On the merits of his complaint for damages, even if Ang invokes breach of warranty against
eviction as inferred from the second part of the earlier-quoted provision of the Deed of
Absolute Sale, the following essential requisites for such breach, vìz:
NUTRIMIX FEEDS CORPORATION, Petitioner, v. COURT OF APPEALS
and SPOUSES EFREN AND MAURA EVANGELISTA, Respondents.
DECISION
CALLEJO, SR., J.:
For review on certiorari is the Decision of the Court of Appeals in CA-G.R. CV No. 59615
modifying, on appeal, the Joint Decision of the Regional Trial Court of Malolos, Bulacan,
Branch 9, in Civil Case No. 1026-M-93 for sum of money and damages with prayer for
issuance of writ of preliminary attachment, and Civil Case No. 49-M-94 for damages. The trial
court dismissed the complaint of the respondents, ordering them to pay the petitioner the
unpaid value of the assorted animal feeds delivered to the former by the latter, with legal
interest thereon from the filing of the complaint, including attorney's fees.

"A breach of this warranty requires the concurrence of the following circumstances: The Factual Antecedents

(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for eviction at the
instance of the vendee.
On April 5, 1993, the Spouses Efren and Maura Evangelista, the respondents herein, started to
directly procure various kinds of animal feeds from petitioner Nutrimix Feeds Corporation.
The petitioner gave the respondents a credit period of thirty to forty-five days to postdate
checks to be issued in payment for the delivery of the feeds. The accommodation was made
apparently because of the company president's close friendship with Eugenio Evangelista, the
brother of respondent Efren Evangelista. The various animal feeds were paid and covered by
checks with due dates from July 1993 to September 1993. Initially, the respondents were good
paying customers. In some instances, however, they failed to issue checks despite the
deliveries of animal feeds which were appropriately covered by sales invoices. Consequently,
the

In the absence of these requisites, a breach of the warranty against eviction under Article 1547 Sales Invoice Number Date Amount
cannot be declared." 24 (Emphasis supplied),
21334 June 23, 1993 7, 260.00
21420 June 26, 1993 6,990.00
have not been met. For one, there is no judgment which deprived Ang of the vehicle. For 21437 June 28, 1993 41,510.00
another, there was no suit for eviction in which Soledad as seller was impleaded as co- 21722 July 12, 1993 45,185.00
defendant at the instance of the vendee. 22048 July 26, 1993 44,540.00
22054 July 27, 1993 45,246.00
 22186 August 2, 1993 84,900.00 A joint trial thereafter ensued.
TOTAL 275,631.00
During the hearing, the petitioner presented Rufino Arenas, Nutrimix Assistant Manager, as its
respondents incurred an aggregate unsettled account with the petitioner in the amount lone witness. He testified that on the first week of August 1993, Nutrimix President Efren
of P766,151.00. The breakdown of the unpaid obligation is as follows: Bartolome met the respondents to discuss the possible settlement of their unpaid account. The
said respondents still pleaded to the petitioner to continue to supply them with animal feeds
because their livestock were supposedly suffering from a disease.

Bank Check Number Due Date Amount For her part, respondent Maura Evangelista testified that as direct buyers of animal feeds from
the petitioner, Mr. Bartolome, the company president, gave them a discount of P12.00 per bag
United Coconut
BTS052084 July 30, 1993 47,760.00 and a credit term of forty-five to seventy-five days. For the operation of the respondents'
Planters Bank
poultry and piggery farm, the assorted animal feeds sold by the petitioner were delivered in
-do - BTS052087 July 30, 1993 131,340.00
their residence and stored in an adjacent bodega made of concrete wall and galvanized iron
-do - BTS052091 July 30, 1993 59,700.00
sheet roofing with monolithic flooring.
-do - BTS062721 August 4, 1993 47,860.00
-do - BTS062720 August 5, 1993 43,780.00
It appears that in the morning of July 26, 1993, three various kinds of animal feeds, numbering
-do - BTS062774 August 6, 1993 15,000.00
130 bags, were delivered to the residence of the respondents in Sta. Rosa, Marilao, Bulacan.
-do - BTS062748 September 11, 1993 47,180.00 The deliveries came at about 10:00 a.m. and were fed to the animals at approximately 1:30
-do - BTS062763 September 11, 1993 48,440.00 p.m. at the respondents' farm in Balasing, Sta. Maria, Bulacan. At about 8:30 p.m., respondent
-do - BTS062766 September 18, 1993 49,460.00 Maura Evangelista received a radio message from a worker in her farm, warning her that the
TOTAL 490,520.00 chickens were dying at rapid intervals. When the respondents arrived at their farm, they
witnessed the death of 18,000 broilers, averaging 1.7 kilos in weight, approximately forty-one
When the above-mentioned checks were deposited at the petitioner's depository bank, the to forty-five days old. The broilers then had a prevailing market price of P46.00 per kilo.
