Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-60174 February 16, 1983
EDUARDO FELIPE, HERMOGENA V. FELIPE AND VICENTE V. FELIPE, petitioners,
vs.
HEIRS OF MAXIMO ALDON, NAMELY: GIMENA ALMOSARA, SOFIA ALDON, SALVADOR ALDON, AND
THE HONORABLE COURT OF APPEALS, respondents.
Romulo D. San Juan for petitioner.
Gerundino Castillejo for private respondent.

ABAD SANTOS, J.:

Maximo Aldon married Gimena Almosara in 1936. The spouses bought several pieces of land sometime
between 1948 and 1950. In 1960-62, the lands were divided into three lots, 1370, 1371 and 1415 of the San
Jacinto Public Land Subdivision, San Jacinto, Masbate.
In 1951, Gimena Almosara sold the lots to the spouses Eduardo Felipe and Hermogena V. Felipe. The sale
was made without the consent of her husband, Maximo.
On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador
Aldon, filed a complaint in the Court of First Instance of Masbate against the Felipes. The complaint which was
docketed as Civil Case No. 2372 alleged that the plaintiffs were the owners of Lots 1370, 1371 and 1415; that
they had orally mortgaged the same to the defendants; and an offer to redeem the mortgage had been refused
so they filed the complaint in order to recover the three parcels of land.
The defendants asserted that they had acquired the lots from the plaintiffs by purchase and subsequent
delivery to them. The trial court sustained the claim of the defendants and rendered the following judgment:
a. declaring the defendants to be the lawful owners of the property subject of the present
litigation;
b. declaring the complaint in the present action to be without merit and is therefore hereby
ordered dismissed;
c. ordering the plaintiffs to pay to the defendants the amount of P2,000.00 as reasonable
attorney's fees and to pay the costs of the suit.
The plaintiffs appealed the decision to the Court of Appeals which rendered the following judgment:
PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and SET ASIDE,
and a new one is hereby RENDERED, ordering the defendants-appellees to surrender the lots
in question as well as the plaintiffs'-appellants' muniments of title thereof to said plaintiffsappellants, to make an accounting of the produce derived from the lands including expenses
incurred since 1951, and to solidarity turn over to the plaintiffs-appellants the NET monetary
value of the profits, after deducting the sum of P1,800.00. No attorney's fees nor moral
damages are awarded for lack of any legal justification therefor. No. costs.
The ratio of the judgment is stated in the following paragraphs of the decision penned by Justice Edgardo L.
Paras with the concurrence of Justices Venicio Escolin and Mariano A. Zosa:

One of the principal issues in the case involves the nature of the aforementioned conveyance or
transaction, with appellants claiming the same to be an oral contract of mortgage or antichresis,
the redemption of which could be done anytime upon repayment of the P1,800.00 involved
(incidentally the only thing written about the transaction is the aforementioned receipt re the
P1,800). Upon the other hand, appellees claim that the transaction was one of sale, accordingly,
redemption was improper. The appellees claim that plaintiffs never conveyed the property
because of a loan or mortgage or antichresis and that what really transpired was the execution
of a contract of sale thru a private document designated as a 'Deed of Purchase and Sale'
(Exhibit 1), the execution having been made by Gimena Almosara in favor of appellee
Hermogena V. Felipe.
After a study of this case, we have come to the conclusion that the appellants are entitled to
recover the ownership of the lots in question. We so hold because although Exh. 1 concerning
the sale made in 1951 of the disputed lots is, in Our opinion, not a forgery the fact is that the
sale made by Gimena Almosara is invalid, having been executed without the needed consent of
her husband, the lots being conjugal. Appellees' argument that this was an issue not raised in
the pleadings is baseless, considering the fact that the complaint alleges that the parcels 'were
purchased by plaintiff Gimena Almosara and her late husband Maximo Aldon' (the lots having
been purchased during the existence of the marriage, the same are presumed conjugal) and
inferentially, by force of law, could not, be disposed of by a wife without her husband's consent.
The defendants are now the appellants in this petition for review. They invoke several grounds in seeking the
reversal of the decision of the Court of Appeals. One of the grounds is factual in nature; petitioners claim that
"respondent Court of Appeals has found as a fact that the 'Deed of Purchase and Sale' executed by
respondent Gimena Almosara is not a forgery and therefore its authenticity and due execution is already
beyond question." We cannot consider this ground because as a rule only questions of law are reviewed in
proceedings under Rule 45 of the Rules of Court subject to well-defined exceptions not present in the instant
case.
The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal
partnership made by the wife without the consent of the husband.
It is useful at this point to re-state some elementary rules: The husband is the administrator of the conjugal
partnership. (Art. 165, Civil Code.) Subject to certain exceptions, the husband cannot alienate or encumber any
real property of the conjugal partnership without the wife's consent. (Art. 166, Idem.) And the wife cannot bind
the conjugal partnership without the husband's consent, except in cases provided by law. (Art. 172, Idem.)
In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the consent of
the husband and the sale is not covered by the phrase "except in cases provided by law." The Court of Appeals
described the sale as "invalid" - a term which is imprecise when used in relation to contracts because the Civil
Code uses specific names in designating defective contracts, namely: rescissible (Arts. 1380 et
seq.), voidable(Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et
seq.)
The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable
contract.
According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose where one of the parties is
incapable of giving consent to the contract." (Par. 1.) In the instant case-Gimena had no capacity to give
consent to the contract of sale. The capacity to give consent belonged not even to the husband alone but to
both spouses.
The view that the contract made by Gimena is a voidable contract is supported by the legal provision that
contracts entered by the husband without the consent of the wife when such consent is required, are
annullable at her instance during the marriage and within ten years from the transaction questioned. (Art. 173,
Civil Code.)
Gimena's contract is not rescissible for in such contract all the essential elements are untainted but Gimena's
consent was tainted. Neither can the contract be classified as unenforceable because it does not fit any of
those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent because it

is not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it must perforce be a
voidable contract.
The voidable contract of Gimena was subject to annulment by her husband only during the marriage because
he was the victim who had an interest in the contract. Gimena, who was the party responsible for the defect,
could not ask for its annulment. Their children could not likewise seek the annulment of the contract while the
marriage subsisted because they merely had an inchoate right to the lands sold.
The termination of the marriage and the dissolution of the conjugal partnership by the death of Maximo Aldon
did not improve the situation of Gimena. What she could not do during the marriage, she could not do
thereafter.
The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question
the defective contract insofar as it deprived them of their hereditary rights in their father's share in the lands.
The father's share is one-half (1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3)
pertaining to the widow.
The petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents
filed action to recover the lands. In the meantime, Maximo Aldon died.
Two questions come to mind, namely: (1) Have the petitioners acquired the lands by acquisitive prescription?
(2) Is the right of action of Sofia and Salvador Aldon barred by the statute of limitations?
Anent the first question, We quote with approval the following statement of the Court of Appeals:
We would like to state further that appellees [petitioners herein] could not have acquired
ownership of the lots by prescription in view of what we regard as their bad faith. This bad faith
is revealed by testimony to the effect that defendant-appellee Vicente V. Felipe (son of
appellees Eduardo Felipe and Hermogena V. Felipe) attempted in December 1970 to have
Gimena Almosara sign a ready-made document purporting to self the disputed lots to the
appellees. This actuation clearly indicated that the appellees knew the lots did not still belong to
them, otherwise, why were they interested in a document of sale in their favor? Again why did
Vicente V. Felipe tell Gimena that the purpose of the document was to obtain Gimena's consent
to the construction of an irrigation pump on the lots in question? The only possible reason for
purporting to obtain such consent is that the appellees knew the lots were not theirs. Why was
there an attempted improvement (the irrigation tank) only in 1970? Why was the declaration of
property made only in 1974? Why were no attempts made to obtain the husband's signature,
despite the fact that Gimena and Hermogena were close relatives? An these indicate the bad
faith of the appellees. Now then, even if we were to consider appellees' possession in bad faith
as a possession in the concept of owners, this possession at the earliest started in 1951, hence
the period for extraordinary prescription (30 years) had not yet lapsed when the present action
was instituted on April 26, 1976.
As to the second question, the children's cause of action accrued from the death of their father in 1959 and
they had thirty (30) years to institute it (Art. 1141, Civil Code.) They filed action in 1976 which is well within the
period.
WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is entered awarding to Sofia
and Salvador Aldon their shares of the lands as stated in the body of this decision; and the petitioners as
possessors in bad faith shall make an accounting of the fruits corresponding to the share aforementioned from
1959 and solidarity pay their value to Sofia and Salvador Aldon; costs against the petitioners.
SO ORDERED.
Concepcion Jr., Guerrero and De Castro, JJ., concur.
Makasiar, (Chairman), J., In the result.
Escolin J., took no part.

Separate Opinions

AQUINO, J., concurring:

I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered sixteen-hectare conjugal
land, without the consent of her husband (he died in 1959), can be annulled in 1976 by the wife and her two
children.
As a rule, the husband cannot dispose of the conjugal realty without the wife's consent (Art. 166, Civil Code).
Thus, a sale by the husband of the conjugal realty without the wife's consent was declared void (Tolentino vs.
Cardenas, 123 Phil. 517; Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April
25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369; Bucoy vs. Paulino, L25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L-45418, October 30,1980, 100 SCRA 619).
With more reason, the wife cannot make such a disposition without the husband's consent since the husband
is the administrator of the conjugal assets.
In the instant case, the Court of Appeals did not err in voiding the wife's sale of the conjugal land without the
husband's consent. As that sale is contrary to law, the action to have it declared void or inexistent does not
prescribe.
Moreover, there are indications that the contract between the parties was an antichresis, a transaction which is
very common in rural areas.

Separate Opinions
AQUINO, J., concurring:
I concur in the result. The issue is whether the wife's sale in 1651 of an unregistered sixteen-hectare conjugal
land, without the consent of her husband (he died in 1959), can be annulled in 1976 by the wife and her two
children.
As a rule, the husband cannot dispose of the conjugal realty without the wife's consent (Art. 166, Civil Code).
Thus, a sale by the husband of the conjugal realty without the wife's consent was declared void (Tolentino vs.
Cardenas, 123 Phil. 517; Villocino vs. Doyon, L-19797, December 17, 1966, 18 SCRA 1094 and L-28871, April
25, 1975, 63 SCRA 460; Reyes vs. De Leon, L-22331, June 6,1967, 20 SCRA 369; Bucoy vs. Paulino, L25775, April 26, 1968, 23 SCRA 248; Tinitigan vs. Tinitigan, L-45418, October 30,1980, 100 SCRA 619).
With more reason, the wife cannot make such a disposition without the husband's consent since the husband
is the administrator of the conjugal assets.
In the instant case, the Court of Appeals did not err in voiding the wife's sale of the conjugal land without the
husband's consent. As that sale is contrary to law, the action to have it declared void or inexistent does not
prescribe.
Moreover, there are indications that the contract between the parties was an antichresis, a transaction which is
very common in rural areas.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-18238 January 22, 1980
ZENAIDA K. CASTILLO and EMILIO CORDOVA, JR., plaintiffs- appellants,
vs.
HORACIO K. CASTILLO, BEATRIZ K. CASTILLO, CONRADO VALERA (Formal Party), LOURDES K.
CASTILLO, PELAGIO ARAMBULO, JR. (Formal Party), ENRIQUETA LEONOR K. CASTILLO, YSIDRO K.
CASTILLO, JR., CRISPIN K. CASTILLO, ALICIA K. CASTILLO, BENJAMIN SORIANO (Formal Party),
ERNESTO K. CASTILLO, and ENRIQUETA K. VDA. DE CASTILLO, defendants-appellants.
Crispin Baisas & A Associates for plaintiffs-appellants.
Manuel O. Chan for defendants-appellants.

GUERRERO, J.:
This is a joint appeal from the decision dated January 13, 1961 as amended by an order dated February 4,
1961 of the Court of First Instance of Manila in Civil Case No. 42496 entitled "Zenaida K. Castillo, et al versus
Horacio K. Castillo, et al." The dispositive portion of the decision states thus:
IN VIEW WHEREOF,
1. The Court orders the partition of the properties as follows.
a). The private properties of Ysidro Castillo consisting ill 38 parcels described in the project of
partition shall be partitioned in the proportion of 1/9 to each of the children, i.e., 1/9 to plaintiff;
b). The four (4) parcel of land share of the children in the conjugal properties as set forth in the
project of partition shall be also partitioned in the same proportion;
c). The seven (7) parcels of land under usufruct of Enriqueta shall also be partitioned in the
same proportion but subject to said usufruct.
d). The share in the property described in Exh. Plaintiff 2 shall be partitioned in the proportion
of 1/36 to each of the children and 1/4 unto Enriqueta Castillo the Court grants the partition as to
the other in the proportion outlined in par. (h) below;
e). The property described in Exh. Plaintiff 3, 7, 8 and 9 shah be partitioned in the proportion of
to Enriqueta and 1/18 to each of the 9 children;
f). The property in Tagaytay City, exh. Plaintiff 63, shall be partitioned among the 9 children in
the proportion of 1/9 each;
g). The partition of the properties in the names of defendants (with the exception of Enriqueta)
i.e., these in Exhs. 36, 37, 38, 39, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 65, 66, 67, 68, 69,
70, 25, 26, 62, 56, 57, 58, 22, 59, 60, 61, 52, 53, 54, and 55 is denied; h).
h). The properties described in the remaining of Exh. Plaintiff 2 and those in Exhs. 6, 10, 12,
13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A are ordered to be partitioned,
giving unto plaintiff a 6/100ths undivided share in the same;

i). The parties are given 30 days from notice to arrive at an amicable partition under the
proportions set forth above of the properties whose partition is decreed, should they fail to do
so, the Court orders commissioners of partition to be appointed to proceed accordingly
1. From and after the date of the filing of the complaint and until partition shall have been
terminated, all the income on the properties be partitioned shall he also partitioned in the
proportion already stated:
2. The stock of plaintiff in the Tiaong Rural Bank is ordered cancelled and placed in the name of
Enriqueta Vda. de Castillo;
3. The counterclaims are dismissed.
4. No pronouncement as to costs except the costs of partition which shall be borne by all in
proportion to the share of each.
SO ORDERED, Manila, Philippines, 12 January, 1961.
Acting on the motion for reconsideration filed by plaintiff 's the court a quo on February 4, 1961, issued an
Order, amending its decision as follows:
... the Court does not agree that the situation of Dr. Horacio and his brothers and sisters is the
same as that of Enriqueta for the reason that with respect to Enriqueta there is definite proof
and it is admitted by her that she had been in administration of the common property even after
the closing of the probate case; with respect to the other portion of ground two as well as
ground three concerning the monies which Enriqueta had used in her personal investment and
borrowings, the Court having adopted for this purpose the total of P153,591.69 and the plaintiff
complaining that this should be reduced because the money was raised after the properties of
the children had been used as collateral the Court does not agree that the said amount should
be reduced; in the mind of the Court the point is that this total sum of P153,591.69 were used by
Enriqueta herself in her personal investments; this will dispose of ground three, paragraph
three; and for the reason that the mention by the Court of the sale of the Moret property is only a
preliminary to the acceptance by the court of the sum of P153,591.69, stated otherwise, the
proceeds of the sale of the Moret property having in fact been already in the computation by the
Court made a part of the investments by Enriqueta, there is no more need to modify this amount
of P153,591.69 with respect to the claim that Enriqueta had bought shares of stock in the
Tiaong Rural Bank in the sum of P107,410.00 if this is correct, and it is correct according to
Exhibit Plaintiff 122, that really should be added to the original sum of P359,350.00 found by this
court as her acquisition and investments so that the total will be P466,760.00; deducting from
this the amount of P153,591.69 would leave a balance of P313,168.31; divide this by 9 which is
the number of the children would give a quotient of P34,795.37 which is equivalent to 7% of
P466,760.00; the result will be to grant the motion in part and to deny it in part.
IN VIEW WHEREOF, the dispositive part of the decision on page 496, specifically paragraph (h)
thereof is hereby amended to read, as follows:
(h) The properties described in the remaining of Exh. plaintiff 2 and those in Exhs. 6, 10, 12,
13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A are ordered to be partitioned,
giving unto plaintiff a 7/100ths undivided share in the same.
SO ORDERED.
The records disclose that Ysidro C. Castillo died on October 15, 1947 leaving as his heirs his wife Enriqueta
Katigbak and their nine children Horacio, Beatriz, Zenaida, Ysidro, Jr., Leonor, Crispin, Lourdes, Alicia and
Ernesto. Intestate proceedings for the settlement of the deceased's estate (Special Proceedings No. 4211 of
the Court of First Instance of Manila) were instituted and in January, 1948, Enriqueta Katigbak Vda. de Castillo
was appointed administratrix. On June 21, 1948, she filed an inventory of the properties as well as the
obligations left by the deceased. Two months thereafter, she was ordered to submit a project of partition. On
August 23, 1948, she filed an urgent petition asking the Court to reconsider its order on the ground that there
were pending obligations of the estate amounting to P90,920.00. However, on November 11, 1948, the

surviving spouse as administratrix of the intestate estate of Ysidro C. Castillo submitted a project of partition,
stating that the properties which constituted the residuary hereditary estate of the deceased Ysidro C. Castillo,
after complete payment of debts, funeral charges, expenses of administration, the allowance of the widow and
inheritance and estate taxes are: (1) 38 parcels of land which are properties brought to the marriage by the
deceased Ysidro C. Castillo and (2) 19 parcels of land which are conjugal properties of the spouses. Under
said project of partition, all the 38 parcels of land brought by the deceased into the marriage and 4 parcels of
the conjugal properties were adjudicated to all the nine children in equal shares, pro-indiviso; 8 parcels of the
conjugal properties were adjudicated to the widow as her share in the conjugal partnership and the remaining 7
parcels given in usufruct to the widow. Despite approval of the project of partition and the closing of the
intestate proceedings, the properties remained under the administration of Enriqueta K. Vda. de Castillo.
On February 4, 1960, after an extrajudicial demand for partition failed, herein plaintiff-appellant Zenaida K.
Castillo, assisted by her husband, filed an action for partition with accounting and receivership against her
mother Enriqueta K. Vda. de Castillo and her brothers and sisters (Civil Case No. 42496, CFI of Manila).
Alleging that the project of partition omitted to include certain properties acquired by the defendants using
community funds in their acquisition, she prayed that said properties be divided and partitioned accordingly.
The complaint was duly answered by the defendants-appellants. After hearing, the Court of First instance of
Manila rendered judgment on January 12, 1961, which was amended on February 4, 1961. From said
judgment, both parties appealed to this court, raising the following assignment of errors:
PLAINTIFFS-APPELLANTS' ASSIGNMENT OF ERRORS
I. The lower court erred in finding that -plaintiff Zenaida K. Castillo was entitled to an undivided
share of only 7/100ths in the properties described in the remaining 1/2 of Exhibit Plaintiff 2, and
those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A.
II. The lower court erred in not finding that the income and the fruits of the common properties
were used in the acquisition of those properties in the names of defendants (with the exception
of Enriqueta Vda. de Castillo) and in consequently denying thu partition of the same.
III. The lower court likewise erred in not holding that the investments in the Tiaong Rural Bank of
defendants (with the exception of Enriqueta Vda. de Castillo) including the investment of
P20,000.00 in the name of plaintiff Zenaida Castillo, having an aggregate value of P318,950.00
were made with the fruits and income of the common properties and consequently erred in not
ordering the Partition of the same among the nine of them.
DEFENDANTS-APPELLANTS' ASSIGNMENT OF ERRORS
I. The lower court erred when it held that the money used in the purchase of 1/2 of the land
covered by Exhibit Plaintiff 2 below to the spouses Ysidro C. Castillo and Enriqueta Katigbak
and therefore, erred when it ordered that the same be partitioned as a conjugal partnership
property.
II. The lower court erred when it held that the properties covered by Exhibit 2 (the remaining half
6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and 78-A were acquired with the
fruits of the properties of Enriqueta K. Vda. de Castillo under her administration and, therefore,
erred when it ordered that the said properties be partitioned.
III. The lower court erred when it denied the counterclaim of defendants-appellants.
Both plaintiffs-appellants and defendants-appellants under their respective assignments of errors the derision
rendered by the trial court on the following properties which the trial court itself classified as follows:
I. Those not included in the project of partition and allegedly acquired before the death of Ysidro Castillo;
II. Those acquired or purchased by Enriqueta Vda. de Castillo after the death of Ysidro Castillo; and
III. Those acquired by the brothers and sisters of plaintiff appellant Zenaida Castillo after the death of Ysidro
Castillo.

The first classification of properties are those claimed to be not included in the project of partition and allegedly
acquired before the death of Ysidro Castillo. And among these properties is the land described under Exhibit
Plaintiff 2, situated in Cabay, Tiaong, Quezon, with an area of 262,421 sq. meters originally co-owned by
Romeo Baldeo Ona. The lower court ruled that of this property was conjugal and therefore subject to
partition among the heirs. The defendants-appellants in their first assignment of error maintain that the lower
court erred when it held that the money used in the purchase of one-half of the land covered by said Exhibit
belonged to the spouses Ysidro C. Castillo and Enriqueta Katigbak and, therefore, it was erroneous for the
court to order that it be partitioned as conjugal partnership property. Defendants-appellants contend that in
ruling thus, the lower court committed error in disregarding the testimony of Enriqueta K. Vda. de Castillo which
was corroborated by her eldest son, defendant-appellant Horacio K. Castillo, that although she and her
husband appear as two of the buyers of said property, neither of them paid any part of the purchase price for
lack of money at the time the deed of sale was executed (Exhibit Plaintiff 2) 1 ; that neither did their co-buyers,
the spouses Paulo Macasaet and Gabriela Macasaet pay the whole price but merely gave a down-payment;
that after the death of her husband and the intestate proceedings were closed, Paulo Macasaet, upon learning
that the land was involved in a litigation, sold the entire parcel of land to her; that She had to make
arrangements with the Baldeos in whose favor there still remained the unpaid balance of the purchase price;
that Macasaet agreed that Enriqueta K. Vda. de Castillo pay on installment basis that portion of the purchase
price he had already paid; and that the said installments were paid from the fruits of the property sold and her
other properties.
We find no error in the lower court's ruling that the money used in the purchase of of the land covered by
Exhibit Plaintiff 2 belonged to the spouses Ysidro C. Castillo and Enriqueta Katigbak and ordering that such
land be partitioned as conjugal partnership property. We must here underscore the specific rule in our civil law
that all properties of the marriage shall be presumed conjugal unless it be proved that they belong exclusively
to either of the spouses. 2 To rebut or overcome this presumption, there must be clear, convincing and
satisfactory proof that this consideration of the sale was paid by only one of the spouses and from her
exclusive or separate property. 3
We agree with the plaintiffs-appellants that the version of Enriqueta K. Vda. de Castillo that the controverted
property is paraphernal cannot be given serious consideration. The improbability that her name and that of her
husband would not have been written as co- buyers of the land in Exhibit Plaintiff 2 unless they were the actual
co-purchasers thereof can easily be discerned It is indeed extremely difficult to believe that the vendor Romeo
Baldeo Ona would have acknowledged in the deed of sale receipt in full of the purchase price of P30,000.00
from the vendees if he had not really received full payment from the latter, This version of Enriqueta becomes
even more doubtful in view of the fact that the vendor, Romeo Baldeo Ona, signed and executed the said deed
of sale not only in his personal capacity but also as attorney-in-fact of his brother Claro Baldeo Ona and his
sister Adelaida Baldeo Ona, for such fiduciary capacity naturally and rightly would have made him more careful
and cautious in entering into the transaction. It stands to reason to conclude that Romeo Baldeo Ona would not
have signed or executed the document in question unless its recital were in truth and in fact as therein stated.
Although the testimony of the surviving spouse regarding the nature of the property is corroborated by
defendant- appellant Horacio K. Castillo, the eldest of the surviving children, such corroboration cannot carry
weight, the same being self-serving. In fine, defendants-appellants have not come up with such substantial,
satisfactory and convincing proof as would be sufficient to rebut the presumption that the property in
controversy is conjugal.
The document in question, Exhibit Plaintiff 2, is a public instrument valid and binding even as against third
parties, the said deed of sale having been duly registered in the Register of Deeds on June 23, 1947. The
Register of Deeds has duly certified that said deed of sale was duly recorded in the Registration Book under
Act 3344. It needs no further argumentation to hold that the defendants-appellants' gratuitous testimony cannot
prevail over the recitals in said public instrument, for it must be here reiterated that:
A recital in a public instrument celebrated with all the legal formalities under the safeguard of a
notarial certificate is evidence against the parties and a high degree of proof is necessary to
overcome the legal presumption that such recital is true." (Valencia vs. Tantoco, et al., 99 Phil.
824).
The second classification of properties are those acquired or purchase by Enriqueta Vda. de Castillo after the
death of Ysidro Castillo, among them the remaining one-half of the property described in Exhibit Plaintiff 2 as
well as the properties shown under Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and

78-A. The lower court ruled that these properties were acquired with the fruits of the properties of the children
of the spouses Ysidro Castillo and Enriqueta K. de Castillo and, therefore, ordered that the said properties be
partitioned. Defendants-appellants under the second assignment of error take the position that the lower court
committed a reversible error. On the other hand, plaintiffs-appellants in their first assignment of error maintain
that the lower court erred in finding that Zenaida K. Castillo was entitled to an undivided share of only 7/100ths
in these properties mentioned under the second classification. Zenaida claims that she should be entitled to an
undivided share of at least 9/100ths of the said properties.
We agree with the reasoning of the trial court in its disposition of the properties enumerated under the second
classification, stated thus:
... (A)s to these, it must be conceived for the plaintiff that as there is no question that Enriqueta
was the one who administered the properties of the children not only after the death of Ysidro
but even after the approval of the project of partition, harvesting their fruits and it being
established in the evidence that she did not during the period after the closure of the intestate
proceeding ever account to their children formally, for said harvests, to the court, this is
evidence that would indicate that she had obtained moneys of her claims one of them being
plaintiff, and it is a question what she did with these moneys; nor can the court account her
version and that of her witnesses that the lands hardly gave any creditable income being only
coconut lands; what so the court is telling is that they were 180 hectares assessed at no less
than P100,000.00 and it is not easy for the Court to believe that they had produced no
creditable income for the ten years that she was alone in possession.
There is of course the difficulty that there is no clear proof on how much use the harvest she
collected year after year; this however, in the face of the established administration by her
conducted and the admitted fact that she was the one who harvest would be enough for the
court to make her responsible x x x. now appears that for all these properties, she spent at least
a total of P359,350.00, the court making its additions, as follows:
Exh. 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . P 1,500.00
Exh. 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,600.00
Exh. 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000.00
Exh. 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,000.00
Exh. 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000.00
Exh. 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,800.00
Exh. 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,600.00
Exh. 18. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,000.00
Exh. 19. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500.00
Exh. 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500.00
Exh. 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,500.00
Exh. 72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,410.00
Exh. 74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610.00
Exh. 75. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,190.00
Exh. 76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480.00
Exh. 78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000.00

Exh. 78-A
Exh. 40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,400.00
1/2 of Exh. 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000.00 Exh.
Exh. 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690.00
Exh. 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 610.00
Exh. 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,960.00.

