Republic of the Philippines SUPREME COURT Manila

SECOND DIVISION

G.R. No. 130352 November 3, 1998
ROGELIA P. DIAZ-DUARTE, petitioner, vs. SPS. BEN and ETHYL
ONG, and the COURT OF APPEALS, respondents.

PUNO, J.:
Before us is a petition for review on certiorari under Rule 45 of the
Revised Rules of Court to set aside the decision of the Court of Appeals
awarding Lot 1208 to respondent spouses Ben and Ethyl Ong.
1

The facts are as succinctly summarized by the trial court, viz:
Macario Diaz married Encarnacion Reyes sometime in 1895. Out of this
union, Trinidad Diaz was born in 1896. Sometime in 1903, Encarnacion
Reyes died. In 1905, Macario Diaz married Cristina Pedrosa. Out of this
union, . . ., Rogelia-Diaz Duarte was born in 1910.
Trinidad Diaz, . . ., married Filomeno Arteche. This marriage was
blessed by nine children, including Encarnacion Arteche and all the
other plaintiffs in the case in the trial court. Trinidad Arteche died on
March 21, 1977.
On October 28, 1932, in Cadastral Case No. 17, GLRO Cad. Record No.
1040, Judge Luciano Ortiz adjudicated Lot 1208 of the Tacloban
Cadastre, located in Marasbaras, Tacloban City, containing 26,738
square meters to "Macario Diaz married to Cristina Pedrosa, of
Tacloban, Province of Leyte, Philippines". The decision having become
final, Decree No. 639202 was issued by the General Land Registration
Office on August 18, 1937, and Original Certificate of Title No. 19486
was issued.
On April 30, 1941, Macario Diaz died and on October 2, 1962, his
second wife Cristina died. On June 6, 1979, Rogelia Diaz-Duarte issued
an Affidavit of Adjudication and Sale of Lot 1208 of the Tacloban
Cadastre in favor of Wilfredo M. Corregidor for P20,000.00 before
Notary Public Atty. Antonio F. Mendiola of Tacloban City who entered
the same as Doc. No. 445, Page 40, Book 29, Series of 1979. By virtue of
this sale, OCT No. 19486 of Macario Diaz was cancelled and in its place
TCT No. T-17501 was issued by the Register of Deeds of Tacloban City
in favor of Wilfredo Corregidor on June 25, 1979.
On October 12, 1979, Wilfredo Corregidor sold back Lots 1208, 3332,
and 3364 of the Tacloban Cadastre to Mrs. Rogelia Diaz-Duarte for
P33,000.00 as evidenced by a deed of repurchase executed by him on
said date before Notary Public Atty. Victor C. Veloso of Tacloban City
who entered the same as Doc. No. 5, Page 2, Book I, Series of 1979.
On October 17, 1979, Mrs. Rogelia Diaz-Duarte executed an adverse
claim to Lot 1208 covered by TCT No. T-17501 of Wilfredo Corregidor
on the basis of the deed of sale executed by Wilfredo to her on October
12, 1979.
On April 10, 1980, 30 days having elapsed, the affidavit of adverse
claim of Diaz-Duarte was cancelled by the Register of Deeds of
Tacloban City, albeit erroneously, pursuant to Sec. 70 of Presidential
Decree No. 1529, otherwise known as the Property Registration Decree
of the Philippines.
On February 28, 1981, notwithstanding the resale of the property made
by him in favor of Mrs. Rogelia Diaz-Duarte in 1979, Wilfredo
Corregidor sold again Lot 1208 to Ben S. Ong and his wife Ethyl Ong for
P35,000.00 under a deed of absolute sale executed by him on said date
before a Notary Public who entered the same as Doc. No. 380, Page 79,
Book I, series of 1981.
On July 21, 1981, Ben S. Ong mortgaged Lot 1208 and some other
properties to the Rizal Commercial Banking Corporation to secure a
loan of P450,000.00.
On February 17, 1983, Encarnacion A. Arteche and the other children
and heirs of the deceased Trinidad Diaz-Arteche, filed a civil case for
recovery of Lot 1208 of the Tacloban Cadastre against herein petitioner
Rogelia Diaz-Duarte, Wilfredo Corregidor and his wife, Ben S. Ong and
his wife, and the Rizal Commercial Banking Corporation and Pablo G.
Amascual Jr., the Register of Deeds of Tacloban City.
2