same were, consequently, dishonored because respondent Maura Evangelista had already
closed her account. The petitioner made several demands for the respondents to settle their On July 27, 1993, the respondents received another delivery of 160 bags of animal feeds from
unpaid obligation, but the latter failed and refused to pay their remaining balance with the the petitioner, some of which were distributed to the contract growers of the respondents. At
petitioner. that time, respondent Maura Evangelista requested the representative of the petitioner to notify
Mr. Bartolome of the fact that their broilers died after having been fed with the animal feeds
On December 15, 1993, the petitioner filed with the Regional Trial Court of Malolos, Bulacan, delivered by the petitioner the previous day. She, likewise, asked that a technician or
a complaint, docketed as Civil Case No. 1026-M-93, against the respondents for sum of veterinarian be sent to oversee the untoward occurrence. Nevertheless, the various feeds
money and damages with a prayer for issuance of writ of preliminary attachment. In their delivered on that day were still fed to the animals. On July 27, 1993, the witness recounted
answer with counterclaim, the respondents admitted their unpaid obligation but impugned that all of the chickens and hogs died. Efren Evangelista suffered from a heart attack and was
their liability to the petitioner. They asserted that the nine checks issued by respondent Maura hospitalized as a consequence of the massive death of their animals in the farm. On August 2,
Evangelista were made to guarantee the payment of the purchases, which was previously 1993, another set of animal feeds were delivered to the respondents, but the same were not
determined to be procured from the expected proceeds in the sale of their broilers and hogs. returned as the latter were not yet cognizant of the fact that the cause of the death of their
They contended that inasmuch as the sudden and massive death of their animals was caused by animals was the polluted feeds of the petitioner.
the contaminated products of the petitioner, the nonpayment of their obligation was based on a
just and legal ground. When respondent Maura Evangelista eventually met with Mr. Bartolome on an undisclosed
date, she attributed the improbable incident to the animal feeds supplied by the petitioner, and
On January 19, 1994, the respondents also lodged a complaint for damages against the asked Mr. Bartolome for indemnity for the massive death of her livestock. Mr. Bartolome
petitioner, docketed as Civil Case No. 49-M-94, for the untimely and unforeseen death of their disavowed liability thereon and, thereafter, filed a case against the respondents.
animals supposedly effected by the adulterated animal feeds the petitioner sold to them.
Within the period to file an answer, the petitioner moved to dismiss the respondents' complaint After the meeting with Mr. Bartolome, respondent Maura Evangelista requested Dr. Rolando
on the ground of litis pendentia. The trial court denied the same in a Resolution dated April Sanchez, a veterinarian, to conduct an inspection in the respondents' poultry. On October 20,
26, 1994, and ordered the consolidation of the case with Civil Case No. 1026-M-93. On May 1993, the respondents took ample amounts remaining from the feeds sold by the petitioner and
13, 1994, the petitioner filed its Answer with Counterclaim, alleging that the death of the furnished the same to various government agencies for laboratory examination.
respondents' animals was due to the widespread pestilence in their farm. The petitioner,
likewise, maintained that it received information that the respondents were in an unstable Dr. Juliana G. Garcia, a doctor of veterinary medicine and the Supervising Agriculturist of the
financial condition and even sold their animals to settle their obligations from other enraged Bureau of Animal Industry, testified that on October 20, 1993, sample feeds for chickens
and insistent creditors. It, moreover, theorized that it was the respondents who mixed poison to contained in a pail were presented to her for examination by respondent Efren Evangelista and
its feeds to make it appear that the feeds were contaminated. a certain veterinarian. The Clinical Laboratory Report revealed that the feeds were negative of
salmonella and that the very high aflatoxin level15 found therein would not cause instantaneous
death if taken orally by birds.
Dr. Rodrigo Diaz, the veterinarian who accompanied Efren at the Bureau of Animal Industry,
testified that sometime in October 1993, Efren sought for his advice regarding the death of the
respondents' chickens. He suggested that the remaining feeds from their warehouse be brought
to a laboratory for examination. The witness claimed that the feeds brought to the laboratory
came from one bag of sealed Nutrimix feeds which was covered with a sack.
Dr. Florencio Isagani S. Medina III, Chief Scientist Research Specialist of the Philippine
Nuclear Research Institute, informed the trial court that respondent Maura Evangelista and Dr.
Garcia brought sample feeds and four live and healthy chickens to him for laboratory
examination. In his Cytogenetic Analysis, Dr. Medina reported that he divided the chickens
into two categories, which he separately fed at 6:00 a.m. with the animal feeds of a different
commercial brand and with the sample feeds supposedly supplied by the petitioner. At noon of
the same day, one of the chickens which had been fed with the Nutrimix feeds died, and a
second chicken died at 5:45 p.m. of the same day. Samples of blood and bone marrow were
taken for chromosome analysis, which showed pulverized chromosomes both from bone
marrow and blood chromosomes. On cross-examination, the witness admitted that the feeds
brought to him were merely placed in a small unmarked plastic bag and that he had no way of
ascertaining whether the feeds were indeed manufactured by the petitioner.
