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 Decision1 dated August 20, 2002 and
the Resolution2 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 petitioners Motion for Reconsideration.
The antecedent facts are as follows:
On May 25, 1988,3 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 1988,4 a Deed of Absolute Sale5 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 P250,000 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
corporations 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 codefendants, 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.6
The spouses Velasco, herein respondents, then filed an appeal
before the Court of Appeals alleging that the courta 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:

SO ORDERED.7
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.8
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:
...

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, Sheriffs 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 attorneys fees; and P10,000 as litigation
expenses.
Costs against appellee.

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.9
In Bautista v. Court of Appeals,10 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,11 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.12
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.13
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 diligence14 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. 15 Since the mortgage contract was
void, the foreclosure of the property was ineffectual as
well.16 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 vendors title, will not make him an innocent
purchaser for value, if it afterwards develops that the title was
in fact defective, and it appears that he had such notice of the
defect as would have led to its discovery had he acted with
that measure of precaution which may reasonably be required
of a prudent man in a like situation. 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.17
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. Petitioners 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.18
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.

16. CARBONELL v CA

had notice that Carbonell paid off the mortgage debt as

FACTS: Poncio, a Batanes native, owned a parcel of

the mortgage passbook was already in his possession.

land, which he offered to sell to Carbonell and Infante.

She likewise ignored Carbonell and refused to talk to

The land was mortgaged to Republic Bank. Poncio and

here. These are badges of bad faith that taint her

Carbonell agreed to the sale of the land, and the latter

registration.

assumed to pay the mortgage in favor of the bank.

Poncio and Carbonell executed an instrument where the
latter allowed the former to remain in the premises in

Article 1544 provides that for double sale of an immovable

property, the ownership shall belong to the person who first
acquired it in good faith and recorded it in the Registry of
Property

spite of the sale for a period of 1 year. Later on, when

the Formal Deed of Sale was to be executed, Poncio told
Carbonell that he could no longer proceed with the sale
as he had already sold the same to Infante for a better
price. Carbonell immediately sought to register adverse
claim; 4 days later, Infante registered the sale with the
adverse claim annotated thereto. Infante thereafter
introduced significant improvements on the property.
They now dispute ownership over the said land.

Article 1544, New Civil Code, which is decisive of this case,

recites:
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
movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
The buyer must act in good faith in registering the deed of sale

ISSUE: Who has a better title, Carbonell or Infante?

It is essential that the buyer of realty must act in good faith in

registering his deed of sale to merit the protection of the
second paragraph of said Article 1544.

HELD: CARBONELL. In order to claim the benefit of Art.

1544, the buyer of realty must register the property in
good faith. It is a pre-condition to a superior title. In
this case, Infante was not in good faith, thus the prior
sale to Carbonell must prevail. Infante registered her
claim 4 days after the adverse claim was registered, she

Unlike the first and third paragraphs of said Article 1544,

which accord preference to the one who first takes possession
in good faith of personal or real property, the second
paragraph directs that ownership of immovable property
should be recognized in favor of one "who in good faith first
recorded" his right. Under the first and third paragraph, good
faith must characterize the act of anterior registration.
Rule when there is inscription or not

If there is no inscription, what is decisive is prior possession in

good faith. If there is inscription, as in the case at bar, prior
registration in good faith is a pre-condition to superior title.
Carbonell was in good faith when she bought the lot
When Carbonell bought the lot from Poncio on January 27,
1955, she was the only buyer thereof and the title of Poncio
was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware and she
could not have been aware of any sale of Infante as there
was no such sale to Infante then.
Hence, Carbonell's prior purchase of the land was made in
good faith. Her good faith subsisted and continued to exist
when she recorded her adverse claim four (4) days prior to the
registration of Infantes's deed of sale.
Carbonells good faith did not cease when she was informed
by Poncio about the sale to Emma Infante
After learning about the second sale, Carbonell tried to talk to
the Infantes but the latter refused.
(Exact words of the SC: With an aristocratic disdain unworthy
of the good breeding of a good Christian and good neighbor,
Infante snubbed Carbonell like a leper and refused to see her.)
So Carbonell did the next best thing to protect her right she
registered her adversed claim on February 8, 1955. Under the
circumstances, this recording of her adverse claim should be
deemed to have been done in good faith and should emphasize
Infante's bad faith when she registered her deed of sale four
(4) days later on February 12, 1955.
The Infantes were in bad faith (5 indications of bad faith listed
below)
Bad faith arising from previous knowledge by Infante of the
prior sale to Carbonell is shown by the following facts:
1. Mrs. Infante refused to see Carbonell.
Her refusal to talk to Carbonell could only mean that she did
not want to listen to Carbonell's story that she (Carbonell) had
previously bought the lot from Poncio.
2. Carbonell was already in possession of mortgage passbook
and copy of the mortgage contract. (Not Poncios saving
deposit passbook.)
Infante naturally must have demanded from Poncio the
delivery to her of his mortgage passbook and mortgage

contract so that the fact of full payment of his bank mortgage

will be entered therein; and Poncio, as well as the bank, must
have inevitably informed her that said mortgage passbook
could not be given to her because it was already delivered to
Carbonell.
3. Emma Infante did not inquire why Poncio was no longer in
possession of the mortgage passbook and why it was in
Carbonells possession.
The fact that Poncio was no longer in possession of his
mortgage passbook and that the said mortgage passbook was
already in possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no longer in
possession of the mortgage passbook and from Carbonell why
she was in possession of the same.
4. Emma Infante registered the sale under her name after
Carbonell filed an adverse claim 4 days earlier.
Here she was again on notice of the prior sale to Carbonell.
Such registration of adverse claim is valid and effective.
5. Infante failed to inquire to Poncio WON he had already sold
the property to Carbonell especially that it can be shown that
he was aware of the offer made by Carbonell.
Poncio alleged in his answer that Mrs. Infante and Mrs.
Carbonell offered to buy the lot at P15/sq. m. which offers he
rejected as he believed that his lot is worth at least P20.00/sq.
m. It is therefore logical to presume that Infante was told by
Poncio and consequently knew of the offer of Carbonell which
fact likewise should have put her on her guard and should
have compelled her to inquire from Poncio whether or not he
had already sold the property to Carbonell
The existence of prior sale to Carbonell was duly established
From the terms of the memorandum, it tends to show that the
sale of the property in favor of Carbonell is already an
accomplished act. As found by the trial court, to repeat the
said memorandum states "that Poncio is allowed to stay in the
property which he had sold to the plaintiff ..., it tends to show
that the sale of the property in favor of the plaintiff is already
an accomplished act..."
There was an adequate consideration or price for the sale in
favor of Carbonell
Poncio agreed to sell the same to Carbonell at P9.50 per
square meter, on condition that Carbonell:
1. should pay (a) the amount of P400.00 to Poncio and the
arrears in the amount of P247.26 to the bank

2. should assume his mortgage indebtedness.

The bank president agreed to the said sale with assumption of
mortgage in favor of Carbonell an Carbonell accordingly paid
the arrears of P247.26.
It is evident therefore that there was ample consideration, and
not merely the sum of P200.00, for the sale of Poncio to
Carbonell of the lot in question.
The subject property was identified and described
The court has arrived at the conclusion that there is sufficient
description of the lot referred to in Exh. As none other than the
parcel of lot occupied by the defendant Poncio and where he
has his improvements erected. The Identity of the parcel of
land involved herein is sufficiently established by the contents
of the note Exh. 'A'.

SPOUSES TANGLAO vs. SPOUSES PARUNGAO

G.R. No. 166913
October 5, 2007
[KNOWLEDGE BY FIRST BUYER]

appeal and affirmed the Decision of the HLURB Board of

Commissioners. Petitioners MR was also denied by the said
Office.
Eventually, petitioners filed with the CA a petition for
review.The CA rendered its Decision dismissing the petition,
hence this petition for Review on Certiorari

FACTS: Spouses Parungao, purchased from Spring Homes 7

Subdivision Lots in Laguna. Respondents made a down
payment, leaving a balance exclusive of interest. Respondents
introduced improvements on the lots. Under the terms of the
Contracts to Sell signed by respondents and Spring Homes,
the balance of was to be paid by them within one year from its
execution. Respondents failed to pay the installments.

ISSUE: Who between the petitioners and respondents have the

right of ownership over the two lots in controversy.

Later, Spring Homes executed two separate Deeds of Absolute

Sale in favor of spouses Tanglao, petitioners, wherein the
former sold to the latter two lots. It turned out that the lots sold
to them were among the lots previously sold to the spouses
Parungao.

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:

In a letter, 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; it apologized and promised
she would settle the matter with petitioners. However, the
controversy was not settled.
Respondent Spouses Parungao filed with the Housing and
Land Use Regulatory Board (HLURB), a complaint for
annulment of deed of sale and/or return of investment for the
seven (7) lots and costs of improvements, plus interest and
damages. Impleaded as respondents were Spring Homes and
petitioners. Despite notice, Spring Homes did not appear
during the hearings.
The HLURB Arbiter rendered a Decision ordering respondent
Spring Homes to pay complainants by way of refund of
payments and damages.
Dissatisfied with the ruling, respondents filed a petition for
review with the HLURB Board of Commissioners. The
HLURB Board of Commissioners reversed the Arbiters
Decision and granted the petition for review. Petitioners filed a
motion for reconsideration, but this was denied by the
HLURB Board of Commissioners. Petitioners then filed an
appeal with the Office of the President, which dismissed their

HELD: SPOUSES PARUNGAO, the first buyer.

PETITION DENIED. The Decision of the CA is AFFIRMED
in toto.

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 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 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.
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
NOTES:
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

CHENG V. GENATO (December 29, 1998)

FACTS:
Respondent Genato entered a contract to sell to spouses Da
Jose pertaining to his property in Bulacan. The contract made
in public document states that the spouses shall pay the down
payment and 30 days after verifying the authenticity of the
documents, they shall pay the remaining purchase price.
Da Jose spouses was not able to finish verifying the
documents and as such asked for a 30 day extension. Pending
the extension and without notice to the spouses, Genato made
a document for the annulment of the contract.
Petitioner Cheng expressed interest over the property and paid
50K check with the assurance that the contract between
Genato and the spouses Da Jose will be annulled. Da Jose
spouses protested with the annulment and persuaded Genato to
continue the contract. Genato returned the check to Cheng and
hence, this petition.
HELD:
The contract between Genato and spouses Da Jose was a
contract to sell which is subject to a suspensive condition.
Thus, there will be no contract to speak of, if the obligor failed
to perform the suspensive condition which enforces a juridical
relation. 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 30day extension period has not yet expired.
Even assuming that the spouses defaulted, the contract also
cannot be validly rescinded because no notice was given to
them. Thus, 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.
The contract between Genato and Cheng is a contract to sell
not a contract of sale. But But even assuming that it should be
treated as a conditional contract of sale, it did not acquire any
obligatory force since it was subject to a suspensive condition
that the earlier contract to sell between Genato and the Da Jose
spouses should first be cancelled or rescinded.
Art.1544 should apply because 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 (PRIMUS
TEMPORE, PORTIOR JURE). (Spouses made annotation on
the title of Genato). 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.