On October 28, 1985, the Regional Trial Court, 8th Judicial Region
decided the civil case for the recovery of Lot 1208 in favor of
Encarnacion Arteche, et. al., to wit:
3

Wherefore, judgment is hereby rendered as follows:
1. Declaring the affidavit of Adjudication and Sale of Lot 1208 of the
Tacloban Cadastre executed by Rogelia Diaz-Duarte on June 6, 1979 as
null and void being a false document it having been established to the
satisfaction of the court that Mrs. Rogelia-Diaz Duarte is not the sole
heir of Macario Diaz, original owner of Lot 1208;
2. Ordering the Register of Deeds of Tacloban City, to cancel Transfer
Certificate of Title No. T-17501 of Wilfredo Corregidor and Roseanna F.
Corregidor of Lot 1208 of the Tacloban Cadastre and all certificates of
title emanating therefrom including TCT No. 20338 of Ben S. Ong and
Ethyl Ong;
3. Ordering the Register of Deeds of Tacloban to cancel TCT No. 20338
of Ben S. Ong and his wife Ethyl Y. Ong to Lot 1208 of the Tacloban
Cadastre and issue in lieu thereof a new transfer certificate of title to
the following persons: Mrs. Rogelia Diaz-Duarte, of legal age, widow
and residing in Tacloban City, three-fourth or 20,052 square meters;
and to the Heirs of Trinidad Diaz Arteche, represented by Mrs.
Encarnacion A. Benedicto of Tacloban City, Philippines, one-fourth or
6,684 square meters, subject to the mortgage lien of the Rizal
Commercial Banking Corporation.
4. Ordering the defendants to pay the costs.
SO ORDERED.
The defendants appealed but only the appeal of spouses Ben and Ethyl
Ong was considered by the Court of Appeals as Wilfredo Corregidor,
Rizal Banking Corporation and Pablo Amascual failed to file their
respective briefs.
4
In their appeal, appellant-spouses raised the
following errors, to wit:
I
The trial court erred in admitting as evidence and giving it any
probative value the parol testimony of the defendant Rogelia Diaz-
Duarte as to the affidavit of adjudication with deed of absolute sale of
the land in question executed by Rogelia Diaz Duarte in favor of
Wilfredo Corregidor on June 6, 1979.
II
The trial court erred in not finding or declaring that the affidavit of
adjudication with deed of absolute sale of the land in question executed
by Rogelia Diaz Duarte in favor of Wilfredo Corregidor was valid and
legal.
III
The trial court erred in not finding or declaring the deed of repurchase
of the land in question executed by Wilfredo Corregidor in favor of
Rogelia Diaz-Duarte on October 17, 1979 was absolutely simulated or
fictitious.
IV
The trial court erred in not declaring or finding that the deed of sale of
the land in question executed by Wilfredo Corregidor in favor of the
spouses Ben S. Ong and Ethyl Y. Ong on February 28, 1981 as valid and
legal.
V
The trial court erred in not declaring or finding that Rogelia Diaz-
Duarte was the sole heir of Macario Diaz with respect to the property in
question.
VI
The trial court erred in ordering the cancellation of Transfer Certificate
of Title No. T-20338 of Ben S. Ong and Ethyl Y. Ong of the land in
question and the issuance of new transfer certificates of title to Rogelia
Diaz-Duarte and to the heirs of Trinidad Diaz Arteche for the three
fourth (3/4) and one fourth (1/4) portions of the land in litigation,
respectively in their names by the Register of Deeds of Tacloban City.
The appellate court sustained the fourth and sixth assigned errors of
the appellant-spouses. It awarded Lot 1208 to appellant-spouses Ben
and Ethyl Ong after a finding that they were buyers in good faith and
for value.
Hence, this petition where Rogelia Diaz-Duarte contends:
I
THE COURT A QUO GRAVELY ABUSED ITS DISCRETION AND
SERIOUSLY ERRED IN HOLDING THAT THE SPOUSES ONG WERE
INNOCENT PURCHASERS FOR VALUE AND IN GOOD FAITH.
II
THE COURT A QUO GRAVELY ABUSED ITS DISCRETION AND
SERIOUSLY ERRED IN DISREGARDING THE FINDING OF THE TRIAL
COURT THAT THE SPOUSES ONG WERE BUYERS IN BAD FAITH.
III
THE COURT A QUO SERIOUSLY ERRED IN DISREGARDING THE
WRONGFUL AND ILLEGAL CANCELLATION OF PETITIONER'S
ADVERSE CLAIM.
IV
THE COURT A QUO SERIOUSLY ERRED IN FINDING THAT PETITIONER
HAS LOST HER RIGHTS OVER THE SUBJECT PROPERTY.
The core issue is who between petitioner Rogelia Diaz-Duarte and
respondent spouses Ong, has a better right over Lot 1208. Petitioner
claims ownership over Lot 1208 on the basis of the deed of repurchase
between her and Wilfredo Corregidor. When the latter refused to
surrender TCT No. T-17501 to her, she caused to be annotated thereon
a notice of adverse claim. On the other hand, respondent spouses aver
that they own Lot. 1208, having bought the same from Corregidor
without knowledge of its encumbrance. They contend that petitioner's
notice of adverse claim in Corregidor's title, was already cancelled
when they bought the property. Petitioner disputes the legality of said
cancellation. She maintains that the Registrar of Deeds should not have
automatically cancelled the notice of adverse claim simply because the
30-day period has lapsed.
We find for petitioner.
The good faith of appellant-spouses rests heavily on whether the notice
of adverse claim on Lot 1208 was validly cancelled by the Registrar of
Deeds. The issue is no longer of first impression. In the 1996 case of
Sajonas v. Court of Appeals
5
, we explained that a notice of adverse claim
remains valid even after the lapse of the 30-day period provided by
Section 70 of P.D. No. 1529 or the Property Registration Decree. Section
70 provides:
Whoever claims any part or interest in registered land adverse to the
registered owner, arising subsequent to the date of the original
registration, may, if no other provision is made in this Decree for
registering the same, make a statement in writing setting forth fully his
alleged right or interest, and how or under whom acquired, a reference
to the number of the certificate of title of the registered owner, and a
description of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the adverse
claimant's residence, and a place at which all notices may be served
upon him. This statement shall be entitled to registration as an adverse
claim on the certificate of title. The adverse claim shall be effective for a
period of thirty days from the date of registration. After the lapse of
said period, the annotation of adverse claim may be cancelled upon
filing of a verified petition therefor by the party in interest. Provided,
however that after cancellation, no second adverse claim based on the
same ground shall be registered by the same claimant.
We explained in Sajonas that for as long as there is yet no petition for
its cancellation, the notice of adverse claim remains subsisting: Thus:
At first blush, the provision in question would seem to restrict the
effectivity of the adverse claim to thirty days. But the above provision
cannot and should not be treated separately, but should be read in
relation to the sentence following, which reads:
After the lapse of said period, the annotation of the adverse claim may
be cancelled upon filing of a verified petition therefor by the party in
interest.
If the rationale of the law was for the adverse claim to ipso facto lose
force and effect after the lapse of thirty days, then it would not have
been necessary to include the foregoing caveat to clarify and complete
the rule. For then, no adverse claim need be cancelled. If it has been
automatically terminated by mere lapse of time, the law would not
have required the party in interest to do a useless act.
6