Another witness for the respondents, Aida Viloria Magsipoc, Forensic Chemist III of the
Forensic Chemist Division of the National Bureau of Investigation, affirmed that she
performed a chemical analysis of the animal feeds, submitted to her by respondent Maura
Evangelista and Dr. Garcia in a sealed plastic bag, to determine the presence of poison in the
said specimen. The witness verified that the sample feeds yielded positive results to the tests
for COUMATETRALYL Compound, the active component of RACUMIN, a brand name for
a commercially known rat poison. According to the witness, the presence of the compound in
the chicken feeds would be fatal to internal organs of the chickens, as it would give a delayed
blood clotting effect and eventually lead to internal hemorrhage, culminating in their
inevitable death.
Paz Austria, the Chief of the Pesticide Analytical Section of the Bureau of Plants Industry,
conducted a laboratory examination to determine the presence of pesticide residue in the
animal feeds submitted by respondent Maura Evangelista and Dr. Garcia. The tests disclosed
that no pesticide residue was detected in the samples received but it was discovered that the
animal feeds were positive for Warfarin, a rodenticide (anticoagulant), which is the chemical
family of Coumarin.
After due consideration of the evidence presented, the trial court ruled in favor of the
petitioner. The dispositive portion of the decision reads:
WHEREFORE, in light of the evidence on record and the laws/jurisprudence applicable
thereon, judgment is hereby rendered:
1) in Civil Case No. 1026-M-93, ordering defendant spouses Efren and Maura Evangelista to
pay unto plaintiff Nutrimix Feeds Corporation the amount of P766,151.00 representing the
unpaid value of assorted animal feeds delivered by the latter to and received by the former,
with legal interest thereon from the filing of the complaint on December 15, 1993 until the
same shall have been paid in full, and the amount of P50,000.00 as attorney's fees. Costs
against the aforenamed defendants; andcralawlibrary
2) dismissing the complaint as well as counterclaims in Civil Case No. 49-M-94 for
inadequacy of evidence to sustain the same. No pronouncement as to costs.
SO ORDERED.
In finding for the petitioner, the trial court ratiocinated as follows:
On the strength of the foregoing disquisition, the Court cannot sustain the Evangelistas'
contention that Nutrimix is liable under Articles 1561 and 1566 of the Civil Code governing
"hidden defects" of commodities sold. As already explained, the Court is predisposed to
believe that the subject feeds were contaminated sometime between their storage at the bodega
of the Evangelistas and their consumption by the poultry and hogs fed therewith, and that the
contamination was perpetrated by unidentified or unidentifiable ill-meaning mischief-maker(s)
over whom Nutrimix had no control in whichever way.
All told, the Court finds and so holds that for inadequacy of proof to the contrary, Nutrimix
was not responsible at all for the contamination or poisoning of the feeds supplied by it to the
Evangelistas which precipitated the mass death of the latter's chickens and hogs. By no means
and under no circumstance, therefore, may Nutrimix be held liable for the sundry damages
prayed for by the Evangelistas in their complaint in Civil Case No. 49-M-94 and answer in
Civil Case No. 1026-M-93. In fine, Civil Case No. 49-M-94 deserves dismissal.
Parenthetically, vis - Ã -vis the fulminations of the Evangelistas in this specific regard, the
Court does not perceive any act or omission on the part of Nutrimix constitutive of "abuse of
rights" as would render said corporation liable for damages under Arts. 19 and 21 of the Civil
Code. The alleged "callous attitude and lack of concern of Nutrimix" have not been
established with more definitiveness.
As regards Civil Case No. 1026-M-93, on the other hand, the Court is perfectly convinced that
the deliveries of animal feeds by Nutrimix to the Evangelistas constituted a simple contract of
sale, albeit on a continuing basis and on terms or installment payments.
Undaunted, the respondents sought a review of the trial court's decision to the Court of
Appeals (CA), principally arguing that the trial court erred in holding that they failed to prove
that their broilers and hogs died as a result of consuming the petitioner's feeds.
On February 12, 2002, the CA modified the decision of the trial court. The fallo of the
decision reads:
WHEREFORE, premises considered, the appealed decision is hereby MODIFIED such that
the complaint in Civil Case No. 1026-M-93 is dismissed for lack of merit.
So ordered.
In dismissing the complaint in Civil Case No. 1026-M-93, the CA ruled that the respondents
were not obligated to pay their outstanding obligation to the petitioner in view of its breach of
warranty against hidden defects. The CA gave much credence to the testimony of Dr. Rodrigo
Diaz, who attested that the sample feeds distributed to the various governmental agencies for
laboratory examination were taken from a sealed sack bearing the brand name Nutrimix. The
CA further argued that the declarations of Dr. Diaz were not effectively impugned during
cross-examination, nor was there any contrary evidence adduced to destroy his damning
allegations.