Defendants-appellants maintain that contrary to the ruling of the lower court, Enriqueta K. Vda. de Castro, the
surviving widow and administratrix of the properties of her children, did not use the assets of her children for
her personal acquisitions. They argue that these properties in question were not acquired by her overnight but
slowly, involving thrift and knowledge of financing, by mortgaging her personal properties to obtain loans from
the banks and use the proceeds in building houses which were rent producing, by sewing a piece of her
property located at Moret Street, Sampaloc and invested the proceeds in the construction of other houses,
sari-sari store and the purchase of other parcels of land as well as investments in the Tiaong Rural Bank in the
name of the children. She had also income from the fruits of her citrus, rice and coconut plantation which
increased her income, enabling her to buy other parcels of land. On the other hand, the properties of their
children produced no creditable income, rather she testified that their income was not sufficient to defray all
their expenses for their living, education, medicine, and maintenance and improvement of the children's
properties.
Defendants-appellants also claim that the court a quo erred in determining the total investments of the
appellant Enriqueta K. Vda. de Castillo and the appellant Zenaida Castillo's participation in the same when it
included the properties described under Exhibits 7, 8, and 9 which are admittedly conjugal partnership
properties which the court had already ordered their partition as such in its decision, hence, they cannot again
be appreciated as properties acquired with funds of the children to increase their share correspondingly.
The properties covered or described under Exhibits 10 and 40 which the lower court ordered to be partitioned
are also claimed by defendants-appellants not to belong to the defendant-appellant Enriqueta K. Vda. de
Castillo. It is claimed that Exhibit 10 is a deed entitled "Kasunduan ng Pagbibile at Magbibile Ulit" executed by
Juan Maralit and Maria Salamat in favor of the appellant Enriqueta K. Vda. de Castillo but the vendors,
however, exercised their right of repurchase and the lot was transferred to them. With respect to the land under
Exhibit 40, the same belongs to defendant-appellant Horacio Castillo, who purchased it from his mother,
Enriqueta, for good and sufficient consideration.
We cannot agree with defendants-appellants' theory that Enriqueta K. Vda. de Castillo did not use the fruits of
the properties of her children for her personal acquisitions. Since the evidence has fully established that
Enriqueta remained in administration and management of the common properties for quite a considerable
period of time after her husband's death which, from an examination of the documents evidencing the same
would reach some P800,000.00 in worth, whereas the fact was that her personal income alone was greatly
disproportionate to her acquisitions because for the years 1951-1958 her income was only P43,674.34 or a net
average yearly income of a little more than P5,400.00 a year, and the court a quo considered her explanation
on how she was able to raise and acquire her huge acquisitions, as unacceptable, We are not persuaded nor
convinced to review, revise or alter the lower court's conclusion. In fact, there is merit to plaintiffs-appellants'
argument that the personal income of Enriqueta was false and misleading since the sources thereof were
questionable, the 16 hectares of citrus land having been given to her only in May, 1956 per Exhibit 121Plaintiff, the sale of her Moret property gave her only a net of P19,500.00 in cash from the sale and the
P75,000.00 loan from the Philippine National Bank was taken in her capacity as attorney-in-fact of the children
with properties of the children mortgaged as security therefor. Moreover, the vastness of the properties allotted
to the children in the project of partition consisting of 42 parcels of land, assessed at about P100,000.00 with a
combined area of more than 180 hectares, 84.36 hectares of which consist of riceland and the rest being
residential lots and coconut land planted with approximately 2,050 trees cannot but be productive of substantial
fruits and profits, an accounting of which Enriqueta as administratrix had not submitted to the court.
As to defendants-appellants' claim that the properties described under Exhibits 7, 8 and 9 should not be
considered or included as properties acquired with funds of the children because they are admittedly conjugal

partnership properties and the court had already ordered their partition as such in its decision, We find the
same to be meritorious. Indeed, said lands under Exhibits 7, 8 and 9 were already ruled by the lower court as
conjugal partnership properties and subject to partition, pursuant to paragraph (e) of the dispositive portion of
the decision. Hence, from the total investment of P466,760.00 should be deducted the amount of P20,260.00
representing the investments relating to Exhibits 7, 8 and 9, thereby arriving at the sum of P446,500.00.
With respect to the property under Exhibit 10, We find the ruling of the lower court to be correct and
meritorious. Exhibit 10, of the plaintiff refers to a deed of sale with right of repurchase executed on April 30,
1955 by Juan Maralit and Maria Salamat in favor of Enriqueta K. Vda. de Castillo for the sum of P3,600.00 with
the following conditions: (1) that vendors can exercise their right of repurchase for the same amount within two
(2) years from date of execution of contract; (2) that if repurchase is not effected within the 2-year period, then
vendors would be given a one-year extension; (3) that if after the one year extension vendors have not
repurchased the property, then the sale would be considered an absolute sale and said property can no more
be the subject of repurchase. Defendants- appellants through Exhibit Defendant 65 sought to show that the
vendors repurchased the property from Enriqueta K. Castillo in April, 1957 but that they could not locate the
document relative thereto and that said vendors have sold this same property to one Reynaldo Manguiat who
was then the councilor of Tiaong, Quezon. This exhibit which is an affidavit executed by the vendors on April 1,
1960 was rejected by the court a quo and to this We acquiesce, since the affidavit (Exhibit 6) executed in 1960
is self-serving and cannot supersede or revoke the deed of sale executed on April 30, 1955.
Defendants-appellants' assignment that the court erred in the inclusion of the property under Exhibit 40 in the
determination of the total investments, is without merit. Exhibit 40 covers a parcel of land in the name of
defendant-appellant Horacio Castillo, and while it is admitted that said property was purchased by Enriqueta K.
Vda. de Castillo from Florentino Villaverde the same was thereafter purchased by Horacio for good and
sufficient consideration and, therefore, the latter has exclusive right of ownership thereto. It is also pointed out
that although a discrepancy appears in the purchase price paid by the defendant-appellant Enriqueta K. Vda.
de Castillo for the land and the price appearing in Exhibit 40 as paid by Horacio to his mother, the latter
explained that when her husband band Ysidro Castillo died, Horacio was awarded his war damage claim which
he gave to Mrs. Castillo and when Exhibit 40 was executed, he delivered P1,500.00 more, thereby giving the
impression that the consideration for the parcel of land was the war damage claim amount plus P1,500.00 in
cash. The recitals of Exhibit Plaintiff 40, however, clearly belie Mrs. Castillo's assertion that the consideration
was other than the P1,500.00 as shown and cited as follows:
Na ako, ENRIQUETA K. CASTILLO, pilipino, balo, may sapat na gulang, naninirahan at may
padalang sulat sa 1107 Pennsylvania, Malate, Manila, alang-alang at dahilan sa halagang
ISANG LIBO AT LIMANG DAANG (Pl,500.00) PISO, kuartang Pilipino, an ibinayad sa akin ni Dr.
HORACIO K. CASTILLO, pilipino rin may sapat na gulang, binata, naninirahan at may padalang
sulat sa Poblacion, Bayan ng Tiaong, Lalawigan ng Quezon, ay aking ipinagbibili, inililipat at
isinasalin, at sa pamamagitan ng kasunduang ito ng BILIHANG LUBOS AT TULUYAN ay akin
ngang IPINAGBIBILI, INILILIPAT at ISINASALIN sa naulit na Dr. Horacio K. Castillo, sa kanyang
magiging tagapagmana at kahalili, ang isang lagay ng lupang tubigan, sampo ng lahat ng mga
mejoras dito...
The document evidencing the sale of the property by Enriqueta to Horacio clearly indicates that the
consideration is the amount of P1,500.00, no more, no less. Said document is a notarized absolute deed of
sale duly acknowledged by Enriqueta before Notary Public Restituto C. de Ramos on May 3, 1955 in Tiaong,
Quezon. We must apply the rule deeply-rooted in Our jurisprudence that mere preponderance of evidence is
not sufficient to overthrow a certification of a notary public to the effect that a grantor executed a certain
document and acknowledged the fact of its due execution before him. To accomplish this result, the evidence
must be so clear, strong and convincing as to exclude all reasonable controversy as to the falsity of the
certification. And when the evidence is conflicting, the certification will be upheld. 6
We agree with the ruling of the court a quo that the property under Exhibit Plaintiff 40 was a property acquired
first by Enriqueta with the fruits of the common properties of the children and although it was later transferred
to defendant-appellant Horacio for P1,500.00 barely three months after it had been purchased by Enriqueta
from the, original owner Florentino Villaverde for P5,400.00, the patent disparity in the sale price to Horacio as
well as the evident partiality of the disposition in favor of Horacio, the eldest child who was her alter ego in the
administration of the undivided portion of her husband's estate, are strong and cogent reasons supporting the
holding of the lower court that this particular property should be considered part or included in the classification

of properties bought with the fruits of the children's properties and should, therefore, be partitioned in favor of
all the children of the deceased Ysidro Castillo.
We shall now address Ourselves to plaintiffs- appellants' assignment of errors and the third classification of
properties.
The first error assigned by plaintiffs-appellants is that the lower court erred in finding that plaintiff-appellant
Zenaida K. Castillo is entitled to an undivided share of only 7/100ths in the properties describe in the remaining
of Exhibit Plaintiff 2, and those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 72, 74, 75, 76, 78 and
78-A. According to her, she should be entitled to an undivided share of at least 9/100ths of the said properties.
According to the decision of the trial court, Enriqueta K. Vda. de Castillo spent at least a total of P359,350.00 in
acquiring the properties described under Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 72, 74, 75, 76, 78,
78-A, 40, of Exh. 2, E exh. 7, 8, and 9 (Decision, pp. 107-108, Record on Appeal). The court then added her
investment of P107,410.00 in the Tiaong Rural Bank, thus making an aggregate total of P466,760.00 as the
value of properties and investments acquired by Enriqueta after the death of her husband (Order of February
4, 1961, pp. 130-131, Record on Appeal). And from the aggregate total of P466,760.00, there was deducted a
sum of P153,591.69 which the lower court accepted as Enriqueta's personal investments and borrowings, on
the basis of her mortgage loans as appearing in her statements of assets and liabilities (Exh. Plaintiff 123) as
follows:
LIABILITIES AND EQUITY
CURRENT LIABILITY.
Trade Account Payable . . . . . . . . . . . . . . . . . . . . . . . . . . .P 4,832.00
MORTGAGES PAYABLE.Phil. Nat. Bank (Manila) P75,000.00
Phil. Nat. Bank (Lucena) 58,200.00
Retailer's Loan (PNB Mla.) 1,541.90 .
Phil. Dev. Bank (RFC) 14,017.79
Total Mortgages Payable 148,759.69
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,591.69
And after deducting P153,591.69 from the total investments of P466,760.00, leaving a balance of
P313,168.31, the court divided this by 9 which is the number of the children resulting in a quotient of P34,79537 which is equivalent to 7% of ?466,760.00. The court concluded that plaintiff-appellant Zenaida K. Castillo
was entitled to a 7/100ths undivided share in the properties described in the remaining one-half of Exhibit
Plaintiff 2 and those in Exhibits 6, 10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 40, 12, 74, 75, 76, 78 and 78-A.
Plaintiffs-appellants contend that the above computation of the court a quo is erroneous, claiming that the
P75,000.00 loan from the Philippine National Bank should not be included in Enriqueta's personal borrowings
because the collateral used in obtaining the same were three parcels of land belonging to the 9 children and
that in securing said loan from these collaterals, Enriqueta Vda. de Castillo signed not in her personal capacity
but as the attorney-in- fact of her children (Exhs. Plaintiff 125 and 125-A) and was in duty-bound to account for
the same to the children. And following the process adopted by the trial court, the amount of the P75,000.00
loan should be deducted from P153,591.69, leaving a balance of P78,591.69 which should represent
Enriqueta's personal investments and borrowings. This amount of P78,591.69 should be deducted from
P466,760.00 (the aggregate total of properties and investments of Enriqueta acquired after her husband's
death) and get a balance of P388,168.31 representing the value of those properties impressed with the
character of a trust to be divided among the 9 children. P388,168.31 divided by 9 will give a quotient of
P43,129.80 which is slightly over 9/100ths of the aggregate total, as the share of each of the 9 children,
including plaintiff-appellant Zenaida Castillo.

Disposing of this contention of plaintiffs-appellants, the court a quo in its order granting the motion for
reconsideration of plaintiffs-appellants in part and denying it in part, said: with respect to the other portion of
ground two as well as ground three concerning the monies which Enriqueta had used in her personal
investment and borrowings, the Court having adopted for this purpose the total of P153,591.69 and the plaintiff
complaining that this should be reduced because the money was raised after the properties of the children had
been used as collateral, the Court does not agree that the said amount should be reduced; in the mind of the
Court the point is that this total sum of P153,591.69 were used by Enriqueta herself in her personal
investments;" (pp. 129-130, Record on Appeal).
We agree with the above ruling of the lower court because, as pointed out by defendants-appellants, Enriqueta
was the sole debtor of the loan, the use of the collaterals not being authorized by the court or the children, and
as such should also be the sole benefactor thereof
In disposing previously defendants-appellants' second assignment of error in relation to the properties under
Exhibits 7, 8 and 9, We have ruled that from the total investment of P466,760.00 should be deducted the
amount of P20,260.00 representing the investments made in the acquisition of the properties under Exhibits 7,
8 and 9, leaving a balance of P446,500.00. From this balance of P446,500.00 must be deducted the personal
investments of Enriqueta in the sum of P153,591.69 as accepted by the lower court, giving a balance of
P292,908.31 which should be divided by 9 (there being 9 children) making a quotient of P32,565.35, which is
7/100ths, more or less, of the aggregate total, as the share of each of the 9 children, including plaintiffappellant Zenaida K. Castillo. As a result thereof, We reject plaintiffs-appellants' claim of 9/100ths and affirm
the lower Court's disposition of 7/100ths in its order of February 4, 1961.
With respect to the third classification of properties which are those acquired by the brothers and sisters of
plaintiff-appellant Zenaida Castillo after the death of their father Ysidro Castillo and which plaintiff-appellant
claims the court a quo erred in not finding that the income and the fruits of the common properties were used
in the acquisition of those properties in the names of defendants-appellants (with the exception of Enriqueta
Vda. de Castillo) and in consequently denying the partition of the same, We are in full agreement with the
disposition by the trial court and its rationale stated thus:
II ANow, however, the Court believes that it should eliminate from the right of plaintiff to
demand partition, the properties acquired not by her mother but by her brothers and sisters,
Horacio, Crispin, Ysidro, Jr., Lourdes, Nita, Alice and Ernesto, for the reason that there is no
proof at all that the moneys with which they had acquired said properties now claimed as
common by plaintiff after the death of their father, had been so acquired with fruits of the
common properties to all of them adjudicated in the project of partition inasmuch that they had
made use of the share of plaintiff in said fruits; it is true that there is in the evidence an
indication that the mother, Enriqueta, had made Dr. Horacio Castillo her alter ego in her de facto
administration after the death of her husband and even after the approval of the project of
partition; but the evidence points to the effect just the same that Dr. Horacio was only such alter
ego and no more and that his mother was the one that ultimately gathered the harvest; now
since this is the evidence, it cannot be said with reason that plaintiff has proved that her share in
the fruits of the common properties had been used by her brothers and sisters in their
acquisition of these questioned properties; if as she claims in her counsel's memorandum, said
brothers and sisters were in no financial position to buy said properties that alone while
suspicious is no proof that they had used her money; the result will be to discard the right to
partition the properties described in Exhs. 36, 37, 38, 39, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50,
51, 55, 66, 67, 68, 69, 70, 25, 26, 62, 56, 57, 58, 22, 59, 60, 61, 52, 53, 54, and 55." (Decision,
pp. 104-105, Record on Appeal).
Ruling on the same point raised in plaintiffs- appellants' motion for reconsideration, the lower court was correct
in declaring that
... the fact that Dr. Horacio Castillo was an alter ego of the mother Enriqueta is no proof that he
had used the money coming from the fruits of his own purposes; the natural presumption should
be that the money coming from the fruits went to the principal and not to the agent; this will
relieve Horacio; with respect to the brothers and sisters neither is there any proof at all that the
money coming from the fruits of the properties are or were being used to enrich said brothers
and sisters; mere suspicion cannot take the place of evidence; the Court does not agree that the

situation of Dr. Horacio and his brothers and sisters is the same as that of Enriqueta, for the
reason that with respect to Enriqueta there is definite proof and it is admitted by her that she
had been in administration of the common property even after the closing of the probate case.
(Order of February 4, 1961, p. 129, Record on Appeal).
For the same reasons that We reject plaintiffs-appellants' second assignment of error, We find no merit to her
third assignment of error. Her claim that the investments in the Tiaong Rural Bank of defendants excepting her
mother Enriqueta, including the investment of P20,000.00 in the name of plaintiff-appellant Zenaida having an
aggregate value of P318,950.00 were made with the fruits and income of the common properties, is not
supported by factual evidence; at most, they are simply suspicions which, however, do not constitute proof.
Circumstantial evidence showing gross disparity in their income and investments as well as their refusal to
submit their respective income tax returns do not substantially support plaintiffs-appellants' contentions for it is
her duty to establish her allegations with preponderance of evidence based on clear, competent and cogent
proofs which she failed to discharge in the case at bar.
As regards the P20,000.00 shares of stock subscribed by defendant- appellant Enriqueta K. Vda. de Castillo
for plaintiff-appellant 'Zenaida K. Castillo in the Tiaong Rural Bank, without the knowledge of the latter, the
lower court disposed of it, saying: "There is no need to debate on the same since plaintiff is willing to have her
share subscribed without her knowledge, surrendered unto Enriqueta," (Decision, p. 109, Record on Appeal)
and in the dispositive portion of the decision ordered "2.The stock of plaintiff in the Tiaong Rural Bank is
ordered cancelled and placed in the name of Enriqueta Vda. de Castillo;" (Decision, p. 11 5, Record on
Appeal).
Plaintiff-appellant in her Brief stated that she was willing to have these stocks cancelled and placed in her
mother's name but this manifestation was made under the belief and presumption that all properties and
investments, including this P20,000.00 stock, acquired with the fruits of the common properties, would be
partitioned equally among the 9 children. This is manifest from her evidence and pleadings and such
willingness on her part would not in any reasonable manner be taken as an intention on her part to waive her
rights to said stock (Brief for Plaintiffs-Appellants, p. 25). In other words, she contends that her willingness to
surrender the stocks was conditional and not absolute, to which We agree.
We note that in plaintiffs-appellants' Exhibit No. 122 listing the stockholders of the Tiaong Rural Bank as of
September 30, 1960, there are also subscribed shares in the same amount of P20,000.00 in the name of Alicia
K. Castillo, another P20,000.00 in the name of Lourdes K. Castillo, and another P20,000.00 in the name of
Beatriz K. Castillo, all sisters of the plaintiff-appellant Zenaida K. Castillo. 'There is strong and cogent reason to
conclude that Enriqueta K. Vda. de Castillo, the mother, intended her children Alicia, Lourdes, Beatriz and
Zenaida to be the beneficiary of these stocks but with respect to Zenaida, Enriqueta has now adopted a volte
face stance because of the complaint filed by Zenaida. Since there is no unequivocal and categorical waiver of
her rights to said stocks, We rule that the same be maintained in her name, just as the shares of Alicia,
Lourdes and Beatriz are recognized in their respective names.
Defendants-appellants under their third assignment of error maintain that the lower court erred when it denied
the counterclaims of defendants-appellants. We are in full agreement with the ruling laid down by the lower
court that absent any showing that the complaint was malicious and Chat in fact said court found the complaint
meritorious to a reasonable extent, damages may not be claimed by defendants-appellants. The lower court
ruled correcting when it said:
III. Those of the brothers and sisters hardly need any discussion; they refer to moral damages
of defendants Beatriz, (answer, p. 32), Crispin (Answer, p. 62), Horacio, Lourdes, Leonor, Alicia,
Ysidro, Jr. and Ernesto, (Answer, p. 35) but there is no showing that the complaint was
malicious, in fact the court has found it meritorious to a reasonable extent; as to the
counterclaims of the mother, Enriqueta, while it must be admitted that this case is peculiar in
that it is one filed by a daughter against her own mother, that alone does not justify any
counterclaim, specifically for the exemplary damages and moral damages sought to be
collected since the complaint as has been said has been found to have some merit; as to the
counterclaim for expenses for Zenaida's education, living maintenance, medical expenses,
vacation to Hongkong and Japan for her health the court does not see that they are proper
items for counterclaim; it does not appear that they were loaned moneys from which Enriqueta
had expected to be repaid; on the contrary to an indications they were spent if truly all of them

were, as part of the obligation she believed herself bound to perform for her daughter; at least
that is the law that the parent should support the child; as to the counterclaim for the stay of
Zenaida in the apartment in Pennsylvania, there is no proof either other than the mother's
uncorroborated testimony that Zenaida had agreed to pay for her stay; to all indications, once
again, she was allowed to stay because she is her own child, apart from the finding already
made by the Court that virtually, Zenaida was a co-owner and could therefore stay without
paying; as to the counterclaim for damages allegedly suffered because Zenaida cancelled the
authority by her previously given unto her mother to give their properties in security for her
mother's overdraft, the Court accepts Zenaida's contention that it was her right and that being
the case, the cancellation and its effect was damnum absque injuria as to the counterclaim for
the share of Zenaida in the P60,000.00 allegedly paid by the mother unto the creditors of the
intestate, and which seeks to impose upon Zenaida the payment of that share in the sum of
P6,666.00, the Court once again will have to accept her contention that in the very project of
partition presented by her in Special Proceeding No. 4211, Enriqueta manifested that there were
no more debts; (Page 1, Project of Partition, Exh. Plff. 1); and her testimony that she had paid
them after the closing of the intestate neither is clear and convincing:
xxx xxx xxx
at any rate, while it may have been true that she did really pay the RFC after the closing of the
intestate, as can be seen in Exh. Def. 4, the bank book of the RFC and her total debt therein
satisfied after that was P17,452-53 so that 1/9 of it would be P1,939.17 and this should be
shouldered by Zenaida, it should be remembered that the Court already had adjudicated unto
Enriqueta the worth of all her borrowings in the total sum of P153,591,69, so that she no longer
should be allowed once again to recover that from the children; ...
Indeed, the right of plaintiff-appellant Zenaida Castillo to demand partition is indisputable, such right being
embodied in paragraph 1, Article 494 of the New Civil Code which provides thus:
No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at
any time the partition of the thing owned in common, insofar as his share is concerned.
With respect to Zenaida's brothers and sisters as co-owners, they were necessary parties and had to be joined
as defendants in compliance with the procedural requirement embodied in Section 1, Rule 69 of the Revised
Rules of Court which provides thus:
A person having the right to compel the partition of real estate may do so as in this rule
prescribed, setting forth in his complaint the nature and extent of his title and an adequate
description of the real estate of which partition is demanded and joining as defendants all the
other persons interested in the property.
The finding of the trial court that the firing of the complaint in the case at bar was not malicious is a finding of
fact which is binding and conclusive upon Us, thereby negating any award of damages against plaintiffsappellants, following the ruling that it is not a sound policy to place a penalty on the right to litigate (Koster Inc.
vs. Zulueta, 99 Phil. 945; Receiver for North Negros Sugar Co., Inc. vs. Ybanez, L-22183, Aug. 30, 1968), and
that in order that a person may be made liable to the payment of moral damages, the law requires that his act
be wrongful. The adverse result of an action does not per se make the act wrongful and subject the actor to the
payment of moral damages. The law could not have meant to impose a penalty on the right to litigate; such
right is so precious that moral damages may not be charged on those who may exercise it erroneously."
(Barreto vs. Arevalo, 99 Phil. 771).
WHEREFORE, the judgment appealed from is hereby AFFIRMED but with the modification that the stocks of
plaintiff-appellant Zenaida K. Castillo in the amount of P20,000.00 in the Tiaong Rural Bank remain in her
name. No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-68838

March 11, 1991

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo,
Cristeta F. Maglinte and Antonio Fabillo), petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO
MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M.
Babol),respondents.
Francisco A. Tan for petitioners.
Von Kaiser P. Soro for private respondent.
FERNAN, C.J.:
In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's decision
interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between him and his
clients, spouses Florencio Fabillo and Josefa Taa.
In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother, Florencio, a
house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration No. 19335, and to her
husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. 1 After Justina's death, Florencio filed
a petition for the probate of said will. On June 2, 1962, the probate court approved the project of partition "with
the reservation that the ownership of the land declared under Tax Declaration No. 19335 and the house
erected thereon be litigated and determined in a separate proceedings." 2
Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador
property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten letter:
Dear Mr. Fabillo:
I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are ready
with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses.
Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you
will gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a success.
When I come back I shall prepare the contract of services for your signature.
Thank you.
Cordially yours,
(Sgd.) Alfredo M. Murillo
Aug. 9, 1964 3
Thirteen days later, Florencio and Murillo entered into the following contract:
CONTRACT OF SERVICES
KNOW ALL MEN BY THESE PRESENTS:
That I, FLORENCIO FABILLO, married to JOSEFA TANA, of legal age, Filipino citizen and with
residence and postal address at Palo, Leyte, was the Petitioner in Special Proceedings No. 843,
entitled "In the Matter of the Testate Estate of the late Justina Fabillo, Florencio Fabillo,
Petitioner" of the Court of First Instance of Leyte;
That by reason of the Order of the Court of First Instance of Leyte dated June 2, 1962, my claim
for the house and lot mentioned in paragraph one (1) of the last will and testament of the late
Justina Fabillo, was denied altho the will was probated and allowed by the Court;

That acting upon the counsel of Atty. Alfredo M. Murillo, I have cause(d) the preparation and
filing of another case, entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was docketed as
Civil Case No. 3532 of the Court of First Instance of Leyte;
That I have retained and engaged the services of Atty. ALFREDO M. MURILLO, married and of
legal age, with residence and postal address at Santa Fe, Leyte to be my lawyer not only in
Social Proceedings No. 843 but also in Civil Case No. 3532 under the following terms and
conditions;
That he will represent me and my heirs, in case of my demise in the two cases until their
successful conclusion or until the case is settled to my entire satisfaction;
That for and in consideration for his legal services, in the two cases, I hereby promise and bind
myself to pay Atty. ALFREDO M. MURILLO, in case of success in any or both cases the sum
equivalent to FORTY PER CENTUM (40%) of whatever benefit I may derive from such casesto
be implemented as follows:
If the house and lot in question is finally awarded to me or a part of the same by virtue of an
amicable settlement, and the same is sold, Atty. Murillo, is hereby constituted as Atty. in-fact to
sell and convey the said house and lot and he shall be given as his compensation for his
services as counsel and as attorney-in-fact the sum equivalent to forty per centum of the
purchase price of the house and lot;
If the same house and lot is just mortgage(d) to any person, Atty. Murillo shall be given the sum
equivalent to forty per centum (40%) of the proceeds of the mortgage;
If the house and lot is leased to any person, Atty. Murillo shall be entitled to receive an amount
equivalent to 40% (FORTY PER CENTUM) of the rentals of the house and lot, or a part thereof;
If the house and lot or a portion thereof is just occupied by the undersigned or his heirs, Atty.
Murillo shall have the option of either occupying or leasing to any interested party FORTY PER
CENT of the house and lot.
Atty. Alfredo M. Murillo shall also be given as part of his compensation for legal services in the
two cases FORTY PER CENTUM of whatever damages, which the undersigned can collect in
either or both cases, provided, that in case I am awarded attorney's fees, the full amount of
attorney's fees shall be given to the said Atty. ALFREDO M. MURILLO;
That in the event the house and lot is (sic) not sold and the same is maintained by the
undersigned or his heirs, the costs of repairs, maintenance, taxes and insurance premiums shall
be for the account of myself or my heirs and Attorney Murillo, in proportion to our rights and
interest thereunder that is forty per cent shall be for the account of Atty. Murillo and sixty per
cent shall be for my account or my heirs.
IN WITNESS HEREOF, I hereby set unto my signature below this 22nd day of August 1964 at
Tacloban City.
(Sgd.) FLORENCIO FABILLO
(Sgd.) JOSEFA T. FABILLO
WITH MY CONFORMITY:
(Sgd.) ALFREDO M. MURILLO
(Sgd.) ROMAN T. FABILLO
(Witness)

(Sgd.) CRISTETA F. MAGLINTE

(Witness) 4

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D. Brioso to
recover the San Salvador property. The case was terminated on October 29, 1964 when the court, upon the
parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner
not only of the San Salvador property but also the Pugahanay parcel of land.
Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by
taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the
Pugahanay property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo
his share of their produce. 5 Inasmuch as his demands for his share of the produce of the Pugahanay property
were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint
captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo,
his wife Josefa Taa, and their children Ramon (sic) Fabillo and Cristeta F. Maglinte. 6
Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that defendants be
directed to pay him jointly and severally P900.00 per annum from 1966 until he would be given his share of the
produce of the land plus P5,000 as consequential damages and P1,000 as attorney's fees, and that
defendants be ordered to pay moral and exemplary damages in such amounts as the court might deem just
and reasonable.
In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses was
vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No. 843 on the
probate of Justina's will was already terminated when actually it was still pending resolution; and that the
contingent fee of 40% of the value of the San Salvador property was excessive, unfair and unconscionable
considering the nature of the case, the length of time spent for it, the efforts exerted by Murillo, and his
professional standing.
They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the
assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000
rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay
property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property which
he had occupied; that the Pugahanay property which was not the subject of either Special Proceedings No.
843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and that Murillo be
ordered to pay moral damages and the total amount of P1,000 representing expenses of litigation and
attorney's fees.
In its decision of December 2, 1975, 7 the lower court ruled that there was insufficient evidence to prove that
the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by two of
their children who appeared to be highly educated. The spouses themselves were old but literate and
physically fit.
In claiming jurisdiction over the case, the lower court ruled that the complaint being one "to recover real
property from the defendant spouses and their heirs or to enforce a lien thereon," the case could be decided
independent of the probate proceedings. Ruling that the contract of services did not violate Article 1491 of the
Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent
attorney's fees of 40% of the value of recoverable properties." However, the court declared Murillo to be the
lawful owner of 40% of both the San Salvador and Pugahanay properties and the improvements thereon. It
directed the defendants to pay jointly and severally to Murillo the amount of P1,200 representing 40% of the
net produce of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the 1974 and 1975
income of the Pugahanay property which was on deposit with a bank, and ordered defendants to pay the costs
of the suit.
Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court awarded
40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of the properties
from 1967 to 1973. On January 29, 1976, the lower court resolved the motions and modified its decision thus:
ACCORDINGLY, the judgment heretofore rendered is modified to read as follows:
(a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the
parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229 described
in Paragraph 5 of the complaint;
(b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand
Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay property
from 1967 to 1973;
(c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on deposit
with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver of the
property;
(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as
attorney's fees; and
(e) Ordering the defendants to pay the costs of this suit.