In a petition for cancellation of adverse claim, a hearing must first be
conducted. The hearing will afford the parties an opportunity to prove
the propriety or impropriety of the adverse claim.
7
Petitioner was
unlawfully denied this opportunity when the Registrar of Deeds
automatically cancelled the adverse claim. Needless to state, the
cancellation of her adverse claim is ineffective.
But this is not all. Appellant spouses alleged good faith is negated by
the evidence on record. At the trial court, respondent spouses declared
that they retained Atty. Rufino Reyes to assist them in buying Lot 1208.
According to Atty. Reyes, his clients asked him to verify the status of
the land from the Register of Deeds. However, he failed to do so. Had he
done so, he would have discovered the adverse claim of the petitioner
over the lot. He would have also known that the adverse claim was
cancelled by the Registrar on his own and not because any petition was
made by any party-in-interest.
8
Respondent spouses are bound by the
negligence of their lawyer.
Time and again, we have reiterated that a purchaser in good faith and
for value is 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 claims or interest of some other person in the
property.
9
The adverse claim of petitioner Rogelia Diaz-Duarte was
annotated in Corregidor's title as early as October 17, 1979. It was
existing when Corregidor sold the property to respondents Ong on
February 28, 1981. Hence, respondent spouses cannot be considered
innocent purchasers for value and in good faith. Their claim over Lot
1208 must yield to the lien in favor of petitioner.
10