On March 7, 2002, the petitioner filed with this Court the instant Petition for Review on the
sole ground that
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT THE
CLAIMS OF HEREIN PETITIONER FOR COLLECTION OF SUM OF MONEY AGAINST
PRIVATE RESPONDENTS MUST BE DENIED BECAUSE OF HIDDEN DEFECTS.
The Present Petition
The petitioner resolutely avers that the testimony of Dr. Diaz can hardly be considered as
conclusive evidence of hidden defects that can be attributed to the petitioner. Parenthetically,
the petitioner asserts, assuming that the sample feeds were taken from a sealed sack bearing
the brand name Nutrimix, it cannot decisively be presumed that these were the same feeds
brought to the respondents' farm and given to their chickens and hogs for consumption.
It is the contention of the respondents that the appellate court correctly ordered the dismissal
of the complaint in Civil Case No. 1026-M-93. They further add that there was sufficient basis
for the CA to hold the petitioner guilty of breach of warranty thereby releasing the respondents
from paying their outstanding obligation.
The Ruling of the Court
Oft repeated is the rule that the Supreme Court reviews only errors of law in Petitions for
Review on Certiorari under Rule 45. However, this rule is not absolute. The Court may
review the factual findings of the CA should they be contrary to those of the trial court.
Conformably, this Court may review findings of facts when the judgment of the CA is
premised on a misapprehension of facts.
The threshold issue is whether or not there is sufficient evidence to hold the petitioner guilty
of breach of warranty due to hidden defects.
The petition is meritorious.
The provisions on warranty against hidden defects are found in Articles 1561 and 1566 of the
New Civil Code of the Philippines, which read as follows:
Art. 1561. The vendor shall be responsible for warranty against hidden defects which the thing
sold may have, should they render it unfit for the use for which it is intended, or should they
diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he
would not have acquired it or would have given a lower price for it; but said vendor shall not
be answerable for patent defects or those which may be visible, or for those which are not
visible if the vendee is an expert who, by reason of his trade or profession, should have known
them.
Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated, and the vendor was not
aware of the hidden faults or defects in the thing sold.
A hidden defect is one which is unknown or could not have been known to the vendee. Under
the law, the requisites to recover on account of hidden defects are as follows:
(a) the defect must be hidden;
(b) the defect must exist at the time the sale was made;
(c) the defect must ordinarily have been excluded from the contract;
(d) the defect, must be important (renders thing UNFIT or considerably decreases FITNESS);
(e) the action must be instituted within the statute of limitations.27
In the sale of animal feeds, there is an implied warranty that it is reasonably fit and suitable to
be used for the purpose which both parties contemplated.28 To be able to prove liability on the
basis of breach of implied warranty, three things must be established by the respondents. The
first is that they sustained injury because of the product; the second is that the injury occurred
because the product was defective or unreasonably unsafe; and finally, the defect existed when
the product left the hands of the petitioner.29 A manufacturer or seller of a product cannot be
held liable for any damage allegedly caused by the product in the absence of any proof that the
product in question was defective.30 The defect must be present upon the delivery or
manufacture of the product;31 or when the product left the seller's or manufacturer's
control;32 or when the product was sold to the purchaser;33 or the product must have reached
the user or consumer without substantial change in the condition it was sold. Tracing the
defect to the petitioner requires some evidence that there was no tampering with, or changing
of the animal feeds. The nature of the animal feeds makes it necessarily difficult for the
respondents to prove that the defect was existing when the product left the premises of the
petitioner.
A review of the facts of the case would reveal that the petitioner delivered the animal feeds,
allegedly containing rat poison, on July 26, 1993; but it is astonishing that the respondents had
the animal feeds examined only on October 20, 1993, or barely three months after their
broilers and hogs had died. On cross-examination, respondent Maura Evangelista testified in
this manner:
Atty. Cruz:
Q: Madam Witness, you said in the last hearing that believing that the 250 bags of feeds
delivered to (sic) the Nutrimix Feeds Corporation on August 2, 1993 were poison (sic),
allegedly your husband Efren Evangelista burned the same with the chicken[s], is that right?
A: Yes, Sir. Some, Sir.
Q: And is it not a fact, Madam Witness, that you did not, as according to you, used (sic) any of
these deliveries made on August 2, 1993?chanroblesvirtualawlibrary
A: We were able to feed (sic) some of those deliveries because we did not know yet during
that time that it is the cause of the death of our chicks (sic), Sir.
Q: But according to you, the previous deliveries were not used by you because you believe
(sic) that they were poison (sic)?chanroblesvirtualawlibrary
A: Which previous deliveries, Sir[?]
Q: Those delivered on July 26 and 22 (sic), 1993?chanroblesvirtualawlibrary
A: Those were fed to the chickens, Sir. This is the cause of the death of the chickens.
Q: And you stated that this last delivery on August 2 were poison (sic) also and you did not
use them, is that right?chanroblesvirtualawlibrary
Atty. Roxas: That is misleading.
Atty. Cruz: She stated that.
Atty. Roxas: She said some were fed because they did not know yet of the poisoning.