SO ORDERED.
In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower court,
their children, who substituted them as parties to the case, appealed the decision of the lower court to the then
Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the decision of the lower
court. 8
The instant petition for review on certiorari which was interposed by the Fabillo children, was filed shortly after
Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein question the appellate
court's interpretation of the contract of services and contend that it is in violation of Article 1491 of the Civil
Code.
The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction,
properties and rights which are the objects of litigation in which they may take part by virtue of their profession.
The said prohibition, however, applies only if the sale or assignment of the property takes place during the
pendency of the litigation involving the client's property. 9
Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition
under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of
the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the
1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of his client and
may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements. 10
As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition
applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent
fee is valid and enforceable. 11 Moreover, contingent fees were impliedly sanctioned by No. 13 of the Canons of
Professional Ethics which governed lawyer-client relationships when the contract of services was entered into
between the Fabillo spouses and Murillo. 12
However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and
Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A
careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as
Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases,"
Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from
favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964
aforequoted.
Worth noting are the provisions of the contract which clearly states that in case the properties are sold,
mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the
mortgage," or "rentals." The contract is vague, however, with respect to a situation wherein the properties are
neither sold, mortgaged or leased because Murillo is allowed "to have the option of occupying or leasing to any
interested party forty per cent of the house and lot." Had the parties intended that Murillo should become the
lawful owner of 40% of the properties, it would have been clearly and unequivocally stipulated in the contract
considering that the Fabillos would part with actual portions of their properties and cede the same to Murillo.
The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who drafted
the contract. 13 This is in consonance with the rule of interpretation that, in construing a contract of professional
services between a lawyer and his client, such construction as would be more favorable to the client should be
adopted even if it would work prejudice to the lawyer. 14 Rightly so because of the inequality in situation
between an attorney who knows the technicalities of the law on the one hand and a client who usually is
ignorant of the vagaries of the law on the other hand. 15
Considering the nature of the case, the value of the properties subject matter thereof, the length of time and
effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos
(P3,000.00) as reasonable attorney's fees for services rendered in the case which ended on a compromise
agreement. In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and
securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the
litigated property to his lawyer in whom all trust and confidence were bestowed at the very inception of the
legal controversy." 16
WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside and a
new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the amount of P3,000.00
as his contingent fee with legal interest from October 29, 1964 when Civil Case No. 3532 was terminated until
the amount is fully paid less any and all amounts which Murillo might have received out of the produce or
rentals of the Pugahanay and San Salvador properties, and (b) ordering the receiver of said properties to

render a complete report and accounting of his receivership to the court below within fifteen (15) days from the
finality of this decision. Costs against the private respondent.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36731 January 27, 1983
VICENTE GODINEZ, ET AL., plaintiffs-appellants,
vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.
Dominador Sobrevinas for plaintiffs-appellants.
Muss S. Inquerto for defendant-appellee

GUTIERREZ, JR., J.:

The plaintiffs filed this case to recover a parcel of land sold by their father, now deceased, to Fong Pak Luen,
an alien, on the ground that the sale was null and void ab initio since it violates applicable provisions of the
Constitution and the Civil Code.
The order of the Court of First Instance of Sulu dismissing the complaint was appealed to the Court of Appeals
but the latter court certified the appeal to us since only pure questions of law were raised by the appellants.
The facts of the case were summarized by the Court of Appeals as follows:
On September 30, 1966, the plaintiffs filed a complaint in the Court of First Instance of Sulu
alleging among others that they are the heirs of Jose Godinez who was married to Martina
Alvarez Godinez sometime in 1910; that during the marriage of their parents the said parents
acquired a parcel of land lot No. 94 of Jolo townsite with an area of 3,665 square meters as
evidenced by Original Certificate of Title No. 179 (D -155) in the name of Jose Godinez; that
their mother died sometime in 1938 leaving the plaintiffs as their sole surviving heirs; that on
November 27, 1941, without the knowledge of the plaintiffs, the said Jose Godinez, for valuable
consideration, sold the aforesaid parcel of land to the defendant Fong Pak Luen, a Chinese
citizen, which transaction is contrary to law and in violation of the Civil Code because the latter
being an alien who is inhibited by law to purchase real property; that Transfer Certificate Title
No. 884 was then issued by the Register of Deeds to the said defendant, which is null and
void ab initio since the transaction constituted a non-existent contract; that on January 11, 1963,
said defendant Fong Pak Luen executed a power of attorney in favor of his co-defendant Kwan
Pun Ming, also an alien, who conveyed and sold the above described parcel of land to codefendant Trinidad S. Navata, who is aware of and with full knowledge that Fong Pak Luen is a
Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified to
acquire real property in this jurisdiction; that defendant Fong Pak Luen has not acquired any title
or interest in said parcel of land as the purported contract of sale executed by Jose Godinez
alone was contrary to law and considered non- existent, so much so that the alleged attorney-infact, defendant Kwan Pun Ming had not conveyed any title or interest over said property and
defendant Navata had not acquired anything from said grantor and as a consequence Transfer
Certificate of Title No. 1322, which was issued by the Register of Deeds in favor of the latter is
null and void ab initio,- that since one-half of the said property is conjugal property inherited by
the plaintiffs from their mother, Jose Godinez could -not have legally conveyed the entire
property; that notwithstanding repeated demands on said defendant to surrender to plaintiffs the
said property she refused and still refuses to do so to the great damage and prejudice of the
plaintiffs; and that they were constrained to engage the services of counsel in the sum of
P2,000.00.1wph1.t The plaintiffs thus pray that they be adjudged as the owners of the
parcel of land in question and that Transfer Certificate of Title RT-90 (T-884) issued in the name
of defendant Fong Pak Luen be declared null and void ab initio; and that the power of attorney
issued in the name of Kwan Pun Ming, as well as Transfer Certificate of Title No. 'L322 issued in

the name of defendant Navata be likewise declared null and void, with costs against
defendants.
On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he was not
yet the register of deeds then; that it was only the ministerial duty of his office to issue the title in
favor of the defendant Navata once he was determined the registerability of the documents
presented to his office.
On October 20, 1966, the defendant Navata filed her answer with the affirmative defenses and
counterclaim alleging among others that the complaint does not state a cause of action since it
appears from the allegation that the property is registered in the name of Jose Godinez so that
as his sole property he may dispose of the same; that the cause of action has been barred by
the statute of limitations as the alleged document of sale executed by Jose Godinez on
November 27, 1941, conveyed the property to defendant Fong Pak Luen as a result of which a
title was issued to said defendant; that under Article 1144 (1) of the Civil Code, an action based
upon a written contract must be brought within 10 years from the time the right of action
accrues; that the right of action accrued on November 27, 1941 but the complaint was filed only
on September 30, 1966, beyond the 10 year period provided for by law; that the torrens title in
the name of defendant Navata is indefeasible who acquired the property from defendant Fong
Pak Luen who had been in possession of the property since 1941 and thereafter defendant
Navata had possessed the same for the last 25 years including the possession of Fong Pak
Luen; that the complaint is intended to harass the defendant as a civic leader and respectable
member of the community as a result of which she suffered moral damages of P100,000.00,
P2,500.00 for attorney's fees and P500.00 expenses of litigation, hence, said defendant prays
that the complaint be dismissed and that her counterclaim be granted, with costs against the
plaintiffs. On November 24, 1967, the plaintiffs filed an answer to the affirmative defenses and
counter-claim. As the defendants Fong Pak Luen and Kwan Pun Ming are residing outside the
Philippines, the trial court upon motion issued an order of April 17, 1967, for the service of
summons on said defendants by publication. No answer has been filed by said defendants.
On December 2, 196 7, the court issued an order as follows:
Both parties having agreed to the suggestion of the Court that they submit their
supplemental pleadings to support both motion and opposition and after
submittal of the same the said motion to dismiss which is an affirmative defense
alleged in the complaint is deemed submitted. Failure of both parties or either
party to submit their supplemental pleadings on or about December 9, the Court
will resolve the case.
On November 29, 1968, the trial court issued an order missing the complaint without
pronouncement as to costs. (Record on Appeal, pp. 31- 37). A motion for reconsideration of this
order was filed by the plaintiffs on December 12, 196F, which was denied by the trial court in an
order of July 11, 1969, (Rec. on Appeal, pp. 38, 43, 45, 47). The plaintiffs now interpose this
appeal with the following assignments of errors:
I. The trial court erred in dismissing plaintiffs-appellants' complaint on the ground
of prescription of action, applying Art. 1144 (1) New Civil Code on the basis of
defendant Trinidad S. Navata's affirmative defense of prescription in her answer
treated as a motion to dismiss.
II. The trial court erred in denying plaintiffs-appellants' motion for reconsideration
of the order of dismissal.
III. The trial court erred in not ordering this case to be tried on the merits."
The appellants contend that the lower court erred in dismissing the complaint on the ground that their cause of
action has prescribed. While the issue raised appears to be only the applicability of the law governing
prescription, the real question before us is whether or not the heirs of a person who sold a parcel of land to an
alien in violation of a constitutional prohibition may recover the property if it had, in the meantime, been
conveyed to a Filipino citizen qualified to own and possess it.

The question is not a novel one. Judicial precedents indicate fairly clearly how the question should be resolved.
There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the Bureau
of Lands as part of the Jolo townsite to Fong Pak Luen, a Chinese citizen residing in Hongkong, was violative
of Section 5, Article XIII of the 1935 Constitution which provided:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or
assigned except to individuals, corporations, or associations qualified to acquire or hold lands of
the public domain in the Philippines.
The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79 Phil.
461) which also detailed the evolution of the provision in the public land laws, Act No. 2874 and
Commonwealth Act No. 141. The Krivenko ruling that "under the Constitution aliens may not acquire private or
agricultural lands, including residential lands" is a declaration of an imperative constitutional policy.
Consequently, prescription may never be invoked to defend that which the Constitution prohibits. However, we
see no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose
Godinez and Fong Pak Luen whether void ab initio, illegal per se or merely pro-exhibited.** It is enough to
stress that insofar as the vendee is concerned, prescription is unavailing. But neither can the vendor or his
heirs rely on an argument based on imprescriptibility because the land sold in 1941 is now in the hands of a
Filipino citizen against whom the constitutional prescription was never intended to apply. The lower court erred
in treating the case as one involving simply the application of the statute of limitations.
From the fact that prescription may not be used to defend a contract which the Constitution prohibits, it does
not necessarily follow that the appellants may be allowed to recover the property sold to an alien. As earlier
mentioned, Fong Pak Luen, the disqualified alien vendee later sold the same property to Trinidad S. Navata, a
Filipino citizen qualified to acquire real property.
In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien vendee later sold the
property to a Filipino corporation, this Court, in affirming a judgment dismissing the complaint to rescind the
sale of real property to the defendant Li Seng Giap on January 22, 1940, on the ground that the vendee was
an alien and under the Constitution incapable to own and hold title to lands, held:
In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz., 4331; Bautista vs.
Uy 49 Off. Gaz., 4336; Rellosa vs. Gaw Chee 49 Off. Gaz., 4345 and Mercado vs. Go Bio, 49
Off. Gaz., 5360, the majority of this Court has ruled that in sales of real estate to aliens
incapable of holding title thereto by virtue of the provisions of the Constitution (Section 5, Article
XIII Krivenko vs. Register of Deeds, 44 Off. Gaz., 471) both the vendor and the vendee are
deemed to have committed the constitutional violation and being thus in pari delicto the courts
will not afford protection to either party. (Article 1305, old Civil Code; Article 1411, new Civil
Code) From this ruling three Justices dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and
the writer. See Caoile vs. Yu Chiao Talento vs. Makiki Bautista us. Uy, Rellosa vs. Gaw Chee
and Mercado vs. Go Bio). supra.
The action is not of rescission because it is not postulated upon any of the grounds provided for
in Article 1291 of the old Civil Code and because the action of rescission involves lesion or
damage and seeks to repair it. It is an action for annulment under Chapter VI, Title II, Book 11,
on nullity of contracts, based on a defect in the contract which invalidates it independently of
such lesion or damages. (Manresa, Commentarios al Codigo Civil Espanol Vol. VIII, p. 698, 4th
ed.) It is very likely that the majority of this Court proceeded upon that theory when it applied
the in pari delicto rule referred to above.
In the United States the rule is that in a sale of real estate to an alien disqualified to hold title
thereto the vendor divests himself of the title to such real estate and has no recourse against
the vendee despite the latter's disability on account of alienage to hold title to such real estate
and the vendee may hold it against the whole world except as against the State. It is only the
State that is entitled by proceedings in the nature of office found to have a forfeiture or escheat
declared against the vendee who is incapable of holding title to the real estate sold and
conveyed to him. Abrams vs. State, 88 Pac. 327; Craig vs. Leslie et al., 4 Law, Ed. 460; 3

Wheat, 563, 589590; Cross vs. Del Valle, 1 Wall, [U.S.] 513; 17 Law. Ed., 515; Governeur vs.
Robertson, 11 Wheat, 332, 6 Law. Ed., 488.)
However, if the State does not commence such proceedings and in the meantime the alien
becomes naturalized citizen, the State is deemed to have waived its right to escheat the real
property and the title of the alien thereto becomes lawful and valid as of the date of its
conveyance or transfer to him. (Osterman vs. Baldwin, 6 Wall, 116, 18 Law. ed. 730; Manuel vs.
Wulff, 152 U.S. 505, 38 Law. ed. 532; Pembroke vs. Houston, 79, SW 470; Fioerella vs. Jones,
259 SW 782. The rule in the United States that in a sale of real estate to an alien disqualified to
hold title thereto, the vendor divests himself of the title to such real estate and is not permitted to
sue for the annulment Of his Contract, is also the rule under the Civil Code. ... Article 1302 of
the old Civil Code provides: ... Persons sui juriscannot, however, avail themselves of the
incapacity of those with whom they contracted; ...
xxx xxx xxx
. . . (I)f the ban on aliens from acquiring not only agricultural but, also urban lands, as construed
by this Court in the Krivenko case, is to preserve the nation's land for future generations of
Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the
acquisition of real estate by aliens who became Filipino citizens by naturalization. The title to the
parcel of land of the vendee, a naturalized Filipino citizen, being valid that of the domestic
corporation to which the parcel of land has been transferred, must also be valid, 96.67 per cent
of its capital stock being owned by Filipinos.
Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that where land is sold to a
Chinese citizen, who later sold it to a Filipino, the sale to the latter cannot be impugned.
The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21 SCRA 52) which relaxed
the pari delicto doctrine to allow the heirs or successors-in-interest, in appropriate cases, to recover that which
their predecessors sold to aliens.
Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon a factual
situation substantially similar to the one in the instant case. We ruled:
But the factual set-up has changed. The litigated property is now in the hands of a naturalized
Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen,
was constitutionally qualified to own the subject property. There would be no more public policy
to be served in allowing petitioner Epifania to recover the land as it is already in the hands of a
qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap & Sons: (.96
Phil. 447 [1955])
... if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by
this Court in the Krivenko case, is to preserve the nation's lands for future generations of
Filipinos, that aim or purpose would not be thwarted but achieved by making lawful the
acquisition of real estate by aliens who became Filipino citizens by naturalization.
While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership
to transmit, it is likewise in escapable that petitioner Epifania had slept on her rights for 26 years
from 1936 to 1962. By her long inaction or inexcusable neglect, she should be held barred from
asserting her claim to the litigated property (Sotto vs. Teves, 86 SCRA 157 [1978])
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length
of time, to do that which by exercising due diligence could or should have been done earlier; it is
negligence or ommission to assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it either has abandoned it or declined to assert it. (Tijam, et al.
vs. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35).' (Cited in Sotto vs.
Teves, 86 SCRA 154 [1978]).
Respondent, therefore, must be declared to be the rightful owner of the property.

In the light of the above considerations, we find the second and third assignments of errors without merit.
Respondent Navata, the titled owner of the property is declared the rightful owner.
WHEREFORE, the instant appeal is hereby denied. The orders dismissing the complaint and denying the
motion for reconsideration are affirmed.
SO ORDERED.
THIRD DIVISION
[G.R. No. 128573. January 13, 2003]
NAAWAN COMMUNITY RURAL BANK INC., petitioner, vs. THE COURT OF APPEALS and SPOUSES
ALFREDO AND ANNABELLE LUMO,respondents.
DECISION
CORONA, J.:
Under the established principles of land registration, a person dealing with registered land may generally
rely on the correctness of a certificate of title and the law will in no way oblige him to go beyond it to determine
the legal status of the property.
Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision [1] of the Court of
Appeals in CA-G.R. CV No. 55149, which in turn affirmed the decision [2] of the Regional Trial Court of Misamis
Oriental, Branch 18 as follows:
WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and possessors of the properties in
question (Lot 18583, under TCT No. T-50134, and all improvements thereon) and quieting title thereto as
against any and all adverse claims of the defendant. Further, the sheriffs certificate of sale, Exhibit 4; 4-A;
Sheriffs deed of final conveyance, Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit 7, and any and all
instrument, record, claim, encumbrance or proceeding in favor of the defendant, as against the plaintiffs, and
their predecessor-in-interest, which may be extant in the office of the Register of Deeds of Province of Misamis
Oriental, and of Cagayan de Oro City, and in the City Assessors Office of Cagayan de Oro City, are declared
as invalid and ineffective as against the plaintiffs title.
The counterclaim is dismissed for lack of merit.
SO ORDERED.[3]
The facts of the case, as culled from the records, are as follows:
On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses Alfredo and
Annabelle Lumo, a house and lot measuring 340 square meters located at Pinikitan, Camaman-an, Cagayan
de Oro City.
Wanting to buy said house and lot, private respondents made inquiries at the Office of the Register of
Deeds of Cagayan de Oro City where the property is located and the Bureau of Lands on the legal status of
the vendors title. They found out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that
the owners copy of the Certificate of Title to said property was in her possession.
Private respondents directed Guillermo Comayas to redeem the property from Galupo at their expense,
giving the amount of P10,000 to Comayas for that purpose.
On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499 which
covered the subject property.
In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private
respondents and Guillermo Comayas, executed a deed of absolute sale.The subject property was allegedly

sold for P125,000 but the deed of sale reflected the amount of only P30,000 which was the amount private
respondents were ready to pay at the time of the execution of said deed, the balance payable by installment.
On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499 and, on
even date, TCT No. T-50134 was issued in favor of private respondents.
After obtaining their TCT, private respondents requested the issuance of a new tax declaration certificate
in their names. However, they were surprised to learn from the City Assessors Office that the property was also
declared for tax purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City
Assessors Office revealed that, for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the
note: This lot is also declared in the name of Naawan Community Rural Bank Inc. under T/D # 71210.
Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank using
the subject property as security. At the time said contract of mortgage was entered into, the subject property
was then an unregistered parcel of residential land, tax-declared in the name of a certain Sergio A. Balibay
while the residential one-storey house was tax-declared in the name of Comayas.
Balibay executed a special power of attorney authorizing Comayas to borrow money and use the subject
lot as security. But the Deed of Real Estate Mortgage and the Special Power of Attorney were recorded in the
registration book of the Province of Misamis Oriental, not in the registration book of Cagayan de Oro City. It
appears that, when the registration was made, there was only one Register of Deeds for the entire province of
Misamis Oriental, including Cagayan de Oro City. It was only in 1985 when the Office of the Register of Deeds
for Cagayan de Oro City was established separately from the Office of the Register of Deeds for the Province
of Misamis Oriental.
For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property sold at a
public auction to the mortgagee Naawan Community Rural Bank as the highest bidder in the amount
of P16,031.35. Thereafter, the sheriffs certificate of sale was issued and registered under Act 3344 in the
Register of Deeds of the Province of Misamis Oriental.
On April 17, 1984, the subject property was registered in original proceedings under the Land Registration
Act. Title was entered in the registration book of the Register of Deeds of Cagayan de Oro City as Original
Certificate of Title No. 0-820, pursuant to Decree No. N-189413.
On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P. Comayas was
entered in the Register of Deeds of Cagayan de Oro City.
Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject property lapsed
and the MTCC Deputy Sheriff of Cagayan de Oro City issued and delivered to petitioner bank the sheriffs deed
of final conveyance. This time, the deed was registered under Act 3344 and recorded in the registration book
of the Register of Deeds of Cagayan de Oro City.
By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot.
Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC which
decided in its favor. On appeal, the Regional Trial Court affirmed the decision of the MTCC in a decision dated
April 13, 1988.
On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of execution of its
judgment. The MTCC, being the court of origin, promptly issued said writ.
However, when the writ was served, the property was no longer occupied by Comayas but herein private
respondents, the spouses Lumo who had, as earlier mentioned, bought it from Comayas on May 17, 1988
Alarmed by the prospect of being ejected from their home, private respondents filed an action for quieting
of title which was docketed as Civil Case No. 89-138. After trial, the Regional Trial Court rendered a decision
declaring private respondents as purchasers for value and in good faith, and consequently declaring them as
the absolute owners and possessors of the subject house and lot.
Petitioner appealed to the Court of Appeals which in turn affirmed the trial courts decision.

Hence, this petition.

Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFFS DEED OF FINAL CONVEYANCE WAS DULY EXECUTED
AND REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY ON
DECEMBER 2, 1986;
II. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN THE
PROPER REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES LUMO.
Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable property.
Article 1544 provides:
x x x. 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.
Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in the day
book under Act 3344 should prevail over the later registration of private respondents deed of absolute sale
under Act 496,[4] as amended by the Property Registration Decree, PD 1529.
This contention has no leg to stand on. It has been held that, where a person claims to have superior
proprietary rights over another on the ground that he derived his title from a sheriffs sale registered in the
Registry of Property, Article 1473 (now Article 1544) of the Civil Code will apply only if said execution sale of
real estate is registered under Act 496.[5]
Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by virtue of a
final deed of conveyance. On the other hand, when private respondents purchased the same property, it was
already covered by the Torrens System.
Petitioner also relies on the case of Bautista vs. Fule[6] where the Court ruled that the registration of an
instrument involving unregistered land in the Registry of Deeds creates constructive notice and binds third
person who may subsequently deal with the same property.
However, a close scrutiny of the records reveals that, at the time of the execution and delivery of the
sheriffs deed of final conveyance on September 5, 1986, the disputed property was already covered by the
Land Registration Act and Original Certificate of Title No. 0-820 pursuant to Decree No. N189413 was likewise
already entered in the registration book of the Register of Deeds of Cagayan De Oro City as of April 17, 1984.
Thus, from April 17, 1984, the subject property was already under the operation of the Torrens
System. Under the said system, registration is the operative act that gives validity to the transfer or creates a
lien upon the land.
Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except those
noted thereon. Accordingly, private respondents, in dealing with the subject registered land, were not required
by law to go beyond the register to determine the legal condition of the property. They were only charged with
notice of such burdens on the property as were noted on the register or the certificate of title. To have required
them to do more would have been to defeat the primary object of the Torrens System which is to make the
Torrens Title indefeasible and valid against the whole world.
Private respondents posit that, even assuming that the sheriffs deed of final conveyance in favor of
petitioner bank was duly recorded in the day book of the Register of Deeds under Act 3344, ownership of the
subject real property would still be theirs as purchasers in good faith because they registered the sale first
under the Property Registration Decree.
The rights created by the above-stated statute of course do not and cannot accrue under an inscription in
bad faith. Mere registration of title in case of double sale is not enough; good faith must concur with the
registration.[7]

Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance on
December 2, 1986 amounted to constructive notice to private respondents. Thus, when private respondents
bought the subject property on May 17, 1988, they were deemed to have purchased the said property with the
knowledge that it was already registered in the name of petitioner bank.
Thus, the only issue left to be resolved is whether or not private respondents could be considered as
buyers in good faith.
The priority in time principle being invoked by petitioner bank is misplaced because its registration referred
to land not within the Torrens System but under Act 3344.On the other hand, when private respondents bought
the subject property, the same was already registered under the Torrens System. It is a well-known rule in this
jurisdiction that persons dealing with registered land have the legal right to rely on the face of the Torrens
Certificate of Title and to dispense with the need to inquire further, except when the party concerned has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.[8]
Did private respondents exercise the required diligence in ascertaining the legal condition of the title to the
subject property so as to be considered as innocent purchasers for value and in good faith?
We answer in the affirmative.
Before private respondents bought the subject property from Guillermo Comayas, inquiries were made
with the Registry of Deeds and the Bureau of Lands regarding the status of the vendors title. No liens or
encumbrances were found to have been annotated on the certificate of title. Neither were private respondents
aware of any adverse claim or lien on the property other than the adverse claim of a certain Geneva Galupo to
whom Guillermo Comayas had mortgaged the subject property. But, as already mentioned, the claim of Galupo
was eventually settled and the adverse claim previously annotated on the title cancelled. Thus, having made
the necessary inquiries, private respondents did not have to go beyond the certificate of title. Otherwise, the
efficacy and conclusiveness of the Torrens Certificate of Title would be rendered futile and nugatory.
Considering therefore that private respondents exercised the diligence required by law in ascertaining the
legal status of the Torrens title of Guillermo Comayas over the subject property and found no flaws therein,
they should be considered as innocent purchasers for value and in good faith.
Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo and
Annabelle Lumo as the true and rightful owners of the disputed property is affirmed.
WHEREFORE, petition is hereby DENIED.
SO ORDERED.

THIRD DIVISION
[G.R. No. 142403. March 26, 2003]
ALEJANDRO
GABRIEL
and
ALFREDO
GABRIEL, petitioners,
vs.
SPOUSES
PABLO
MABANTA AND ESCOLASTICA COLOBONG, DEVELOPMENT BANK OF THE PHILIPPINES
(Isabela Branch) and ZENAIDA TAN-REYES, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Born of the need to protect our land registration system from being converted into an instrument of fraud,
this Court has consistently adhered to the principle that a mere registration of title in case of double sale is not
enough, good faith must concur with the registration.
In this petition for review on certiorari, Alejandro Gabriel and Alfredo Gabriel assailed the Decision [1] dated
March 30, 1999 of the Court of Appeals in CA-G.R. CV No. 33941 modifying the Decision [2] dated April 12,
1991 of the Regional Trial Court, Branch 21, Santiago, Isabela in Civil Case No. 0399 for specific performance,
reconveyance and damages with application for preliminary injunction.
The facts are as follows:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in Patul and
Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by Transfer Certificates
of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975, they mortgaged both lots with the
Development Bank of the Philippines (DBP) as collateral for a loan of P14,000.00.[3]
Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano by way
of a Deed of Sale of Parcels of Land With Assumption of Mortgage. [4] Included in the Deed is an agreement
that they could repurchase the lots within a period of two (2) years.
Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince
Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered to Susana a
500-square meter residential lot with an actual value of P40,000.00 and paid spouses Mabanta the sum
of P5,000.00. On May 15, 1984, spouses Mabanta executed a Deed of Sale with Assumption of Mortgage [5] in
favor of Alejandro. For her part, Susana executed a document entitled Cancellation of Contract[6] whereby she
transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses Mabantas
loan with the DBP.[7] However, when they were ready to pay the entire loan, they found that spouses Benito
and Pura Tan had paid it and that the mortgage was already cancelled.[8]
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached Alejandro to
refund to him the P5,000.00 he paid to spouses Mabanta.Alejandro refused because Tan was unwilling to
return the formers 500-square meter lot delivered to Susana as purchase price for the lots. Thereafter, spouses
Tan tried to eject Alejandro from the lot covered by TCT No. 72707.
On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21, Santiago,
Isabela a complaint (involving the lot covered by TCT No. 72707) for specific performance, reconveyance and
damages with an application for a preliminary injunction against spouses Mabanta, spouses Tan, the DBP and
barangay officials Dominador Maylem and Alejandro Tridanio. In due time, these defendants filed their
respective answers.
During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-Reyes who
bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985. Not
having been impleaded as a party-defendant, she filed an answer-in-intervention alleging that she is the
registered owner of the lot covered by TCT No. 72707; that she purchased it from spouses Mabanta in good
faith and for value; that she paid their loan with the DBP in the amounts ofP17,580.88 and P16,845.17 per

Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the DBP was cancelled and
spouses Mabanta executed a Deed of Absolute Sale [9] in her favor; and that TCT No. T-72707 was cancelled
and in lieu thereof, TCT No. T-160391 was issued in her name.
On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and Alfredo Gabriel
over the lot covered by TCT No. 72707 (now TCT No. T-160391), thus:
WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered:
1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the spouses
Pablo Mabanta and Escolastica Colobong (in favor of Alejandro and Alfredo Gabriel) valid and
subsisting.
2. ORDERING the plaintiff Alejandro Gabriel to pay to the spouses Pablo Mabanta and Escolastica
Colobong the sums of P5,000.00 plus P34,426.05 (representing the loan with the DBP which
plaintiff assumed) within 30 days from receipt hereof.
3. DECLARING the deed of sale executed by the spouses Pablo Mabanta and Escolastica
Colobong in favor of Zenaida Tan Reyes as null and void.
4. ORDERING the intervenor Zenaida Tan-Reyes to reconvey the land covered by T.C.T. No. T160391 in favor of Alejandro Gabriel.
SO ORDERED.
In declaring null and void the Deed of Absolute Sale (or second sale) of the lot covered by TCT No. 72707
between spouses Mabanta and Zenaida Tan-Reyes, the trial court ratiocinated as follows:
But Zenaida (Tan) Reyes professes that she is a buyer in good faith and for value. In her testimony she said
that the spouses Mabanta offered to sell the land to her on August 19, 1985. She was informed that the land
was mortgaged in the DBP. She readily agreed to buy the land on that same day. She did not inquire further
into the status of the land. She did not go and see the land first. What she did was to immediately go to the
DBP the following day and paid the mortgage obligation in the amount of P16,845.17 and P17,580.88 (Exhibits
1 and 2). The following day August 21, a deed of sale in her favor was prepared and on October 17, 1985 she
secured a certificate of title (Exhibit 5). Under the above circumstances, it cannot be said that she is a
purchaser in good faith. She should have first made a thorough investigation of the status of the land. Had she
inquired, she should have been informed that the land was previously sold to at least two persons Susana
Soriano and Alejandro Gabriel. She should also have first visited the land she was buying. Had she done so
she should have discovered that the land was being cultivated by the Gabriels who would have informed her
that they already bought the land from the Mabantas. The reason why she did not do this is because she
already was appraised of the status of the land by her father Benito Tan. For reasons known only to
her, she decided to buy the land just the same.
xxxxxx
Zenaida Tan therefore is not a purchaser in good faith and she cannot seek refuge behind her
certificate of title. True, Article 1544 of the Civil Code provides that should immovable property be sold
to different vendees, the ownership shall belong to the person who in good faith first recorded it in the
registry of property. Unfortunately, the registration made by Zenaida (Tan) Reyes of her deed of sale
was not in good faith. For this reason in accordance with the same Article 1544, the land shall pertain
to the person who in good faith was first in possession. There is no question that it is the Gabriels who
are in possession of the land.
Unsatisfied, spouses Mabanta and Zenaida Tan-Reyes interposed an appeal to the Court of Appeals.
On March 30, 1999, the Court of Appeals rendered a Decision modifying the trial courts Decision,
declaring as valid the second sale of the lot covered by TCT No. 72707 between spouses Mabanta and
Zenaida Tan-Reyes on the ground that a person dealing with registered land may simply rely on the
correctness of the certificate of title and, in the absence of anything to engender suspicion, he is under no
obligation to look beyond it. The dispositive portion of the Appellate Courts Decision reads:

Wherefore the appealed judgment is AFFIRMED with the following modification:

1. DECLARING Exhibit A, the deed of sale with assumption of mortgage executed by the defendantsappellants spouses Pablo Mabanta and Escolastica Colobong over lots covered by TCT Nos. T-72705 and T72707 valid and subsisting;
2. ORDERING spouses Pablo Mabanta and Escolastica Colobong to surrender TCT No. 72705 to plaintiffappellee Alejandro Gabriel;
3. DECLARING the deed of sale executed over lot with TCT No. 72707 (now T-160391) by spouses Pablo
Mabanta and Escolastica Colobong in favor of intervenor-appellant Zenaida Tan Reyes as valid;
4. ORDERING plaintiffs-appellees and any all persons claiming rights under them to vacate Lot 3651-A now
covered by TCT No. T-160391 and to deliver to intervenor-appellant Zenaida Tan-Reyes the possession
thereof;
5. Dismissing the case against defendants-appellants Benito Tan and Purita Masa;
6. No pronouncement as to costs.
SO ORDERED.
In the instant petition for review on certiorari, petitioners Alejandro and Alfredo Gabriel raise this lone
issue:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN DECLARING THE SECOND SALE OF THE
DISPUTED LOT EXECUTED BY SPOUSES MABANTA IN FAVOR OF ZENAIDA TAN-REYES VALID
UNDER ARTICLE 1544 OF THE CIVIL CODE.
Petitioners contend that respondent Reyes is not a purchaser in good faith since she bought the disputed
lot with the knowledge that petitioner Alejandro is claiming it in a previous sale.
In her comment on the petition, respondent Reyes maintains that the Court of Appeals factual finding that
she is a purchaser in good faith and for value is final and conclusive. Meeting the issue head on, she claims
that there is no evidence that prior to August 21, 1985, when she purchased the lot from respondent spouses
Mabanta, she had knowledge of any previous lien or encumbrance on the property.
For its part, respondent DBP avers that it acted in utmost good faith in releasing the mortgaged lots to
respondent spouses Mabanta who had the loan restructured and paid the same. Also, it did not transact
business with spouses Tan.
With respect to respondent spouses Mabanta, this Courts Resolution dated June 14, 2000 requiring them
to file comment on the present petition was returned unserved. Thus, in its Resolution dated January 22, 2001,
this Court resolved to consider the Resolution of June 14, 2000 deemed served upon them.[10]
The petition is impressed with merit.
The issue for our resolution is whether or not respondent Zenaida Tan-Reyes acted in good faith when she
purchased the subject lot and had the sale registered.
Settled is the principle that this Court is not a trier of facts. In the exercise of its power of review, the
findings of fact of the Court of Appeals are conclusive and binding and consequently, it is not our function to
analyze or weigh evidence all over again.[11] This rule, however, is not an iron-clad rule. [12] In Floro vs. Llenado,
[13]
we enumerated the various exceptions and one which finds application to the present case is when the
findings of the Court of Appeals are contrary to those of the trial court.
We start first with the applicable law.
Article 1544 of the Civil Code provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first 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.
Otherwise stated, where it is an immovable property that is the subject of a double sale, ownership shall
be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of
Property; (2) in default thereof, to the person who in good faith was first in possession; and (3) in default
thereof, to the person who presents the oldest title, provided there is good faith. [14] The requirement of the law
then is two-fold: acquisition in good faith and registration in good faith.[15]The rationale behind this is
well-expounded in Uraca vs. Court of Appeals,[16] where this Court held:
Under the foregoing, the prior registration of the disputed property by the second buyer does not by itself
confer ownership or a better right over the property. Article 1544 requires that such registration must be
coupled with good faith. Jurisprudence teaches us that (t)he governing principle is primus tempore, potior
jure (first in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the
first buyers right except where the second buyer registers in good faith the second sale ahead of the first, as
provided by the Civil Code. Such knowledge of the first buyer does not bar her from availing of her rights under
the law, among them, to register first her purchase as against the second buyer. But in converso, knowledge
gained by the second buyer of the first sale defeats his right even if he is first to register the second sale, since
such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the
Civil Code for the second buyer being able to displace the first buyer, that before the second buyer can
obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of
the first sale and of the first buyers right) from the time of acquisition until the title is transferred to him
by registration or failing registration, by delivery of possession. (Emphasis supplied)
In the case at bar, certain pieces of evidence, put together, would prove that respondent Reyes is not a
buyer in good faith. The records show that on August 18, 1985, spouses Mabanta offered to her for sale the
disputed lot. They told her it was mortgaged with respondent DBP and that she had to pay the loan if she
wanted to buy it.[17]She readily agreed to such a condition. The following day, her father Benito Tan,
accompanied by barangay official Tridanio, went to petitioner Alejandros house offering to return to him
the P5,000.00 he had paid to spouses Mabanta. Tan did not suggest to return the 500-square meter lot
petitioner delivered to Susana Soriano.[18] For this reason, petitioner refused Tans offer and even prohibited him
from going to respondent DBP. We quote the following testimony of petitioner who, despite his blindness as
shown by the records, testified to assert his right, thus:
ATTY. CHANGALE:
Q What can you say to that statement?
A That is their mistake, sir.
Q Why do you say that is their mistake?
A Because her husband and Tridanio went at home offering to return the money but I did not
accept, sir.
Q Who is this Benito Tan you are referring to?
A The husband of Pura Masa, sir.
Q What is the relationship with the intervenor Zenaida Tan?
A The daughter, sir.