IN VIEW WHEREOF, the decision of the Court of Appeals in C.A. G.R. CV
No. 09598, is REVERSED and the decision of the trial court is hereby
REINSTATED. No costs.
SO ORDERED.
Melo, Mendoza and Martinez, JJ., concur.
Footnotes
1 C.A. G.R. CV No. 09598.
2 Court of Appeals Decision, pp. 2-5; Rollo, pp. 41-44.
3 Civil Case No. 6545 entitled "Encarnacion A. Benedicto, et. al. v.
Rogelia Diaz-Duarte, et. al.".
4 Court of Appeals Decision, p. 2; Rollo, p. 41.
5 258 SCRA 79 (1996).
6 Supra note 5.
7 Id. See also Gonzales v. Bersamin, 254 SCRA 652 (1996).
8 TSN, June 8, 1984, pp. 3-8.
9 Sandoval v. Court of Appeals, 263 SCRA 275 (1996).
10 Yu v. Court of Appeals, 251 SCRA 509 (1995).

Republic of the Philippines SUPREME COURT Manila
FIRST DIVISION
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.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari
seeking to reverse the Decision
1
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 attorneys 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 Arbiters 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,
3
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.
4

In Occea v. Esponilla,
5
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 buyers rights except
when the second buyer first registers in good faith the second sale; and
(2) Knowledge gained by the second buyer of the first sale defeats his
rights even if he is first to register, since such knowledge taints his
registration with bad faith. Differently put, the act of registration by the
second buyer must be coupled with good faith, meaning, the registrant
must have no knowledge of the defect or lack of title of his vendor or
must not have been aware of facts which should put him upon such
inquiry and investigation as might be necessary to acquaint him with
the defects in the title of his vendor.
6

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 persons claim on or
interest in it.
7
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.
8

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.
9

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.
10

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.

Footnotes
1
Rollo, pp. 20-41. Penned by Associate Justice Celia C. Librea-Leagogo
and concurred in by Associate Justice Andres B. Reyes, Jr., and
Associate Justice Lucas P. Bersamin.
2
Ten Forty Realty and Development Corp. v. Cruz, G.R. No. 151212,
September 10, 2003, 410 SCRA 484.
3
G.R. No. 144576, May 28, 2004, 430 SCRA 210, citing Balatbat v. Court
of Appeals, 261 SCRA 128 (1996).
4
Gabriel v. Spouses Mabanta and Colobong, G.R. No. 142403, March 26,
2003, 399 SCRA 573.
5
G.R. No. 156973, June 4, 2004, 431 SCRA 116.
6
San Lorenzo Development Corp. v. Court of Appeals, G.R. No. 124242,
January 21, 2005, 449 SCRA 99, citing Nuguid v. Court of Appeals, 171
SCRA 213 (1989); Bautista v. Court of Appeals, 230 SCRA 446 (1994).
7
Tanongon v. Samson, G.R. No. 140889, May 9, 2002, 382 SCRA 130,
citing David v. Malay, 318 SCRA 711 (1999); Republic v. Court of Appeals,
301 SCRA 366 (1999); Co v. Court of Appeals, 196 SCRA 705 (1991).
8
Aguirre v. Court of Appeals, G.R. No. 122249, January 29, 2004, 421
SCRA 310.
9
Occea v. Espanilla, supra, footnote 5, pp. 124-125, citing Spouses
Castro v. Miat, 397 SCRA 271 (2003).
10
Baricuatro, Jr. v. Court of Appeals, G.R. No. 105902, February 9, 2000,
325 SCRA 137, citing Philippine Stock Exchange, Inc. v. Court of Appeals,
281 SCRA 232 (1997).