Court: And when the chickens died, they stopped naturally feeding it to the chickens.
Atty. Cruz:
Q: You mean to say, Madam Witness, that although you believe (sic) that the chickens were
allegedly poisoned, you used the same for feeding your animals?
A: We did not know yet during that time that the feeds contained poison, only during that time
when we learned about the same after the analysis.
Q: Therefore you have known only of the alleged poison in the Nutrimix Feeds only after you
have caused the analysis of the same?chanroblesvirtualawlibrary
A: Yes, Sir.
Q: When was that, Madam Witness?chanroblesvirtualawlibrary
A: I cannot be sure about the exact time but it is within the months of October to November,
Sir.
Q: So, before this analysis of about October and November, you were not aware that the feeds
of Nutrimix Feeds Corporation were, according to you, with poison?
A: We did not know yet that it contained poison but we were sure that the feeds were the cause
of the death of our animals.
We find it difficult to believe that the feeds delivered on July 26 and 27, 1993 and fed to the
broilers and hogs contained poison at the time they reached the respondents. A difference of
approximately three months enfeebles the respondents' theory that the petitioner is guilty of
breach of warranty by virtue of hidden defects. In a span of three months, the feeds could have
already been contaminated by outside factors and subjected to many conditions
unquestionably beyond the control of the petitioner. In fact, Dr. Garcia, one of the witnesses
for the respondents, testified that the animal feeds submitted to her for laboratory examination
contained very high level of aflatoxin, possibly caused by mold (aspergillus flavus). We agree
with the contention of the petitioner that there is no evidence on record to prove that the
animal feeds taken to the various governmental agencies for laboratory examination were the
same animal feeds given to the respondents' broilers and hogs for their consumption.
Moreover, Dr. Diaz even admitted that the feeds that were submitted for analysis came from a
sealed bag. There is simply no evidence to show that the feeds given to the animals on July 26
and 27, 1993 were identical to those submitted to the expert witnesses in October 1993.
It bears stressing, too, that the chickens brought to the Philippine Nuclear Research Institute
for laboratory tests were healthy animals, and were not the ones that were ostensibly poisoned.
There was even no attempt to have the dead fowls examined. Neither was there any analysis of
the stomach of the dead chickens to determine whether the petitioner's feeds really caused
their sudden death. Mere sickness and death of the chickens is not satisfactory evidence in
itself to establish a prima facie case of breach of warranty.
Likewise, there was evidence tending to show that the respondents combined different kinds
of animal feeds and that the mixture was given to the animals. Respondent Maura Evangelista
testified that it was common practice among chicken and hog raisers to mix animal feeds. The
testimonies of respondent Maura Evangelista may be thus summarized:
Cross-Examination
Atty. Cruz:
Q: Because, Madam Witness, you ordered chicken booster mash from Nutrimix Feeds
Corporation because in July 1993 you were taking care of many chickens, as a matter of fact,

majority of the chickens you were taking care [of] were chicks and not chickens which are
marketable?
A: What I can remember was that I ordered chicken booster mash on that month of July 1993
because we have some chicks which have to be fed with chicken booster mash and I now
remember that on the particular month of July 1993 we ordered several bags of chicken
booster mash for the consumption also of our chicken in our other poultry and at the same time
they were also used to be mixed with the feeds that were given to the hogs.
Q: You mean to say [that], as a practice, you are mixing chicken booster mash which is
specifically made for chick feeds you are feeding the same to the hogs, is that what you want
the Court to believe? chanroblesvirtualawlibrary
A: Yes, Sir, because when you mix chicken booster mash in the feeds of hogs there is a better
result, Sir, in raising hogs.37
Re-Direct Examination
Atty. Roxas:
Q: Now, you mentioned that shortly before July 26 and 27, 1993, various types of Nutrimix
feeds were delivered to you like chicks booster mash, broiler starter mash and hog finisher or
hog grower mash. What is the reason for simultaneous deliveries of various types of feeds?
A: Because we used to mix all those together in one feeding, Sir.
Q: And what is the reason for mixing the chick booster mash with broiler starter mash?
A: So that the chickens will get fat, Sir.
Re-Cross Examination
Atty. Cruz:
Q: Madam Witness, is it not a fact that the mixing of these feeds by you is your own
concuction (sic) and without the advice of a veterinarian expert to do so?
A: That is common practice among raisers to mix two feeds, Sir.
Q By yourself, Madam Witness, who advised you to do the mixing of these two types of feeds
for feeding your chickens?
A: That is common practice of chicken raisers, Sir.
Even more surprising is the fact that during the meeting with Nutrimix President Mr.
Bartolome, the respondents claimed that their animals were plagued by disease, and that they
needed more time to settle their obligations with the petitioner. It was only after a few months
that the respondents changed their justification for not paying their unsettled accounts,
claiming anew that their animals were poisoned with the animal feeds supplied by the
petitioner. The volte-face of the respondents deserves scant consideration for having been
conjured as a mere afterthought.