Q When did Benito Tan together with Councilman Tridanio came?

A Before they went to the Development Bank of the Philippines they came at home and I
prohibit them, sir.
Q How did you prohibit them?
A No, I said please I am just waiting for the Bank to inspect then I will pay my obligation.
xxxxxx
Q You stated earlier that you will just pay the payments. What are those payments you are referring
to?
A The payment I have given to Colobong and to the Bank, sir. They do not want to return the payment
I have given to Susana Soriano and that is the beginning of our quarrel.[19]
We are thus convinced that respondent Reyes had knowledge that petitioner previously bought the
disputed lot from respondent spouses Mabanta. Why should her father approach petitioner and offer to return
to him the money he paid spouses Mabanta? Obviously, aware of the previous sale to petitioner, respondent
Reyes informed her father about it. At this juncture, it is reasonable to conclude that what prompted him to go
to petitioners house was his desire to facilitate his daughters acquisition of the lot, i.e., to prevent petitioner
Alejandro from contesting it. He did not foresee then that petitioner would insist he has a prior right over the lot.
Now respondent Reyes claims that she is a purchaser in good faith. This is preposterous. Good faith is
something internal. Actually, it is a question of intention. In ascertaining ones intention, this Court must rely on
the evidence of ones conduct and outward acts. From her actuations as specified above, respondent Reyes
cannot be considered to be in good faith when she bought the lot.
Moreover, it bears noting that on September 16, 1985, both petitioners filed with the trial court their
complaint involving the lot in question against respondents. After a month, or on October 17, 1985, respondent
Reyes had the Deed of Absolute Sale registered with the Registry of Property. Evidently, she wanted to be the
first one to effect its registration to the prejudice of petitioners who, although in possession, have not registered
the same. This is another indicum of bad faith.
We have consistently held that in cases of double sale of immovables, what finds relevance and
materiality is not whether or not the second buyer was a buyer in good faith but whether or not said
second buyer registers such second sale in good faith, that is, without knowledge of any defect in the
title of the property sold.[20] In Salvoro vs. Tanega,[21] we had the occasion to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous sale
of the same property to a third party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer upon him any right.
Mere registration of title is not enough, good faith must concur with the registration. To be entitled to
priority, the second purchaser must not only establish prior recording of his deed, but must have acted in good
faith, without knowledge of the existence of another alienation by the vendor to the other. [22] In the old case
of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this Court ruled:
One who purchases a real estate with knowledge of a defect of title in his vendor cannot claim that he
has acquired title thereto in good faith as against 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. A
purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then
claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His
mere refusal to believe that such a 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. x x x [23]

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the lot and
had the sale registered.
WHEREFORE, the assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The
Decision of the trial court is hereby REINSTATED.
SO ORDERED.

THIRD DIVISION
[G.R. No. 151212. September 10, 2003]
TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President, VERONICA G.
LORENZANA, petitioner, vs. MARINA CRUZ, respondent.
DECISION
PANGANIBAN, J.:
In an ejectment suit, the question of ownership may be provisionally ruled upon for the sole purpose of
determining who is entitled to possession de facto. In the present case, both parties base their alleged right to
possess on their right to own. Hence, the Court of Appeals did not err in passing upon the question of
ownership to be able to decide who was entitled to physical possession of the disputed land.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the August 31,
2001 Decision[2] and December 19, 2001 Resolution[3] of the Court of Appeals (CA) in CA- GR SP No.
64861. The dispositive portion of the assailed Decision is as follows:
WHEREFORE, premises considered, the petition is hereby DISMISSED and the Decision dated May 4, 2001
is hereby AFFIRMED.[4]
The assailed Resolution denied petitioner's Motion for Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development Corporation] against x x
x [Respondent Marina Cruz] before the Municipal Trial Court in Cities (MTCC) of Olongapo City, docketed as
Civil Case 4269, which alleged that: petitioner is the true and absolute owner of a parcel of lot and residential
house situated in #71 18th Street, E.B.B. Olongapo City, particularly described as:
A parcel of residential house and lot situated in the above-mentioned address containing an area of 324 square
meters more or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the Southeast by 044 (Lot 255, Ts308); on the Southwest by 043 (Lot 226-A & 18th street) and on the Northwest by 045 (Lot 227, Ts-308) and
declared for taxation purposes in the name of [petitioner] under T.D. No. 002-4595-R and 002-4596.
having acquired the same on December 5, 1996 from Barbara Galino by virtue of a Deed of Absolute Sale; the
sale was acknowledged by said Barbara Galino through a 'Katunayan'; payment of the capital gains tax for the
transfer of the property was evidenced by a Certification Authorizing Registration issued by the Bureau of
Internal Revenue; petitioner came to know that Barbara Galino sold the same property on April 24, 1998 to
Cruz, who immediately occupied the property and which occupation was merely tolerated by petitioner; on
October 16, 1998, a complaint for ejectment was filed with the Barangay East Bajac-Bajac, Olongapo City but
for failure to arrive at an amicable settlement, a Certificate to File Action was issued;on April 12, 1999 a
demand letter was sent to [respondent] to vacate and pay reasonable amount for the use and occupation of
the same, but was ignored by the latter; and due to the refusal of [respondent] to vacate the premises,
petitioner was constrained to secure the services of a counsel for an agreed fee of P5,000.00 as attorneys fee
and P500.00 as appearance fee and incurred an expense of P5,000.00 for litigation.
In respondents Answer with Counterclaim, it was alleged that: petitioner is not qualified to own the residential
lot in dispute, being a public land; according to Barbara Galino, she did not sell her house and lot to petitioner
but merely obtained a loan from Veronica Lorenzana; the payment of the capital gains tax does not necessarily
show that the Deed of Absolute Sale was at that time already in existence; the court has no jurisdiction over
the subject matter because the complaint was filed beyond the one (1) year period after the alleged unlawful
deprivation of possession; there is no allegation that petitioner had been in prior possession of the premises

and the same was lost thru force, stealth or violence; evidence will show that it was Barbara Galino who was in
possession at the time of the sale and vacated the property in favor of respondent; never was there an
occasion when petitioner occupied a portion of the premises, before respondent occupied the lot in April 1998,
she caused the cancellation of the tax declaration in the name of Barbara Galino and a new one issued in
respondents name; petitioner obtained its tax declaration over the same property on November 3, 1998, seven
(7) months [after] the respondent [obtained hers]; at the time the house and lot [were] bought by respondent,
the house was not habitable, the power and water connections were disconnected; being a public land,
respondent filed a miscellaneous sales application with the Community Environment and Natural Resources
Office in Olongapo City; and the action for ejectment cannot succeed where it appears that respondent had
been in possession of the property prior to the petitioner.[5]
In a Decision[6] dated October 30, 2000, the Municipal Trial Court in Cities (MTCC) ordered respondent to
vacate the property and surrender to petitioner possession thereof. It also directed her to pay, as damages for
its continued unlawful use, P500 a month from April 24, 1999 until the property was vacated, P5,000 as
attorneys fees, and the costs of the suit.
On appeal, the Regional Trial Court[7] (RTC) of Olongapo City (Branch 72) reversed the MTCC. The RTC
ruled as follows: 1) respondents entry into the property was not by mere tolerance of petitioner, but by virtue of
a Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the execution of the Deed of
Sale without actual transfer of the physical possession did not have the effect of making petitioner the owner of
the property, because there was no delivery of the object of the sale as provided for in Article 1428 of the Civil
Code; and 3) being a corporation, petitioner was disqualified from acquiring the property, which was public
land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful detainer, because
no contract -- express or implied -- had been entered into by the parties with regard to possession of the
property. It ruled that the action should have been for forcible entry, in which prior physical possession was
indispensable -- a circumstance petitioner had not shown either.
The appellate court also held that petitioner had challenged the RTCs ruling on the question of ownership
for the purpose of compensating for the latters failure to counter such ruling. The RTC had held that, as a
corporation, petitioner had no right to acquire the property which was alienable public land.
Hence, this Petition.[8]
Issues
Petitioner submits the following issues for our consideration:
1. The Honorable Court of Appeals had clearly erred in not holding that [r]espondents occupation or
possession of the property in question was merely through the tolerance or permission of the
herein [p]etitioner;
[2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment case should have
been a forcible entry case where prior physical possession is indispensable; and
[3.] The Honorable Court of Appeals had also erred when it ruled that the herein [r]espondents
possession or occupation of the said property is in the nature of an exercise of ownership which
should put the herein [p]etitioner on guard.[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance

Petitioner faults the CA for not holding that the former merely tolerated respondents occupation of the
subject property. By raising this issue, petitioner is in effect asking this Court to reassess factual findings. As a
general rule, this kind of reassessment cannot be done through a petition for review on certiorari under Rule 45
of the Rules of Court, because this Court is not a trier of facts; it reviews only questions of law. [10] Petitioner has
not given us ample reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC, we find that petitioner failed to substantiate its
case for unlawful detainer. Admittedly, no express contract existed between the parties. Not shown either was
the corporations alleged tolerance of respondents possession.
While possession by tolerance may initially be lawful, it ceases to be so upon the owners demand that the
possessor by tolerance vacate the property.[11] To justify an action for unlawful detainer, the permission or
tolerance must have been present at the beginning of the possession. [12] Otherwise, if the possession was
unlawful from the start, an action for unlawful detainer would be an improper remedy. Sarona v.
Villegas[13] elucidates thus:
A close assessment of the law and the concept of the word tolerance confirms our view heretofore expressed
that such tolerance must be present right from the start of possession sought to be recovered, to categorize a
cause of action as one of unlawful detainer not of forcible entry. Indeed, to hold otherwise would espouse a
dangerous doctrine. And for two reasons. First.Forcible entry into the land is an open challenge to the right of
the possessor. Violation of that right authorizes the speedy redress in the inferior court provided for in the
rules. If one year from the forcible entry is allowed to lapse before suit is filed, then the remedy ceases to be
speedy; and the possessor is deemed to have waived his right to seek relief in the inferior court.Second, if a
forcible entry action in the inferior court is allowed after the lapse of a number of years, then the result may well
be that no action for forcible entry can really prescribe. No matter how long such defendant is in physical
possession, plaintiff will merely make a demand, bring suit in the inferior court upon a plea of tolerance to
prevent prescription to set in and summarily throw him out of the land. Such a conclusion is
unreasonable. Especially if we bear in mind the postulates that proceedings of forcible entry and unlawful
detainer are summary in nature, and that the one year time bar to suit is but in pursuance of the summary
nature of the action.[14]
In this case, the Complaint and the other pleadings do not recite any averment of fact that would
substantiate the claim of petitioner that it permitted or tolerated the occupation of the property by Respondent
Cruz. The Complaint contains only bare allegations that 1) respondent immediately occupied the subject
property after its sale to her, an action merely tolerated by petitioner; [15] and 2) her allegedly illegal occupation
of the premises was by mere tolerance.[16]
These allegations contradict, rather than support, petitioners theory that its cause of action is for unlawful
detainer. First, these arguments advance the view that respondents occupation of the property was unlawful at
its inception. Second, they counter the essential requirement in unlawful detainer cases that petitioners
supposed act of sufferance or tolerance must be present right from the start of a possession that is later sought
to be recovered.[17]
As the bare allegation of petitioners tolerance of respondents occupation of the premises has not been
proven, the possession should be deemed illegal from the beginning. Thus, the CA correctly ruled that the
ejectment case should have been for forcible entry -- an action that had already prescribed, however, when the
Complaint was filed on May 12, 1999. The prescriptive period of one year for forcible entry cases is reckoned
from the date of respondents actual entry into the land, which in this case was on April 24, 1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems from the legal characterization of the ejectment
Complaint filed by petitioner. Specifically, was it for unlawful detainer or for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce as follows:
SECTION 1. Who may institute proceedings, and when. - Subject to the provisions of the next succeeding
section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy, or

stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee, or other person,
may, at any time within one (1) year after such unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under them, for the restitution of such possession, together with
damages and costs.
While both causes of action deal only with the sole issue of physical or de facto possession,[18] the two
cases are really separate and distinct, as explained below:
x x x. In forcible entry, one is deprived of physical possession of land or building by means of force,
intimidation, threat, strategy, or stealth. In unlawful detainer, one unlawfully withholds possession thereof after
the expiration or termination of his right to hold possession under any contract, express or implied. In forcible
entry, the possession is illegal from the beginning and the basic inquiry centers on who has the prior
possession de facto. In unlawful detainer, the possession was originally lawful but became unlawful by the
expiration or termination of the right to possess, hence the issue of rightful possession is decisive for, in such
action, the defendant is in actual possession and the plaintiffs cause of action is the termination of the
defendants right to continue in possession.
What determines the cause of action is the nature of defendants entry into the land. If the entry is illegal, then
the action which may be filed against the intruder within one year therefrom is forcible entry. If, on the other
hand, the entry is legal but the possession thereafter became illegal, the case is one of unlawful detainer which
must be filed within one year from the date of the last demand.[19]
It is axiomatic that what determines the nature of an action as well as which court has jurisdiction over it
are the allegations in the complaint[20] and the character of the relief sought.[21]
In its Complaint, petitioner alleged that, having acquired the subject property from Barbara Galino on
December 5, 1996,[22] it was the true and absolute owner[23]thereof; that Galino had sold the property to
Respondent Cruz on April 24, 1998;[24] that after the sale, the latter immediately occupied the property, an
action that was merely tolerated by petitioner; [25] and that, in a letter given to respondent on April 12, 1999,
[26]
petitioner had demanded that the former vacate the property, but that she refused to do so. [27] Petitioner
thereupon prayed for judgment ordering her to vacate the property and to pay reasonable rentals for the use of
the premises, attorneys fees and the costs of the suit.[28]
The above allegations appeared to show the elements of unlawful detainer. They also conferred initiatory
jurisdiction on the MTCC, because the case was filed a month after the last demand to vacate -- hence, within
the one-year prescriptive period.
However, what was actually proven by petitioner was that possession by respondent had been illegal from
the beginning. While the Complaint was crafted to be an unlawful detainer suit, petitioners real cause of action
was for forcible entry, which had already prescribed. Consequently, the MTCC had no more jurisdiction over
the action.
The appellate court, therefore, did not err when it ruled that petitioners Complaint for unlawful detainer was
a mere subterfuge or a disguised substitute action for forcible entry, which had already prescribed. To repeat,
to maintain a viable action for forcible entry, plaintiff must have been in prior physical possession of the
property; this is an essential element of the suit.[29]
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CAs pronouncement that respondents occupation of the property was an
exercise of a right flowing from a claim of ownership. It submits that the appellate court should not have passed
upon the issue of ownership, because the only question for resolution in an ejectment suit is that of
possession de facto.

Clearly, each of the parties claimed the right to possess the disputed property because of alleged
ownership of it. Hence, no error could have been imputed to the appellate court when it passed upon the issue
of ownership only for the purpose of resolving the issue of possession de facto.[30] The CAs holding is
moreover in accord with jurisprudence and the law.
Execution of a Deed of Sale
Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold only upon its delivery in any of the ways specified in
Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from
the vendor to the vendee.[31] With respect to incorporeal property, Article 1498 lays down the general rule: the
execution of a public instrument shall be equivalent to the delivery of the thing that is the object of the contract
if, from the deed, the contrary does not appear or cannot be clearly inferred.
However, ownership is transferred not by contract but by tradition or delivery.[32] Nowhere in the Civil Code
is it provided that the execution of a Deed of Sale is aconclusive presumption of delivery of possession of a
piece of real estate.[33]
This Court has held that the execution of a public instrument gives rise only to a prima facie presumption
of delivery. Such presumption is destroyed when the delivery is not effected because of a legal impediment.
[34]
Pasagui v. Villablanca[35] had earlier ruled that such constructive or symbolic delivery, being merely
presumptive, was deemed negated by the failure of the vendee to take actual possession of the land sold.
It is undisputed that petitioner did not occupy the property from the time it was allegedly sold to it on
December 5, 1996 or at any time thereafter. Nonetheless, it maintains that Galinos continued stay in the
premises from the time of the sale up to the time respondents occupation of the same on April 24, 1998, was
possession held on its behalf and had the effect of delivery under the law.[36]
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain control and possession
of the property, because Galino had continued to exercise ownership rights over the realty. That is, she had
remained in possession, continued to declare it as her property for tax purposes and sold it to respondent in
1998.
For its part, the CA found it highly unbelievable that petitioner -- which claims to be the owner of the
disputed property -- would tolerate possession of the property by respondent from April 24, 1998 up to October
16, 1998. How could it have been so tolerant despite its knowledge that the property had been sold to her, and
that it was by virtue of that sale that she had undertaken major repairs and improvements on it?
Petitioner should have likewise been put on guard by respondents declaration of the property for tax
purposes on April 23, 1998,[37] as annotated in the tax certificate filed seven months later.[38] Verily, the tax
declaration represented an adverse claim over the unregistered property and was inimical to the right of
petitioner.
Indeed, the above circumstances derogated its claim of control and possession of the property.
Order of Preference in Double
Sale of Immovable Property
The ownership of immovable property sold to two different buyers at different times is governed by Article
1544 of the Civil Code, which reads as follows:
Article 1544. x x x
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.
Galino allegedly sold the property in question to petitioner on December 5, 1996 and, subsequently, to
respondent on April 24, 1998. Petitioner thus argues that being the first buyer, it has a better right to own the
realty. However, it has not been able to establish that its Deed of Sale was recorded in the Registry of Deeds of
Olongapo City.[39] Its claim of an unattested and unverified notation on its Deed of Absolute Sale [40] is not
equivalent to registration. It admits that, indeed, the sale has not been recorded in the Registry of Deeds.[41]
In the absence of the required inscription, the law gives preferential right to the buyer who in good faith is
first in possession. In determining the question of who is firstin possession, certain basic parameters have
been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also symbolic possession.
Second, possessors in good faith are those who are not aware of any flaw in their title or mode of
acquisition.[43] Third, buyers of real property that is in the possession of persons other than the seller must be
wary -- they must investigate the rights of the possessors.[44] Fourth, good faith is always presumed; upon
those who allege bad faith on the part of the possessors rests the burden of proof.[45]
[42]

Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it did not acquire
possession either materially or symbolically. As between the two buyers, therefore, respondent was first in
actual possession of the property.
Petitioner has not proven that respondent was aware that her mode of acquiring the property was
defective at the time she acquired it from Galino. At the time, the property -- which was public land -- had not
been registered in the name of Galino; thus, respondent relied on the tax declarations thereon. As shown, the
formers name appeared on the tax declarations for the property until its sale to the latter in 1998. Galino was in
fact occupying the realty when respondent took over possession. Thus, there was no circumstance that could
have placed the latter upon inquiry or required her to further investigate petitioners right of ownership.
Disqualification from Ownership
of Alienable Public Land
Private corporations are disqualified from acquiring lands of the public domain, as provided under Section
3 of Article XII of the Constitution, which we quote:
Sec. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national
parks. Agricultural lands of the public domain may be further classified by law according to the uses to which
they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private
corporations or associations may not hold such alienable lands of the public domain except by lease, for a
period not exceeding twenty-five years, and not to exceed one thousand hectares in area. Citizens of the
Philippines may not lease not more than five hundred hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant. x x x. (Italics supplied)
While corporations cannot acquire land of the public domain, they can however acquire private land.
Hence, the next issue that needs to be resolved is the determination of whether the disputed property is
private land or of the public domain.
[46]

According to the certification by the City Planning and Development Office of Olongapo City, the contested
property in this case is alienable and disposable public land. [47] It was for this reason that respondent filed a
miscellaneous sales application to acquire it.[48]
On the other hand, petitioner has not presented proof that, at the time it purchased the property from
Galino, the property had ceased to be of the public domain and was already private land. The established rule
is that alienable and disposable land of the public domain held and occupied by a possessor -- personally or
through predecessors-in-interest, openly, continuously, and exclusively for 30 years -- is ipso jure converted to
private property by the mere lapse of time.[49]

In view of the foregoing, we affirm the appellate courts ruling that respondent is entitled to possession de
facto. This determination, however, is only provisional in nature. [50] Well-settled is the rule that an award of
possession de facto over a piece of property does not constitute res judicata as to the issue of its ownership.[51]
WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED.

THIRD DIVISION

[G.R. No. 144576. May 28, 2004]

SPOUSES ISABELO and ERLINDA PAYONGAYONG, petitioners, vs. HON. COURT OF APPEALS,
SPOUSES CLEMENTE and ROSALIA SALVADOR,respondents.
DECISION
CARPIO MORALES, J.:
Being assailed by petition for review on certiorari under Rule 45 of the Rules of Court[1] is the June 29,
2000 Decision[2] of the Court of Appeals in CA-G.R. CV No. 52917 affirming that of the Regional Trial Court
(RTC), Branch 217, Quezon City dismissing Civil Case No. Q-93-16891, [3] the complaint of spouses Isabelo
and Erlinda Payongayong (petitioners) against spouses Clemente and Rosalia Salvador (respondents).
Eduardo Mendoza (Mendoza) was the registered owner of a two hundred square meter parcel of land
situated in Barrio San Bartolome, Caloocan, covered by and described in Transfer Certificate of Title No.
329509[4] of the Registry of Deeds of Quezon City.
On April 18, 1985, Mendoza mortgaged the parcel of land to the Meralco Employees Savings and Loan
Association (MESALA) to secure a loan in the amount of P81,700.00. The mortgage was duly annotated on the
title as Primary Entry No. 2872[5] on April 23, 1985.
On July 11, 1987, Mendoza executed a Deed of Sale with Assumption of Mortgage [6] over the parcel of
land together with all the improvements thereon (hereinafter referred to as the property) in favor of petitioners
in consideration of P50,000.00. It is stated in the deed that petitioners bound themselves to assume payment
of the balance of the mortgage indebtedness of Mendoza to MESALA.[7]
On December 7, 1987, Mendoza, without the knowledge of petitioners, mortgaged the same property to
MESALA to secure a loan in the amount of P758,000.00. On even date, the second mortgage was duly
annotated as Primary Entry No. 8697[8] on Mendozas title.
On November 28, 1991, Mendoza executed a Deed of Absolute Sale[9] over still the same property in favor
of respondents in consideration of P50,000.00. The sale was duly annotated as Primary Entry No. 1005 [10] on
Mendozas title. On even date, MESALA issued a Cancellation of Mortgage[11] acknowledging that for sufficient
and valuable consideration which it received from Mendoza, it was cancelling and releasing the real estate
mortgage over the property. The cancellation was annotated as Primary Entry No. 1003[12] on Mendozas title.
Respondents caused the cancellation of Mendozas title and the issuance of Transfer Certificate Title No.
67432[13] in their name.
Getting wind of the sale of the property to respondents, petitioners filed on July 16, 1993 a complaint [14] for
annulment of deed of absolute sale and transfer certificate of title with recovery of possession and damages
against Mendoza, his wife Sally Mendoza, and respondents before the Quezon City RTC.
In their complaint, petitioners alleged that the spouses Mendoza maliciously sold to respondents the
property which was priorly sold to them and that respondents acted in bad faith in acquiring it, the latter having
had knowledge of the existence of the Deed of Absolute Sale with Assumption of Mortgage between them
(petitioners) and Mendoza.
Branch 217 of the Quezon City RTC, by Order [15] of December 3, 1993, archived the case in view of the
failure to determine the whereabouts of the spouses Mendoza.
A motion[16] for the revival of the case as against respondents and its dismissal as against the spouses
Mendoza was later filed on December 17, 1993 by petitioners, which motion was granted by the trial court by
Order[17] of December 27, 1993.
By Decision of February 5, 1996, the trial court found for respondents.
Dissatisfied, petitioners appealed the decision to the Court of Appeals (CA) which, as stated early on,
affirmed the same.
[19]

Petitioners Motion for Reconsideration[18] having been denied by the CA by Resolution of August 25, 2000,
the petition at bar was lodged.
Petitioners assign to the CA the following errors:[20]
I

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING IN (sic) EXCESS OF JURISDICTION WHEN IT FAILED TO RULE THAT THE DEED
OF SALE EXECUTED BY EDUARDO MENDOZA IN FAVOR OF PRIVATE RESPONDENTS WAS
SIMULATED AND THEREFORE NULL AND VOID.
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING IN (sic) EXCESS OF JURISDICTION WHEN IT GAVE CREDENCE TO THE THEORY
OF THE PRIVATE RESPONDENTS THUS FOUND TO BE INNOCENT PURCHASERS FOR VALUE.
III
THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AMOUNTING
IN (sic) EXCESS OF ITS JURISDICTION BY HOLDING THAT PETITIONERS ARE BARRED BY
LACHES.[21]
On procedural and substantive grounds, the petition fails.
The petition which was filed by registered mail was not accompanied by a written explanation why such
service was not done personally, in contravention of Section 11, Rule 13 of the Revised Rules of Court which
provides:
SEC. 11. Priorities in modes of service and filing. Whenever practicable, the service and filing of pleadings and
other papers shall be done personally. Except with respect to papers emanating from the court, a resort to
other modes must be accompanied by a written explanation why the service or filing was not done
personally. A violation of this Rule may be cause to consider the paper as not filed.
Under the above-quoted provision, service and filing of pleadings and other papers must, whenever
practicable, be done personally. If they are made through other modes, the party concerned must provide a
written explanation why the service or filing was not done personally. If only to underscore the mandatory
nature of this innovation to the set of adjective rules requiring personal service whenever practicable, the
provision gives the court the discretion to consider a pleading or paper as not filed if the other modes of service
or filing were resorted to and no written explanation was made as to why personal service was not done in the
first place.[22] Strictest compliance is mandated, lest this provision be rendered meaningless and its sound
purpose negated.[23]
On the merits, respondents claim that they are entitled to the protection accorded to purchasers in good
faith is well-taken.
It is a well-established principle that a person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the
certificate to determine the condition of the property.[24] He is charged with notice only of such burdens and
claims as are annotated on the title. [25] He is considered in law as an innocent purchaser for value or one who
buys the property of another without notice that some other person has a right to or interest in such property
and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of
another person.[26]
That petitioners did not cause the cancellation of the certificate of title of Mendoza and procure one in their
names is not disputed. Nor that they had their claims annotated on the same title. Thus, at the time of the sale
of the property to respondents on November 28, 1991, only the mortgages in favor of MESALA appeared on
the annotations of encumbrances on Mendozas title. Respondent Rosalia Salvador (Rosalia) so testified:
Q: Now, according to you, you bought this property from the Mendozas (sic), Eduardo and Sally
Mendoza on November 28, 1991, is that correct?
A: Yes, sir.
xxx
Q: Now, Mrs. Sally Salvador, what did you do after buying the property from the Mendozas (sic)?
A: We renovated it, we constructed a concrete fence, sir.
Q: When you bought the property, is this property encumbered or mortgaged?
A: The property was mortgaged to Meralco Savings and Loan Association, sir.
xxx
Q: And what did you do before buying the property?
A: I verified with the City Hall if they are real owners of the property.
xxx

Q: When you bought the property, mortgaged to Meralco, was this particular property titled in the
name of Eduardo Mendoza?
A: Yes, sir.
xxx
Q: When you bought the property, Mrs. Sally Salvador, is this covered by any real property tax in the
name of Eduardo Mendoza?
A: In the name of Eduardo Mendoza the one given to me, sir.
xxx
Q: Now, Mrs. Sally Salvador, when for the first time did you see Mr. Payongayong?
A: On the third call of Honorable Judge Enriquez, sir.
xxx
Q: Is it not a fact that before you bought that property, you made an ocular inspection of the premises,
is that correct?
A: Yes, sir.
xxx
Q: And after you have inspected the premises in question, is it not a fact that you went to the Register
of Deeds, is that correct?
A: Yes, sir. Together with Sally Mendoza and the agent.
xxx
Q: So, you went to the Office of the Register of Deeds of Quezon City, you, together with Benny
Salvador and Mrs. Mendoza?
A: Yes, sir.
Q: What did you find out from your verification as to the authenticity of the title?
A: That she is the real owner of the property registered in the Register of Deeds.
Q: Who is the owner?
A: Mr. and Mrs. Eduardo Mendoza.
Q: Did you try to see if the property is free from any lien or encumbrance?
A: Before we went to the Register of Deeds, she told us that the property is mortgaged at (sic)
Meralco, sir.
Q: Did you check it up, were you given a Xerox copy of the TCT, Transfer Certificate of Title No.
329509, in addition to the information given to you that the property in question is mortgaged in
favor of Meralco Employees Savings?
A: Yes, sir.
Q: And when you went to the Register of Deeds, you saw that the mortgage in favor of the Meralco
Employees Savings and Loan Association was duly annotated on the title which is being kept and
intact in the Office of the Register of Deeds, is that correct?
A: Yes, sir.[27]
Where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the
property, the court cannot just disregard such rights. Otherwise, public confidence in the certificate of title, and
ultimately, the Torrens system, would be impaired, for everyone dealing with registered property would still
have to inquire at every instance whether the title has been regularly or irregularly issued.[28]
The real purpose of the Torrens system of registration is to quiet title to land and to put a stop to any question
of legality of the title except to claims which have been recorded in the certificate of title at the time of
registration or which may arise subsequent thereto. Every registered owner and every subsequent purchaser
for value in good faith holds the title to the property free from all encumbrances except those noted in the
certificate. Hence, a purchaser is not required to explore further what the Torrens title on its face indicates in
quest for any hidden defect or inchoate right that may subsequently defeat his right thereto.[29]
In respondents case, they did not only rely upon Mendozas title. Rosalia personally inspected the property
and verified with the Registry of Deeds of Quezon City if Mendoza was indeed the registered owner. Given this

factual backdrop, respondents did indeed purchase the property in good faith and accordingly acquired valid
and indefeasible title thereto.
The law is thus in respondents favor. Article 1544 of the Civil Code so provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith.
There being double sale of an immovable property, as the above-quoted provision instructs, ownership
shall be transferred (1) to the person acquiring it who in good faith first recorded it in the Registry of Property;
(2) in default thereof, to the person who in good faith was first in possession; and (3) in default thereof, to the
person who presents the oldest title, provided there is good faith.[30]
The trial and appellate courts thus correctly accorded preferential rights to respondents who had the sale
registered in their favor.
Petitioners claim, however, that the sale between Mendoza and respondents was simulated.
Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act
which does not exist or is different from that which was really executed. [31] Its requisites are: a) an outward
declaration of will different from the will of the parties; b) the false appearance must have been intended by
mutual agreement; and c) the purpose is to deceive third persons.[32]
The basic characteristic then of a simulated contract is that it is not really desired or intended to produce
legal effects or does not in any way alter the juridical situation of the parties.[33]
The cancellation of Mendozas certificate of title over the property and the procurement of one in its stead
in the name of respondents, which acts were directed towards the fulfillment of the purpose of the contract,
unmistakably show the parties intention to give effect to their agreement. The claim of simulation does not thus
lie.
That petitioners and respondents were forced to litigate due to the deceitful acts of the spouses Mendoza,
this Court is not unmindful. It cannot be denied, however, that petitioners failure to register the sale in their
favor made it possible for the Mendozas to sell the same property to respondents.
Under the circumstances, this Court cannot come to petitioners succor at the expense of respondentsinnocent purchasers in good faith. Petitioners are not without remedy, however.They may bring an action for
damages against the spouses Mendoza.[34]
WHEREFORE, the petition is DENIED.
SO ORDERED.