G.R. No. L-20046

March 27, 1968

ROMEO PAYLAGO and ROSARIO DIMAANDAL,

petitioners,
vs.
INES PASTRANA JARABE and THE HONORABLE
COURT OF APPEALS, respondents.
M. de la Cruz for petitioners.
M.G. Garcia for respondents.
REYES J.B.L.,:
This is an appeal by certiorari from the decision of the
Court of Appeals affirming the lower court's decision in the
case of Romeo Paylago, et al. vs. Ines Pastrana Jarabe, CAG.R. No. 25031-R, promulgated on June 6, 1962. (Civil Case
No. R-709 of the Court of First Instance of Oriental Mindoro).
The entire lot involved in this suit was originally
covered by Homestead Patent issued on June 7, 1920 under
Act No. 926 and later under OCT No. 251 of the Registry of
Deeds of Mindoro, issued on June 22, 1920 in the name of
Anselmo Lacatan. On May 17, 1948, after the death of
Anselmo Lacatan, TCT No. T-728 (which cancelled OCT No.
251) was issued in the name his two sons and heirs, Vidal and
Florentino Lacatan. Vidal Lacatan died on August 27, 1950.
On March 23, 1953, Vidal Lacatan's heirs, namely,
Maximo, Tomas and Lucia Lacatan, executed a deed of sale
(Exh. C) in favor of the spouses Romeo Paylago and Rosario
Dimaandal, plaintiffs-petitioners herein, over a portion of the
entire lot under TCT No. T-728, which portion is described as
follows:
North Provincial Road;
East Property of Romeo Paylago;
South Property of Florentino Lacatan;
West Provincial Road (Nabuslot-Batingan);
containing an area of 3.9500 hectares.
On October 6, 1953, Florentino Lacatan also died,
leaving as his heirs his widow and three children, Felipe,
Rosita and Florencia Lacatan. On December 31, 1953, the said
children of Florentino Lacatan likewise executed a deed of
sale (Exh. D) in favor of the same vendees over another
portion of the same lot described as follows:
North Provincial Road (Calapan-Pinamalayan);
East Heirs of Sotero Mongo;
South Aniceta Lolong;
West Heirs of Vidal Lacatan;

with an area of 2.8408 hectares.

On March 2, 1954, by virtue of the registration of the
two deeds of sale (Exhs. C and D), a new TCT No. T-4208
covering the total area of
6.7908 hectares was issued in favor of plaintiffs-petitioners,
the Paylago spouses. A subsequent subdivision survey for the
purpose of segregating the two aforementioned portions of
land described in the deeds (Exhs. C and D) as well as in the
new TCT No. T-4208, however, disclosed that a portion (one
half hectare) of the total area purchased by plaintiffspetitioners and indicated in the sketch Exh. B at a point
marked Exh. B-1 was being occupied by defendantrespondent. Hence, the action to recover possession and
ownership of the said portion.
Vis-a-vis the foregoing undisputed facts, the trial court
and the Court of Appeals found that a portion of land in
question which is described as follows:
North Provincial Road;
East Apolonio Lacatan;
South Anselmo Lacatan;
West Valentin Lastica;
and with an area of one half hectare is indicated in the
sketch of subdivision plan marked Exh. B-1 of Exh. B; that on
November 27, 1938, the said portion of land was purchased by
Hilario Jarabe, late husband of defendant-respondent, from
one Apolonio Lacatan, which sale is evidenced by an
unregistered deed of sale (Exh. 6); that Apolonio Lacatan, in
turn, bought the same in 1936 from Anselmo Lacatan, the
original registered owner in whose favor OCT No. 251 and
later TCT No. T-4208 were issued; that the first deed of sale,
also unregistered, executed by Anselmo Lacatan in favor of
Apolonio Lacatan was lost during the Japanese occupation;
that the herein defendant-respondent has been in possession of
the said portion continuously, publicly, peacefully and
adversely as owner thereof from 1938 up to the present; and,
that the herein plaintiffs-petitioners knew, nay, admitted in a
deed of lease, paragraph 3 (Exh. 4), that defendant-respondent
has been in possession of the premises since 1945.
After trial, the lower court held that plaintiffs-petitioners
were not purchasers in good faith and, accordingly, rendered
judgment in favor of defendant-respondent, declaring the latter
as owner of the land in question with the right to retain
possession of the same. The decision was affirmed in toto by
the Court of Appeals.
From the evidence adduced by the parties evolved the
issue: Who has a better right in case of double sale of real
property, the registered buyer or the prior but unregistered
purchaser?

This Court has formulated in no uncertain terms the

general principle governing the matter: as between two
purchasers, the one who has registered the sale in his favor, in
good faith, has a preferred right over the other who has not
registered his title, even if the latter is in the actual possession
of the immovable property (Mendiola v. Pacalda, 10 Phil. 705;
Veguillas v. Jaucian, 25 Phil. 315; Po Sun Tun v. Price, 54
Phil. 192). Indeed, the foregoing principle finds concrete bases
in the pertinent provisions of the New Civil Code, Article
1544, providing that if the same immovable property should
have been sold to different vendees, "the ownership shall
belong to the person acquiring it who in good faith first
recorded it in the registry of property."
There is no question that the sales made in favor of
plaintiffs-petitioners were registered while the alleged sale
executed in favor of defendant-respondent was not. Applying
the foregoing principle of law to the instant case, it is now
contended by plaintiffs-petitioners that their certificate of title
must prevail over defendant-respondent, and that the courts
below correspondingly committed error in deciding the case to
the contrary.
But there is more than meets the eye in the case at bar.
While plaintiffs-petitioners have a registered title, it cannot be
denied that their acquisition and subsequent registration were
tainted with the vitiating element of bad faith. It was so found
by both the Court of First Instance and the Court of Appeals,
and their finding is conclusive upon us. Thus, in Evangelista
vs. Montao, 93 Phil. 275, 279, this Court ruled:
Both the Court of First Instance and the Court of
Appeals absolved the defendants, having found and declared
after weighing the evidence that the plaintiff, was not a
purchaser in good faith. That this conclusion is a finding of
fact and, being a finding of fact, not subject to review, is too
plain to admit of argument.
Both Courts below found that petitioners knew
beforehand that the parcel of land in question was owned by
defendant-respondent.1wph1.t
In its decision the Court of Appeals declared that
"plaintiffs herein were aware of that peaceful, continuous and
adverse possession of defendant since 1945, because this fact
is admitted by said plaintiffs in a deed of lease, paragraph 3
(Exhibit 4) covering a portion of the entire lot, and situated
just across the road from the land in question." (Dec., C. App.,
p. 4).
Considering that the boundaries of the lands that the
petitioners Paylago purchased in 1953 and 1954 were well
defined, they must have known that the portion occupied by

the defendant-respondent under claim of ownership and leased

to them by the latter was included in the description. And
coupled with their knowledge that defendant-respondent
purchased the same from Apolonio Lacatan, plaintiffspetitioners should have inquired and made an investigation as
to the possible defects of the title of the Lacatan heirs over the
entire lot sold to them, granting that the latter's certificate of
title was clear. This, they failed to do. They cannot now claim
complete ignorance of defendant-respondent's claim over the
property. As was well stated in one case, "a purchaser who has
knowledge of facts which should put him upon inquiry and
investigation as to possible defects of the title of the vendor
and fails to make such inquiry and investigation, cannot claim
that he is a purchaser in good faith and has acquired a valid
title thereto". (Sampilo vs. Court of Appeals, 55 O.G. No. 30,
p. 5772). To the same effect is the following doctrine laid
down by the Supreme Court in the case of Leung Yee v. F.L.
Strong Machinery Co. & Williamson, 37 Phil. 644. Said the
Court:
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 of the title of his
vendor. A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard and then claims
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 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.
The fundamental premise of the preferential rights
established by Article 1544 of the New Civil Code is good
faith (Bernas v. Bolo, 81 Phil. 16). To be entitled to the
priority, the second vendee must not only show prior recording
of his deed of conveyance or possession of the property sold,
but must, above all, have acted in good faith, that is to say,
without knowledge of the existence of another alienation by
his vendor to a stranger (Obras Pias v. Ignacio, 17 Phil. 45;
Leung Yee v. F.L. Strong Machinery Co., et al., op. cit.; Emas
v. De Zuzuarregui, et al., 53 Phil. 197). Short of this qualifying
circumstance, the mantle of legal protection and the
consequential guarantee of indefeasibility of title to the
registered property will not in any way shelter the recording
purchaser against known and just claims of a prior though
unregistered buyer. Verily, it is now settled jurisprudence that

knowledge of a prior transfer of a registered property by a

subsequent purchaser makes him a purchaser in bad faith and
his knowledge of such transfer vitiates his title acquired by
virtue of the later instrument of conveyance which was
registered in the Registry of Deeds (Ignacio v. Chua Hong, 52
Phil. 940; Gustilo, et al. v. Maravilla, 48 Phil. 442; Ramos, et
al. v. Dueno, et al., 50 Phil. 786). The registration of the later
instrument creates no right as against the first purchaser. For
the rights secured under the provisions of Article 1544 of the
New Civil Code to the one of the two purchasers of the same
real estate, who has secured and inscribed his title thereto in
the Registry of Deeds, do not accrue, as already mentioned,
unless such inscription is done in good faith (Leung Yee v.
F.L. Strong Machinery Co., et al., op. cit.). To hold otherwise
would reduce the Torrens system to a shield for the
commission of fraud (Gustilo, et al. v. Maravilla, op. cit.).
Plaintiffs-petitioners cited the case of Bacolod-Murcia
Milling Co., Inc. v. De la Rama, et al., G.R. No. L-4526
September 1959, to disprove bad faith ascribed to them. But
the citation does not fit with the facts of the present case. It is
to be noted that the second purchaser in the De la Rama case
had no knowledge of the previous sale and possession of the
first purchaser at the time he (second purchaser) acquired the
property involved therein. "(T)here is nothing in the complaint
which may in any way indicate that he knew such possession
and encumbrance when he bought the property from its
owner." Plaintiffs-petitioners in the instant case, however, had
knowledge of defendant-respondent's claim of ownership over
the land in question long before they purchased the same from
the Lacatan heirs. They were even told, as previously
intimated, that defendant-respondent bought the land from
Apolonio Lacatan. Thus, it could easily be distinguished that
the second purchaser in the De la Rama case acted with good
faith, i.e., without knowledge of the anterior sale and claim of
ownership of the first vendee, whereas, plaintiffs-petitioners
herein acted with manifest bad faith in buying the land in
question, all the while knowing that defendant-respondent
owns the same. Such knowledge of defendant-respondent's
ownership of the land is more than enough to overthrow the
presumption of good faith created by law in favor of plaintiffspetitioners. This being the case, we cannot just close our eyes
and blindly stamp our approval on the argument of plaintiffspetitioners that they have the better right simply because their
title is registered and as such is indefeasible.
Plaintiffs-petitioners also contend that the identity of the
land in question has not been established. Again, we disagree.
Evidence of record, both oral and documentary, unequivocally
show that the said portion of land can be identified and
segregated, and has been in fact identified and segregated
(Exh. B-1), from the entire lot covered by TCT No. T-4208
(Exh- A) issued in the names of plaintiffs-petitioners. The
boundaries of the same have been clearly indicated as that