In essence, we hold that the respondents failed to prove that the petitioner is guilty of breach
of warranty due to hidden defects. It is, likewise, rudimentary that common law places upon
the buyer of the product the burden of proving that the seller of the product breached its
warranty. The bevy of expert evidence adduced by the respondents is too shaky and utterly
insufficient to prove that the Nutrimix feeds caused the death of their animals. For these
reasons, the expert testimonies lack probative weight. The respondents' case of breach of
implied warranty was fundamentally based upon the circumstantial evidence that the chickens
and hogs sickened, stunted, and died after eating Nutrimix feeds; but this was not enough to
raise a reasonable supposition that the unwholesome feeds were the proximate cause of the
death with that degree of certainty and probability required. The rule is well-settled that if
there be no evidence, or if evidence be so slight as not reasonably to warrant inference of the
fact in issue or furnish more than materials for a mere conjecture, the court will not hesitate to
strike down the evidence and rule in favor of the other party. This rule is both fair and sound.
Any other interpretation of the law would unloose the courts to meander aimlessly in the arena
of speculation.
It must be stressed, however, that the remedy against violations of warranty against hidden
defects is either to withdraw from the contract (accion redhibitoria) or to demand a
proportionate reduction of the price (accion quanti minoris), with damages in either case. In
any case, the respondents have already admitted, both in their testimonies and pleadings
submitted, that they are indeed indebted to the petitioner for the unpaid animal feeds delivered
to them. For this reason alone, they should be held liable for their unsettled obligations to the
petitioner.
WHEREFORE, in light of all the foregoing, the petition is GRANTED. The assailed
Decision of the Court of Appeals, dated February 12, 2002, is REVERSED and SET ASIDE.
The Decision of the Regional Trial Court of Malolos, Bulacan, Branch 9, dated January 12,
1998, is REINSTATED. No costs.
SO ORDERED.
Puno, Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
[G.R. NO. 141480 : November 29, 2006]
CARLOS B. DE GUZMAN, Petitioner, v. TOYOTA CUBAO, INC., Respondent.
DECISION
AZCUNA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
annul the Order, dated September 9, 1999, of the Regional Trial Court of Quezon City (the
RTC), Branch 105, which dismissed the complaint for damages filed by petitioner Carlos B.
De Guzman against respondent Toyota Cubao, Inc.
On November 27, 1997, petitioner purchased from respondent a brand new white Toyota Hi-
Lux 2.4 SS double cab motor vehicle, 1996 model, in the amount of P508,000. Petitioner
made a down payment of P152,400, leaving a balance of P355,600 which was payable in 36
months with 54% interest. The vehicle was delivered to petitioner two days later. On October
18, 1998, petitioner demanded the replacement of the engine of the vehicle because it
developed a crack after traversing Marcos Highway during a heavy rain. Petitioner asserted
that respondent should replace the engine with a new one based on an implied warranty.
Respondent countered that the alleged damage on the engine was not covered by a warranty.
On April 20, 1999, petitioner filed a complaint for damages against respondent with the RTC.
Respondent moved to dismiss the case on the ground that under Article 1571 of the Civil
Code, the petitioner's cause of action had prescribed as the case was filed more than six
months from the date the vehicle was sold and/or delivered.
In an Order dated September 9, 1999, the RTC granted respondent's motion and dismissed the
complaint, thus:
For the Court's consideration are: (1) defendant's Motion to Dismiss; (2) plaintiff's Opposition
thereto; (3) defendant's Reply; and (4) plaintiff's Rejoinder.
The Court agrees with the plaintiff's counsel that the subject pick-up is a consumer product
because it is used for personal, family or agricultural purposes, contrary to defendant counsel's
claim that it is not because it is a non-consumable item.
Since no warranty card or agreement was attached to the complaint, the contract of sale of the
subject pick-up carried an implied warranty that it was free from any hidden faults or defects,
or any charge or encumbrance not declared or known to the buyer. The prescriptive period
thereof is six (6) months under the Civil Code (Art. 1571).
Under RA No. 7394, the provisions of the Civil Code on conditions and warranties shall
govern all contracts of sale with condition and warranties (Art. 67). The duration of the
implied warranty (not accompanied by an express warranty) shall endure not less than sixty
days nor more than one (1) year following the sale of new consumer products (Art. 68, par.
[e]). The two (2) year prescriptive period under Art. 169 cannot prevail over Art. 68 because
the latter is the specific provision on the matter.
The Court has noted that the prescriptive period for implied and express warranties cannot be
the same. In the Civil Code, a redhibitory action for violation of an implied warranty against
hidden defects prescribes in six (6) months, while if it based on an express warranty[,] the
action prescribes in four (4) years. Under RA No. 7394, the implied warranty cannot be more
than one (1) year; however, the implied warranty can only be of equal duration to that an
express warranty when the implied warranty of merchantability accompanies an express
warranty (Art. 68, par. [e]). Therefore, the prescriptive period of two years under Art. 169 does
not cover an implied warranty, which is not accompanied by an express warranty. It is
applicable to cases where there is an express warranty in the sale of the consumer product.