SECOND DIVISION
RUDOLF LIETZ, INC., G.R. No. 122463
Petitioner,
Present:
- versus- PUNO, J.,
Chairman, AUSTRIA-MARTINEZ,
CALLEJO, SR.,
THE COURT OF APPEALS, TINGA, and
AGAPITO BURIOL, TIZIANA CHICO-NAZARIO, JJ.
TURATELLO & PAOLA SANI,
Respondents. Promulgated:
December 19, 2005
x --------------------------------------------------------------------x
DECISION
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, praying for the
annulment of the Decision[1] dated April 17, 1995 and the Resolution[2] dated October 25, 1995 of the Court of
Appeals in CA-G.R. CV No. 38854. The Court of Appeals affirmed theDecision[3] in Civil Case No. 2164 of the
Regional Trial Court (RTC), Branch 48, of Palawan and Puerto Princesa City with the modification that herein
respondents Tiziana Turatello and Paola Sani are entitled to damages, attorneys fees, and litigation expenses.

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing and as prayed for by the defendants, the instant
complaint is hereby DISMISSED. Defendants counterclaim is likewise DISMISSED. Plaintiff,
however, is ordered to pay defendant Turatello and Sanis counsel the sum of P3,010.38 from
August 9, 1990 until fully paid representing the expenses incurred by said counsel when the trial
was cancelled due to the non-appearance of plaintiffs witnesses. With costs against the plaintiff.
SO ORDERED.[4]

As culled from the records, the following antecedents appear:

Respondent Agapito Buriol previously owned a parcel of unregistered land situated at Capsalay Island, Port
Barton, San Vicente, Palawan. On August 15, 1986, respondent Buriol entered into a lease agreement with
Flavia Turatello and respondents Turatello and Sani, all Italian citizens, involving one (1) hectare of respondent
Buriols property. The lease agreement was for a period of 25 years, renewable for another 25 years. The
lessees took possession of the land after paying respondent Buriol a down payment of P10,000.00.[5] The
lease agreement, however, was reduced into writing only in January 1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same parcel of land for the
amount of P30,000.00. The Deed of Absolute Sale embodying the agreement described the land as follows:

A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of land
declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in the year
1985, together with all improvements thereon, situated at the Island of Capsalay, Barangay Port
Barton, municipality of San Vicente, province of Palawan which segregated from the whole
parcel described in said tax declaration, has the following superficial boundaries: NORTH, Sec.
01-017; and remaining property of the vendor; EAST, by Seashore; SOUTH, 01-020; and
WEST, by 01-018 (now Elizabeth Lietz).[6]

Petitioner later discovered that respondent Buriol owned only four (4) hectares, and with one more hectare
covered by lease, only three (3) hectares were actually delivered to petitioner. Thus, petitioner instituted on
April 3, 1989 a complaint for Annulment of Lease with Recovery of Possession with Injunction and
Damages against respondents and Flavia Turatello before the RTC. The complaint alleged that with evident
bad faith and malice, respondent Buriol sold to petitioner five (5) hectares of land when respondent Buriol knew
for a fact that he owned only four (4) hectares and managed to lease one more hectare to Flavia Turatello and
respondents Tiziana Turatello and Paola Sani. The complaint sought the issuance of a restraining order and a
writ of preliminary injunction to prevent Flavia Turatello and respondents Turatello and Sani from introducing
improvements on the property, the annulment of the lease agreement between respondents, and the
restoration of the amount paid by petitioner in excess of the value of the property sold to him. Except for Flavia
Turatello, respondents filed separate answers raising similar defenses of lack of cause of action and lack of
jurisdiction over the action for recovery of possession. Respondents Turatello and Sani also prayed for the
award of damages and attorneys fees.[7]
After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing both petitioners
complaint and respondents counterclaim for damages. Petitioner and respondents Turatello and Sani
separately appealed the RTC Decision to the Court of Appeals, which affirmed the dismissal of petitioners
complaint and awarded respondents Turatello and Sani damages and attorneys fees. The dispositive portion of
the Court of Appeals Decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following
modification:
Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants
Turatello and Sani, the sum of P100,000.00 as moral damages; (2) P100,000.00 as exemplary
damages; (3) P135,728.73 as attorneys fees; and (4) P10,000.00 as litigation expenses.
SO ORDERED.[8]

Petitioner brought to this Court the instant petition after the denial of its motion for reconsideration of the Court
of Appeal Decision. The instant petition imputes the following errors to the Court of Appeals.
I.
IN DEFENDING AGAPITO BURIOLS GOOD FAITH AND IN STATING THAT
ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.
II.

IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE
ARE, RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.

III.

IN NOT GRANTING PETITIONERS CLAIM FOR ACTUAL AND EXEMPLARY

DAMAGES.

IV.

IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI

EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.[9]

Essentially, only two main issues confront this Court, namely: (i) whether or not petitioner is entitled to
the delivery of the entire five hectares or its equivalent, and (ii) whether or not damages may be awarded to
either party.
Petitioner contends that it is entitled to the corresponding reduction of the purchase price because the
agreement was for the sale of five (5) hectares although respondent Buriol owned only four (4) hectares. As in
its appeal to the Court of Appeals, petitioner anchors its argument on the second paragraph of Article 1539 of
the Civil Code, which provides:
Art. 1539. The obligation to deliver the thing sold includes that of placing in the control of
the vendee all that is mentioned in the contract, in conformity with the following rules:
If the sale of real estate should be made with a statement of its area, at the rate of a
certain price for a unit of measure or number, the vendor shall be obliged to deliver to the
vendee, if the latter should demand it, all that may have been stated in the contract; but, should
this be not possible, the vendee may choose between a proportional reduction of the price and
the rescission of the contract, provided that, in the latter case, the lack in the area be not less
than one-tenth of that stated.
....

The Court of Appeals Decision, however, declared as inapplicable the abovequoted provision and
instead ruled that petitioner is no longer entitled to a reduction in price based on the provisions of Article 1542
of the Civil Code, which read:
Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain
sum for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or lesser area or number than that stated in the contract.
The same rule shall be applied when two or more immovables are sold for a single price;
but if, besides mentioning the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract, the vendor shall be bound to
deliver all that is included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the
price, in proportion to what is lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver what has been stipulated.

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit area. In a unit
price contract, the statement of area of immovable is not conclusive and the price may be reduced or
increased depending on the area actually delivered. If the vendor delivers less than the area agreed upon, the
vendee may oblige the vendor to deliver all that may be stated in the contract or demand for the proportionate

reduction of the purchase price if delivery is not possible. If the vendor delivers more than the area stated in
the contract, the vendee has the option to accept only the amount agreed upon or to accept the whole area,
provided he pays for the additional area at the contract rate.[10]
In some instances, a sale of an immovable may be made for a lump sum and not at a rate per unit. The
parties agree on a stated purchase price for an immovable the area of which may be declared based on an
estimate or where both the area and boundaries are stated.
In the case where the area of the immovable is stated in the contract based on an estimate, the actual
area delivered may not measure up exactly with the area stated in the contract. According to Article 1542 [11] of
the Civil Code, in the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price although there be a greater or lesser
area or number than that stated in the contract. However, the discrepancy must not be substantial. A vendee of
land, when sold in gross or with the description more or less with reference to its area, does not thereby ipso
facto take all risk of quantity in the land. The use of more or less or similar words in designating quantity covers
only a reasonable excess or deficiency.[12]
Where both the area and the boundaries of the immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated area. In cases of conflict between areas and boundaries,
it is the latter which should prevail. What really defines a piece of ground is not the area, calculated with more
or less certainty, mentioned in its description, but the boundaries therein laid down, as enclosing the land and
indicating its limits. In a contract of sale of land in a mass, it is well established that the specific boundaries
stated in the contract must control over any statement with respect to the area contained within its boundaries.
It is not of vital consequence that a deed or contract of sale of land should disclose the area with mathematical
accuracy. It is sufficient if its extent is objectively indicated with sufficient precision to enable one to identify it.
An error as to the superficial area is immaterial. [13] Thus, the obligation of the vendor is to deliver everything
within the boundaries, inasmuch as it is the entirety thereof that distinguishes the determinate object.[14]
As correctly noted by the trial court and the Court of Appeals, the sale between petitioner and
respondent Buriol involving the latters property is one made for a lump sum. The Deed of Absolute Sale shows
that the parties agreed on the purchase price on a predetermined area of five hectares within the specified
boundaries and not based on a particular rate per area. In accordance with Article 1542, there shall be no
reduction in the purchase price even if the area delivered to petitioner is less than that stated in the contract. In
the instant case, the area within the boundaries as stated in the contract shall control over the area agreed
upon in the contract.

The Court rejects petitioners contention that the propertys boundaries as stated in the Deed of Absolute
Sale are superficial and unintelligible and, therefore, cannot prevail over the area stated in the contract. First,
as pointed out by the Court of Appeals, at an ocular inspection prior to the perfection of the contract of sale,
respondent Buriol pointed to petitioner the boundaries of the property. Hence, petitioner gained a fair estimate
of the area of the property sold to him. Second, petitioner cannot now assail the contents of the Deed of
Absolute Sale, particularly the description of the boundaries of the property, because petitioners subscription to
the Deed of Absolute Sale indicates his assent to the correct description of the boundaries of the property.
Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into believing that the
latter was buying five hectares when he knew prior to the sale that he owned only four hectares. The review of
the circumstances of the alleged misrepresentation is factual and, therefore, beyond the province of the Court.
Besides, this issue had already been raised before and passed upon by the trial court and the Court of
Appeals. The factual finding of the courts below that no sufficient evidence supports petitioners allegation of
misrepresentation is binding on the Court.
The Court of Appeals reversed the trial courts dismissal of respondents Turatello and Sanis
counterclaim for moral and exemplary damages, attorneys fees and litigation expenses. In awarding moral
damages in the amount of P100,000 in favor of Turatello and Sani, the Court of Appeals justified the award to
alleviate the suffering caused by petitioners unfounded civil action. The filing alone of a civil action should not
be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among
the grounds for moral damages.[15]
Exemplary or corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages. [16] With the deletion of the award for
moral damages, there is no basis for the award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is GRANTED in PART. The Court of
Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the MODIFICATION that the award of moral
and exemplary damages is DELETED.
SO ORDERED.

THIRD DIVISION
SPOUSES MARIO ONG AND MARIA
CARMELITA ONG, and DEMETRIO
VERZANO,
Petitioners,

- versus -

G.R. No. 162045

Present:
QUISUMBING, J., Chairperson,*
CARPIO, Acting Chairperson,
CARPIO MORALES, and
TINGA, JJ.
Promulgated:

March 28, 2006

SPOUSES ERGELIA OLASIMAN
and LEONARDO OLASIMAN,
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

CARPIO MORALES, J.:

By Deed of Sale dated June 1, 1992, Paula Verzano (Paula) sold an unregistered parcel of land
covered by Tax Declaration No. 18-270-A[1] in her name to her niece Bernandita Verzano-Matugas
(Bernandita)-daughter of her brother Isebero.[2] The land was particularly described as:
A parcel of land, covered by Tax Dec. No. 18-270-A, situated at Mampas, Valencia,
Negros Oriental, bounded on the North by Crisanta Abequibel, 62.00 m.; on the East by Victoria
Verzano, 90.00 m.; on the South by Demetrio Abante, 62.00 m.; and, on the West by Vicente
Darong, 90.00 m., containing an area of .5518 square meters, more or less. x x x[3]
A road traversed the land, dividing it into two lots: Lot 4080, Cad. 903, with an area of approximately 3,624 sq.
m., covered by Tax Declaration No. 20-020-0174;[4] and Lot 4091, Cad. 903, with an area of approximately 506
sq. m., covered by Tax Declaration No. 20-020-0214.[5]

Bernandita took initial steps to register the land but failed to complete the registration process.[6]

On November 26, 1992, Paula died single and without issue.[7] She was survived by her siblings herein
petitioner Demetrio Verzano (Verzano), Victoria Verzano, and the children of her deceased brother Isebero
Verzano, namely Isebero Verzano, Jr.,[8] Epifanio Verzano, Bernandita and Estrella Verzano.[9]

On November 22, 1995, Verzano executed a public document entitled Extrajudicial Settlement by Sole
Heir and Sale[10] wherein he adjudicated exclusively unto himself Lot 4080, Cad. 903 (the questioned lot) and
sold it to petitioner Carmelita Ong (Carmelita). Carmelita subsequently caused the cancellation of Tax
Declaration No. 20-020-0174 covering the questioned lot and the issuance of Tax Declaration No. 96-0200316[11] in her own name.

On February 5, 1996, Bernandita, by Deed of Sale of even date,[12] sold the questioned lot to
respondents spouses Ergelia Olasiman and Leonardo Olasiman.

On November 28, 1997, respondents filed a Complaint [13] against petitioners, for annulment of the
Extrajudicial Settlement by Sole Heir and Sale, quieting of title, and damages before the Regional Trial Court
(RTC) of Dumaguete City. They alleged, inter alia, that they, through their predecessors-in-interest, have been
in actual, continuous and adverse possession of the questioned lot since time immemorial until mid-February
1996 when petitioners spouses Ong disturbed them in their possession by fencing the same; [14] and petitioner
Verzano executed the Extrajudicial Settlement by Sole Heir and Sale fraudulently.

In their Answer (with Affirmative Defenses and Compulsory Counterclaim), [15] petitioners alleged that
respondents, not being co-heirs, are not the real parties in interest; [16] and the RTC has no jurisdiction over the
case as their cause of action is more of forcible entry.[17]

Applying Article 1544 of the Civil Code which provides:

Article 1544. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken possession thereof in
good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith, (Underscoring supplied)

and finding petitioners spouses Ong to be buyers in good faith and the first to possess the questioned lot,
Branch 41 of the Dumaguete City RTC dismissed respondents complaint.
Defendant Demetrio Verzano is a compulsory heir [sic] of the deceased Paula Verzano
and as the Tax Declaration under the name of the latter had not been cancelled, coupled with
the fact that he continued to be in possession of the property in question, defendant Verzano
had every reason to believe that the title to the property passed on to him upon Paulas death by
operation of law. He had continued paying realty taxes thereon which plaintiffs, thru their
predecessor-in-interest had not even bothered to pay. Hence, when defendant Maria Carmelita
Ong had established defendant Verzanos relationship with the registered owner [ sic] of the
property and thereafter secured clearances from the Provincial Agrarian Reform Office, the BIR,
the Municipal Agrarian Reform Office, and the Community Environment and Natural Resources
Office II, and caused the cancellation of the Tax Declaration in the name of Paula Verzano, and
filed an application for free patent, she was no doubt a buyer in good faith. Further being first
in the possession of the property, defendant Maria Carmelita Ong must necessarily be
preferred as neither of the parties have inscribed their respective Deeds of Sale with the
Register of Deeds.
In the case of Vda. De Laig v. Court of Appeals, 82 SCRA 294, it was held:
Where there was no proper inscription of two deeds of sale of the same
land, the vendee who in good faith was first in possession will be preferred.

Plaintiffs have not shown an iota of proof that they were first in possession of the
property as vendees thereof. Plaintiffs predecessor-in-interest, Bernandita Matugas contends
that her caretaker, Fidela Darong, cultivated the land in question. However, the Agricultural
Leasehold Contract shows that Darong cultivated the same as a lessee of the questioned
property and not as an agent or caretaker of the buyer thereof. Had plaintiffs Olasimans made
further inquiries, they would have known that as early as 23 November 1995, defendant Maria
Carmelita Ong had filed her notice and application for free patent. Hence, they were buyers in
bad faith.
On the other hand, defendant Maria Carmelita Ong has shown that she had fenced the
property and that per certifications of the MARO, the said property has not been cultivated nor
tenanted. Between a bare allegation of possession by plaintiffs and a certification from the
MARO that the property is untenanted, the latter is given more credence on the presumption
that its officers acted in the performance of its duties. Hence, the Contract of Sale executed by
Demetrio Verzano in favor of Maria Carmelita Ong should be given effect.
Therefore, it becomes unnecessary to discuss the other issues as without ownership, an
action may not be brought to remove such cloud or to quiet title. [18] (Underscoring in the
original; emphasis supplied)

On appeal by respondents, the Court of Appeals reversed the decision of the trial court by the assailed
Decision[19] of October 14, 2003. It found the Extrajudicial Settlement by Sole Heir and Sale to be void not only
because Verzano was not the only heir when he executed the same document, [20] but also because when the
deed, by which the property in question was sold by Demetrio Verzano to appellees Carmelita and Mario Ong,
was executed on November 22, 1995, the original owner, PaulaVerzano, had already disposed of the same in
favor of her niece, Bernandita Matugas, on June 1, 1992, by virtue of a Deed of Sale. (Underscoring supplied)

The appellate court thus concluded that the second sale was invalid and of no effect because Demetrio
Verzano had nothing to convey and transfer to appellees at the time of the second sale. [21] (Emphasis and
underscoring supplied)

The trial courts application of Article 1544 of the Civil Code was erroneous, held the appellate court,
because

the

case

does

not

involve

double

sale. For

respondents

bought

the

questioned

lot from Bernandita to whom it was sold by the original owner Paula, whereas petitioners bought
it from Verzano whose claim to ownership arose from the Extrajudicial Settlement by Sole Heir and Sale.

The Court of Appeals thus disposed:

WHEREFORE, the Decision appealed from is hereby REVERSED and SET ASIDE and
another one entered (1) declaring as null and void the Deed of Extra-judicial Settlement by Sole
Heir and Sale and Tax Declaration No. 96-20-020-0316 issued in the name of appellees;
(2) declaring and restoring the appellants as the true, rightful and legal owners of Lot No. 4080,
Cad 903, situated in Mampas, Valencia, Negros Oriental; and (3) ordering appellees to vacate
the said property thirty (30) days from receipt of this decision.
SO ORDERED.[22] (Underscoring supplied)

Their Motion for Reconsideration[23] having been denied by the Court of Appeals by a Resolution [24] of
February 9, 2004, petitioners filed the petition[25] at bar.

The petition fails.

When Paula sold to Bernandita by Deed of Absolute Sale dated June 1, 1992 the parcel of land of
which the questioned lot formed part, ownership thereof was transferred to the latter in accordance with Article
1496 of the Civil Code reading:
ART. 1496. The ownership of the thing sold is acquired by the vendee from the moment
it is delivered to him in any of the ways specified in articles 1497 to 1501, or in any other
manner signifying an agreement that the possession is transferred from the vendor to the
vendee,

in relation to Article 1498 of the Civil Code reading:

ART. 1498. When the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred.
xxxx
The Deed of Absolute Sale in favor of Bernandita contains nothing contrary to an intent to transfer ownership.

When Paula died on November 26, 1992, she no longer owned the questioned lot and, therefore, her
brother petitioner Verzano could not have inherited it. The Extrajudicial Settlement by Sole Heir and Sale did
not thus confer upon Verzano ownership of the questioned lot; hence, he could not have conveyed it to
petitioners spouses Ong.

Parenthetically, the execution by Verzano of the Extrajudicial Settlement by Sole Heir and Sale is
fraudulent, he having falsely stated therein that his deceased sister Paula left no known debts, neither has she
left any ascendants or descendants or any other heirs, except myself being his [sic] brother[26] despite the
fact that other heirs his sister Victoria and the four children of his deceased brother Isebero were still alive.[27]

Petitioners insistence that Article 1544 on double sales should apply does not lie. Article 1544 applies
where the same thing is sold to different vendees by the same vendor. It does not apply where the same thing
is sold to different vendees by different vendors[28] as in the case at bar.

Finally, petitioners claim of good faith does not lie too as it is irrelevant:
[T]he issue of good faith or bad faith of the buyer is relevant only where the subject of the sale
is registered land and the purchaser is buying the same from the registered owner whose title to
the land is clean xxx in such case the purchaser who relies on the clean title of the registered
owner is protected if he is a purchaser in good faith for value. Since the properties in question
areunregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim
of having bought the land in good faith, i.e., without notice that some other person has a right to
or interest in the property, would not protect them if it turns out, as it actually did in this case,

that their seller did not own the property at the time of the sale.[29] (Italics in the
original;underscoring supplied)

WHEREFORE, the assailed October 14, 2003 Decision of the Court of Appeals is AFFIRMED. This
Decision is WITHOUT PREJUDICE to the filing of any action which petitioner-spouses Mario Ong and Maria
Carmelita Ong may maintain against their co-petitioner Demetrio Verzano.

Costs against petitioners.

SO ORDERED.

FIRST DIVISION

SPOUSES
AVELINO
EXALTACION SALERA,

and

G.R. No. 135900

Petitioners,
Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
-versus-

CORONA,
AZCUNA, and
GARCIA, JJ.

SPOUSES
CELEDONIO
POLICRONIA RODAJE,

and

Promulgated:

Respondents.
August 17, 2007
x-----------------------------------------------------------------------------------------x

DECISION

SANDOVAL-GUTIERREZ, J.:

Challenged in this Petition for Review on Certiorari is the Decision [1] dated October 9, 1998 of the Court
of Appeals (Seventeenth Division) in CA-G.R. CV No. 51480, entitled Spouses Avelino Salera and Exaltacion
Salera, plaintiffs-appellees, v. Spouses Celedonio Rodaje and Policronia Rodaje, defendants-appellants.

On May 7, 1993, spouses Avelino and Exaltacion Salera, now petitioners, filed with the Regional Trial
Court (RTC), Branch 11, Calubian, Leyte, a complaint for quieting of title, docketed as Civil Case No. CN-27,
against spouses Celedonio and Policronia Rodaje, herein respondents. Petitioners alleged that they are the

absolute owners of a parcel of land situated at Basud, San Isidro, Leyte with an area of 448.98 square meters,
more or less. They acquired the property from the heirs of Brigido Tonacao as shown by a Deed of Absolute
Sale executed on June 23, 1986. They had the document registered in the Registry of Deeds of Iloilo on July 1,
1986. When they asked the Provincial Assessor to declare the property under their names for taxation
purposes, they found that Tax Declaration No. 2994 (R-5) in the name of Brigido was already cancelled and
another one, Tax Declaration No. 2408, was issued in the names of respondents. Petitioners further alleged
that they have been in possession of the property and the house they built thereon because they had paid the
purchase price even before the execution of the deed of sale.

In their answer to the complaint, respondents claimed that they are the absolute owners of the same
property. They acquired it from Catalino Tonacao, the father of Brigido, in a Deed of Absolute Sale dated June
6, 1986. The sale was registered in the Registry of Deeds of Leyte on June 10, 1986 and Tax Declaration No.
2408 was issued in their names. Prior thereto, or on January 11, 1984, they had a verbal contract of sale with
Catalino. They paid him P1,000.00 as downpayment. They agreed that the balance ofP4,000.00 shall be paid
upon execution of the deed of sale. Since then, they have been exercising their right of ownership over the
property and the building constructed thereon peacefully, publicly, adversely and continuously. Apart from
being the first registrants, they are buyers in good faith.

On July 17, 1995, the RTC rendered a Decision declaring petitioners the rightful and legal owners of
the property, thus:

In view of all the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, declaring the plaintiffs the rightful and legal owners of the property described in
paragraph 3 of the complaint; declaring as null and void the sale (Exhibits 1 and 2) made by
Catalino Tonacao to herein defendants for lack of capacity to sell; and ordering the cancellation
of Tax Declaration No. 2408 issued in favor of Sps. Celedonio Rodaje and Policronia Rodaje by
the Provincial Assessor of Leyte and directing defendants to pay the costs.

In declaring null and void the Deed of Absolute Sale between Catalino and herein respondents and
ordering the cancellation of Tax Declaration No. 2408 issued in the latters names, the RTC ratiocinated as
follows:

Assessing the validity of the sale in favor of plaintiffs by the heirs of Brigido
Tonacao vis--vis the sale by Catalino Tonacao, father of Brigido Tonacao, to the defendants of
the property, the Court believes that the former must survive over the latter.
To begin with, defendants admit that Brigido Tonacao was the declared owner of the land
in question before defendants purchased such land from Catalino Tonacao. Defendants also
admit that the wife and children of Brigido Tonacao indeed partitioned the land in question
extrajudicially among themselves and that such wife and children of Brigido Tonacao sold the
land to plaintiffs although defendants question the capacity of some children to sell the property
for being minors.
These admissions tend to establish ownership of the land in question by Brigido
Tonacao. Upon his death, therefore, the property subject of the case at bar would by operation
of law on succession, pass to the heirs of Brigido Tonacao, namely: to the surviving spouse and
his children.
Catalino Tonacao, the father of the deceased Brigido Tonacao, is excluded by operation
of law by the presence of the compulsory heirs who are the children of Brigido
Tonacao.Whatever sale Catalino Tonacao may have executed in favor of the defendants is a
sale by one who has no legal personality or authority to do so. Thus, the sale by Catalino
Tonacao to defendants is invalidated by his lack of personality to execute such sale, which
conferred no rights to the defendants nor did it impair the right of Brigido Tonacaos heirs to
dispose of their inheritance in favor of the plaintiffs.

On appeal, the Court of Appeals, in a Decision dated October 9, 1998, reversed and set aside the trial
courts Decision, declaring respondents the true and lawful owners of the property in dispute, thus:

WHEREFORE, the decision, dated July 17, 1995, of the Regional Trial Court (Branch 11) in
Calubian, Leyte is hereby REVERSED AND SET ASIDE. Therewithal, another judgment is
rendered declaring the order of the trial court null and void, hereby: declaring the defendantsappellants to have the superior right to the property in question and to be the true and lawful
owners thereof; directing the Register of Deeds of Leyte to cancel the Deed of Absolute Sale,
dated June 23, 1986, in favor of the plaintiffs-appellees and to reinstate the Deed of Absolute
Sale in favor of the defendants-appellants and Tax Declaration No. 2408 be issued in favor of
spouses Celedonio Rodaje and Policronia Rodaje; and directing the plaintiffs-appellees and

other persons claiming rights under them, and residing in the premises of the land in question,
to immediately vacate the same and to remove whatever improvements they had placed in the
premises.No pronouncement as to costs.

Hence, this petition.

The issue before us is which of the two contracts of sale is valid.

Petitioners contend that the sale between Catalino and respondents is void because the former was not
the owner of the lot, hence had no legal capacity to sue. The true owner was Brigido as shown by Tax
Declaration No. 2994 (R-5) in his name. Thus, his spouse and children, being his successors-in-interest, could
validly sell the property to them (petitioners).

On the other hand, respondents insist that they are buyers in good faith. They bought the property, had
the deed of sale registered, and took possession thereof ahead ofpetitioners. They also constructed a house
thereon which they used as a store. They paid the real estate taxes corresponding to the period from 1974 up
to 1993.

The Court of Appeals, in upholding the validity of the sale in favor of respondents, relied on Article 1544
of the Civil Code on double sale, thus:

As between two purchasers, the one who registered the sale in his favor has a preferred right
over the other who has not registered his title, even if the latter is in actual possession of the
immovable property (Taedo v. Court of Appeals, 252 SCRA 80). A fortiori the defendantsappellants have a superior right over the contested property inasmuch as they have both actual
possession and prior registration of the conveyance (Exhibit 2; page 6, TSN, August 9, 1994;
page 5, TSN, August 23, 1994). Dominium a possessione cepisse dicitur. Right is said to have
its beginning from possession.
The applicable provision of the New Civil Code provides:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have
taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the

person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is good
faith.
xxx
Since the controversy involves two deeds of sale over the same property, Article 1544
properly applies thereto (Vda. De Alcantara v. Court of Appeals, 252 SCRA 457). Following the
above-quoted provision, the court a quo was not justified in according preferential rights to the
plaintiffs-appellees, who had registered the sale in their favor later, as against the defendantsappellants.

The Court of Appeals is wrong. Article 1544 of the Civil Code contemplates a case of double sale or
multiple sales by a single vendor. More specifically, it covers a situation where a single vendor sold one and
the same immovable property to two or more buyers. [2] 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. [3] In the instant
case, the property was sold by two different vendors to different purchasers. The first sale was between
Catalino and herein respondents, while the second was between Brigidos heirs and herein petitioners.