planted by madre cacao trees. Even the surveyor hired by

plaintiffs-petitioners was able to fix the said boundaries in
such a manner as to definitely and accurately segregate the
premises from the adjoining property. How could plaintiffspetitioners now argue that the land has not been identified
when the Supreme Court itself says that what really defines a
piece of land is not the area mentioned in the description but
the boundaries (Sanchez v. Director of Lands, 63 Phil. 378;
Buizer v. Cabrera, etc., 81 Phil. 669; Bayot v. Director of
Lands, 98 Phil. 935)? Besides, the area has been also
established as one-half hectare.
Another collateral question raised by plaintiffspetitioners is the admission by the courts a quo of secondary
evidence to establish the contents of the first unregistered deed
of sale executed by Anselmo Lacatan in favor of Apolonio
Lacatan when the loss or destruction of the original document,
according to them, has not been established. Again, the
findings of the Court of Appeals destroy this assertion of
petitioners (Dec., p. 5):
Undeniably the alleged unregistered document could no
longer be examined by the parties in court, because it was lost
but its original, however, upon, the trial court's findings
which we have no reason to question has been sufficiently
proved as having existed.
As observed by this Supreme Court, "the destruction of
the instrument may be proved by any person knowing the fact.
The loss may be shown by any person who knew the fact of its
loss, or by any one who has made, in the judgment of the
court, a sufficient examination of the place or places where the
document or papers of similar character are kept by the person
in whose custody the document lost was, and has been unable
to find it; or has made any other investigation which is
sufficient to satisfy the court that the instrument is indeed
lost." (Michael & Co. v. Enriquez, 33 Phil. 87). And "it is not
even necessary to prove its loss beyond all possibility of
mistake. A reasonable probability of its loss is sufficient, and
this may be shown by a bona fide and diligent search,
fruitlessly made, for it in places where it is likely to be found."
(Government of P.I. v. Martinez, 44 Phil. 817). And after
proving the due execution and delivery of the document,
together with the fact that the same has been lost or destroyed,
its contents may be proved, among others, by the recollection
of witnesses (Vaguillas v. Jaucian, 25 Phil. 315).
Finding that the facts and the law support the same, it is
our opinion, and so hold, that the appealed decision should be,
as it is hereby affirmed. Costs against petitioners spouses
Paylago and Dimaandal.

Agricultural & Home Extension v. CA,

(See bernes pdf)
G.R. No. 11176
MARCIANO RIVERA, plaintiff-appellant, vs.
ONG CHE, defendant-appellee.
STREET, J.:
For some time prior to the events which gave origin to the
lawsuit, the house of Lichauco, or Lichauco Brothers, had
offered for sale certain old machinery and boilers which were
deposited and exposed for sale in a yard at Tanduay, in the city
of Manila. The plaintiff, Marciano Rivera, alleges that upon
January 8, 1912, he purchased some of this old material for the
price of P5,500, and received a receipt from Crisanto Lichauco
showing that he had become such purchaser. These things
consisted, according to said receipt, of two complete steamboilers, with chimneys; one steam motor (15 by 30 inches)
complete; one pair of twin rice hullers complete, and a feeding
pump (donkey) for boilers.
The plaintiff, however, did not take possession of the property,
which remained in the same place. It further appears that upon
February 9, 1912, the defendant, Ong Che, bought from
Lichauco Brothers a lot of old iron, machinery, and junk for
the sum of P1,100. This purchaser took immediate possession
of the materials purchased by him. Later, when Marciano
Rivera appeared to take possession of the things of which he
supposed himself to be the purchaser, under the receipt given
by Crisanto Lichauco, he found that many of the accessory
and auxiliary parts of the boilers, motor, and rice mill were
wanting; and upon investigation it developed that these
articles were held by the defendant, Ong Che, and were
claimed by him as owner by virtue of the purchase effected by
him upon February 9, as stated above. The plaintiff thereupon
instituted the present action to recover the articles in question
alleging that he was the true owner thereof. At the hearing in
the Court of First Instance of the city of Manila, judgment was
given in favor of the defendant and the plaintiff has appealed.
We concur in the conclusion reached by the judge of the Court
of First Instance the defendant, Ong Che, was a purchaser of
these articles in good faith. It is furthermore uncontroverted
that he acquired possession by virtue of his purchase. He,
therefore, undoubtedly has, under article 1473 of the Civil
Code, a better title than the first purchaser, who has never had
possession at all. The only doubt as to the application of that
article to the present case arises from the fact that there is
some conflict in the testimony upon the question as to who
was the original owner. It is to be inferred from the testimony
that the house of Lichauco consists of Faustino Lichauco and
Galo Lichauco, and it would seem that Crisanto Lichauco,
who effected the sale to Rivera, is not a member of that

establishment. Crisanto testified that the property sold by him

to the plaintiff Rivera, including the articles which are now in
dispute, was the property of Galo Lichauco. There is grave
doubt as to the correctness of this statement, however, as the
same witness admits that the machinery sold by him to Rivera
had been taken out of an old mill owned by Lichauco Brothers
in Dagupan; and it is not made clear that Galo Lichauco had
ever become its exclusive owner. Furthermore, the evidence
submitted by the defendant tends to show that the things
acquired by him, including the articles in dispute, were bought
from Faustino Lichauco as property of the house. At any rate
we find that, under the circumstances disclosed in this case,
and even conceding that the property belong to Galo
Lichauco, the house of Lichauco had authority to sell it. In this
view the case presented is that where two different agents of
the same owner successively negotiated sales to two different
purchasers, and it is obvious that, under the article of the Civil
Code cited above, the second purchaser having acquired
possession first must be declared the true owner. In our view
of the facts it was merely a case where a mistake was made by
the house of Lichauco in selling something that had already
been sold.
Other aspects of the case are equally fatal to the contention of
the plaintiff. It was incumbent upon the plaintiff to prove title
in himself, as against the defendant, by a preponderance of the
evidence; and he could not recover merely upon the weakness
of the defendant's title. (Belen vs. Belen, 13 Phil. Rep., 202.)
The court below held that the plaintiff had failed to prove title
in himself and we see no reason for disturbing the judgment
on this point. The defendant had, in his favor, the fact that he
was a purchaser in good faith and had acquired lawful
possession. There is a presumption arising from such
possession that he was the owner (sec. 334 [10], Code of Civil
Procedure); and the mere fact, if such it be, that the property
originally belonged to Galo Lichauco was not sufficient,
without more, to defeat a title acquired by the defendant
through the house of Lichauco.
It should be stated that at the hearing the plaintiff himself did
not appear as a witness. Furthermore, no steps were taken,
prior to the trial to secure the attendance of either Galo
Lichauco or Faustino Lichauco, both of whom would have
been most material witnesses for the plaintiff if his contention
is correct.
At the close of the trial in the court below, plaintiff's counsel
asked for a continuance in order to call these witnesses. The
court refused to grant a continuance for such purpose. In this
we think the court did not abuse its discretion, and its action in
this respect does not constitute reversible error. The plaintiff
was appraised from the nature of the issue raised that the
question to be tried was that of ownership and he should have
been ready with the witnesses to prove it. He was not entitled

to a continuance on the ground of the absence of those

important witnesses unless he showed that he had used
reasonable diligence to secure their attendance. An application
for a continuance of a cause is addressed to the sound legal
discretion of the trial court, and its ruling thereon will not be
disturbed, unless it clearly appears that such discretion has
been abused, and that by the refusal of the continuance a party
has been without his fault deprived of an opportunity of
making his case or defense.
It results that the judgment of the lower court should be
affirmed, with costs of this instance against the appellant. So
ordered.

Cagayan vs. Ca
CRB vs. CA and HEIRS OF DELA CRUZ

HELD: NO.

G.R. No. 132161

January 17, 2005
FACTS: The Madrid brothers were the registered owners of
Lot A situated in Isabela.
Said lot was subdivided into several lots. Rizal Madrid sold
part of his share identified lot A-7 to Gamiao and Dayag by
virtue of a Deed of Sale, to which his brothers offered no
objection as evidenced by their Joint Affidavit .The deed of
sale was not registered with the ORD of Isabela. However,
Gamiao and Dayag declared the property in their names on a
Tax Declaration.
Gamiao and Dayag sold the subject southern half of lot to
Teodoro dela Cruz, and the northern half to Hernandez.
Thereupon, Teodoro dela Cruz and Hernandez took possession
of and cultivated the portions of the property respectively sold
to them (Later Restituto Hernandez donated the northern half
to his daughter. The children of Teodoro dela Cruz continued
possession of the southern half after their fathers death.)
In a Deed of Sale the Madrid brothers conveyed all their rights
and interests over lot A-7 to Marquez which the former
confirmed. The deed of sale was registered with the ORD of
Isabela.
Subsequently, Marquez subdivided lot A-7 into eight (8) lots.
On the same date, Marquez and his spouse, Mercedita
Mariana, mortgaged 4 lots to the Consolidated Rural Bank,
Inc. of Cagayan Valley (hereafter, CRB) to secure a loan.
These deeds of real estate mortgage were registered with the
ORD.
As Marquez defaulted in the payment of his loan, CRB caused
the foreclosure of the mortgages in its favor and the lots were
sold to it as the highest bidder.
The Heirs-now respondents filed a case for reconveyance and
damages for the southern portion of Lot No. 7036-A
(hereafter, the subject property) against Marquez and CRB.
The RTC handed down a decision in favor of Marquez. The
Heirs interposed an appeal with the CA, which upheld the
claim of the Heirs. Hence, the instant CRB petition.
ISSUE: WON Art. 1544 of the Civil Code (double sale)
applicable in this case