Relative to plaintiff's argument that the claim for moral and exemplary damages and attorney's
fees is based on quasi-delict or breach of contract, such are merely ancillary to the main cause
of action which is based on warranty against hidden defects. Without the latter, the former
cannot stand alone.
Based on the record, the subject vehicle was purchased on 27 November 1997 and delivered
on 29 November 1997. This case was filed only on 20 April 1999 or almost nineteen (19)
months from [the] sale and/or delivery. Applying Art. 1571 of Civil Code, the action is barred
by prescription because the complaint was filed more than six (6) months after the sale and/or
delivery of the vehicle. In addition, the duration of the implied warranty of not more than one
(1) year under Art. 68, par (e) of RA No. 7394 has already elapsed.
Accordingly, defendant's Motion is granted and the plaintiff's Complaint is ordered dismissed.
SO ORDERED
On December 21, 1999, the RTC denied petitioner's motion for reconsideration, as follows:
Submitted for resolution are: (1) plaintiff's Motion for Reconsideration; (2) defendant's
Opposition; and (3) plaintiff's Reply.
Although plaintiff's motion was filed beyond the ten-day period, the Court is convinced that it
was not for the purpose of delay; hence, it cannot be considered as a mere scrap of paper.
After a thorough study, the Court resolves that while reference to Art. 68, par. (e) of RA No.
7394 may have been misplaced, yet the subject sale carried an implied warranty whose
prescriptive period is six (6) months under Art. 1571 of the Civil Code.
Accordingly, plaintiff's Motion for Reconsideration is DENIED.
SO ORDERED.
Petitioner thereupon filed a Petition for Review on Certiorari with this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be denied for violation of the
hierarchy of courts. Petitioner states that the present petition is an "appeal by certiorari on
pure questions of law, from the final Order of Branch 105 of the Regional Trial Court of
Quezon City in Civil Case No. Q-99-37381 - under Rule 45 of the Rules of Court." Upon
receipt of the Order of the RTC, dated September 9, 1999, on September 21, 1999, petitioner
filed a motion for reconsideration on September 28, 1999. On December 21, 1999, the RTC
denied petitioner's motion. When petitioner received a copy of the said order on January 18,
2000, he had fifteen (15) days from receipt within which to appeal to the Court of Appeals by
filing a notice of appeal under Section 2(a) of Rule 41, from an order of the RTC issued in the
exercise of its original jurisdiction. The RTC's order dated September 9, 1999 and its
subsequent order dated December 21, 1999 partake of the nature of a final disposition of the
case. Hence, the appropriate remedy petitioner should have taken was to file a notice of appeal
from the RTC to the Court of Appeals, not a Petition for Review on Certiorari directly with
this Court.
Although petitioner intended his petition, filed on February 2, 2000, to be one filed under Rule
45 and he filed it well within the 15-day reglementary period counted from January 18, 2000,
the same was in effect a Petition for Certiorari under Rule 65, and is therefore dismissible for
violation of the hierarchy of courts under Section 4 thereof. Petitioner failed to show that
special and important reasons or exceptional and compelling circumstances exist to justify a
direct filing of the petition with this Court instead of first taking an appeal to the Court of
Appeals. Likewise, petitioner cannot find refuge in the argument that he was raising pure
questions of law. The sole matter petitioner assails in this action is the RTC's order of
dismissal of his complaint for damages on the ground of prescription which was tantamount to
an adjudication on the merits. Again, petitioner should have resorted to the remedy of
appealing the case to the Court of Appeals by filing a notice of appeal with the RTC.
Second, even if the Court were to disregard the procedural infirmity, the petition should be
denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff purchased from the defendant a brand new Toyota
Hilux 2.4 motor vehicle with [E]ngine [N]o. 2-L-9514743. It was delivered to the plaintiff on
29 November 1997. Copies of the Vehicle Sales Invoice and Vehicle Delivery Note issued by
the defendant are hereto attached as Annexes "A" and "B," respectively.
3. Last 18 October 1998, after only 12,000 kilometers of use, the vehicle's engine cracked.
Although it was previously driven through a heavy rain, it didn't pass through flooded streets
high enough to stop sturdy and resistant vehicles. Besides, vehicles of this class are advertised
as being capable of being driven on flooded areas or rugged terrain.
4. As plaintiff knows no reason why the vehicle's engine would crack just like that, the same
could only be due to the fact that said engine and/or the vehicle itself was defective even from
the time it was bought.
5. Brought to the attention, defendant refused to answer for this defect saying it is not covered
by the vehicle's warranty. It refused to replace the vehicle as plaintiff demanded (or at least its
engine, or even repair the damage).
6. As a result of defendant's actions, plaintiff suffered mental anxiety and sleepless nights for
which he demands an award of P200,000.00 moral damages.