Settled is the principle that this Court is not a trier of facts. In Gabriel v. Mabanta[4] we said that (t)his
rule, however, is not an iron-clad rule. One of the recognized exceptions is when the findings of fact of the
Court of Appeals are contrary to those of the trial court, as in this case.

Here, the trial court which had the opportunity to observe the demeanor of the parties and first to
consider the evidence submitted by them, concluded that respondents are not purchasers in good faith, thus:

The court finds no merit in the claim of good faith by the defendants in purchasing the
land in question. Exhibit 14, which is Tax Declaration No. 2408, shows that such declaration is a
transfer from Tax Declaration No. 2994 (R-5) in the name of Brigido Tonacao. Defendants,
therefore, knew when they bought the property that they were buying the property from Catalino
who is not the registered owner. The Deed of Sale (Exh. 2) showcases defendants bad faith in
that they purchased the property from Catalino Tonacao and Lourdes Tonacao and not from the
declared owner, Brigido Tonacao.

In reversing the trial courts findings, the appellate court found, thus:

Since the plaintiffs-appellees had prior knowledge of the sale of the questioned property
to the defendants-appellantsand even recognized and respected the latters possession
thereofthey acted with gross and evident bad faith in perfecting a contract of sale in their
favor. Accordingly, since it has been proven that the defendants-appellants were the anterior
possessors in good faith, ownership of the questioned property vested in them by sheer force of
law. Besides, the defendants-appellants subsequently registered the deed of sale in their favor
on June 10, 1986. For all intents and purposes, they were the first to register the deed of
conveyance. Irrefragably, since they were the first vendees, their registration enjoyed the
presumption of good faith.

Good faith is something internal. Actually, it is a question of intention. In ascertaining ones intention,
this Court must rely on the evidence of ones conduct and outward acts.[5] Good faith, or 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
be judged by actual or fancied tokens or signs. [6] Good faith consists in the possessors belief that the person
from whom he received the thing was the owner of the same and could convey his title.Good faith, while it is
always to be presumed in the absence of proof to the contrary, requires a well founded belief that the person
from whom title was received was himself the owner of the land, with the right to convey it. There is good faith
where there is an honest intention to abstain from taking any unconscientious advantage of another.[7]

Contrastingly, in Magat, Jr. v. Court of Appeals,[8] the Court explained that [b]ad faith does not simply
connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious
doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of
the nature of fraud.In Arenas v. Court of Appeals,[9] the Court held that the determination of whether one acted
in bad faith is evidentiary in nature. Thus, [s]uch acts (of bad faith) must be substantiated by evidence. Indeed,
the unbroken jurisprudence is that [b]ad faith under the law cannot be presumed; it must be established by
clear and convincing evidence.

Evidence submitted to the court, oral and documentary, established that respondents knew beforehand
that the property was declared in the name of Brigido Tonacao for taxation purposes. Respondent Celedonio
Rodaje testified as follows:

Q: Mr. Celedonio Rodaje, you said the property you bought in this case was bought from
Catalino Tonacao?
A: It was from Catalino Tonacao.

Q: And the Deed of Absolute Sale was executed in the year 1986?
A: Yes.
Q: It was likewise Catalino Tonacao who signed and executed the Deed of Absolute Sale?
A: Yes, including his wife.
Q: Before you purchased this property, did you find for yourself the ownership of the property
you were supposed to buy?
A: Yes, I did.
Q: Did Catalino Tonacao presented to you a document showing that he really owns the
property?
A: The Tax Declaration of his son Brigido Tonacao signed by Catalino Tonacao.
Q: It was presented to you, the Tax Declaration declared in the name of Brigido Tonacao?
A: It was presented to me.[10]

Respondents claim that they have been in possession of the lot even before the execution of the Deed
of Absolute Sale on June 6, 1986. Catalino allowed them to take possession after they made an initial payment
on January 11, 1984. They constructed a house thereon which they use as a store. They are the ones paying
the electric bills and realty taxes.

However, a perusal of the records of the case shows that petitioners are the ones in prior possession of
the property. After they purchased it from the heirs of Brigido in 1981, they started building a house
thereon. The construction was completed in 1984. The house was declared in the name of their daughter Aida
Salera[11] under Tax Declaration No. 4403 issued on October 11, 1984.[12] She occupied the house and used it
as a sari-sari store until 1985 when she had to close it because business was bad.[13]Even the electrical
connection of the house was registered in her name.[14] In fact, respondent Celedonio Rodaje testified that the
electric bills are in the name of Aida Salera,[15] thus:

Q: Aida Salera testified that she is the owner of the house, plaintiffs daughter in this case. She
presented the electric bills in her name, what can you say to that?
A: The electric bills are in her name, but I was the one paying.

Q: How did it come that the electric bills are in her name?
A: It was a time when the house was newly constructed where she lived for a while.

Q: You said you were the one paying her electric bills, do you have any evidence to prove your
allegation?
A: I have.

Q: What is your proof?

A: A certification from the electric bill collector that I have paid the electric bills from the
beginning.

The certification referred to by respondent Celedonio states that Mr. Celedonio C. Rodaje, Jr. is the one
paying the electric bills of Aida Salera whose dwelling unit is situated in barangay Basud, San
Isidro, Leyte since 1986. The certification clearly shows that the house is owned by Aida Salera and that
respondents started paying the electric bills only in 1986.[16]

Respondent Celedonio Rodaje likewise testified that he paid the realty taxes for the lot from 1974 to
1984 up to the present.[17] However, it appears from his Realty Tax Clearance that he paid only in 1984 and that
the payment was in lump sum.[18]

As stated earlier, respondents knew, prior to the sale to them, that the lot was declared for taxation
purposes under the name of Brigido. Thus, respondents should have been wary in buying the property. Any lot
buyer is expected to be vigilant, exercising utmost care in determining whether the seller is the true owner of
the property and whether there are other claimants. There is no indication from the record that respondents
first determined the status of the lot.

While tax declarations are not conclusive proofs of ownership, however, they are good indicia of
possession in the concept of owner, for no one in his right mind would be paying taxes for a property that is not
in his actual or at least constructive possession. [19] Hence, as between Brigido and Catalino, the former had

better right to the property. In other words, Catalino, not being the owner or possessor, could not validly sell the
lot to respondents.

The Court is convinced that respondents had knowledge that the disputed property was previously sold
to petitioners by Brigidos heirs. Obviously, aware that the sale to petitioners was not registered, they
purchased the property and have the sale registered ahead of petitioners, who although in possession, failed
to have their contract of sale registered immediately in the Registry of Deeds.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV
No. 51480 is REVERSED and the Decision of the trial court is REINSTATED.

SO ORDERED.

SECOND DIVISION
CARMELITA FUDOT, G.R. No. 171008
Petitioner,
Present:
QUISUMBING, J.,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
CATTLEYA LAND, INC., VELASCO, JR., JJ.
Respondent.
Promulgated:
September 13, 2007
x-----------------------------------------------------------------------------------x
DECISION
TINGA, J.:
For resolution is a petition that seeks to nullify the Decision [1] and Resolution[2] of the Court of Appeals dated 28
April 2005 and 11 January 2006, respectively, in C.A.G.R. CV No. 73025 which declared respondent as having
a better right over a parcel of land located in Doljo, Panglao, Bohol.

The facts, as culled from the records, follow.

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked someone to check,
on its behalf, the titles of nine (9) lots, the subject land included, which it intended to buy from the spouses
Troadio and Asuncion Tecson. Finding no defect on the titles, respondent purchased the nine lots through a
Deed of Conditional Sale on 6 November 1992. Subsequently, on 30 August 1993, respondent and the
Tecsons executed a Deed of Absolute Sale over the same properties. The Deed of Conditional Sale and the
Deed of Absolute Sale were registered with the Register of Deeds on 06 November 1992 and 04 October
1993, respectively.[3] The Register of Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of
sale on the titles because of the existing notice of attachment in connection with Civil Case No. 3399 pending
before the Regional Trial Court of Bohol.[4] The attachment was eventually cancelled by virtue of a compromise
agreement between the Tecsons and their attaching creditor which was brokered by respondent. Titles to six
(6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to the remaining three (3)
lots , because the titles covering the same were still unaccounted for.
On 23 January 1995, petitioner presented for registration before the Register of Deeds the owners copy of the
title of the subject property, together with the deed of sale purportedly executed by the Tecsons in favor of
petitioner on 19 December 1986. On the following day, respondent sent a letter of protest/opposition to
petitioners application.Much to its surprise, respondent learned that the Register of Deeds had already
registered the deed of sale in favor of petitioner and issued a new title in her name.[5]

On 5 May 1995, respondent filed its Complaint [6] for Quieting Of Title &/Or Recovery Of Ownership,
Cancellation

Of

Title

With

Damages

before

the Regional Trial Court ofTagbilaran City.[7] On 26

June

1995, Asuncion filed a complaint-in-intervention, claiming that she never signed any deed of sale covering any
part of their conjugal property in favor of petitioner. She averred that her signature in petitioners deed of sale
was forged thus, said deed should be declared null and void. [8] She also claimed that she has discovered only
recently that there was an amorous relationship between her husband and petitioner.[9]

Petitioner, for her part, alleged in her answer[10] that the spouses Tecson had sold to her the subject
property for P20,000.00 and delivered to her the owners copy of the title on 26 December 1986. She claims
that she subsequently presented the said title to the Register of Deeds but the latter refused to register the
same because the property was still under attachment.

On 31 October 2001, the trial court rendered its decision: [11] (i) quieting the title or ownership of the subject land
in favor of respondent; (ii) declaring the deed of sale between petitioner and spouses Tecson invalid; (iii)
ordering the registration of the subject land in favor of respondent; (iv) dismissing respondents claim for
damages against the Register of Deeds for insufficiency of evidence; (v) dismissing Asuncions claim for
damages against petitioner for lack of factual basis; and (vi) dismissing petitioners counterclaim for lack of the
required preponderance of evidence.[12]
According to the trial court, respondent had recorded in good faith the deed of sale in its favor ahead of
petitioner. Moreover, based on Asuncions convincing and unrebutted testimony, the trial court concluded that
the purported signature of Asuncion in the deed of sale in favor of petitioner was forged, thereby rendering the
sale void.[13]
Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double sale was
applicable to the case. The appellate court, however, dismissed her appeal, holding that there was no double
sale because the alleged sale to petitioner was null and void in view of the forgery of Asuncions purported
signature in the deed. The appellate court noted that petitioner failed to rebut Asuncions testimony despite
opportunities to do so.[14] Moreover, even if there was double sale, according to the appellate court,
respondents claim would still prevail since it was able to register the second sale in its favor in good faith, had
made inquiries before it purchased the lots, and was informed that the titles were free from encumbrance
except the attachment on the property due to Civil Case No. 3399.[15]
Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion for
reconsideration for lack of merit.[16]

Petitioner thus presents before this Court the following issues for resolution:
I.

BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT

THE FIRST BUYER WHO WAS GIVEN THE OWNERS DUPLICATE TCT TOGETHER
WITH A DEED OF SALE IN 1986, OR THE SECOND BUYER IN 1992 WITH ONLY A DEED
OF SALE.
II.
IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE
DELIVERY OF THE OWNERS DUPLICATE TCT A BUYER IN GOOD FAITH.
III.
II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH
LAW SHALL GOVERN, ARTICLE 1455 OF CIVIL CODE OR P.D. 1529
OR TORRENSSYSTEM.[17]
Petitioner avers that she was the first buyer in good faith and even had in her possession the owners
copy of the title so much so that she was able to register the deed of sale in her favor and caused the issuance
of a new title in her name. She argues that the presentation and surrender of the deed of sale and the owners
copy carried with it the conclusive authority of Asuncion Tecson which cannot be overturned by the latters oral
deposition.[18]

Petitioner claims that respondent did not demand nor require delivery of the owners duplicate title from
the spouses Tecson, neither did it investigate the circumstances surrounding the absence of the title. These
indicate respondents knowledge of a defect in the title of the spouses and, thus, petitioner concludes that
respondent was not a buyer in good faith.[19]

Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law dealing
precisely with the registration of registered lands or any subsequent sale thereof, and not Article 1544 of the
Civil Code which deals with immovable property not covered by the Torrens System.[20]

Respondent points out, on one hand, that petitioners first two issues which present an inquiry on who
has a better right or which one is a buyer in good faith, are questions of fact not proper in a petition for review.
The third issue, on the other hand, is ostensibly a question of law which had been unsuccessfully raised below.
[21]

Respondent maintains that there is no room to speak of petitioner as a buyer in good faith since she
was never a buyer in the first place, as her claim is based on a null and void deed of sale, so the court a
quo found. Respondent also asserts that its status as a buyer in good faith was established and confirmed
in the proceedings before the two courts below.[22]

Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The production of
the owners duplicate certificate x x x being conclusive authority from the registered owner is only true as
between the registration applicant and the register of deeds concerned, but never to third parties. Such
conclusive authority, respondent adds, is only for the Register of Deeds to enter a new certificate or to make a

memorandum of registration in accordance with such instrument. It cannot cure the fatal defect that the
instrument from which such registration was effected is null and void ab initio, respondent concludes.[23]

The petition is bereft of merit.

Petitioners arguments, which rest on the assumption that there was a double sale, must fail.

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code,[24] which provides the rule on
double sale, applies only to a situation where the same property is validly sold to different vendees. In this
case, there is only one sale to advert to, that between the spouses Tecson and respondent.

In Remalante v. Tibe,[25] this Court ruled that the Civil Law provision on double sale is not applicable where
there is only one valid sale, the previous sale having been found to be fraudulent. Likewise, in Espiritu and
Apostol v. Valerio,[26] where the same parcel of land was purportedly sold to two different parties, the Court held
that despite the fact that one deed of sale was registered ahead of the other, Art. 1544 of the Civil Code will not
apply where said deed is found to be a forgery, the result of this being that the right of the other vendee should
prevail.

The trial court declared that the sale between the spouses Tecson and petitioner is invalid, as it bears the
forged signature of Asuncion. Said finding is based on the unrebutted testimony of Asuncion and the trial
courts visual analysis and comparison of the signatures in her Complaint-in-Intervention and the purported
deed of sale. This finding was upheld by the Court of Appeals, as it ruled that the purported sale in
petitioners favor is null and void, taking into account Asuncions unrefuted deposition. In particular, the Court of
Appeals noted petitioners failure to attend the taking of the oral deposition and to give written interrogatories. In
short, she did not take the necessary steps to rebut Asuncions definitive assertion.

The congruence of the wills of the spouses is essential for the valid disposition of conjugal property.[27] Thus,
under Article 166 of the Civil Code[28] which was still in effect on 19 December 1986 when the deed of sale was
purportedly executed, the husband cannot generally alienate or encumber any real property of the conjugal
partnership without the wifes consent.

In this case, following Article 173[29] of the Civil Code, on 26 June 1995, or eight and a half years (8 ) after the
purported sale to petitioner, Asuncion filed her Complaint-in-Intervention seeking the nullification thereof, and
while her marriage with Troadio was still subsisting. Both the Court of Appeals and the trial court
found Asuncions signature in the deed of sale to have been forged, and consequently, the deed of sale void for
lack of marital consent. We find no reason to disturb the findings of the trial court and the Court of
Appeals. Findings of fact of lower courts are deemed conclusive and binding upon the Supreme Court subject

to certain exceptions,[30] none of which are present in this case. Besides, it has long been recognized in our
jurisprudence that a forged deed is a nullity and conveys no title.[31]

Petitioner argues she has a better right over the property in question, as the holder of and the first one to
present, the owners copy of the title for the issuance of a new TCT. The Court is not persuaded.

The act of registration does not validate petitioners otherwise void contract. Registration is a mere ministerial
act by which a deed, contract, or instrument is sought to be inscribed in the records of the Office of the
Register of Deeds and annotated at the back of the certificate of title covering the land subject of the deed,
contract, or instrument.While it operates as a notice of the deed, contract, or instrument to others, it does not
add to its validity nor converts an invalid instrument into a valid one as between the parties, [32] nor amounts to a
declaration by the state that the instrument is a valid and subsisting interest in the land. [33] The registration of
petitioners void deed is not an impediment to a declaration by the courts of its invalidity.

Even assuming that there was double sale in this case, petitioner would still not prevail. The pertinent portion
of Art. 1544 provides:
Art. 1544. x x x.
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.
x x x x.

In interpreting this provision, the Court declared that the governing principle is primus tempore, potior jure (first
in time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the first buyers
rights, except where the second buyer registers in good faith the second sale ahead of the first as provided by
the aforequoted provision of the Civil Code. Such knowledge of the first buyer does not bar him from availing of
his rights under the law, among them to register first his purchase as against the second buyer. However,
knowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the
second sale, since such knowledge taints his prior registration with bad faith. [34] It is thus essential, to merit the
protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in registering his
deed of sale.[35]
We agree with the trial court and the Court of Appeals that respondent was a buyer in good faith, having
purchased the nine (9) lots, including the subject lot, without any notice of a previous sale, but only a notice of
attachment relative to a pending civil case. In fact, in its desire to finally have the title to the properties
transferred in its name, it persuaded the parties in the said case to settle the same so that the notice of
attachment could be cancelled.

Relevant to the discussion are the following provisions of P.D. No. 1529:

Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may
convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing
laws. He may use such forms of deeds, mortgages, lease or other voluntary instruments as are
sufficient in law. But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the
land, but shall operate only as a contract between the parties and as evidence of authority to
the Register of Deeds to make Registration.
The act of registration shall be the operative act to convey or affect the land
insofar as third persons are concerned, and in all cases under this Decree, the registration
shall be made in the office of the Register of Deeds for the province or city where the land lies.
(Emphasis supplied)

Sec. 52. Constructive notice upon registration.Every conveyance, mortgage, lease, lien
attachment, order, judgment, instrument or entry affecting registered land shall, if registered,
filed or entered in the office of the Register of Deeds for the province or city where the land to
which it relates lies, be constructive notice to all persons from the time of such registering, filing
or entering.

It has been held that between two transactions concerning the same parcel of land, the registered transaction
prevails over the earlier unregistered right. The act of registration operates to convey and affect the registered
land so that a bona fide purchaser of such land acquires good title as against a prior transferee, if such prior
transfer was unrecorded.[36] As found by the courts a quo, respondent was able to register its purchase ahead
of petitioner. It will be recalled that respondent was able to register its Deed of Conditional Sale with the
Register of Deeds as early as 6 November 1992, and its Deed of Absolute Sale on 14 October 1993. On the
other hand, petitioner was able to present for registration her deed of sale and owners copy of the title only
on 23 January 1995, or almost nine years after the purported sale. Why it took petitioner nine (9) years to
present the deed and the owners copy, she had no credible explanation; but it is clear that when she finally did,
she already had constructive notice of the deed of sale in respondents favor. Without a doubt, respondent had
acquired a better title to the property.
Finally, anent petitioners claim that P.D. No. 1529 applies to registered lands or any subsequent sale thereof,
while Art. 1544 of the Civil Code applies only to immovable property not covered by the Torrens System, suffice
it to say that this quandary has already been answered by an eminent former member of this Court, Justice
Jose Vitug, who explained that the registration contemplated under Art. 1544 has been held to refer to
registration under P.D. No. 1529, thus:
The registration contemplated under Art. 1544 has been held to refer to
registration under Act 496 Land Registration Act (now PD 1529) which considers the act of
registration as the operative act that binds the land (see Mediante v. Rosabal, 1 O.G. [12]
900, Garcia v. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the purchaser
acquires such rights and interest as they appear in the certificate of title, unaffected by any prior
lien or encumbrance not noted therein. The purchaser is not required to explore farther than
what the Torrens title, upon its face, indicates. The only exception is where the purchaser has
actual knowledge of a flaw or defect in the title of the seller or of such liens or encumbrances
which, as to him, is equivalent to registration (see Sec. 39, Act 496; Bernales v. IAC, G.R.
75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court of Appeals, L26677, 27 March 1981) (Emphasis supplied)[37]

WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals
are affirmed. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166913

October 5, 2007

SPOUSES MARIANO S. TANGLAO and CORAZON M. TANGLAO, petitioners,

vs.
SPOUSES CORAZON S. PARUNGAO and LORENZO G. PARUNGAO (deceased), substituted by
LAWRENCE S. PARUNGAO, MARY CHRISTINE PARUNGAO-CURUTCHET, LORDBERT S. PARUNGAO,
LODELBERTO S. PARUNGAO and MA. CECILIA PARUNGAO-HERNANDEZ, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Decision1 of the Court
of Appeals (Fifteenth Division) dated January 31, 2005 in CA-G.R. SP No. 78079.
The facts of the case are:
In 1992, spouses Lorenzo and Corazon Parungao, respondents, purchased from Spring Homes Subdivision
(Spring Homes) Lot Nos. 1, 2, 3, and 4 with a total area of 486 square meters (sq. m.) at P1,350.00 per sq. m.
or a total price of P656,100.00. In addition, they also bought Lot Nos. 7, 8, and 9 with a total area of 457 sq. m.
atP1,550.00 per sq. m. or a total price of P708,360.00. All these lots are located at Block VI, Phase II-C, Spring
Homes, Barangay Culiat, Calamba City, Laguna. Respondents made a down payment of P536,000.00, leaving
a balance of P828,450.00, exclusive of interest.
Sometime in November 1992, respondents introduced improvements on the lots consisting of a concrete
perimeter fence with cyclone wires on top, a heavy steel gate, and two fish breeding buildings, all at a cost
ofP945,000.00. They also elevated the ground level of the lots by filling them with earth and "adobe."
Under the terms of the Contracts to Sell signed by respondents and Spring Homes, the balance
of P828,450.00 was to be paid by them within one year from its execution; and that should they apply for a
loan as payment for the balance, they would continue to pay the monthly installment until their obligation is fully
paid.
Respondents failed to pay the installments. They also failed to secure a loan because Spring Homes refused
to deliver to them the Transfer Certificates of Title (TCTs) covering the lots required in their application for a
loan secured by a real estate mortgage. Apparently, respondents had requested Spring Homes to furnish them
copies of the Contracts to Sell, the TCTs, receipts of real estate taxes paid, tax declarations, and the survey
and vicinity plans of the lots they purchased. However, Roy Madamba, salesman-representative of Spring
Homes, gave respondents only copies of the Contracts to Sell. But respondents returned these copies to
Spring Homes for correction of the lot numbers and the names of the vendees.
On April 11, 1997, Spring Homes executed two separate Deeds of Absolute Sale in favor of spouses Mariano
and Corazon Tanglao, petitioners, wherein the former sold to the latter two lots covered by TCT Nos. T-268566
and T-268572. Hence, the said TCTs were cancelled and in lieu thereof, TCT Nos. T-393365 and T-3377723
were issued in the names of petitioners. It turned out that the lots sold to them were among the lots previously
sold to respondents.
In a letter dated September 15, 1997, respondents demanded that Spring Homes deliver to them the corrected
Contracts to Sell, as well as the TCTs covering the lots they purchased.
Meanwhile, petitioners took possession of the two lots they bought. They forcibly opened the steel gate as well
as the doors of the buildings and entered the premises.

When informed of these events, respondents demanded an explanation from Spring Homes. Bertha Pasic, its
treasurer, apologized and promised she would settle the matter with petitioners. However, the controversy was
not settled.
On July 15, 1999, respondents filed with the Housing and Land Use Regulatory Board (HLURB), Regional
Office No. 1V a complaint for annulment of deed of sale and/or return of investment for the seven (7) lots and
costs of improvements, plus interest and damages, docketed as HLURB Case No. R-1V6-08199-1104.
Impleaded as respondents were Spring Homes, Berta Pasic, Felipa Messiah, and petitioners.
Despite notice, Spring Homes, Pasic, and Messiah did not file their respective answers to the complaint, nor
did they appear during the hearings.
On October 3, 2000, HLURB Arbiter Gregorio L. Dean rendered a Decision, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaint filed against respondents Felipa Messiah and Spouses Tanglao for lack of
merit;
2. Ordering respondent Spring Homes to pay complainants:
a) Php536,000.00 by way of refund of payments with 12% interest per annum to commence
from August 11, 1999;
b) Php935,000.00 as actual damages; and
c) Php20,000.00 as attorneys fees..
3. Ordering respondents Spring Homes Subdivision Co., Inc., and Bertha Pasic, jointly and severally, to
pay complainant the sum of Php20,000.00 as moral damages and to pay this Board the sum of
Php10,000.00 as administrative fine.
IT IS SO ORDERED.
Dissatisfied with the ruling, respondents filed a petition for review with the HLURB Board of Commissioners,
docketed as HLURB Case No. REM-A-001211-0272.
On August 24, 2001, the HLURB Board of Commissioners rendered its Judgment reversing the Arbiters
Decision and granting the petition for review, thus:
WHEREFORE, premises considered, the petition for review is granted. The decision of the office below
is set aside and a new decision is rendered as follows:
1. Declaring as valid and subsisting the contract to sell between complainants and respondent Spring
Homes;
2. Directing complainants to immediately update their account and directing respondent Spring Homes
to accept payment and to deliver title to complainants upon full payment of the purchases price;
3. Declaring as invalid the deed of absolute sale in favor of the spouses Tanglao over the subject lots
and directing the cancellation of respondent spouses TCTs Nos. T-268566 and T-268572 of the
Registry of Deeds for Calamba, Laguna and its reversion to respondent Spring Homes;
4. Directing respondent Spring Homes to refund to respondent spouses Tanglao all the amounts paid
by the latter in connection with the sale of the subject lots to the latter with 12% interest reckoned from
the date of the sale;
5. Directing respondent Spring Homes to pay administrative fine of P10,000.00 for unsound business
practice.

SO ORDERED.
The HLURB Board of Commissioners found that at the time of the sale of the two lots in question to petitioners,
the contracts between respondents and Spring Homes were still subsisting. Moreover, the fence and existing
structures erected on the premises should have forewarned petitioners that there are adverse claimants of the
two lots.
Petitioners filed a motion for reconsideration, but this was denied by the HLURB Board of Commissioners in a
Resolution promulgated on February 22, 2002.
Petitioners then filed an appeal with the Office of the President, docketed as O.P. Case No. 02-C-099. But in its
Decision dated March 12, 2003, the Office of the President dismissed their appeal and affirmed the Decision of
the HLURB Board of Commissioners.
Petitioners motion for reconsideration was also denied by the said Office in its Order dated June 18, 2003.
Eventually, petitioners filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of
Civil Procedure, as amended.
On January 31, 2004, the Court of Appeals rendered its Decision dismissing the petition, thus:
WHEREFORE, premises considered, the petition for review is DENIED DUE COURSE and ordered
DISMISSED. The Decision dated 12 March 2003 of the Office of the President which affirmed the
Decision of the HLURB Board of Commissioners (Third Division) dated 24 August 2001 reversing the
03 October 2000 Decision of Housing and Land Use Arbiter Gerardo L. Dean and the Order dated 18
June 2003 of the Office of the President denying the motion for reconsideration are hereby AFFIRMED.
Costs against petitioners Sps. Mariano S. Tanglao and Corazon M. Tanglao.
SO ORDERED.
The Court of Appeals held that there was a perfected contract to sell between respondents and Spring Homes
as early as 1992. As this contract was subsisting at the time of the second sale, respondents have a superior
right over the lots in question.
The only issue for our resolution is who between the petitioners and respondents have the right of ownership
over the two lots in controversy.
The ownership of immovable property sold to two different persons at different times is governed by Article
1544 of the Civil Code,2 which provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong to the person acquiring it who, in good
faith, first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
possession and, in the absence thereof, to the person who presents the oldest title, provided there is
good faith.
In double sales of immovable property, the governing principle is prius tempore, prius jure (first in time,
stronger in right). Thus, in Payongayong v. Court of Appeals,3 this Court held that under Article 1544,
preferential rights shall be accorded to: (1) the person acquiring it who in good faith first recorded it in the
Registry of Property, (2) in default thereof to the person who in good faith was first in possession, and (3) in
default thereof, to the person who presents the oldest title, provided there is good faith. In all of these cases,
good faith is essential, being the basic premise of the preferential rights granted to the person
claiming ownership of the immovable.4

In Occea v. Esponilla,5 this Court, speaking through then Associate Justice (now Chief Justice) Reynato S.
Puno, laid down the following rules in the application of Article 1544: (1) Knowledge by the first buyer of the
second sale cannot defeat the first buyers rights except when the second buyer first registers in good faith the
second sale; and (2) Knowledge gained by the second buyer of the first sale defeats his rights even if he is first
to register, since such knowledge taints his registration with bad faith. Differently put, the act of registration by
the second buyer must be coupled with good faith, meaning, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware of facts which should put him upon such
inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor.6
Applying the foregoing doctrines, the pivotal question before us is whether petitioners, the second buyers, are
purchasers in good faith.
A purchaser in good faith or innocent purchaser for value is one who buys property and pays a full and fair
price for it at the time of the purchase or before any notice of some other persons claim on or interest in
it.7 The burden of proving the status of a purchaser in good faith lies upon him who asserts that status and it is
not sufficient to invoke the ordinary presumption of good faith, that is, that everyone is presumed to have acted
in good faith.8
In the instant case, the HLURB Arbiter, the HLURB Commission, the Office of the President, and the Court of
Appeals found that at the time of the second sale to petitioners by Spring Homes, there were
already occupantsand improvements on the two lots in question. These facts should have put petitioners on
their guard. Settled is the rule that a buyer of real property in possession of persons other than the
seller must be wary and should investigate the rights of those in possession, for without such inquiry
the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property.9
As the petitioners cannot be considered buyers in good faith, they cannot rely upon the indefeasibility of their
TCTs in view of the doctrine that the defense of indefeasibility of a torrens title does not extend to transferees
who take the certificate of title in bad faith.10
Considering that respondents who, in good faith, were first in possession of the subject lots, we rule that the
ownership thereof pertains to them.
WHEREFORE, we DENY the petition. The Decision of the Court of Appeals (Fifteenth Division) dated January
31, 2005 in CA-G.R. SP No. 78079 is AFFIRMED in toto. Costs against the petitioners.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169447

February 26, 2007

DORO LAND REALTY AND DEVELOPMENT CORPORATION, Petitioner,

vs.
NILA CLAUNAN, SILVANO1 SALAS, JOBERTO MAGHANO,2 ALFREDO MOMPAR,3 VICENTE GARCIA,
EDITHA LAPIZ and HEIRS OF ELEUTERIO MAGHANO, namely: AVELINA, RICARDO, ROMEO,
JOBERTO, ROY, LUCRESIA, SUSAN, JOHNNY, CONCHITA, and BEBENA all surnamed
MAGHANO, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review on certiorari of the Decision4 of the Court of Appeals in CA-G.R. CV No. 65522
dated May 31, 2005, which affirmed in toto the Decision5 of the Regional Trial Court of Cagayan De Oro City,
Branch 21, in Civil Case No. 93-126 for recovery of possession and damages. Also assailed is the
Resolution6 of the Court of Appeals dated August 9, 2005 which denied petitioners motion for reconsideration.
The facts of the case are as follows:
Petitioner DOro Land Realty and Development Corporation and Lorna, Florencio, Luis and Felomina, all
surnamed Regalado ("Regalados"), are registered owners of three parcels of land situated in Barrio Mambato
(Agora), Lapasan, Cagayan de Oro City. The lots were originally owned by Chacon Enterprises Inc. as
evidenced by Original Certificate of Title (OCT) No. P-47 issued on July 18, 1956.7 Sometime in the early
1990s, the lots were sold to petitioner and the Regalados. Thus, on September 9, 1992, Transfer Certificate of
Title (TCT) Nos. T-698888 and T-695259 were issued in the name of petitioner for Lots 2-A and 2-B while the
Regalados were issued TCT No. T-6952610 for Lot 2-C. Petitioner later purchased Lot 2-C from the Regalados.
Thereafter, petitioner caused a relocation survey to be conducted and confirmed that there were about 34
houses sporadically erected on the lots. Apparently, certain individuals surreptitiously entered the properties
and introduced improvements thereon shortly after the opening of the nearby Agora Public Market. After
demands to vacate went unheeded, petitioner filed an action for recovery of possession and damages against
more than 50 individuals who refused to surrender possession of the lots. The case was docketed as Civil
Case No. 93-126 and raffled to Branch 21 of the Regional Trial Court of Cagayan De Oro City.
In its Complaint,11 petitioner prayed that the defendants, their assigns and other persons acting in their behalf,
be ordered to vacate the lots and pay a monthly rental of P100.00 from the time they occupied the property
until they vacate the same. Petitioner also prayed for the award of attorneys fees as well as litigation expenses
and costs.
Of the more than 50 defendants, only the following filed an Answer12 within the reglementary period: Eleuterio
Manghano, Joberto Manghano, Siliano Salas, Alfredo Mompar, Virgilio Lapiz, Vicente Garcia and
Mila13 Claunan. The other defendants belatedly filed their answer to the complaint and were thus declared in
default.
Respondents alleged that they entered the lots between the years 1970 to 1982; that their occupation of the
lots has been continuous, undisturbed, public and adverse and has therefore ripened into ownership; that
whatever rights petitioner had over the lots were barred by laches; that they need not pay any rent and must
instead be awarded attorneys fees, exemplary and moral damages as well as litigation expenses and costs.
In support of their claim, respondents presented a Certification14 issued on June 11, 1984 by Forest Guards
Conrado Pagutayao and Marcelo Virtudazo, and approved by District Forester Primitivo Galinato Jr., that the
lots were alienable and disposable land of the State. According to respondents, the lots were marshy, swampy,
surrounded by "piyapi" trees and without improvements when they occupied the same.