The petition is denied, and the decision as modified is

affirmed. Like the lower court, the appellate court resolved the
present controversy by applying the rule on double sale
provided in Article 1544 of the Civil Code. They, however,
arrived at different conclusions. The RTC made CRB and the
other defendants win, while the Court of Appeals decided the
case in favor of the Heirs.
Article 1544 of the Civil Code reads, thus:
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
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.
The provision is not applicable in the present case. It
contemplates a case of double or multiple sales by a single
vendor. It cannot be invoked where the two different contracts
of sale are made by two different persons, one of them not
being the owner of the property sold. And even if the sale was
made by the same person, if the second sale was made when
such person was no longer the owner of the property, because
it had been acquired by the first purchaser in full dominion,
the second purchaser cannot acquire any right.
In the case at bar, the subject property was not transferred to
several purchasers by a single vendor. In the first deed of sale,
the vendors were Gamiao and Dayag whose right to the
subject property originated from their acquisition thereof from
Rizal Madrid with the conformity of all the other Madrid
brothers. On the other hand, the vendors in the other or later
deed were the Madrid brothers but at that time they were no
longer the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.
In a situation where not all the requisites are present which
would warrant the application of Art. 1544, the principle of
prior tempore, potior jure or simply he who is first in time is
preferred in right, should apply. The only essential requisite
of this rule is priority in time; in other words, the only one

who can invoke this is the first vendee. Undisputedly, he is a

purchaser in good faith because at the time he bought the real
property, there was still no sale to a second vendee. In the
instant case, the sale to the Heirs by Gamiao and Dayag, who
first bought it from Rizal Madrid, was anterior to the sale by
the Madrid brothers to Marquez. The Heirs also had possessed
the subject property first in time. Thus, applying the principle,
the Heirs, without a scintilla of doubt, have a superior right to
the subject property.
Moreover, it is an established principle that no one can give
what one does not havenemo dat quod non habet.
Accordingly, one can sell only what one owns or is authorized
to sell, and the buyer can acquire no more than what the seller
can transfer legally.53 In this case, since the Madrid brothers
were no longer the owners of the subject property at the time
of the sale to Marquez, the latter did not acquire any right to it.
NOTES:
In any event, assuming arguendo that Article 1544 applies to
the present case, the claim of Marquez still cannot prevail over
the right of the Heirs since according to the evidence he was
not a purchaser and registrant in good faith.
In the instant case, the actions of Marquez have not satisfied
the requirement of good faith from the time of the purchase of
the subject property to the time of registration. Found by the
Court of Appeals, Marquez knew at the time of the sale that
the subject property was being claimed or taken by the
Heirs. This was a detail which could indicate a defect in the
vendors title which he failed to inquire into. Marquez also
admitted that he did not take possession of the property and at
the time he testified he did not even know who was in
possession.

Carumba v. CA, (See Bernes PDf)

Dagupan v. Macam (See)
ILUMINADO HANOPOL vs. PERFECTO PILAPIL
G.R. No. L-19248
February 28, 1963
FACTS:
Appellant Hanopol claims ownership of a parcel of
unregistered land in Leyte by virtue of a series of purchases
effected in 1938 by means of private instruments, executed by
the former owners Teodora, Lucia, Generosa, Sinforosa and
Isabelo, all surnamed Siapo. Additionally, he invokes in his
favor a decision rendered by the Court of First Instance of
Leyte (in Civil Case No. 412) on a complaint he filed on June
16, 1948, against the same vendors, who, according to his own
averments, took possession of the said property in December,
1945 through fraud, threat and intimidation, pretending falsely
to be the owners thereof and ejecting the tenants of Hanopol
thereon, and since then had continued to possess the land.
Decision declaring him the exclusive owner of the land in
question and ordering therein defendants to deliver possession
thereof was rendered on September 21, 1958.
On the other hand, appellee Pilapil asserts title to the property
on the strength of a duly notarized deed of sale executed in his
favor by the same owners on December 3, 1945, which deed
of sale was registered in the Registry of Deeds of Leyte on
August 20, 1948 under the provisions of Act No. 3344.

ISSUE: Whether or not the registration of the second sale in

favor of Pilapil affects Hanopol's rights as the first vendee
HELD:
Appellant argues that the registration of Pilapil's notarized
deed of sale in 1948 under Act No. 3344 "shall be understood
to be without prejudice to a third party with a better right". He
contends that since at the time the Siapos sold the land in
question in 1945 to Pilapil, the former were no longer the
owners as they had already sold the same to appellant since
1938, the first sale to him is a better right which cannot be
prejudiced by the registration of the second sale.
We do not think the proviso in Act No. 3344 justifies
appellant's contention. If his theory is correct, then the second
paragraph of Article 1544 of the New Civil Code (formerly
Article 1473 of the old Code) would have no application at all
except to lands or real estate registered under the Spanish
Mortgage Law or the Land Registration Act. Such a theory
would thus limit the scope of that codal provision. But even if
we adopt this latter view, that is, that Article 1544 (formerly
Article 1473) only applies to registered land, still we cannot
agree with the appellant that by the mere fact of his having a

previous title or deed of sale, he has acquired thereby what is

referred to in Act No. 3344 as the "better right" that would be
unaffected by the registration of a second deed of sale under
the same law. Under such theory, there would never be a case
of double sale of the same unregistered property.
It thus appears that the "better right" referred to in Act No.
3344 is much more than the mere prior deed of sale in favor of
the first vendee. In the Lichauco case mentioned, it was the
prescriptive right that had supervened. Or, as also suggested in
that case, other facts and circumstances exist which, in
addition to his deed of sale, the first vendee can be said to
have better right than the second purchaser.
In the case at bar, there appears to be no clear evidence of
Hanopol's possession of the land in controversy. In fact, in his
complaint against the vendors, Hanopol alleged that the Siapos
took possession of the same land under claim of ownership in
1945 and continued and were in such possession at the time of
the filing of the complaint against them in 1948.
Consequently, since the Siapos were in actual occupancy of
the property under claim of ownership, when they sold the
said land to appellee Pilapil on December 3, 1945, such
possession was transmitted to the latter, at least constructively,
with the execution of the notarial deed of sale, if not actually
and physically as claimed by Pilapil in his answer filed in the
present case. Thus, even on this score, Hanopol cannot have a
better right than appellee Pilapil who, according to the trial
court, "was not shown to be a purchaser in bad faith".

G.R. No. L-13442

December 20, 1919

NARCISA SANCHEZ, plaintiff-appellant,

vs.
ROQUE RAMOS, defendant-appellee.
Irureta Goyena and Recto for appellant.
Sisenando Palarca for appellee.
AVANCEA, J.:
This is an action for the recovery of a piece of land described
in the second paragraph of the complaint. This land is in the
defendant's possession and formerly belonged to Ciriaco
Fernandez. On July 1, 1910, Ciriaco Fernandez sold it to the
spouses Marcelino Gomez and Narcisa Sanchez under pacto
de retro for the period of one year. This also was executed in a
public instrument. Marcelino Gomez and Narcisa Sanchez
never took material possession of the land. The period for
repurchase elapsed without the vendor making use of it. On
July 3, 1912, Ciriaco Fernandez again sold the same land, by
means of a private document, to Roque Ramos who
immediately took material possession thereof. By applying
article 1473 of the Civil Code, the trial court declared
preferable the sale executed to the defendant and absolved him
from the complaint.
By the same article applied by the lower court, we are of the
opinion that the sale executed to the plaintiff must be declared
preferable. This article provides:
ART. 1473.
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 personal property.
Should it be real property, it shall belong to the purchaser who
first recorded it in the registry of deeds.
Should it not be recorded, the property shall belong to the
person who first took possession of it in good faith, or, in
default of possession, to the person who presents the oldest
title, provided there is good faith.
Not one of the documents of sale in this case having been
recorded, preference must be decided in favor of the vendee
who first took possession.lawphi1.net
To what kind of possession does this article refer? Possession
is acquired by the material occupancy of the thing or right
possessed, or by the fact that the latter is subjected to the
action of our will, or by the appropriate acts and legal
formalities established for acquiring possession (art. 438, Civil
Code.). By a simple reasoning, it appears that, because the law

does not mention to which of these kinds of possession the

article refers, it must be understood that it refers to all of these
kinds. The proposition that this article, according to its letter,
refers to the material possession and excludes the symbolic
does not seem to be founded upon a solid ground. It is said
that the law, in the gradation of the causes of preference
between several sales, fixes, first, possession and then the date
of the title and, as a public instrument is a title, it is claimed
that the inference is that the law has deliberately intended to
place the symbolic possession, which the execution of the
public document implies after the material possession. This
argument, however, would only be forceful if the title,
mentioned by this article, includes public instruments, and this
would only be true if public instruments are not included in
the idea of possession spoken of in said article. In other words,
the strength of the argument rests in that this possession is
precisely the material and does not include the symbolic.
Consequently, the argument is deficient for it is begging the
same question, because if this possession includes the
symbolic, which is acquired by the execution of a public
instrument, it should be understood that the title, mentioned by
the law as the next cause of preference, does not include
public instruments.
Furthermore, our interpretation of this article 1473 is more in
consonance with the principles of justice. The execution of a
public instrument is equivalent to the delivery of the realty
sold (art. 1462, Civil Code) and its possession by the vendee
(art. 438). Under these conditions the sale is considered
consummated and completely transfers to the vendee all of the
vendor's rights of ownership including his real right over the
thing. The vendee by virtue of this sale has acquired
everything and nothing, absolutely nothing, is left to the
vendor. From this moment the vendor is a stranger to the thing
sold like any other who has never been its owner. As the thing
is considered delivered, the vendor has no longer the
obligation of even delivering it. If he continues taking material
possession of it, it is simply on account of vendee's tolerance
and, in this sense, his possession is vendor's possession. And if
the latter should have to ask him for the delivery of this
material possession; it would not be by virtue of the sale,
because this has been already consummated and has produced
all its effects, but by virtue of the vendee's ownership, in the
same way as said vendee could require of another person
although same were not the vendor. This means that after the
sale of a realty by means of a public instrument, the vendor,
who resells it to another, does not transmit anything to the
second vendee and if the latter, by virtue of this second sale,
takes material possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention
against the rights to the thing lawfully acquired by the first
vendee.