7. By way of example for the public good, plaintiff should also be awarded exemplary
damages in the amount of P200,000.00.
8. Forced to litigate to enforce his rights, plaintiff incurred, and shall further incur, litigation-
related expenses (including those for his counsel's fees) in the total estimated sum
of P100,000.
WHEREFORE, it is respectfully prayed that judgment be rendered ordering defendant:
A. to replace the subject vehicle with a brand new one or at least to replace its engine all at
defendant's cost;
b. pay the plaintiff:
i. P200,000 - moral damages;
ii. P200,000 - exemplary damages;
iii. P200,000 - attorney's fees and litigation expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for.
Petitioner contends that the dismissal on the ground of prescription was erroneous because the
applicable provision is Article 169 of Republic Act No. 7394 (otherwise known as "The
Consumer Act of the Philippines" which was approved on April 13, 1992), and not Article
1571 of the Civil Code. Petitioner specifies that in his complaint, he neither asked for a
rescission of the contract of sale nor did he pray for a proportionate reduction of the purchase
price. What petitioner claims is the enforcement of the contract, that is, that respondent should
replace either the vehicle or its engine with a new one. In this regard, petitioner cites Article
169 of Republic Act No. 7394 as the applicable provision, so as to make his suit come within
the purview of the two-year prescriptive period. Tangentially, petitioner also justifies that his
cause of action has not yet prescribed because this present suit, which was an action based on
quasi-delict, prescribes in four years.
On the other hand, respondent maintains that petitioner's cause of action was already barred by
the statute of limitations under Article 1571 of the Civil Code for having been filed more than
six months from the time the vehicle was purchased and/or delivered. Respondent reiterates
that Article 169 of Republic Act No. 7394 does not apply.
Petitioner's argument is erroneous. Article 1495 of the Civil Code states that in a contract of
sale, the vendor is bound to transfer the ownership of and to deliver the thing that is the object
of sale. Corollarily, the pertinent provisions of the Code set forth the available remedies of a
buyer against the seller on the basis of a warranty against hidden defects:
Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the
thing sold may have, should they render it unfit for the use for which it is intended, or should
they diminish its fitness for such use to such an extent that, had the vendee been aware thereof,
he would not have acquired it or would have given a lower price for it; but said vendor shall
not be answerable for patent defects or those which may be visible, or for those which are not f) Breach of warranties - xxx
visible if the vendee is an expert who, by reason of this trade or profession, should have
known them. (Emphasis supplied) xxx

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing
sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated and the vendor was not aware
of the hidden faults or defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be barred
after six months from the delivery of the thing sold.
(Emphasis supplied)
2) In case of breach of implied warranty, the consumer may retain in the goods and recover
damages, or reject the goods, cancel the contractand recover from the seller so much of the
purchase price as has been paid, including damages. (Emphasis supplied.)
Consequently, even if the complaint is made to fall under the Republic Act No. 7394, the same
should still be dismissed since the prescriptive period for implied warranty thereunder, which
is one year, had likewise lapsed.
WHEREFORE, the petition is DENIED for being in violation of the hierarchy of courts, and
in any event, for lack of merit.

Under Article 1599 of the Civil Code, once an express warranty is breached, the buyer can No costs.
accept or keep the goods and maintain an action against the seller for damages. In the absence
of an existing express warranty on the part of the respondent, as in this case, the allegations in SO ORDERED.
petitioner's complaint for damages were clearly anchored on the enforcement of an implied
warranty against hidden defects, i.e., that the engine of the vehicle which respondent had sold
to him was not defective. By filing this case, petitioner wants to hold respondent responsible
for breach of implied warranty for having sold a vehicle with defective engine. Such being the
case, petitioner should have exercised this right within six months from the delivery of the
thing sold. Since petitioner filed the complaint on April 20, 1999, or more than nineteen
months counted from November 29, 1997 (the date of the delivery of the motor vehicle), his
cause of action had become time-barred.

Petitioner contends that the subject motor vehicle comes within the context of Republic Act
No. 7394. Thus, petitioner relies on Article 68 (f) (2) in relation to Article 169 of Republic Act
No. 7394. Article 4 (q) of the said law defines "consumer products and services" as goods,
services and credits, debts or obligations which are primarily for personal, family, household
or agricultural purposes, which shall include, but not limited to, food, drugs, cosmetics, and
devices. The following provisions of Republic Act No. 7394 state:

Art. 67. Applicable Law on Warranties. - The provisions of the Civil Code on conditions and
warranties shall govern all contracts of sale with conditions and warranties.

Art. 68. Additional Provisions on Warranties. - In addition to the Civil Code provisions on sale
with warranties, the following provisions shall govern the sale of consumer products with
warranty:

e) Duration of warranty. The seller and the consumer may stipulate the period within which
the express warranty shall be enforceable. If the implied warranty on merchantability
accompanies an express warranty, both will be of equal duration.

Any other implied warranty shall endure not less than sixty (60) days nor more than one (1)
year following the sale of new consumer products.