In due course, the trial court rendered judgment on September 21, 1998, as follows:
WHEREFORE, the complaint is hereby dismissed as regards defendants Joberto Manghano, Siliano Salas,
Alfredo Mompar, Virgilio Lapiz, Vicente Garcia, Nila Claunan and deceased Defendant Eleuterio Manghano,
represented by his heirs who duly substituted him and declares their possessions legal, without
pronouncement as to the counterclaim, defendants having failed to introduce evidence in support of said claim.
Defaulted defendants who by reason of their default were unable to introduce evidence similar to the
aforementioned defendants evidence are hereby ordered ejected and to pay plaintiffs proportionately the
following:
Attorneys fees P 30,000.00
Actual damages P 10,000.00
Rental at each month from 1980
until they are ejected P 100.00
And to pay the costs.
SO ORDERED.15
The trial court held that while respondents could not acquire title to the registered lots in derogation of that of
petitioner through prescription, the latters claim was nonetheless barred by laches. There was no reason for
petitioner and its predecessor not to have knowledge of respondents possession of the lots as the same was
public and adverse. As such, the failure of petitioner and its predecessor to assert its right of ownership over
the lots within a reasonable length of time necessarily barred its claim against respondents.
The trial court also faulted petitioner for not making the necessary inquiries when it bought the disputed lots
from Chacon Enterprises, Inc. in 1990. According to the trial court, petitioner should have investigated the
nature of respondents possession before it purchased the lots from the original owner. Having failed to do so,
petitioner must be deemed a buyer in bad faith under the principle of caveat emptor.
Petitioner appealed to the Court of Appeals which affirmed the trial courts decision in toto. Hence, upon
denial16of its motion for reconsideration,17 petitioner filed the instant petition for review under Rule 45 of the
Rules of Court.
Petitioner mainly contends that laches could not bar its claim over the subject lots since respondents had no
colorable title or any valid claim of ownership to it. Respondents are mere squatters whose possession of the
lots, no matter how long, could not prevail over petitioners certificate of title. At any rate, respondents length of
possession does not even meet jurisprudential standards for laches to set in.
The petition is impressed with merit.
At the outset, it must be stressed that this Court is not a trier of facts and would not normally undertake a reexamination of the evidence presented by the contending parties during the trial of the case except for
compelling reasons. Factual findings of the trial court and the Court of Appeals, especially when these concur,
are ordinarily binding on this Court, subject to the following well-recognized exceptions: (1) when the findings
are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based
on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the
Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the
appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by the evidence of
record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, could justify a different conclusion.18

In the case at bar, both the trial court and the appellate court mistakenly inferred from the evidence presented
that petitioner was a buyer in bad faith and that respondents, in turn, were possessors in good faith of the lots
in question. Both courts overlooked the fact that respondents had no valid claim of title whatsoever to the
disputed lots. If this was considered by both courts, there would have been no room for them to conclude that
petitioners claim was barred by laches.
For purposes of clarity, we quote the trial courts summary of respondents evidence as follows:
Defendants presented three witnesses, namely defendants Joberto Manghano, Alfredo Mompar and Marcelo
Virtudazo of the Bureau of Forest Development.
Joberto Manghano declared that he is one of the sons of deceased defendant Eleuterio Manghano.
He claimed that he was born on March 18, 1964 at Padada, Davao Del Sur; that in October 1975 they
transferred to La Paz Extension, Lapasan, Cagayan De Oro City. They live in the house constructed by his
father on a 100 square meter lot on the land in question. The house is made of wood and galvanized iron
sheets for roofing with a dimension of 14 x 16 feet with three (3) bedrooms. The land is swampy with piapi
trees. In the same year he saw defendants Virgilio Lapiz, Vicente Garcia and Nila Claunan among the
occupants of the land in question while Siliano Salas and Alfredo Mompar entered in 1982 and 1980
respectively.1awphi1.net
Joberto Manghano got married in 1987 and thereafter built his own house on the land in question which is
fifteen (15) meters away from that of his parents. His house is 12 x 18 feet which consists of wood and GI
sheets for roofing.
In 1984, upon the written request (Exhibit 2) of his father, Marcelo Virtudaso and Conrado Pagutayao,
employees of the Bureau of Forest Development conducted a survey and a sketch map (Exhibit 1) was
prepared by the two.
He claimed that his father chose the land in question as it is a public land. x x x
He further testified that he did not file any application for free patent, homestead, or miscellaneous sales
claiming that he is ignorant of the procedure.
Defendant Alfredo Mompar, a fourth year college engineering student declared that in October 1980, after
having obtained permission from the deceased Eleuterio Manghano, he entered the land in question x x x.
xxxx
He made verification as to the status of the land before he constructed his house and was informed that there
is no owner. He did not, however, verify with other government office as to the status of the land. He did not
declare the land for taxation purposes as he has no money.
The third and last witness for the defendants is Marcelo Virtudazo, an employee of the Bureau of Forest
Development, who declared that on May 31, 1984, the deceased Eleuterio Manghano came to their office with
a written request (Exhibit 2) for a verification of the land in question.
In response to said request, a certain Agustilo Obsioma, Chief of the Timber Management Section of the
Bureau of Forest Development District Office of Cagayan De Oro City, wrote a note (Exhibit 3) instructing him
and Conrado Pagutayao to conduct a verification survey on the land in question. They obliged and as a result
they prepared a location map (Exhibit 1).
On June 11, 1984, they submitted their report. x x x19
The narration above shows that respondents entered the lots and built their dwellings thereon without any
colorable title. Believing that the lots were alienable and disposable property of the State, they occupied the
same in the hope that they would not be disturbed in their possession. They knew that they did not own the lots
and concluded, on the basis of a certification issued by the Bureau of Forest Development, that the lots were
government-owned. Regardless of the nature of the lots ownership, however, the fact remains that
respondents entered the properties without permission from the owner.

It may thus be concluded from the foregoing that respondents are mere squatters on the properties. They are
trespassers who, under the law, enjoy no possessory rights.20 This is notwithstanding the length of time that
they may have physically occupied the lots; they are deemed to have entered the same in bad faith, such that
the nature of their possession is presumed to have retained the same character throughout their
occupancy.1awphil.net
In Baez v. Court of Appeals,21 the Court held that a squatter has no right of possession that may be prejudiced
by his eviction:
What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found that Pio Arcilla "makes no
pretense that he entered into and built his land upon appellee PHHCs land with the consent of the latter." Pio
Arcilla was therefore, a trespasser, or a squatter, he being a person who settled or located on land, inclosed or
uninclosed with no bona fide claim or color of title and without consent of the owner. He began his material
possession of the lot in bad faith, knowing that he did not have a right thereto, and it is presumed that his
possession continued to be enjoyed in the same character in which it was acquired, i.e. in bad faith until the
contrary is proved. x x x A squatter can have no possessory rights whatsoever, and his occupancy of the land
is only at the owners sufferance, his acts are merely tolerated and cannot affect the owners possession. The
squatter is necessarily bound to an implied promise, that he will vacate upon demand."22 (Italics supplied)
Thus, the trial court and the Court of Appeals erred in giving more weight to respondents alleged equitable
right over the lots as against petitioners certificate of title. Having no possessory rights whatsoever, no injury
could be caused to respondents if they return the lots to petitioner. Unless there are intervening rights of third
persons which may be affected or prejudiced by a decision ordering the return of the lots to the registered
owner, the equitable defense of laches will not apply as against the latter.23
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned or declined to assert it. The defense of laches is an equitable one and does not concern itself with
the character of the defendants title, but only with whether or not by reason of plaintiffs long inaction or
inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would
be inequitable and unjust to the defendant.24
The elements of laches are: (1) conduct on the part of the defendant, or one under whom he claims, giving rise
to the situation that led to the complaint and for which the complaint seeks a remedy; (2) delay in asserting the
complainants rights, having had knowledge or notice of the defendants conduct and having been afforded an
opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant
would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief
is accorded to the complainant, or the suit is not held barred.25
The third and fourth elements of laches are not present in the instant case. It cannot be said that respondents
lacked notice that petitioner would assert its right over the lots considering that they knew from the beginning
that they have no right to the same. Neither can respondents claim any injury or prejudice that would result by
restoring possession of the lots to petitioner. Respondents have no possessory rights over the lots. As mere
intruders, they are bound to an implied promise to surrender possession of the property to the real owner,
regardless of the identity of the latter.
In De Vera-Cruz v. Miguel,26 the Court held, upon similar facts, that although a registered landowner may lose
his right to recover possession of his registered property by reason of laches, the equitable defense is
unavailing to one who has not shown any color of title to the property:
Having no title or document to overcome petitioners ownership over the land in question, respondent is
therefore an intruder or squatter whose occupation of the land is merely being tolerated. A squatter has no
possessory rights over the land intruded upon. As such, her occupancy of the land is only at the owners
sufferance, her acts are merely tolerated and cannot affect the owners possession. She is necessarily bound
to an implied promise that she will vacate upon demand.27
For the same reason, the lower courts erred in applying the principle of caveat emptor in the instant case. The
rule simply requires the purchaser of real property to be aware of the alleged title of the vendor such that one
who buys without checking the vendors title takes all the risks and losses consequent to such failure.28 While a

buyer of registered land need not go beyond its certificate of title, the buyer is obliged to investigate or inspect
the property sold to him when there are circumstances that would put him on guard, such as the presence of
occupants other than the registered owner. The buyer cannot claim ignorance of any defect in the vendors title
if, in neglecting to verify the nature of the occupants possession, the latter should turn out to have a better
right to the property than the registered owner.
In the instant case, respondents cannot claim any better right over the lots than its original registered owner,
Chacon Enterprises Inc. Apart from the assertion that they have been in open, adverse and notorious
possession of the lots for a long period of time, respondents have not shown any proof of title that is superior to
that of the registered owner. It should be emphasized that a certificate of title cannot be defeated by adverse,
open and notorious possession by third persons. The title, once registered, is notice to the whole world and no
one can plead ignorance of the registration.29
Thus, while possession by a third person other than the registered owner could indicate a defect in the title of
the vendor, it does not per se render the latters title defective. It is only when such possession is of a character
that would confer upon the possessor some superior right against the registered owner that the latter may be
deemed to have a flawed title. Since respondents "adverse, open and notorious possession" of the lots cannot
defeat the title of Chacon Enterprises Inc., the former did not acquire any superior possessory right over the
lots. Petitioner thus acquired a clean title from Chacon Enterprises Inc. and is not barred from recovering
possession of the lots from respondents.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No.
65522, which affirmed in toto the Decision of the Regional Trial Court of Cagayan De Oro City, Branch 21, in
Civil Case No. 93-126, is REVERSED and SET ASIDE. A new judgment is entered ordering respondents Mila
Claunan, Siliano Salas, Joberto Manghano, Alfredo Mompar, Vicente Garcia, Editha Lapiz, Heirs of Eleuterio
Manghano, as well as their assigns and heirs, to:
1. Immediately VACATE the lots covered by TCT Nos. T-69888, T-69525 and T-69526 located in Barrio
Mambato (Agora), Lapasan, Cagayan De Oro City, upon finality of this Decision; and
2. PAY petitioner DOro Land Realty and Development Corporation a MONTHLY RENTAL of P100.00
from the time that Civil Case No. 93-126 was filed on March 3, 1993 until they vacate the same.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169129

March 28, 2007

SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS.VICTORINO F. SANTOS, & LAGRIMAS
SANTOS, ERNESTO F. SANTOS, and TADEO F. SANTOS, Petitioners,
vs.
SPS. JOSE LUMBAO and PROSERFINA LUMBAO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil
Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV
No. 60450 entitled, Spouses Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and
Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos,
dated 8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein respondents
Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and ordered herein petitioners Spouses
Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos
and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject property and to pay the latter
attorneys fees and litigation expenses, thus, reversing the Decision3 of the Regional Trial Court (RTC) of Pasig
City, dated 17 June 1998 which dismissed the Complaint for Reconveyance with Damages filed by
respondents Spouses Lumbao for lack of merit.
Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and surviving
heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985. The other petitioners Esperanza Lati
and Lagrimas Santos are the daughters-in-law of Rita.
Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-square
meter lot (subject property), which they purportedly bought from Rita during her lifetime.
The facts of the present case are as follows:
On two separate occasions during her lifetime, Rita sold to respondents Spouses Lumbao the subject property
which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died intestate on
19 September 1978. On the first occasion, Rita sold 100 square meters of her inchoate share in her mothers
estate through a document denominated as "Bilihan ng Lupa," dated 17 August 1979.4 Respondents Spouses
Lumbao claimed the execution of the aforesaid document was witnessed by petitioners Virgilio and Tadeo, as
shown by their signatures affixed therein. On the second occasion, an additional seven square meters was
added to the land as evidenced by a document also denominated as "Bilihan ng Lupa," dated 9 January 1981.5
After acquiring the subject property, respondents Spouses Lumbao took actual possession thereof and erected
thereon a house which they have been occupying as exclusive owners up to the present. As the exclusive
owners of the subject property, respondents Spouses Lumbao made several verbal demands upon Rita, during
her lifetime, and thereafter upon herein petitioners, for them to execute the necessary documents to effect the
issuance of a separate title in favor of respondents Spouses Lumbao insofar as the subject property is
concerned. Respondents Spouses Lumbao alleged that prior to her death, Rita informed respondent
Proserfina Lumbao she could not deliver the title to the subject property because the entire property inherited
by her and her co-heirs from Maria had not yet been partitioned.
On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in conspiracy with one
another, executed a Deed of Extrajudicial Settlement,6 adjudicating and partitioning among themselves and the
other heirs, the estate left by Maria, which included the subject property already sold to respondents Spouses
Lumbao and now covered by TCT No. 817297 of the Registry of Deeds of Pasig City.

On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal demand letter8 to petitioners
but despite receipt of such demand letter, petitioners still failed and refused to reconvey the subject property to
the respondents Spouses Lumbao. Consequently, the latter filed a Complaint for Reconveyance with
Damages9before the RTC of Pasig City.
Petitioners filed their Answer denying the allegations that the subject property had been sold to the
respondents Spouses Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been
fraudulently executed because the same was duly published as required by law. On the contrary, they prayed
for the dismissal of the Complaint for lack of cause of action because respondents Spouses Lumbao failed to
comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160, otherwise known as
the Local Government Code of 1991, which repealed Presidential Decree No. 150810 requiring first resort to
barangay conciliation.
Respondents Spouses Lumbao, with leave of court, amended their Complaint because they discovered that on
16 February 1990, without their knowledge, petitioners executed a Deed of Real Estate Mortgage in favor of
Julieta S. Esplana for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the
back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that they failed
to comply with the mandate of the Revised Katarungang Pambarangay Law, respondents Spouses Lumbao
said that the Complaint was filed directly in court in order that prescription or the Statute of Limitations may not
set in.
During the trial, respondents Spouses Lumbao presented Proserfina Lumbao and Carolina Morales as their
witnesses, while the petitioners presented only the testimony of petitioner Virgilio.
The trial court rendered a Decision on 17 June 1998, the dispositive portion of which reads as follows:
Premises considered, the instant complaint is hereby denied for lack of merit.
Considering that [petitioners] have incurred expenses in order to protect their interest, [respondents spouses
Lumbao] are hereby directed to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorneys fees and
litigation expenses, and 2) costs of the suit.11
Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June 2005, the appellate
court rendered a Decision, thus:
WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated
June 17, 1998 of the Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby
REVERSED and SET ASIDE. A new judgment is hereby entered ordering [petitioners] to reconvey 107 square
meters of the subject [property] covered by TCT No. PT-81729 of the Registry of Deeds of Pasig City, Metro
Manila, and to pay to [respondents spouses Lumbao] the sum of P30,000.00 for attorneys fees and litigation
expenses.
No pronouncement as to costs.12
Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid Decision but it was denied in the
Resolution of the appellate court dated 29 July 2005 for lack of merit.
Hence, this Petition.
The grounds relied upon by the petitioners are the following:
I. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN REVERSING THE DECISION OF THE
TRIAL COURT, THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS OF TWO COURTS.
II. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN ORDERING THE PETITIONERS TO
RECONVEY THE SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES LUMBAO] AND IN NOT
RULING THAT THEY ARE GUILTY OF LACHES, HENCE THEY CANNOT RECOVER THE LOT ALLEGEDLY
SOLD TO THEM.

III. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING HEREIN
PETITIONER[S] TO BE IN GOOD FAITH IN EXECUTING THE "DEED OF EXTRAJUDICIAL SETTLEMENT"
DATED [2 MAY 1986].
IV. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT PETITIONERS
ARE NOT LEGALLY BOUND TO COMPLY WITH THE SUPPOSED BILIHAN NG LUPA DATED [17 AUGUST
1979] AND [9 JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC.
V. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS
[SPOUSES LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES CANNOT BE SUPPORTED
WITH AN UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17 AUGUST 1979]
AND [9 JANUARY 1981].
VI. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
RESPONDENTS [SPOUSES LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE (SIC) FOR
NON COMPLIANCE OF THE MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic Act No. 7160.
VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT
RESPONDENTS [SPOUSES LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR
DAMAGES AND ATTORNEY[]S FEES.
Petitioners ask this Court to scrutinize the evidence presented in this case, because they claim that the factual
findings of the trial court and the appellate court are conflicting. They allege that the findings of fact by the trial
court revealed that petitioners Virgilio and Tadeo did not witness the execution of the documents known as
"Bilihan ng Lupa"; hence, this finding runs counter to the conclusion made by the appellate court. And even
assuming that they were witnesses to the aforesaid documents, still, respondents Spouses Lumbao were not
entitled to the reconveyance of the subject property because they were guilty of laches for their failure to assert
their rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept on their rights
for a period of more than 12 years reckoned from the date of execution of the second "Bilihan ng Lupa," it
would be unjust and unfair to the petitioners if the respondents will be allowed to recover the subject property.
Petitioners allege they are in good faith in executing the Deed of Extrajudicial Settlement because even
respondents Spouses Lumbaos witness, Carolina Morales, testified that neither petitioner Virgilio nor petitioner
Tadeo was present during the execution of the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981.
Petitioners affirm that the Deed of Extrajudicial Settlement was published in a newspaper of general circulation
to give notice to all creditors of the estate subject of partition to contest the same within the period prescribed
by law. Since no claimant appeared to interpose a claim within the period allowed by law, a title to the subject
property was then issued in favor of the petitioners; hence, they are considered as holders in good faith and
therefore cannot be barred from entering into any subsequent transactions involving the subject property.
Petitioners also contend that they are not bound by the documents denominated as "Bilihan ng Lupa" because
the same were null and void for the following reasons: 1) for being falsified documents because one of those
documents made it appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they
appeared personally before the notary public, when in truth and in fact they did not; 2) the identities of the
properties in the "Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981 in relation to the subject
property in litigation were not established by the evidence presented by the respondents Spouses Lumbao; 3)
the right of the respondents Spouses Lumbao to lay their claim over the subject property had already been
barred through estoppel by laches; and 4) the respondents Spouses Lumbaos claim over the subject property
had already prescribed.
Finally, petitioners claim that the Complaint for Reconveyance with Damages filed by respondents Spouses
Lumbao was dismissible because they failed to comply with the mandate of Presidential Decree No. 1508, as
amended by Republic Act No. 7160, particularly Section 412 of Republic Act No. 7160.
Given the foregoing, the issues presented by the petitioners may be restated as follows:
I. Whether or not the Complaint for Reconveyance with Damages filed by respondents spouses
Lumbao is dismissible for their failure to comply with the mandate of the Revised Katarungang
Pambarangay Law under R.A. No. 7160.

II. Whether or not the documents known as "Bilihan ng Lupa" are valid and enforceable, thus, they can
be the bases of the respondents spouses Lumbaos action for reconveyance with damages.
III. Whether or not herein petitioners are legally bound to comply with the "Bilihan ng Lupa" dated 17
August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein
respondents spouses Lumbao.
It is well-settled that in the exercise of the Supreme Courts power of review, the court is not a trier of facts and
does not normally undertake the re-examination of the evidence presented by the contending parties during
the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on
the Court.13 But, the rule is not without exceptions. There are several recognized exceptions14 in which factual
issues may be resolved by this Court. One of these exceptions is when the findings of the appellate court are
contrary to those of the trial court. This exception is present in the case at bar.
Going to the first issue presented in this case, it is the argument of the petitioners that the Complaint for
Reconveyance with Damages filed by respondents Spouses Lumbao should be dismissed for failure to comply
with the barangay conciliation proceedings as mandated by the Revised Katarungang Pambarangay Law
under Republic Act No. 7160. This argument cannot be sustained.
Section 408 of the aforesaid law and Administrative Circular No. 14-9315 provide that all disputes between
parties actually residing in the same city or municipality are subject to barangay conciliation. A prior recourse
thereto is a pre-condition before filing a complaint in court or any government offices. Non-compliance with the
said condition precedent could affect the sufficiency of the plaintiffs cause of action and make his complaint
vulnerable to dismissal on ground of lack of cause of action or prematurity; but the same would not prevent a
court of competent jurisdiction from exercising its power of adjudication over the case before it, where the
defendants failed to object to such exercise of jurisdiction.16
While it is true that the present case should first be referred to the Barangay Lupon for conciliation because the
parties involved herein actually reside in the same city (Pasig City) and the dispute between them involves a
real property, hence, the said dispute should have been brought in the city in which the real property, subject
matter of the controversy, is located, which happens to be the same city where the contending parties reside.
In the event that respondents Spouses Lumbao failed to comply with the said condition precedent, their
Complaint for Reconveyance with Damages can be dismissed. In this case, however, respondents Spouses
Lumbaos non-compliance with the aforesaid condition precedent cannot be considered fatal. Although
petitioners alleged in their answer that the Complaint for Reconveyance with Damages filed by respondents
spouses Lumbao should be dismissed for their failure to comply with the condition precedent, which in effect,
made the complaint prematurely instituted and the trial court acquired no jurisdiction to hear the case, yet, they
did not file a Motion to Dismiss the said complaint.
Emphasis must be given to the fact that the petitioners could have prevented the trial court from exercising
jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so, they invoked the
very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse, petitioners actively
participated in the trial of the case by presenting their own witness and by cross-examining the witnesses
presented by the respondents Spouses Lumbao. It is elementary that the active participation of a party in a
case pending against him before a court is tantamount to recognition of that courts jurisdiction and a
willingness to abide by the resolution of the case which will bar said party from later on impugning the courts
jurisdiction.17 It is also well-settled that the non-referral of a case for barangay conciliation when so required
under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a
motion to dismiss.18 Hence, herein petitioners can no longer raise the defense of non-compliance with the
barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses
Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss.
As regards the second issue, petitioners maintain that the "Bilihan ng Lupa," dated 17 August 1979 and 9
January 1981 are null and void for being falsified documents as it is made to appear that petitioners Virgilio
and Tadeo were present in the execution of the said documents and that the identities of the properties in
those documents in relation to the subject property has not been established by the evidence of the
respondents Spouses Lumbao. Petitioners also claim that the enforceability of those documents is barred by
prescription of action and laches.

It is the petitioners incessant barking that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9
January 1981 were falsified because it was made to appear that petitioners Virgilio and Tadeo were present in
the executions thereof, and their allegation that even respondents Spouses Lumbaos witness Carolina
Morales proved that said petitioners were not present during the execution of the aforementioned documents.
This is specious.
Upon examination of the aforesaid documents, this Court finds that in the "Bilihan ng Lupa," dated 17 August
1979, the signatures of petitioners Virgilio and Tadeo appeared thereon. Moreover, in petitioners Answer and
Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made
an admission that indeed they acted as witnesses in the execution of the "Bilihan ng Lupa," dated 17 August
1979.19However, in order to avoid their obligations in the said "Bilihan ng Lupa," petitioner Virgilio, in his crossexamination, denied having knowledge of the sale transaction and claimed that he could not remember the
same as well as his appearance before the notary public due to the length of time that had passed. Noticeably,
petitioner Virgilio did not categorically deny having signed the "Bilihan ng Lupa," dated 17 August 1979 and in
support thereof, his testimony in the cross-examination propounded by the counsel of the respondents
Spouses Lumbao is quoted hereunder:
ATTY. CHIU:
Q. Now, you said, Mr. WitnessVirgilio Santos, that you dont know about this document which was marked as
Exhibit "A" for the [respondents spouses Lumbao]?
ATTY. BUGARING:
The question is misleading, your Honor. Counsel premised the question that he does not have any knowledge
but not that he does not know.
ATTY. CHIU:
Q. Being you are one of the witnesses of this document? [I]s it not?
WITNESS:
A. No, sir.
Q. I am showing to you this document, there is a signature at the left hand margin of this document Virgilio
Santos, will you please go over the same and tell the court whose signature is this?
A. I dont remember, sir, because of the length of time that had passed.
Q. But that is your signature?
A. I dont have eyeglasses My signature is different.
Q. You never appeared before this notary public Apolinario Mangahas?
A. I dont remember.20
As a general rule, facts alleged in a partys pleading are deemed admissions of that party and are binding upon
him, but this is not an absolute and inflexible rule. An answer is a mere statement of fact which the party filing it
expects to prove, but it is not evidence.21 And in spite of the presence of judicial admissions in a partys
pleading, the trial court is still given leeway to consider other evidence presented.22 However, in the case at
bar, as the Court of Appeals mentioned in its Decision, "[herein petitioners] had not adduced any other
evidence to override the admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually signed
the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to the purpose of the
document, x x x."23 Virgilios answers were unsure and quibbled. Hence, the general rule that the admissions
made by a party in a pleading are binding and conclusive upon him applies in this case.
On the testimony of respondents Spouses Lumbaos witness Carolina Morales, this Court adopts the findings
made by the appellate court. Thus -

[T]he trial court gave singular focus on her reply to a question during cross-examination if the [petitioners
Virgilio and Tadeo] were not with her and the vendor [Rita] during the transaction. It must be pointed out that
earlier in the direct examination of said witness, she confirmed that [respondents spouses Lumbao] actually
bought the lot from [Rita] ("nagkabilihan"). Said witness positively identified and confirmed the two (2)
documents evidencing the sale in favor of [respondents spouse Lumbao]. Thus, her subsequent statement that
the [petitioners Virgilio and Tadeo] were not with them during the transaction does not automatically imply that
[petitioners Virgilio and Tadeo] did not at any time sign as witnesses as to the deed of sale attesting to their
mothers voluntary act of selling a portion of her share in her deceased mothers property. The rule is that
testimony of a witness must be considered and calibrated in its entirety and not by truncated portions thereof or
isolated passages therein.24
Furthermore, both "Bilihan ng Lupa" documents dated 17 August 1979 and 9 January 1981 were duly
notarized before a notary public. It is well-settled that a document acknowledged before a notary public is a
public document25 that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts
stated therein and a conclusive presumption of its existence and due execution.26 To overcome this
presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the
presumption must be upheld.27 In addition, one who denies the due execution of a deed where ones signature
appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary
public and acknowledged the deed to be a voluntary act. Nonetheless, in the present case petitioners denials
without clear and convincing evidence to support their claim of fraud and falsity were not sufficient to overthrow
the above-mentioned presumption; hence, the authenticity, due execution and the truth of the facts stated in
the aforesaid "Bilihan ng Lupa" are upheld.
The defense of petitioners that the identities of the properties described in the "Bilihan ng Lupa," dated 17
August 1979 and 9 January 1981 in relation to the subject property were not established by respondents
Spouses Lumbaos evidence is likewise not acceptable.
It is noteworthy that at the time of the execution of the documents denominated as "Bilihan ng Lupa," the entire
property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and so the
description of the entire estate is the only description that can be placed in the "Bilihan ng Lupa, dated 17
August 1979 and 9 January 1981" because the exact metes and bounds of the subject property sold to
respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that does not
make the contract of sale between Rita and respondents Spouses Lumbao invalid because both the law and
jurisprudence have categorically held that even while an estate remains undivided, co-owners have each full
ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage
them.28 The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned
in common, because such right over the thing is represented by an aliquot or ideal portion without any physical
division. In any case, the mere fact that the deed purports to transfer a concrete portion does not per se render
the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore,
the sale is subject to the results of the partition upon the termination of the co-ownership.29
In the case at bar, when the estate left by Maria had been partitioned on 2 May 1986 by virtue of a Deed of
Extrajudicial Settlement, the 107- square meter lot sold by the mother of the petitioners to respondents
Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their deceased
mother, which in this case measures 467 square meters. The 107-square meter lot already sold to respondents
Spouses Lumbao can no longer be inherited by the petitioners because the same was no longer part of their
inheritance as it was already sold during the lifetime of their mother.
Likewise, the fact that the property mentioned in the two "Bilihan ng Lupa" documents was described as "a
portion of a parcel of land covered in Tax Declarations No. A-018-01674," while the subject matter of the Deed
of Extrajudicial Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of the
Registry of Deeds of the Province of Rizal in the name of Maria is of no moment because in the "Bilihan ng
Lupa," dated 17 August 1979 and 9 January 1981, it is clear that there was only one estate left by Maria upon
her death. And this fact was not refuted by the petitioners. Besides, the property described in Tax Declaration
No. A-018-01674 and the property mentioned in TCT No. 3216 are both located in Barrio Rosario, Municipality
of Pasig, Province of Rizal, and almost have the same boundaries. It is, thus, safe to state that the property
mentioned in Tax Declaration No. A-018-01674 and in TCT No. 3216 are one and the same.