We are of the opinion that the possession mentioned in article

1473 (for determining who has better right when the same
piece of land has been sold several times by the same vendor)
includes not only the material but also the symbolic
possession, which is acquired by the execution of a public
instrument.
From the foregoing it follows that the plaintiff was the first to
take possession of the land, and consequently the sale
executed to him is preferable.
Wherefore, the judgment appealed from is hereby reversed;
the plaintiff is declared owner of the land in question; and the
defendant is ordered to deliver the possession of the land to
the plaintiff. No special findings as to costs. So ordered.

G.R. No. L-2397

TOMASA QUIMSON and MARCOS SANTOS, petitioners,
vs.
FRANCISCO ROSETE, respondent.
Marcelino Lontok for petitioners.
Ignacio Mangosing for respondent.

ART. 1462. The thing sold shall be deemed delivered, when it

is placed in the control and possession of the vendee.
When the sale is made by means of a public instrument, the
execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the said
instrument the contrary does not appear or may not be clearly
inferred.

TUASON, J.:
This is an appeal by certiorari from a decision of the Court of
Appeals reversing the judgment of the Court of First Instance
of Zambales. The case involves s dispute over a parcel of land
sold to two different persons.
The Facts as found by the Court of Appeals are these:
Esta finca pertenecia originalmente al hoy difunto Dionisio
Quimson, quien, en 7 de junio de 1932, otorgo la escritura
Exhibit A de trespaso de la misma a favor de su hija Tomasa
Quimson, pero continuo en su posesion y goce. La vendio a
los esposos Magno Agustin y Paulina Manzano en 3 de Mayo
de 1935, con pacto de recomprar dentro del plazo de seis aos;
y dos aos escasos despues, en 5 de abril de 1937, la volvio a
vender a Francisco Rosete, tambien con pacto de retro por el
termino de cinco aos, despues de haber verificado su
recompra de Agustin y Manzano, con dinero que le habla
facilitado Rosete, otorgandose a este facto la escritura de venta
Exhibit 1. Desde entoces Rosete es el que esta en su posesion
y disfrute, de una manera pacifica y quieta, aun despues de la
muerte de Dionisio Quimson, ocurrida en 6 de junio de 1939,
hasta el enero de 1943, en que Tomasa Quimson acudio al
Juez de Paz de San Marcelino , Zambales, para que este
interviniera en un arreglo con Rosete sobre dicha finca, cuyo
fracaso motivo una carrera hacia Iba, la capital de Zambales,
para ganar la prioridad del registro e inscripcion de las
escrituras de venta Exhibits A y 1 que Dionisio Quimson
otorgara a favor de Tomasa Quimson y Francisco Rosete,
respectivamente, carreraque aquella gano por haber llegado a
la meta una hora antes, a las 9:30 a.m. del 17 de febrero de
1943, en tanto que este la alcanzo a las 10:30 a.m. de ese
mismo dia.
Two questions are raised: (1) What were the effects of the
registration of plaintiff's document? and (2) Who was prior in
possession? The Court of Appeals' answer to the question is ,
None, and to the second, the defendant or second purchaser.
We do not deem it necessary to pass upon the first issue in the
light of the view we take of the last, to which we will address
ourselves presently.
Articles 1462 and 1473 of the Civil Code provide:

ART. 1473. 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 first recorded it in the registry.
Should there be no inscription, the ownership shall belong to
the person who in good faith was first in the possession; and,
in the absence of this, to the person who represents the oldest
title, provided there is good faith.
In the case of Buencamino vs. Viceo (13 Phil., 97), Mr. Justice
Willard, speaking for the court and citing article 1462 says:
"Upon a sale of real estate the execution of a notarial
document of sale is a sufficient delivery of the property sold.".
In the case of Florendo vs. Foz (20 Phil., 388), the court,
through Mr. Chief Justice Arellano, rules that "When the sale
is made by menas of a public instrument, the execution thereof
is tantamount to conveyance of the subject matter, unless the
contrary clearly follows or be deduced from such instrument
itself, and in the absence of this condition such execution by
the vendor is per se a formal or symbolical conveyance of the
property sold, that is, the vedor in the instrument itself
authorizes the purchaser to used the title of ownership as proof
that latter is thenceforth the owner of the property."
More decisive of the case at the bar, being almost on all fours
with it, is the case of Sanchez vs. Ramon (40 Phil., 614).
There. appeared that one Fernandez sold a piece of land to
Marcelino Gomez and Narcisa Sanchez under pacto de retro in
a public instrument. The purchasers neither recorded the deed
in the registry of property nor ever took materials possession
of the land. Later, Fernandez sold the same property by means
of a private document to Ramos who immediately entered
upon the possession of it. It was held that, according to article
1473 of the Civil Code, Gomez and Sanchez were the first in
possession and. consequently, that the sale in their favor was
superior. Says the court, through Mr. Justice Avancea, later
chief justice:
To what kind of possession is acquired by the materials
occupancy of the thing or right possessed, or by the fact that

the latter is subjected to the action of our will, or by the

appropriate acts and legal formalities established for acquiring
possession (art. 438, Civil Code). by a simple reasoning, it
appears that, because the law does not mention to which of
these kinds of the possession the article refers, it must be
understood that it refers to all of these kinds. The proposition
that this article, according to its letter, refers to the materials
possession and excludes the symbolic does not seem to be
founded upon a solid ground. It is said that the law, in the first
possession and then the date of the date of the title and as a
public instruments is a title, it is claimed that the inference is
that the law has deliberately intented to place the symbolic
possession, which the execution of the public document
implies, after the materials possession. This argument,
however, would only be forceful if the title, mentioned by this
article, includes public instruments, and this would only be
true if public instruments are not included in the idea of the
possession spoken of in said article. In other words the
strength of the arguments rests in that this possession is
precisely the materials and does not include the symbolic.
Consequently, the argument is deficient for it is begging the
same question, because if this possession includes the
symbolic, which is acquired by the execution of a public
instruments, it should be understood that the title, mentioned
by the law as the next cause of preference, does not include
instruments.
Furthermore, our interpretation of this article 1473 is more in
consonance with the principles of the justice. The execution of
the public instrument is equivalent to the delivery of the realty
sold (art. 1462, Civil Code ) and its possession by the vedee
(art. 438).Under these conditions the sale is considered
consummated and completely transfers to the vendee all of the
thing. the vendee by virtue of this sale has acquired everything
and nothing, absolutely nothing, is left to the vendor. Form
this moment the vendor is a stranger to the thing sold like any
other who has never been its owner. As the obligation of even
delivering it. If he continues taking materials possession of it,
is simply on account of the vendee's tolerance and, in this
sense, his possession is vendor's possession. And if the latter
should have to ask him for the delivery of this materials
possession it would not be by virtue of the sale, because this
has been already consummated and has produced all its
effects, but by virtue of the vendee's ownership, in the same
were not the vendor. This means that after the sale of the realty
by means of a public instruments, the vendor, who resells it to
another, does not transmitted anything to this second sale,
takes materials possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention
against the rights to the thing lawfully acquired by the first
vendee.
We are of the opinion that the possession mentioned in the
article 1473 (for determining who has better right when the

same piece of land has been sold several times by the vendor )
includes not the materials but also the symbolic possession,
which is acquired by the execution of a public instrument.
The Supreme Court of Spain and Mr. Manresa are of the same
opinion. On pp. 157 ,158 Vol. X, of his treatise on the Spanish
Civil Code. Manresa comments:
II. Observacion comun a la venta de muebles y a la de
inmuebles. Hemos interpretado el precepto de articulo
1.473, en sus parrafos 1. y 3. en el sentido mas racional mas
racional, aunque no tal vez en el mas adecuado a las palabras
que se emplean. Las palabras tomar posesion, y primero en la
posesion las hemos considerado como equivalentes a la de la
tradicion real o fingida a que se refieren los articulos 1.462 al
1. 464 porque si la posesion materials del objeto puede otorgar
preferencia e cuestiones de possesion y asi lo re-conoe el
articulo 445. no debe darla nunca en cuestiones de propiedad y
de la propiedad habla expresamente el articulo 1.473. Asi en
nuestra opinion, robustecida por la doctrine que rectamente se
deriva de la sentencia de 24 de Novembre de 1894, vendida
una finca A. en escritura publica despues a B., aunque se
incate materialmente este del inmueble, la etrega de la cosa
elvendedor carecia ya de la facultad de disponer de ella .
The statement of Sr. Manresa which is said to sustain the
theory of the Court of Appeals, expresses, as we under stand
that statement, the literal meaning of article 1473, for the
decision of November 24, 1894 reflects, according to the
learned author, the intention of the lawmaker and is in the
conformity with the principles of justice. now under both the a
Spanish and Philippine rules of interpretation, the spirit, the
intent, the law prevails over its letter.
Counsel for defendant denies that the land was sold to
plaintiff's Tomasa Quimson or that the Court of Appeals so
founds. All that latter court declared, he says, was that a deed
of the land was executed by the original owner on June 7,
1932.
The findings that a deed of conveyance was made by Dionisio
Quimson in favor of his daughter could have no other
meaning, in the absence of any qualifying statement , that the
land was sold by the father to his daughter. Furthermore, this
was the trial court's explicit finding which was not reversed by
the Court of Appeals and stand as the fact of the case. Looking
into the documents itself Exhibits A states categorically that
the vendor received form the vendee the consideration of sale,
P 250, acknowledge before the notary public the notary public
having executed the instruments of his own free will.
The expression in the court's decision in the case of Cruzado
vs. Escaler (34 Phil., 17), cited by the Court of Appeals,
Apparently to the effect that physical possession by the

purchaser is essential to the consummation of a sale of real of

estate, is at best obiter dictum; for the court distinctly found
that the sale to plaintiff's Cruzado's father was a sham,
execution with the sole purpose of enabling the senior
Cruzado to mortgage the property and become procurador.
And with reference to the failure of the second vendee,
Escaler, to register his purchase, the court disregarded the
omission as well as the entry of the first sale in the registry
because that entry was made by the plaintiff, son and heir of
the first supposed vendee, more than a score years after the
alleged transaction, when the plaintiff was no longer or had
any right therein (in the land). Because it already belonged to
the defendant Escaler, its lawful owner." When Escaler, the
second purchase was sued he had become the owner of the
land by prescription. The defendant's possession in the present
case fell far short of having ripened into title by prescription
when the plaintiff commenced her action.
For the reasons above stated, we are constrained to set aside
the decision of the Court of Appeals. Because the Appellate
Court found for the defendant, it made no findings on damages
for the latter's used of the property in controversy. Not being
authorized in this appeal to examine the evidence we have to
accept the trials court's appraisal of the damages. Judge Llanes
assessed the damages of P 180 for the occupation of the
agricultural years 143-44,1944-45 and 1945-46, and P 60 a
year thereafter until the possession of the property was
restituted to the plaintiffs.
Let judgment be entered in accordance with the tenor of this
decision, with costs against the defendant.