THIRD DIVISION
[G.R. No. 119745. June 20, 1997]
POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner,
vs. COURT OF APPEALS, SPOUSES REYNALDO and
ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL
BANK, respondents.
D E C I S I O N
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is the
subject of a contract of sale with assumption of mortgage a ground (1)
for rescission of such contract and (2) for a return by the mortgagee of
the amortization payments made by the buyer who assumed such
mortgage?
Petitioner posits an affirmative answer to such question in this
petition for review on certiorari of the March 27, 1995 Decision[1] of
the Court of Appeals, Eighth Division, in CA-G.R. CV Case No. 32298
upholding the validity of the contract of sale with assumption of
mortgage and absolving the mortgagee from the liability of returning
the mortgage payments already made.[2]
The Facts
Petitioner Power Commercial & Industrial Development
Corporation, an industrial asbestos manufacturer, needed a bigger
office space and warehouse for its products. For this purpose, on
January 31, 1979, it entered into a contract of sale with the spouses
Reynaldo and Angelita R. Quiambao, herein private respondents. The
contract involved a 612-sq. m. parcel of land covered by Transfer
Certificate of Title No. S-6686 located at the corner of Bagtican and St.
Paul Streets, San Antonio Village, Makati City. The parties agreed that
petitioner would pay private respondents P108,000.00 as down
payment, and the balance of P295,000.00 upon the execution of the
deed of transfer of the title over the property. Further, petitioner
assumed, as part of the purchase price, the existing mortgage on the
land. In full satisfaction thereof, he paid P79,145.77 to Respondent
Philippine National Bank (PNB for brevity).
On June 1, 1979, respondent spouses mortgaged again said land
to PNB to guarantee a loan of P145,000.00, P80,000.00 of which was
paid to respondent spouses. Petitioner agreed to assume payment of
the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale
With Assumption of Mortgage which contained the following terms and
conditions:[3]
That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid
in cash, and which we hereby acknowledge to be payment in full and
received to our entire satisfaction, by POWER COMMERCIAL AND
INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino
Corporation, organized and existing under and by virtue of Philippine
Laws with offices located at 252-C Vito Cruz Extension, we hereby by
these presents SELL, TRANSFER and CONVEY by way of absolute sale
the above described property with all the improvements existing
thereon unto the said Power Commercial and Industrial Development
Corporation, its successors and assigns, free from all liens and
encumbrances.
We hereby certify that the aforesaid property is not subject to nor
covered by the provisions of the Land Reform Code -- the same having
no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of
the above described property, free from any lien and/or encumbrance,
and we hereby agree and warrant to defend its title and peaceful
possession thereof in favor of the said Power Commercial and
Industrial Development Corporation, its successors and assigns, against
any claims whatsoever of any and all third persons; subject, however,
to the provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine
National Bank, Cubao, Branch, Quezon City for the amount of one
hundred forty-five thousand pesos, Philippine, evidenced by document
No. 163, found on page No. 34 of Book No. XV, Series of 1979 of Notary
Public Herita L. Altamirano registered with the Register of Deeds of
Pasig (Makati), Rizal xxx;
That the said Power Commercial and Industrial Development
Corporation assumes to pay in full the entire amount of the said
mortgage above described plus interest and bank charges, to the said
mortgagee bank, thus holding the herein vendor free from all claims by
the said bank;
That both parties herein agree to seek and secure the agreement and
approval of the said Philippine National Bank to the herein sale of this
property, hereby agreeing to abide by any and all requirements of the
said bank, agreeing that failure to do so shall give to the bank first lieu
(sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager
of petitioner-corporation, submitted to PNB said deed with a formal
application for assumption of mortgage.[4]
On February 15, 1980, PNB informed respondent spouses that,
for petitioners failure to submit the papers necessary for approval
pursuant to the formers letter dated January 15, 1980, the application
for assumption of mortgage was considered withdrawn; that the
outstanding balance of P145,000.00 was deemed fully due and
demandable; and that said loan was to be paid in full within fifteen (15)
days from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980 and
P20,283.14 on December 23, 1980, payments which were to be applied
to the outstanding loan. On December 23, 1980, PNB received a letter
from petitioner which reads:[6]
With regard to the presence of the people who are currently in
physical occupancy of the (l)ot xxx it is our desire as buyers and new
owners of this lot to make use of this lot for our own purpose, which is
why it is our desire and intention that all the people who are currently
physically present and in occupation of said lot should be removed
immediately.
For this purpose we respectfully request that xxx our assumption of
mortgage be given favorable consideration, and that the mortgage and
title be transferred to our name so that we may undertake the
necessary procedures to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems
of this nature, and that the previous owner would be responsible for
the removal of the people who were there. Inasmuch as the previous
owner has not been able to keep his commitment, it will be necessary
for us to take legal possession of this lot inorder (sic) to take physical
possession.
On February 19, 1982, PNB sent petitioner a letter as
follows:[7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed
on December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last
maturity with interest arrearages amounting to P25,826.08 as of
February 19, 1982. The last payment received by us was on December
24, 1980 for P20,283.14. In order to place your account in current
form, we request you to remit payments to cover interest, charges, and
at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against
respondent spouses for rescission and damages before the Regional