Beatingo vs. Gasis Digest

G.R. No. 179641 : February 9, 2011
DOLORITA C. BEATINGO, Petitioner, v. LILIA BU GASIS,
Respondent.
NACHURA, J.:
FACTS:
Petitioner Dolorita Beatingo bought a piece of land,
denominated as Lot No. 7219 from Flora G. Gasis on May 19,
1998. Petitioner went to the Register of Deeds to have the sale
registered. She, however, failed to obtain registration as she
could not produce the owners duplicate certificate of title.
She, thus, filed a petition for the issuance of the owners
duplicate certificate of title but was opposed by respondent
Lilia Bu Gasis, 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.
Petitioner filed a Complaint for Annulment and Cancellation
of Sale, Reconveyance, Delivery of Title and Damages against
respondent before the Regional Trial Court. 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.
The RTC considered the controversy as one of double sale and
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.
Petitioner elevated the matter to the CA via a Notice of
Appeal. 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. Instead of filing the Appellants Brief within the
extended period, petitioner twice moved for extension of time
to file the brief.
The CA denied the motions for extension to file brief. Thus,
for failure to file the Appellants Brief, the appellate court
dismissed the appeal.
ISSUE: Whether or not the CA erred in not reviewing the
merits of the appeal.
HELD:
The petition lacks merit.
REMEDIAL LAW: Extension to file brief

Evidently, petitioners 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.
The excuse forwarded above is unacceptable. An attorney is
bound to protect his clients 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.
The failure to file the Appellants Brief, though not
jurisdictional, results in the abandonment of the appeal which
may be the cause for its dismissal.
Nevertheless, to put an end to the controversy, the Court
carefully perused the records of the case and reached the
conclusion that the decision dated December 29, 2005 of the
RTC is in perfect harmony with law and jurisprudence. The
rules on double sales, as discussed above, apply.
Petition is DENIED. The decision of CA is affirmed.

Roman vs. Grimalt

6 Phil 96
April 1906
FACTS:
In between the 13th to the 23d of June, 1904, petitioner Pedro
Roman, the owner, and respondent Andres Grimalt, the
purchaser, verbally agreed upon the sale of the schooner Santa
Marina. In his letter on June 23, Grimalt agreed to buy the
vessel and offered to pay in three installments of P500 each on
July 15, September 15, and November 15, provided the title
papers to the vessel were in proper form. The title of the
vessel, however, was in the name of one Paulina Giron and not
in the name of Roman as the alleged owner. Roman promised
to perfect his title to the vessel, but failed so the papers he
presented did not show that he was the owner of the vessel. On
June 25, 1904, the vessel sank in the Manila harbor during a
severe storm, even before Roman was able to produce for
Grimalt the proper papers showing that the former was in fact
the owner of the vessel in question and not Paulina Giron. As a
result, Grimalt refused to pay the purchase price when Roman
made a demand on June 30, 1904.
On July 2, 1904, Roman filed this complaint in the CFI of
Manila, which found that the parties had not arrived at a
definite understanding, and later dismissed said complaint.
ISSUE:
Who should bear the risk of loss?
COURT RULING:
The Supreme Court affirmed the decision of the lower court
and declared Roman as the one who should bear the risk of
lost because there was no actual contract of sale. If no contract
of sale was actually executed by the parties, the loss of the
vessel must be borne by its owner and not by a party who only
intended to purchase it and who was unable to do so on
account of failure on the part of the owner to show proper title
to the vessel and thus enable them to draw up the contract of
sale. Grimalt was under no obligation to pay the price of the
vessel, the purchase of which had not been concluded. The
conversations between the parties and the letter Grimalt had
written to Roman did not establish a contract sufficient in
itself to create reciprocal rights between the parties.

Norkis Distributors, Inc. v. CA

Facts:
Petitioner Norkis Distributors, Inc. is the distributor of
Yamaha motorcycles in Negros Occidental. Alberto Nepales
bought from the Norkis Bacolod branch a brand new Yamaha
Wonderbike motorcycle. The price of P7,500 was payable by
means of a Letter of Guaranty from the DBP, which Norkis
Branch Manager Labajo agrred 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.

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.

The motorcycle was then registered in the Land Transportation

Commission in the name of Alberto Nepales. The motorcycle
was delivered to a certain Julian Nepales who was allegedly
the agent of Alberto Nepales but the latter denies it. The
motorcycle met an accident and an investigation conducted by
the DBP revealed that the unit was being driven by a certain
Zacarias Payba at the time of the accident. The unit was a total
wreck, was returned, and stored inside Norkis' warehouse.

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.

DBP released the proceeds of private respondent's motorcycle

loan to Norkis in thetotal sum of P7,500. As the price of the
motorcycle later increased to P7,828 in March, 1980,
Nepalespaid the difference of P328 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 RTC of Negros Occidental.He alleged that Norkis failed
to deliver the motorcycle which he purchased, thereby causing
himdamages. Norkis answered that the motorcycle had already
been delivered to private respondent beforethe accident,
hence, the risk of loss or damage had to be borne by him as
owner of the unit.
Issue:
WON there had already been a transfer of ownership of the
motorcycle to Alberto Nepales at the time it was destroyed
Held:
No. 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. 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.

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.

G.R. No. L-17527

April 30, 1963

SUN BROTHERS APPLIANCES, INC., plaintiff-appellee,

vs.
DAMASO P. PEREZ, defendant-appellant.
Dominador A. Alafriz for plaintiff-appellee.
Robert P. Halili & Associates for defendant-appellant.
LABRADOR, J.:
This is an action brought by the plaintiff to recover from
defendant the sum of P1,404.00, the price of one Admiral Air
Conditioner, Slim Style, Model 100-23-1 H.P., Serial No.
2978828, delivered to the defendant by the plaintiff under a
conditional sale agreement entered into by and between them
on December 6, 1958, in the City of Manila, plus stipulated
interest of 12% from January 6, 1959 until the same is fully
paid, together with P200 as attorney's fees, and costs.
Defendant answered that the air-conditioner in question was
delivered to him installed in the office of the defendant located
at Gardiner street, Lucena, Quezon on December 14, 1959 but
that said air-conditioner was totally destroyed by fire which
occured in the morning of December 28, 1958 at 2 o'clock.
Defendant further claimed that the machine was destroyed by
force majeure, not by the defendant's fault and/or negligence
and, therefore, he is not liable under the conditional sale,
Annex "A", which the parties, plaintiff and defendant, had
executed.
At the trial of the case the parties entered into a stipulation of
facts, the most important provision of which are as follows:
1. That defendant admits that on December 6, 1958, he entered
into a Conditional Sale Agreement with the plaintiff, copy of
which contract is attached to the complaint as Annex "A";

Conditioner subject of the complaint herein was burned where

it was installed by the plaintiff;
5. That defendant, after making down payment of P274.00 to
the plaintiff, did not pay any of the monthly installments of
P78.00 thereafter, leaving a balance of P1,404.00 in favor of
the plaintiff;
6. That after defendant presents evidence to prove that the Air
Conditioner was burned where it was installed by the plaintiff
to the satisfaction of this Honorable Court, the parties agree to
leave to this Honorable Court the resolution of the issue
whether loss by fire extinguishes the obligation of the
defendant to pay to the plaintiff the subsequent installments of
the initial payment;"
The Court of First Instance before which the action was
brought rendered judgment condemning the defendant to pay
the plaintiff the amount demanded in the complaint, including
interest and attorney's fees. The defendant has appealed the
case directly to us as involving only a question of law.
The conditional sale executed by the plaintiff and defendant
contained the following stipulation:
"2. Title to said property shall vest in the Buyer only upon full
payment of the entire account as herein provided, and only
upon complete performance of all the other conditions herein
specified:
"3. The Buyer shall keep said property in good condition and
properly protected against the elements, at his/its address
above-stated, and undertakes that if said property or any part
thereof be lost, damaged, or destroyed for any causes, he shall
suffer such loss, or repair such damage, it being distinctly
understood and agreed that said property remains at Buyer's
risk after delivery;"

2. That pursuant to the terms and conditions provided in the

said Conditional Sale Agreement the plaintiff delivered to the
defendant (1) Admiral Air Conditioner Slim Style Model 10023-1 HP, Serial No. 2978828 with the contract price of
P1,678.00 and that said Air Conditioner was received by the
defendant;

The Court below declared that as the buyer would be liable in

case of loss for any cause, such buyer assumed liability even
in case of loss by fortuitous event; so it rendered judgment
declaring defendant liable for the sun demanded together with
interest and attorney's fees.

3. That defendant made a down payment of P274.00 on

December 6, 1958, pursuant to the terms and conditions of the
Conditional Sales Agreement; and Air Conditioner was
installed by the plaintiff, thru its representative, at Lucena,
Quezon;

Wherefore, the parties respectfully pray that the foregoing

stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing
other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t

4. That said Air Conditioner was burned on December

27,1958, on or about 2:00 o'clock in the morning, however,
defendant will present evidence to show that the Air

In this Court on appeal defendant-appellant argues that

inasmuch as the title to the property sold shall vest in the
buyer only upon full payment of the price, the loss of the
vendor; that the phrase "for any cause" used in paragraph 2 of

the agreement may not be interpreted to include a fortuitous

event absolutely beyond the control of the appellant; and that
although Article 1174 of the new Civil Code recognizes the
exception on fortuitous event when the parties to a contract
expressly so stipulate, the phrase "for any cause" used in the
contract did not indicate any intention of the parties that the
loss of the unit due to fortuitous event is to be included within
the responsibility of the vendor.
In answer to the arguments above set forth the appellee argues
that the stipulation in the contract of sale whereby the buyer
shall be liable for any loss, damage or destruction for any
cause, is not contrary to law, morals or public policy and is
specifically authorized to be stipulated upon between the
parties by Article 1174 of the Civil Code; that the risk of loss
was expressly stipulated to be undertaken by the buyer, even if
the title to the property sold remained, also by stipulation, in
the vendor; that the terms "any cause" used in the agreement
includes a fortuitous event, and an express stipulation making
the vendee responsible in such case is valid.
We believe that the agreement making the buyer responsible
for any loss whatsoever, fortuitous or otherwise, even if the
title to the property remains in the vendor, is neither contrary
to law, nor to morals or public policy. We have held such
stipulation to be legal in the case of Government vs.
Amechazurra, 10 Phil. 637 (Tolentino, Commentaries on the
Civil Code, Vol. IV, p. 120)and declare it to be based on a
sound public policy in conditional sales according to
American decisions.
"The weight of authority support the rule that where goods are
sold and delivered to the vendor under an agreement that the
title is to remain in the vendor until payment, the loss or
destruction of the property while in the possession of the
vendor before payment, without his fault, does not relieve him
from the obligation to pay the price, and he, therefore, suffers
the loss. In accord with this rule are the provisions of the
Uniform Sales Act and the Uniform Conditional Sales Act.
There are several basis for this rule. First is the absolute and
unconditional nature of the vendee's promise to pay for the
goods. The promise is nowise dependent upon the transfer of
the absolute title. Second is the fact that the vendor has fully
performed his contract and has nothing further to do except
receive payment, and the vendee received what he bargained
for when he obtained the right of possession and use of the
goods and the right to acquire title upon making full payment
of the price. A third basis advanced for the rule is the policy of
providing an incentive to care properly for the goods, they
being exclusively under the control and dominion of the
vendee." (47 Am. Jur., pp. 81-82).
We, therefore, agree with the trial court that the loss by fire or
fortuitous event was expressly agreed in the contract to be

borne by the buyer and this express agreement is not contrary

to law but sanctioned by it as well as by the demands of
sound, public policy. The judgment of the court below is
affirmed, with costs against defendant-appellant.

Lawyers Cooperative v. Tabora

LAWYERS COOPERATIVE PUBLISHING COMPANY v.
PERFECTO A. TABORA
1965 / BAUTISTA ANGELO
FACTS
Perfecto Tabora bought from the Lawyers Cooperative
Publishing Company a complete set of AmJur, plus a set of
AmJur, General Index.
CONTRACT Title to and ownership of the books shall
remain with the seller until the purchase price shall have been
fully paid. Loss or damage to the books after delivery to the
buyer shall be borne by the buyer.
Tabora made a partial payment of P300.00, leaving a balance
of P1,382.40. The books were delivered and receipted for by
Tabora. On the same day, a fire broke out, burning down
Taboras law office and library. Tabora immediately reported it
to LCBC. The company replied and as a token of goodwill it
sent to Tabora free of charge 4 Philippine Reports volumes.
As Tabora failed to pay the monthly installments agreed upon,
LCBC filed an action to recover of the balance.
TABORAS CONTENTIONS
Contract: title to and the ownership of the books shall remain
with the seller until the purchase price shall have been fully
paid, so LCBC should bear the loss
Even assuming that the ownership was transferred to Tabora,
he should not answer for the loss: force majeure (no evidence
that Tabora contributed in any way)
ISSUE & HOLDING
Who bears the loss? Tabora
RATIO
GENERAL RULE The loss of the object of the contract of
sale is borne by the owner or in case of force majeure the one
under obligation to deliver the object is exempt from liability
THIS IS NOT APPLICABLE HERE Contract provides that
loss or damage after delivery shall be borne by the buyer
FORCE MAJEURE DEFENSE FAILS
The rule only holds true when the obligation consists in the
delivery of a determinate thing and there is no stipulation
holding him liable even in case of fortuitous event.
NOT PRESENT IN THIS CASE
The obligation is pecuniaryin nature, and the obligor bound
himself to assume the loss after the delivery.

G.R. No. L-10056

December 24, 1915

SONG FO & CO., plaintiff-appellant,

vs.
MANUEL ORIA, defendant-appellant.
Gutierrez Repide and Socias for plaintiff.
Sanz, Opisso and Luzuriaga for defendant.

CARSON, J.:
Song Fo & Co., the original plaintiff in this action, sold a
launch to Oria, the defendant, for P16,500, payable in
quarterly installments of P1,000, together with interest at the
rate of ten per centum per annum. The launch was delivered to
Oria in Manila, but was shipwrecked and became a total loss
while en route to Oria's place of business in Samar. No part of
the purchase price has ever been paid and this action was
instituted for the recovery of the total amount of the purchase
price with interest thereon until paid. The trial court gave
judgment in favor of the plaintiff for P6,000 and interest, that
being the amount of the unpaid installments due under the
express terms of the contract at the date of the institution of
the action; but declined to enter judgment for the balance of
the indebtedness on the ground that, under the express terms
of the contract, it was not due and payable when the complaint
was filed.
From this judgment both parties appealed, and the record is
now before us on their duly perfected bills of exceptions.
The defendant's contentions on this appeal are substantially
limited to his claim that under the terms of the deed of sale of
the launch, Song Fo & Co. had obligated themselves to insure
the launch, and since they had failed and neglected to do so,
they themselves should suffer the loss resulting from the
shipwreck of the launch without insurance.1awphil.net
It cannot be denied that if the contract of sale did in fact
impose on Song Fo & Co. an imperative obligation to insure
the launch, which under the terms of the contract was
mortgaged to secure the payment of the purchase price, and if
Song Fo & Co. did in fact fail and neglect to insure the launch
in compliance with the terms of the contract, Oria would be
entitled to have the amount of his indebtedness reduced by the
amount of the insurance which he would have been entitled to
have applied to the payment of the purchase price had Song Fo
& Co. faithfully complied with the terms of the contract.
But an examination of the terms of the deed of sale of the
launch discloses that Song Fo & Co. did not expressly
obligated themselves to insure and keep the launch insured,

although it is true that the contract expressly authorized them

to insure it in their own name.
Counsel for Oria contend, however, that although the language
of the contract did not in express terms obligate Song Fo &
Co. to insure the launch, it was their duty so to do under all the
circumstances, and it is insisted that they should not be
permitted to evade the loss resulting from their negligence in
the performance of that duty.
The contract expressly authorized Song Fo & Co. to insure the
launch in their own name and to charge the estimated cost of
the premiums with interest at the rate of ten per centum to
Oria, and there is much force in the contention of counsel for
Oria at least to extent that under all the circumstances, it was
the duty of Song Fo & Co. to insure the vessel if they could.
But there is nothing in the record which would justify a
holding that Song Fo & Co. obligated themselves to insure the
launch at all events. There is nothing in the written contract,
examined in the light of all the surrounding circumstances,
which justifies an inference that there was any thought in the
mind of either of the parties that the vendor of the launch
would himself insure her against loss or damage during the
long period allowed for the payment of the purchase price; yet
that substantially would be the effect of the effect of the
assumption of an obligation of an obligation to insure and
keep her insured at all events. On the contrary, the language of
the contract, which authorized Song Fo & Co. to take out
insurance in their own name and to charge the amount of the
premium to Oria, when read in the light of the transaction of
which it was a part, imposed at most, a duty upon Song Fo &
Co. to take such reasonable measures looking to the insurance
of the vessel as might be required of a prudent man in
connection with the insurance of his own property.
The undisputed evidence of record shows that Song Fo & Co.
did in fact make a bona fide attempt to insure the launch, and
to that end did all in their power and adopted all available
means which could reasonably be required of them. It appears,
however, that partly due to the dangerous nature of the coast
of Samar along which Oria desired to operate the launch, and
partly due to the some lack of confidence in the character and
reputation of the owner of the property for which application
for insurance was made, the local agents of the marine
insurance companies declined to accept the risk without
previous communication within their foreign principals: and
the launch was lost before they could ascertain the wishes of
these principals as to the execution of an insurance contract. It
appears also that Oria, who had exclusive control of the
operation of the vessel, sent her from Manila to Samar on the
trip in the course of which she was shipwrecked, well knowing
that she had not yet been insured: and that Song Fo & Co. had
no power to interfere, or to keep her in port pending their
application for insurance. Indeed it is evident that under the

terms of the deed of sale, they would not have had the right to
detain the vessel in a place of safety, against the wishes of
Oria, had the insurance agents definitely declined their
insurance proposals.
Under these circumstances we are of opinion and so hold that
Song Fo & Co. were in no wise responsible under the contract
for the loss of the launch without insurance and that the
contentions of the defendant in this regard furnish no defense
to the action against him for the purchase agreed upon in the
deed of sale.
Coming now to examine the contentions of the plaintiffs on
their appeal, we think that the trial judge erred in declining to
render judgment in their favor for the total amount of the
purchase price of the launch. He appears to have relied upon
the provisions of article 1125 of the Civil Code but to have
overlooked the co-related provisions of article 1129 of the
same code.
These articles are as follows:itc-a1f
1125. Obligations, the fulfillment of which has been fixed
for a certain day, are exigible only when such day arrives.
By a certain day is understood one which shall necessarily
arrive, even when the date of arrival is unknown.
When the uncertainty consists in the arrival or non-arrival of
the day, then the obligations is conditional and shall be
controlled by the proceeding section.
1129.

The debtor shall lose all right to profit by the term:

1.
When, after the obligation has been contracted, it
appears that he is insolvent, unless he gives security for the
debt.
2.
When he does not give to the creditor the security he
is bound to give.
3.
When by his own acts, he acts, he has reduced such
security after giving it, or when it disappears through an
unforeseen event (vis major), unless it is immediately
substituted by a new one equally safe.
The security for the payment of the purchase price of the
launch itself having disappeared as a result of an unforeseen
event (vis major), and no other security having been
substituted therefor, the plaintiffs were clearly entitled to
recover judgment not only for the installments of the
indebtedness due under the terms of the contract at the time
when the instituted their action, but also for all installments

which, but for the loss of the vessel had not matured at that
time.
The judgment entered in the court below should be modified
by substituting for so much thereof as provides for the
recovery by the plaintiff of P6,000 together with interest of
November 1911, a provision for the recovery of P16,500
together with interest at the rate of ten per centum per annum,
from the 15th day of November, 1911, and thus modified, the
judgment appealed from should be affirmed with the costs of
this instance against the appellant. So ordered.