Trial Court of Pasig, Branch 159. Then, in its reply to PNBs letter of
February 19, 1982, petitioner demanded the return of the payments it
made on the ground that its assumption of mortgage was never
approved. On May 31, 1983,[8] while this case was pending, the
mortgage was foreclosed. The property was subsequently bought by
PNB during the public auction. Thus, an amended complaint was filed
impleading PNB as party defendant.
On July 12, 1990, the trial court[9] ruled that the failure of
respondent spouses to deliver actual possession to petitioner entitled
the latter to rescind the sale, and in view of such failure and of the
denial of the latters assumption of mortgage, PNB was obliged to
return the payments made by the latter. The dispositive portion of said
decision states:[10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment
in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with
Assumption of Mortgage executed between plaintiff and defendants
Spouses Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to
plaintiff the amount of P187,144.77 (P108,000.00 plus P79,145.77)
with legal interest of 12% per annum from date of filing of herein
complaint, that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount
of P62,163.59 (P41,880.45 and P20,283.14) with 12% interest thereon
from date of herein judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being
warranted under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are
dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court
of Appeals reversed the trial court. In the assailed Decision, it held that
the deed of sale between respondent spouses and petitioner did not
obligate the former to eject the lessees from the land in question as a
condition of the sale, nor was the occupation thereof by said lessees a
violation of the warranty against eviction. Hence, there was no
substantial breach to justify the rescission of said contract or the return
of the payments made. The dispositive portion of said Decision
reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and
the complaint filed by Power Commercial and Industrial Development
Corporation against the spouses Reynaldo and Angelita Quiambao and
the Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of
the contract between the parties warranting rescission; and (2) there
was a mistake in payment made by petitioner, obligating PNB to
return such payments. In its Memorandum, it specifically assigns the
following errors of law on the part of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing
to consider in its decision that a breach of
implied warranty under Article 1547 in
relation to Article 1545 of the Civil Code
applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing
to consider in its decision that a mistake in
payment giving rise to a situation where the
principle of solutio indebiti applies is
obtaining in the case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the
difference between a condition and a warranty and the consequences
of such distinction.
Conspicuous Absence of an Imposed Condition
The alleged failure of respondent spouses to eject the lessees
from the lot in question and to deliver actual and physical possession
thereof cannot be considered a substantial breach of a condition for
two reasons: first, such failure was not stipulated as a condition --
whether resolutory or suspensive -- in the contract; and second, its
effects and consequences were not specified either.[13]
The provision adverted to by petitioner does not impose a
condition or an obligation to eject the lessees from the lot. The deed of
sale provides in part:[14]
We hereby also warrant that we are the lawful and absolute owners of
the above described property, free from any lien and/or encumbrance,
and we hereby agree and warrant to defend its title and peaceful
possession thereof in favor of the said Power Commercial and
Industrial Development Corporation, its successors and assigns, against
any claims whatsoever of any and all third persons; subject, however,
to the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of
petitioner-corporation, did not ask the corporations lawyers to
stipulate in the contract that Respondent Reynaldo was guaranteeing
the ejectment of the occupants, because there was already a proviso in
said deed of sale that the sellers were guaranteeing the peaceful
possession by the buyer of the land in question.[15] Any obscurity in a
contract, if the above-quoted provision can be so described, must be
construed against the party who caused it.[16] Petitioner itself caused
the obscurity because it omitted this alleged condition when its lawyer
drafted said contract.
If the parties intended to impose on respondent spouses the
obligation to eject the tenants from the lot sold, it should have included
in the contract a provision similar to that referred to in Romero vs.
Court of Appeals,[17] where the ejectment of the occupants of the lot
sold by private respondent was the operative act which set into motion
the period of petitioners compliance with his own obligation, i.e., to
pay the balance of the purchase price. Failure to remove the squatters
within the stipulated period gave the other party the right to either
refuse to proceed with the agreement or to waive that condition of
ejectment in consonance with Article 1545 of the Civil Code. In the case
cited, the contract specifically stipulated that the ejectment was a
condition to be fulfilled; otherwise, the obligation to pay the balance
would not arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties
intended to make its nonfulfillment a ground for rescission. If they did
intend this, their contract should have expressly stipulated so. In Ang
vs. C.A.,[18] rescission was sought on the ground that the petitioners
had failed to fulfill their obligation to remove and clear the lot sold,
the performance of which would have given rise to the payment of the
consideration by private respondent. Rescission was not allowed,
however, because the breach was not substantial and fundamental to
the fulfillment by the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to
the usual warranty against eviction, and not to a condition that was not
met. The terms of the contract are so clear as to leave no room for any
other interpretation.[19]
Futhermore, petitioner was well aware of the presence of the
tenants at the time it entered into the sales transaction. As testified to
by Reynaldo,[20] petitioners counsel during the sales negotiation even
undertook the job of ejecting the squatters. In fact, petitioner actually
filed suit to eject the occupants. Finally, petitioner in its letter to PNB
of December 23, 1980 admitted that it was the buyer(s) and new
owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the
respondent spouses failed to deliver the lot sold. Petitioner asserts that
the legal fiction of symbolic delivery yielded to the truth that, at the
execution of the deed of sale, transfer of possession of said lot was
impossible due to the presence of occupants on the lot sold. We find
this misleading.
Although most authorities consider transfer of ownership as
the primary purpose of sale, delivery remains an indispensable
requisite as our law does not admit the doctrine of transfer of property
by mere consent.[21] The Civil Code provides that delivery can either
be (1) actual (Article 1497) or (2) constructive (Articles 1498-
1501). Symbolic delivery (Article 1498), as a species of constructive
delivery, effects the transfer of ownership through the execution of a
public document. Its efficacy can, however, be prevented if the vendor
does not possess control over the thing sold,[22] in which case this
legal fiction must yield to reality.
The key word is control, not possession, of the land as petitioner
would like us to believe. The Court has consistently held that:[23]
x x x (I)n 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 xxx 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 not been
effected.
Considering that the deed of sale between the parties did not
stipulate or infer otherwise, delivery was effected through the
execution of said deed. The lot sold had been placed under the control
of petitioner; thus, the filing of the ejectment suit was subsequently
done. It signified that its new owner intended to obtain for itself and to
terminate said occupants actual possession thereof. Prior physical
delivery or possession is not legally required and the execution of the
deed of sale is deemed equivalent to delivery.[24] This deed operates
as a formal or symbolic delivery of the property sold and authorizes the
buyer to use the document as proof of ownership. Nothing more is
required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure
to establish any breach of the warranty against eviction. Despite its
protestation that its acquisition of the lot was to enable it to set up a
warehouse for its asbestos products and that failure to deliver actual
possession thereof defeated this purpose, still no breach of warranty
against eviction can be appreciated because the facts of the case do not
show that the requisites for such breach have been satisfied. A breach
of this warranty requires the concurrence of the following
circumstances:
(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.[25]
In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected
the occupants of said lot, and not that it has been evicted therefrom. As
correctly pointed out by Respondent Court, the presence of lessees
does not constitute an encumbrance of the land,[26] nor does it deprive
petitioner of its control thereof.
We note, however, that petitioners deprivation of ownership
and control finally occurred when it failed and/or discontinued paying
the amortizations on the mortgage, causing the lot to be foreclosed and
sold at public auction. But this deprivation is due to petitioners fault,
and not to any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is
presumed, under the law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the
payments it made to PNB is warranted under Article 2154 of the Code,
solutio indebiti does not apply in this case. This doctrine applies where:
(1) a payment is made when there exists no binding relation between
the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not
through liberality or some other cause.[27]
In this case, petitioner was under obligation to pay the
amortizations on the mortgage under the contract of sale and the deed
of real estate mortgage. Under the deed of sale (Exh. 2),[28] both
parties agreed to abide by any and all the requirements of PNB in
connection with the real estate mortgage. Petitioner was aware that
the deed of mortgage (Exh. C) made it solidarily and, therefore,
primarily[29] liable for the mortgage obligation:[30]
(e) The Mortgagor shall neither lease the mortgaged property xxx
nor sell or dispose of the same in any manner, without the written
consent of the Mortgagee. However, if not withstanding this stipulation
and during the existence of this mortgage, the property herein
mortgaged, or any portion thereof, is xxx sold, it shall be the obligation
of the Mortgagor to impose as a condition of the sale, alienation or
encumbrance that the vendee, or the party in whose favor the
alienation or encumbrance is to be made, should take the property
subject to the obligation of this mortgage in the same terms and
condition under which it is constituted, it being understood that the
Mortgagor is not in any manner relieved of his obligation to the
Mortgagee under this mortgage by such sale, alienation or
encumbrance; on the contrary both the vendor and the vendee, or the
party in whose favor the alienation or encumbrance is made shall be
jointly and severally liable for said mortgage obligations. xxx.
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was
a mistake because PNB disapproved its assumption of mortgage after it
failed to submit the necessary papers for the approval of such
assumption.
But even if petitioner was a third party in regard to the
mortgage of the land purchased, the payment of the loan by petitioner
was a condition clearly imposed by the contract of sale. This fact alone
disproves petitioners insistence that there was a mistake in
payment. On the contrary, such payments were necessary to protect its
interest as a the buyer(s) and new owner(s) of the lot.
The quasi-contract of solutio indebiti is one of the concrete
manifestations of the ancient principle that no one shall enrich himself
unjustly at the expense of another.[31] But as shown earlier, the
payment of the mortgage was an obligation petitioner assumed under
the contract of sale. There is no unjust enrichment where the
transaction, as in this case, is quid pro quo, value for value.
All told, respondent Court did not commit any reversible error
which would warrant the reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed
Decision is AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., and Melo, JJ., concur.
Francisco, J., on leave.