RUSTAN ANG y PASCUA vs. THE HONORABLE COURT

OF APPEALS and IRISH SAGUD G.R. No. 182835 April 20,
2010

nude woman may be used as evidence for violation of Section

5(h) of R.A. 9262.
Held:

Facts:
This case concerns a claim of commission of the crime of
violence against women when a former boyfriend sent to the
girl the picture of a naked woman, not her, but with her face
on it.
The public prosecutor charged petitioner-accused Rustan Ang
(Rustan) before the Regional Trial Court (RTC) of Baler,
Aurora, of violation of the Anti-Violence Against Women and
Their Children Act or Republic Act (R.A.) 9262 in an
information that reads:
On or about June 5, 2005, in the Municipality of Maria
Aurora, Province of Aurora, Philippines and within the
jurisdiction of this Honorable Court, the said accused
willfully, unlawfully and feloniously, in a purposeful and
reckless conduct, sent through the Short Messaging Service
(SMS) using his mobile phone, a pornographic picture to one
Irish Sagud, who was his former girlfriend, whereby the face
of the latter was attached to a completely naked body of
another woman making it to appear that it was said Irish
Sagud who is depicted in the said obscene and pornographic
picture thereby causing substantial emotional anguish,
psychological distress and humiliation to the said Irish Sagud.
On August 1, 2001, the RTC found Rustan guilty of the
violation of Section 5(h) of R.A. 9262.
On Rustans appeal to the Court of Appeals (CA), the latter
rendered a decision dated January 31, 2008, affirming the RTC
decision.
Rustan claims that the obscene picture sent to Irish through a
text message constitutes an electronic document. Thus, it
should be authenticated by means of an electronic signature,
as provided under Section 1, Rule 5 of the Rules on Electronic
Evidence (A.M. 01-7-01-SC).
The CA denied Rustans motion for reconsideration in a
resolution dated April 25, 2008. Thus, Rustan filed the present
for review on certiorari.
Issue:
Whether or not the Rules on Electronic Evidence applies on
criminal cases and thus, the picture sent through a cell phone
message wherein Saguds face was attached on the body of a

The rules he cites do not apply to the present criminal action.

The Rules on Electronic Evidence applies only to civil actions,
quasi-judicial proceedings, and administrative proceedings.
However, Rustan is raising this objection to the admissibility
of the obscene picture, Exhibit A, for the first time before this
Court. The objection is too late since he should have objected
to the admission of the picture on such ground at the time it
was offered in evidence. He should be deemed to have already
waived such ground for objection.
In conclusion, this Court finds that the prosecution has proved
each and every element of the crime charged beyond
reasonable doubt.

FILINVEST CREDIT CORPORATION vs. COURT OF

APPEALS
G.R. No. 82508 September 29, 1989
Facts:
Spouses Sy Bang were engaged in the sale of gravel produced
from crushed rocks and used for construction purposes. In
order to increase their production, they looked for a rock
crusher which Rizal Consolidated Corporation then had for
sale. A brother of Sy Bang, went to inspect the machine at the
Rizal Consolidateds plant site. Apparently satisfied with the
machine, the private respondents signified their intent to
purchase the same.
Since he does not have the financing capability, Sy Bang
applied for financial assistance from Filinvest Credit
Corporation. Filinvest agreed to extend financial aid on the
following conditions: (1) that the machinery be purchased in
the petitioners name; (2) that it be leased with option to
purchase upon the termination of the lease period; and (3) that
Sy Bang execute a real estate mortgage as security for the
amount advanced by Filinvest. A contract of lease of
machinery (with option to purchase) was entered into by the
parties whereby they to lease from the petitioner the rock
crusher for two years. The contract likewise stipulated that at
the end of the two-year period, the machine would be owned
by Sy Bang.
3 months from the date of delivery, Sy Bang claiming that
they had only tested the machine that month, sent a lettercomplaint to the petitioner, alleging that contrary to the 20 to
40 tons per hour capacity of the machine as stated in the lease
contract, the machine could only process 5 tons of rocks and
stones per hour. They then demanded that the petitioner make
good the stipulation in the lease contract. Sy Bang stopped
payment on the remaining checks they had issued to the
petitioner.
As a consequence of the non-payment, Filinvest
extrajudicially foreclosed the real estate mortgage.
Issue:
WON the real transaction was lease or sale? SALE ON
INSTALLMENTS.
Held:
The real intention of the parties should prevail. The
nomenclature of the agreement cannot change its true essence,
i.e., a sale on installments. It is basic that a contract is what the
law defines it and the parties intend it to be, not what it is
called by the parties. It is apparent here that the intent of the

parties to the subject contract is for the so-called rentals to be

the installment payments. Upon the completion of the
payments, then the rock crusher, subject matter of the contract,
would become the property of the private respondents. This
form of agreement has been criticized as a lease only in name.
Sellers desirous of making conditional sales of their goods, but
who do not wish openly to make a bargain in that form, for
one reason or another, have frequently resorted to the device
of making contracts in the form of leases either with options to
the buyer to purchase for a small consideration at the end of
term, provided the so-called rent has been duly paid, or with
stipulations that if the rent throughout the term is paid, title
shall thereupon vest in the lessee. It is obvious that such
transactions are leases only in name. The so-called rent must
necessarily be regarded as payment of the price in installments
since the due payment of the agreed amount results, by the
terms of bargain, in the transfer of title to the lessee.
Indubitably, the device contract of lease with option to buy is
at times resorted to as a means to circumvent Article 1484,
particularly paragraph (3) thereof.Through the set-up, the
vendor, by retaining ownership over the property in the guise
of being the lessor, retains, likewise, the right to repossess the
same, without going through the process of foreclosure, in the
event the vendee-lessee defaults in the payment of the
installments. There arises therefore no need to constitute a
chattel mortgage over the movable sold. More important, the
vendor, after repossessing the property and, in effect,
canceling the contract of sale, gets to keep all the installmentscum-rentals already paid.
Even if there was a contract of sale, Filinvest is still not liable
because Sy Bang is presumed to be more knowledgeable, if
not experts, on the machinery subject of the contract, they
should not therefore be heard now to complain of any alleged
deficiency of the said machinery. It was Sy Bang who was
negligent, not Filinvest. Further, Sy Bang is precluded to
complain because he signed a Waiver of Warranty.

HARRISON MOTORS CORPORATION, petitioner

vs.
RACHEL A. NAVARRO
G.R. No. 132269, April 27, 2000

FACTS:
Sometime in June of 1987 Harrison Motors Corporation
through its president, Renato Claros, sold two Isuzu Elf trucks
to private respondent Rachel Navarro, owner of RN Freight
Lines, a franchise holder operating and maintaining a fleet of
cargo trucks all over Luzon. Petitioner, a known importer,
assembler and manufacturer, assembled the two (2) trucks
using the components parts. Prior to the sale, all the BIR Taxes
and customs duties for the parts used on the two trucks had
been paid for. Subsequently, the Bureau of Internal Revenue
(BIR), the Land Transportation Office entered a Memorandum
of Agreement which provided that for purposes of registering
vehicles, a Certificate of Payment should first be obtained
from the BIR.
On June 16, 1988 the BIR, BOC and LTO entered into a
tripartite MOA that prior to the registration in the LTO of any
locally assembled motor vehicle using imported component
parts, a Certificate of Payment should first be obtained from
the BIR and BOC to prove that all existing taxes and customs
duties have been paid. Government agents seized and detained
the two trucks of Navarro after discovering that there were
still unpaid taxes. Navarro ask for the receipts evidencing
payment of BIR taxes and customs duties, however, Claros
refused to comply. Wanting to secure the immediate release of
the trucks, Navarro paid the assessed BIR taxes and customs
duties and ask for reimbursement but Claros again refused.
ISSUE:
Whether the two (2) Memorandum of Agreement
impairs the contract of sale between petitioner and private
respondent.
RULING:
The Memorandum of Agreement does not impose any
additional taxes which would unduly impair the contract of
sale between the petitioner and private respondent. Instead,
these administrative orders were passed to enforce payment of
existing BIR taxes and customs duties at the time of
importation. Clearly, petitioners contention is unmeritorious.
What Sec 10 Art III of the Constitution prohibits is the passage
of a law which enlarges, abridges or in any manner changes
the intention of the contracting parties.
Court of Appeals ordered Petitioner Harrison Motors
Corporation to reimburse respondent Rachel Navarro.

GUINHAWA v PEOPLE
FACTS: * 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. * Guinhawa purchased a brand new
Mitsubishi L-300
Versa Van from the Union Motors Corporation (UMC) in
Paco, Manila.
* The van bore Plate no. DLK 406. Guinhawas driver,
Olayan, drove the van from Manila to Naga City.
* However, while the van was traveling along the
highway in 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 van was repaired and later offered for sale in
Guinhawas showroom.
* 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.
* Unaware that the van had been damaged and repaired
on account of the accident in Daet, the couple decided
to purchase the van for 591k. Azotea, sales manager,
suggested that the couple make a downpayment of
118,200, and pay the balance of the purchase price by
installments via a loan from the United Coconut Planters
Bank (UCPB), with the van as collateral.
* Azotea offered to make the necessary arrangements
with UCPB for the consummation of the loan transaction
wherein the couple agreed.
* The spouses executed a Promissory Note for the
amount of 692,676 as payment of the balance on the
purchase price, and as evidence of the chattel mortgage
over the van in favor of UCPB.
* The couple arrived in Guinhawas office to take
delivery of the van. The latter executed the deed of
sale, and the couple paid the 161,470 downpayment, for
they were issued a receipt. 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.
* Josephine Silo, accompanied by Glenda Pingol, went to
Manila on board the van, with Glendas husband as the
driver. On their return trip to Naga from Manila, the
driver heard a squeaking sound, which seemed to be
coming from underneath the van. The squeaking sound
persisted and upon examination at the Shell gasoline
station, it was found out that some parts underneath

the van had been welded.

* Guinhawa insisted that the defects were mere factory
defects. As the defects persisted, the spouses requested
that Guinhawa replace the van with 2 Charade-Daihatsu
vehicles within a week or two, with the additional costs
to be taken from their downpayment.
* The spouses brought the car to Rx Auto Clinic for
examination wherein the mechanic discovered that it
was the left front stabilizer that was producing the
annoying sound, and that it had been repaired.
* Josephine Silo filed for rescission of the sale and
refund of their money.
* They instituted also a criminal complaint for other
deceits made by Guinhawa by making fraudulent
representations about the car being brand new and that
it never encountered an accident.
ISSUE: W/N THERE WERE FRAUDULENT
REPRESENTATIONS MADE BY THE SELLER,
GUINHAWA BY
VIRTUE OF THE CONTRACT OF SALE EXECUTED
BETWEEN
HIM AND THE COUPLE
RULING: YES
Article 1389 of NCC 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 grouns 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 it 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 this case, Guinhawa 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. Guinhawa was mandated to
reveal the foregoing facts to Silos but they even
obdurately declared when they testified that the court
did not figure in an accident, nor had it been repaired.
Even when Guinhawa was apprised that Silos had
discovered the vans defects, the former agreed to
replace the van, but changed his mind and insisted that
it must be first sold.
Guinhawa is not relieved of his criminal liability for
deceitful concealment of material facts, even if Silos
made a visual inspection of the vans interior and
exterior before she agreed to buy and failed to inspects
its under chassis