[1] Penned by J. Jesus M. Elbinias and concurred in by JJ. Lourdes K.
Tayao-Jaguros and B.A. Adefuin-De la Cruz.
[2] Rollo, p. 34.
[3] Records, pp. 361-362.
[4] Records, pp. 261-264.
[5] Records, p. 306.
[6] Records, p. 298.
[7] Records, p. 299.
[8] Notice of Extra-Judicial Sale, Records, p. 372.
[9] The decision was penned by then Judge (now Justice of the Court of
Appeals) Maria Alicia M. Austria.
[10] Rollo, p. 44.
[11] Rollo, p. 34.
[12] Rollo, p. 148.
[13] Article 1458, 2nd paragraph, Civil Code; and Romero vs. Court of
Appeals, 250 SCRA 223, 232, November 23, 1995.
[14] Records, p. 361.
[15] TSN, April 1, 1987, pp. 19-21; and Rollo, p. 147.
[16] Article 1377, Civil Code; Ang vs. Court of Appeals, 170 SCRA 286,
294, February 13, 1989; and Lim Yhi Luya vs. Court of
Appeals, 99 SCRA 668, 682-683, September 11, 1980.
[17] Supra, p. 234.
[18] Supra, p. 296.
[19] Article 1370, Civil Code; Ang vs. C.A., ibid, p. 295; Sy vs. Court of
Appeals, 131 SCRA 116, 124, July 31, 1984; Labasan vs.
Lacuesta, 86 SCRA 16, 21, October 30, 1978.
[20] TSN, November 4, 1983, p.23 and November 14, 1983, pp. 28-30.
[21] Article 1477 & 1495, Civil Code; Fidelity & Deposit Co. vs. Wilson, 8
Phil. 51, 56-57 (1907); Tan Leonco vs. Go Inqui, 8 Phil. 531,
534 (1907); and Kuenzle & Streiff vs. Macke & Chandler,
14 Phil. 610, 611-612 (1909).
[22] Addison vs. Felix, 38 Phil. 404, 408 (1918); Vda. de Sarmiento vs.
Lesaca, 108 Phil. 900, 902-903 (1960); and Danguilan vs.
Intermediate Appellate Court, 168 SCRA 22, 32,
November 28, 1988.
[23] Ibid.
[24] Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals, 225 SCRA
678, 687, August 27, 1993.
[25] Escaler v. Court of Appeals, 138 SCRA 1, 7, August 1, 1985;
Canizares Tiana v. Torrejos, 21 Phil. 127, 130 (1911);
Bautista vs. Laserna, 72 Phil. 506, 510 (1941); and
Jovellano vs. Lualhati, 47 Phil. 371, 373 (1925).
[26] Investment & Development Corp. vs. Court of Appeals, 162 SCRA
636, 641-642, June 27, 1988.
[27] Velez vs. Balzarza, 73 Phil. 630, 632 (1942); City of Cebu vs. Judge
Piccio, 110 Phil. 558, 563 (1960); and Andres vs.
Manufacturers Hanover & Trust Corporation, 177 SCRA
618, 622, September 15, 1989.
[28] Records, p. 362.
[29] Article 1216, Civil Code.
[30] Records, p. 256.
[31] Ibid.; and Ramie Textiles, Inc. vs. Mathay, Sr., 89 SCRA 586, 592,
April 30, 1979.