The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance, the
decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or
its title which has been wrongfully or erroneously registered in another persons name to its rightful or legal
owner, or to the one with a better right. It is, indeed, true that the right to seek reconveyance of registered
property is not absolute because it is subject to extinctive prescription. However, when the plaintiff is in
possession of the land to be reconveyed, prescription cannot set in. Such an exception is based on the theory
that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of
another.30
In the case at bar, the right of the respondents Spouses Lumbao to seek reconveyance does not prescribe
because the latter have been and are still in actual possession and occupation as owners of the property
sought to be reconveyed, which fact has not been refuted nor denied by the petitioners. Furthermore,
respondents Spouses Lumbao cannot be held guilty of laches because from the very start that they bought the
107-square meter lot from the mother of the petitioners, they have constantly asked for the transfer of the
certificate of title into their names but Rita, during her lifetime, and the petitioners, after the death of Rita, failed
to do so on the flimsy excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the
entire estate of Maria, petitioners still included the 107-square meter lot in their inheritance which they divided
among themselves despite their knowledge of the contracts of sale between their mother and the respondents
Spouses Lumbao.
Under the above premises, this Court holds that the "Bilihan ng Lupa" documents dated 17 August 1979 and 9
January 1981 are valid and enforceable and can be made the basis of the respondents Spouses Lumbaos
action for reconveyance. The failure of respondents Spouses Lumbao to have the said documents registered
does not affect its validity and enforceability. It must be remembered that registration is not a requirement for
validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.
The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction
involving the property had been entered into. Where the party has knowledge of a prior existing interest which
is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered
interest has the effect of registration as to him.31 Hence, the "Bilihan ng Lupa" documents dated 17 August
1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their
provisions. In short, such documents are absolutely valid between and among the parties thereto.
Finally, the general rule that heirs are bound by contracts entered into by their predecessors-in-interest applies
in the present case. Article 131132 of the NCC is the basis of this rule. It is clear from the said provision that
whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of
succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value
of the inheritance of the heirs.33 Thus, the heirs cannot escape the legal consequence of a transaction entered
into by their predecessor-in-interest because they have inherited the property subject to the liability affecting
their common ancestor. Being heirs, there is privity of interest between them and their deceased mother. They
only succeed to what rights their mother had and what is valid and binding against her is also valid and binding
as against them. The death of a party does not excuse nonperformance of a contract which involves a property
right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the other party has a property interest in the
subject matter of the contract.34
In the end, despite the death of the petitioners mother, they are still bound to comply with the provisions of the
"Bilihan ng Lupa," dated 17 August 1979 and 9 January 1981. Consequently, they must reconvey to herein
respondents Spouses Lumbao the 107-square meter lot which they bought from Rita, petitioners mother. And
as correctly ruled by the appellate court, petitioners must pay respondents Spouses Lumbao attorneys fees
and litigation expenses for having been compelled to litigate and incur expenses to protect their interest.35 On
this matter, we do not find reasons to reverse the said findings.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of
the Court of Appeals dated 8 June 2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein
petitioners are ordered to reconvey to respondents Spouses Lumbao the subject property and to pay the latter
attorneys fees and litigation expenses. Costs against petitioners.
SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

SECOND DIVISION
JAIME D. ANG,
Petitioner,

G.R. No. 177874

Present:

- versus -

COURT OF APPEALS AND

BRUNO SOLEDAD,
Respondents.

QUISUMBING, J., Chairperson,

CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
Promulgated:
September 29, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CARPIO MORALES, J.:

Under a car-swapping scheme, respondent Bruno Soledad (Soledad) sold his Mitsubishi
GSR sedan 1982 model to petitioner Jaime Ang (Ang) by Deed of Absolute Sale [1] dated July
28, 1992. For his part, Ang conveyed to Soledad his Mitsubishi Lancer model 1988, also by
Deed of Absolute Sale[2] of even date. As Angs car was of a later model, Soledad paid him an
additional P55,000.00.
Ang, a buyer and seller of used vehicles, later offered the Mitsubishi GSR for sale
through Far Eastern Motors, a second-hand auto display center. The vehicle was eventually sold
to a certain Paul Bugash (Bugash) for P225,000.00, by Deed of Absolute Sale[3] dated August
14, 1992. Before the deed could be registered in Bugashs name, however, the vehicle was
seized by virtue of a writ of replevin[4] dated January 26, 1993 issued by the Cebu City Regional
Trial Court (RTC), Branch 21 in Civil Case No. CEB-13503, BA Finance Corporation vs.
Ronaldo and Patricia Panes, on account of the alleged failure of Ronaldo Panes, the owner of
the vehicle prior to Soledad, to pay the mortgage debt[5] constituted thereon.
To secure the release of the vehicle, Ang paid BA Finance the amount
of P62,038.47[6]on March 23, 1993. Soledad refused to reimburse the said amount, despite
repeated demands, drawing Ang to charge him for Estafa with abuse of confidence before the
Office of the City Prosecutor, Cebu City. By Resolution[7] of July 15, 1993, the City Prosecutors

Office dismissed the complaint for insufficiency of evidence, drawing Ang to file on November
9, 1993 the first[8] of three successive complaints for damages against Soledad before the RTC
of Cebu City where it was docketed as Civil Case No. Ceb-14883.
Branch 19 of the Cebu City RTC, by Order[9] dated May 4, 1995, dismissed Civil Case
No. Ceb-14883 for failure to submit the controversy to barangay conciliation.
Ang thereafter secured a certification to file action and again filed a complaint for
damages,[10] docketed as Ceb-17871, with the RTC of Cebu City, Branch 14 which dismissed it,
by Order[11] dated March 27, 1996, on the ground that the amount involved is not within its
jurisdiction.
Ang thereupon filed on July 15, 1996 with the Municipal Trial Court in Cities (MTCC) a
complaint,[12] docketed as R-36630, the subject of the instant petition.
After trial, the MTCC dismissed the complaint on the ground of prescription, vz:
It appearing that the Deed of Sale to plaintiff o[f] subject vehicle was
dated and executed on 28 July 1992, the complaint before the Barangay
terminated 21 September 1995 per Certification to File Action attached to the
Complaint, and this case eventually was filed with this Court on 15 July
1996, this action has already been barred since more than six (6) months
elapsed from the delivery of the subject vehicle to the plaintiff buyer to the
filing of this action, pursuant to the aforequoted Article 1571.[13] (Emphasis
and underscoring supplied)

His motion for reconsideration having been denied, Ang appealed to the RTC, Branch 7 of
which affirmed the dismissal of the complaint, albeit it rendered judgment in favor of Ang for
the sake of justice and equity, and in consonance with the salutary principle of non-enrichment
at anothers expense. The RTC ratiocinated:
xxxx
[I]t was error for the Court to rely on Art. 1571 of the Civil Code to
declare the action as having prescribed, since the action is not one for the
enforcement of the warranty against hidden defects. Moreover, Villostas vs.
Court of Appeals declared thatthe six-month prescriptive period for a
redhibitory action applies only to implied warranties. There is here an express
warranty. If at all, what applies is Art. 1144 of the Civil Code, the general
law on prescription, which states, inter alia, that actions upon a written
contract prescribes in ten (10) years [Engineering & Machinery Corporation
vs. Court of Appeals, G.R. No. 52267, January 24, 1996].
More appropriate to the discussion would be defendants warranty against
eviction, which he explicitly made in the Deed of Absolute Sale: I hereby
covenant my absolute ownership to (sic) the above-described property and the
same is free from all liens and encumbrances and I will defend the same from
all claims or any claim whatsoever
Still the Court finds that plaintiff cannot recover under this
warranty. There is no showing of compliance with the requisites.

xxxx
Nonetheless, for the sake of justice and equity, and in consonance with the
salutaryprinciple of non-enrichment at anothers expense, defendant should
reimburse plaintiff the P62,038.47 which on March 23, 1993 he paid BA
Finance Corporation to release the mortgage on the car. (Emphasis and
underscoring supplied)[14]

The RTC thus disposed as follows:

Wherefore,
judgment
is
rendered
directing defendant
to
pay
plaintiff P62,038.47, the amount the latter paid BA Finance Corporation
to release the mortgage on the vehicle, with interest at the legal rate computed
from March 23, 1993. Except for this, the judgment in the decision of the trial
court, dated October 8, 2001 dismissing the claims of plaintiff is
affirmed. (Underscoring supplied)[15]

Soledads Motion for Reconsideration was denied by Order [16] of December 12, 2002, hence, he
elevated the case to the Court of Appeals, Cebu City.
The appellate court, by the challenged Decision[17] of August 30, 2006, noting the sole issue to
be resolved whether the RTC erred in directing Soledad to pay Ang the amount the latter paid to
BA Finance plus legal interest, held that, following Goodyear Phil., Inc. v. Anthony Sy,[18] Ang
cannot anymore seek refuge under the Civil Code provisions granting award of damages for
breach of warranty against eviction for the simple fact that three years and ten months have
lapsed from the execution of the deed of sale in his favor prior to the filing of the instant
complaint. It further held:
It bears to stress that the deed of absolute sale was executed
on July 28, 1992, and the instant complaint dated May 15, 1996 was
received by the MTCC on July 15, 1996.
While it is true that someone unjustly enriched himself at the
expense of herein respondent, we agree with petitioner (Soledad) that it
is not he.
The appellate court accordingly reversed the RTC decision and denied the petition.

By Resolution[19] of April 25, 2007, the appellate court denied Angs motion for
reconsideration, it further noting that when Ang settled the mortgage debt to BA Finance, he did
so voluntarily in order to resell the vehicle, hence, Soledad did not benefit from it as he was
unaware of the mortgage constituted on the vehicle by the previous owner.
The appellate court went on to hold that Soledad has nothing to do with the transaction
anymore; his obligation ended when he delivered the subject vehicle to the respondent upon the
perfection of the contract of sale. And it reiterated its ruling that the action, being one arising
from breach of warranty, had prescribed, it having been filed beyond the 6-month prescriptive
period.

The appellate court brushed aside Angs contention that Soledad was the proximate cause
of the loss due to the latters failure to thoroughly examine and verify the registration and
ownership of the previous owner of the vehicle, given that Ang is engaged in the business of
buying and selling second-hand vehicles and is therefore expected to be cautious in protecting
his rights under the circumstances.
Hence, the present recourse petition for review on certiorari, Ang maintaining that his
cause of action had not yet prescribed when he filed the complaint and he should not be blamed
for paying the mortgage debt.
To Ang, the ruling in Goodyear v. Sy is not applicable to this case, there being
an expresswarranty in the herein subject Deed of Absolute Sale and, therefore, the action based
thereon prescribes in ten (10) years following Engineering & Machinery Corp. v. CA[20] which
held that where there is an express warranty in the contract, the prescriptive period is the one
specified in the contract or, in the absence thereof, the general rule on rescission of contract.
Ang likewise maintains that he should not be blamed for paying BA Finance and should
thus be entitled to reimbursement and damages for, following Carrascoso, Jr. v. Court of
Appeals,[21] in case of breach of an express warranty, the seller is liable for damages provided
that certain requisites are met which he insists are present in the case at bar.
The resolution of the sole issue of whether the complaint had prescribed hinges on a
determination of what kind of warranty is provided in the Deed of Absolute Sale subject of the
present case.
A warranty is a statement or representation made by the seller of goods,
contemporaneously and as part of the contract of sale, having reference to the character, quality
or title of the goods, and by which he promises or undertakes to insure that certain facts are or
shall be as he then represents them.[22]
Warranties by the seller may be express or implied. Art. 1546 of the Civil Code
definesexpress warranty as follows:
Art. 1546. Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural tendency
of such affirmation or promise is to induce the buyer to purchase the
same, and if the buyer purchases the thing relying thereon. No
affirmation of the value of the thing, nor any statement purporting to be a
statement of the sellers opinion only, shall be construed as a warranty,
unless the seller made such affirmation or statement as an expert and it
was relied upon by the buyer. (Emphasis and underscoring supplied)

On the other hand, an implied warranty is that which the law derives by application
orinference from the nature of the transaction or the relative situation or circumstances of the
parties, irrespective of any intention of the seller to create it.[23] Among the implied warranty
provisions of the Civil Code are: as to the sellers title (Art. 1548), against hidden defects and

encumbrances (Art. 1561), as to fitness or merchantability (Art. 1562), and against eviction
(Art. 1548).
The earlier cited ruling in Engineering & Machinery Corp. states that the prescriptive
period for instituting actions based on a breach of express warranty is that specified in the
contract, and in the absence of such period, the general rule on rescission of contract, which
isfour years (Article 1389, Civil Code).

As for actions based on breach of implied warranty, the prescriptive period is, under Art.
1571 (warranty against hidden defects of or encumbrances upon the thing sold) and Art. 1548
(warranty against eviction), six months from the date of delivery of the thing sold.
The following provision of the Deed of Absolute Sale reflecting the kind of warranty
made by Soledad reads:
xxxx
I hereby covenant my absolute ownership to (sic) the abovedescribed property and the same is free from all liens and
encumbrances and I will defend the same from all claims or any
claim whatsoever; will save the vendee from any suit by the
government of the Republic of the Philippines.
x x x x (Emphasis supplied)
In declaring that he owned and had clean title to the vehicle at the time the Deed of
Absolute Sale was forged, Soledad gave an implied warranty of title. In pledging that he will
defend the same from all claims or any claim whatsoever [and] will save the vendee from any
suit by the government of the Republic of the Philippines, Soledad gave a warranty against
eviction.
Given Angs business of buying and selling used vehicles, he could not have merely relied
on Soledads affirmation that the car was free from liens and encumbrances. He was expected to
have thoroughly verified the cars registration and related documents.
Since what Soledad, as seller, gave was an implied warranty, the prescriptive period to
file a breach thereof is six months after the delivery of the vehicle, following Art. 1571. But
even if the date of filing of the action is reckoned from the date petitioner instituted his first
complaint for damages on November 9, 1993, and not on July 15, 1996 when he filed the
complaint subject of the present petition, the action just the same had prescribed, it having been
filed 16 months after July 28, 1992, the date of delivery of the vehicle.
On the merits of his complaint for damages, even if Ang invokes breach of warranty against
eviction as inferred from the second part of the earlier-quoted provision of the Deed of Absolute
Sale, the following essential requisites for such breach, vz:

A breach of this warranty requires the concurrence of the

following circumstances:
(1) The purchaser has been deprived of the whole or part of the
thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale
made by the vendor; and
(4) The vendor has been summoned and made co-defendant in
the suit for eviction at the instance of the vendee.
In the absence of these requisites, a breach of the warranty against
eviction under Article 1547 cannot be declared. [24] (Emphasis supplied),

have not been met. For one, there is no judgment which deprived Ang of the vehicle. For
another, there was no suit for eviction in which Soledad as seller was impleaded as co-defendant
at the instance of the vendee.
Finally, even under the principle of solutio indebiti which the RTC applied, Ang cannot
recover from Soledad the amount he paid BA Finance. For, as the appellate court observed, Ang
settled the mortgage debt on his own volition under the supposition that he would resell the
car.It turned out

that he did pay BA Finance in order to avoid returning the payment made by the ultimate buyer
Bugash. It need not be stressed that Soledad did not benefit from Angs paying BA Finance, he
not being the one who mortgaged the vehicle, hence, did not benefit from the proceeds thereof.
WHEREFORE, the petition is, in light of the foregoing disquisition, DENIED.
SO ORDERED.

FIRST DIVISION

SPS. ERNESTO V. YU AND G.R. No. 172172

ELSIE ONG YU,
Petitioners, Present:
PUNO, C.J., Chairperson,
- versus - CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BALTAZAR N. PACLEB, BRION, JJ.
(Substituted by ANTONIETA S.
PACLEB, LORNA PACLEB- Promulgated :
GUERRERO, FLORENCIO C.
PACLEB, and MYRLA C. PACLEB),
Respondents. February 24, 2009
x------------------------------------------------x
DECISION
PUNO, C.J.:
Before the Court is a Petition filed under Rule 45 of the Rules of Court assailing: (i) the Decision [1] dated August
31, 2005 of the Court of Appeals in CA-G.R. CV No. 78629 setting aside the Decision [2] dated December 27,
2002 of the Regional Trial Court in Civil Case No. 1325-96; and (ii) the Resolution[3] dated April 3, 2006 of the
Court of Appeals denying reconsideration of the said decision.

The facts are well established.

Respondent Baltazar N. Pacleb and his late first wife, Angelita Chan, are the registered owners of an
18,000-square meter parcel of land in Barrio Langcaan, Dasmarias,Cavite, covered by Transfer Certificate of
Title (TCT) No. T-118375[4] (Langcaan Property).

In 1992, the Langcaan Property became the subject of three (3) documents purporting to transfer its
ownership. On February 27, 1992, a Deed of Absolute Sale[5] was entered into between Spouses Baltazar N.

Pacleb and Angelita Chan and Rebecca Del Rosario. On May 7, 1992, a Deed of Absolute Sale [6] was entered
into between Rebecca Del Rosario and Ruperto L. Javier (Javier). On November 10, 1992, a Contract to
Sell[7] was entered into between Javier and petitioner spouses Ernesto V. Yu and Elsie Ong Yu. In their
contract, petitioner spouses Yu agreed to pay Javier a total consideration of P900,000. Six hundred thousand
pesos (P600,000) (consisting of P200,000 as previous payment and P400,000 to be paid upon execution of
the contract) was acknowledged as received by Javier and P300,000 remained as balance. Javier undertook to
deliver possession of the Langcaan Property and to sign a deed of absolute sale within thirty (30) days from
execution of the contract.

All the aforementioned sales were not registered.

On April 23, 1993, petitioner spouses Yu filed with the Regional Trial Court of Imus, Cavite, a Complaint [8] for
specific performance and damages against Javier, docketed as Civil Case No. 741-93, to compel the latter to
deliver to them ownership and possession, as well as title to the Langcaan Property. In their Complaint, they
alleged that Javier represented to them that the Langcaan Property was not tenanted. However, after they
already paid P200,000 as initial payment and entered into an Agreement dated September 11, 1992 for the
sale of the Langcaan Property, they discovered it was tenanted by Ramon C. Pacleb (Ramon). [9] Petitioner
spouses demanded the cancellation of their agreement and the return of their initial payment. Thereafter,
petitioner spouses and Javier verified from Ramon if he was willing to vacate the property and the latter was
agreeable. Javier then promised to make arrangements with Ramon to vacate the property and to pay the
latter his disturbance compensation. Hence, they proceeded to enter into a Contract to Sell canceling the
Agreement mentioned. However, Javier failed to comply with his obligations.

Javier did not appear in the proceedings and was declared in default. On September 8, 1994, the trial court
rendered a Decision,[10] the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendant based
on the sale of subject parcel of land to the former who is entitled thereby to the ownership and
possession thereof from the said defendant who is further directed to pay damages of Thirty
Thousand Pesos (P30,000.00) including attorneys fees and expenses incurred by the plaintiff in
this case as a consequence.
The defendant is further directed to deliver the certificate of title of the land to the plaintiff
who is entitled to it as transferee and new owner thereof upon payment by the plaintiff of his
balance of the purchase price in the sum of Three Hundred Thousand Pesos (P300,000.00)
with legal interest from date.
SO ORDERED.

The said Decision and its Certificate of Finality[11] were annotated on TCT No. T-118375 as Entry No. 267675[12] and Entry No. 2677-75,[13] respectively.

On March 10, 1995, petitioner spouses and Ramon and the latters wife, Corazon Bodino, executed
a Kusangloob na Pagsasauli ng Lupang Sakahan at Pagpapahayag ng Pagtalikod sa Karapatan.[14] Under the
said agreement, petitioner spouses paid Ramon the amount of P500,000 in exchange for the waiver of his
tenancy rights over the Langcaan Property.
On October 12, 1995, respondent filed a Complaint[15] for annulment of deed of sale and other documents
arising from it, docketed as Civil Case No. 1199-95. He alleged that the deed of sale purportedly executed
between him and his late first wife and Rebecca Del Rosario was spurious as their signatures thereon were
forgeries. Respondent moved to have summons served upon Rebecca Del Rosario by publication since the
latters address could not be found. The trial court, however, denied his motion.[16] Respondent then moved to
dismiss the case, and the trial court granted the motion in its Order [17] dated April 11, 1996, dismissing the case
without prejudice.

Meanwhile, on November 23, 1995, petitioner spouses filed an action for forcible entry against
respondent with the Municipal Trial Court (MTC). They alleged that they had prior physical possession of the
Langcaan Property through their trustee, Ramon, until the latter was ousted by respondent in September 1995.
The MTC ruled in favor of petitioner spouses, which decision was affirmed by the Regional Trial Court.
[18]

However, the Court of Appeals set aside the decisions of the lower courts and found that it was respondent

who had prior physical possession of the property as shown by his payment of real estate taxes thereon.[19]

On May 29, 1996, respondent filed the instant case for removal of cloud from title with damages to
cancel Entry No. 2676-75 and Entry No. 2677-75, the annotated Decision in Civil Case No. 741-93 and its
Certificate of Finality, from the title of the Langcaan Property.[20] Respondent alleged that the deed of sale
between him and his late first wife and Rebecca Del Rosario, who is not known to them, could not have been
possibly executed on February 27, 1992, the date appearing thereon. He alleged that on said date, he was
residing in the United States[21] and his late first wife, Angelita Chan, died twenty (20) years ago.[22]
On May 28, 1997, during the pendency of the instant case before the trial court, respondent died without
having testified on the merits of his case. Hence, he was substituted by his surviving spouse, Antonieta S.
Pacleb, and Lorna Pacleb-Guerrero, Florencio C. Pacleb and Myrla C. Pacleb representing the children with
the first wife.[23]

On December 27, 2002, the trial court dismissed respondents case and held that petitioner spouses are
purchasers in good faith.[24] The trial court ratiocinated that the dismissal of respondents complaint for
annulment of the successive sales at his instance sealed the regularity of the purchase [25] by petitioner spouses
and that he in effect admits that the said salewas valid and in order.[26] Further, the trial court held that the
Decision in Civil Case No. 741-93 on petitioner spouses action for specific performance against Javier is
already final and can no longer be altered. Accordingly, the trial court ordered the cancellation of TCT No. T118375 in the name of respondent and the issuance of a new title in the name of petitioner spouses. The trial
court also ordered the heirs of respondent and all persons claiming under them to surrender possession of the
Langcaan Property to petitioner spouses.
On appeal by respondent, the Court of Appeals reversed and set aside the decision of the trial court. [27] The
Court of Appeals ruled that petitioner spouses are not purchasers in good faith and that the Decision in Civil
Case No. 741-93 did not transfer ownership of the Langcaan Property to them. Accordingly, the appellate court
ordered the cancellation of the annotation of the Decision in Civil Case No. 741-93 on the title of the Langcaan
Property. The Court of Appeals denied reconsideration of said decision.[28]

Hence, this Petition.

Two issues are involved in the instant petition. The first is whether petitioner spouses are innocent purchasers
for value and in good faith. The second is whether ownership over the Langcaan Property was properly vested
in petitioner spouses by virtue of the Decision in Civil Case No. 741-93.

Petitioner spouses argue that they are purchasers in good faith. Further, they contend that the Court of
Appeals erred in finding that: Ramon told him [Ernesto V. Yu] that the property is owned by his father, Baltazar,
and that he is the mere caretaker thereof [29] since Ramon clarified that his father was the former owner of the
Langcaan Property.In support of their stance, they cite the following testimony of petitioner Ernesto V. Yu:

Atty. Abalos: Mr. Witness, you testified during the direct that you acquired the subject property
from one Ruperto Javier, when for the first time have you come to know Mr.
Ruperto Javier?

A: I first came to know him in the year 1992 when he was accompanied by Mr. Kalagayan. He
showed me some papers to the office.

Q: Do you know the exact date Mr. Witness?

A: I forgot the exact date, maam.

Q: More or less can you estimate what month?

A: Sometime in February or March 1992.

Q: When you said that the subject property was offered to you for sale, what did you
do Mr. Witness, in preparation for a transaction?

A: I asked my lawyer Atty. Florencio Paredes to check and verify the Deed of Sale.
Q: And after Atty. Florencio Paredes verified the document you decided to buy the property?

A: No, maam. We visited the place.

Q: When was that?

A: I could not remember the exact date but I visited the place and I met the son, Ramon
Pacleb. I went there in order to verify if the property is existing. When I verified
that the property is existing Mr. Javier visited me again to follow-up what
decision I have but I told him that I will wait for my lawyers advi[c]e.

Q: Mr. Witness, what particular instruction did you give to your lawyer?

A: To verify the title and the documents.

Court: Documents for the title?

A: Yes, Your Honor.

Atty. Abalos: When you were able to get the title in whose name the title was registered?

A: It was registered in the name of the older Pacleb.

Court: By the way Mr. Witness, when you said you met Ramon Pacleb the son of the owner of
the property, was he residing there or he was (sic) just went there? When you
visited the property did you find him to be residing in that property?

A: No, Your Honor.

Atty. Abalos: You mean to say Mr. Witness, you just met Mr. Ramon Pacleb in the place at the
time you went there?

A: No, maam. He went to my office with Mr. Kalagayan. He was introduced to me at the Kelly
Hardware. I do not know Mr. Ruperto Javier. He told me that there is a property
that [is] tenanted and occupied by the son Ramon Pacleb after that I went with
them to visit the place. On (sic) there he introduced me [to] Mr. Ramon Pacleb
the caretaker of the property and I told them that I will still look at the property
and he gave me some documents and that (sic) documents I gave it to my
lawyer for verification.

Q: You said that Mr. Ruperto Javier went to your office with Mr. Kalagayan, so the first time
you visited the property you did not see Mr. Ramon Pacleb there?

A: No, maam. When I went there I met Ramon Pacleb the caretaker and he was the one who
showed the place to us.

Q: Mr. Witness, since you visited the place you were able to see the allege[d] caretaker Mr.
Ramon Pacleb, did you ask him regarding the property or the whereabouts of
the registered owner, did you ask him?

A: When Ruperto introduced me to Mr. Ramon Pacleb he told me that he is the son of the
owner and he is the caretaker and his father is in the States. He showed me
the place, I verified and I saw the monuments and I told him I will come back to
check the papers and if it is okay I will bring with me the surveyor.

Q: Could you estimate Mr. Witness, more or less what was the month when you were
able to talk to Mr. Ramon Pacleb?

A: I am not sure but it was morning of February.

Q: So it was in February, Mr. Witness?

A: I am not sure if February or March.

Q: But definitely

A: Before I purchased the property I checked the property.

Q: But that was definitely after Mr. Ruperto offered to you for sale the subject property?

xxx

Atty. Abalos: Okay, Mr. Witness, you said that you talked to Mr. Ramon Pacleb and he told you
that his father is the owner of the property?

A: He told me that property is their former property and it was owned by them. Now, he is the
tenant of the property.[30] (Emphasis ours)

Petitioner spouses conclude that based on their personal inspection of the property and the
representations of the registered tenant thereon, they had no reason to doubt the validity of the deeds of
absolute sale since these were duly notarized. Consequently, the alleged forgery of Angelita Chans signature
is of no moment since they had no notice of any claim or interest of some other person in the property despite
their diligent inquiry.
We find petitioner spouses contentions without merit.
At the outset, we note that in petitioner Ernesto V. Yus testimony, he stated that he inspected the Langcaan
Property and talked with the tenant, Ramon, before he purchased the same. However, in his Complaint for
specific performance and damages which he filed against Javier, he alleged that it was only after he had
entered into an Agreement for the sale of the property and his initial payment of P200,000 that he discovered
that the property was indeed being tenanted by Ramon who lives in the said farm, viz.:

8. Sometime on September 11, 1992, defendant came again to the Office of plaintiff
reiterating his offer to sell said Lot No. 6853-D, containing an area of 18,000 square meters,
at P75.00 per square meters (sic). Defendant manifested to the plaintiff that if his offer is
acceptable to the plaintiff, he binds and obligates himself to pay the capital gains of previous
transactions with the BIR and register subject Lot No. 6853-D in his name (defendant). On these
conditions, plaintiff accepted the offer and made [the] initial payment of TWO HUNDRED
THOUSAND PESOS (P200,000.00) to defendant by issuance and delivery of plaintiffs
personal check.

9. Sometime on September 11, 1992, plaintiff and defendant signed an AGREEMENT

on the sale of Lot No. 6853-D of the subdivision plan (LRC) Psd-282604, containing an area of
18,000
square
meters,
more
or
less,
located
at
Bo.
Langcaan, Municipality of Dasmarinas, Province of Cavite, at a selling price of P75.00 per square
meter. A xerox copy of this AGREEMENT signed by the parties thereto is hereto attached and
marked as ANNEX D of this complaint.

10. Thereafter, however, plaintiff and defendant, with their surveyor discovered that
subject Lot No. 6853-D offered for sale to the plaintiff is indeed being tenanted by one
RAMON PACLEB who lives in the said farm.

11. In view of the foregoing developments, plaintiff informed defendant that he wanted the
Agreement be cancelled and for the defendant to return the sum of TWO HUNDRED THOUSAND
PESOS (P200,000.00).[31] (Emphasis supplied)

This inconsistency casts grave doubt as to whether petitioner spouses personally inspected the
property before purchasing it.

More importantly, however, several facts should have put petitioner spouses on inquiry as to the alleged
rights of their vendor, Javier, over the Langcaan Property.

First, it should be noted that the property remains to be registered in the name of respondent despite
the two (2) Deeds of Absolute Sale[32] purporting to transfer the Langcaan Property from respondent and his
late first wife, Angelita Chan, to Rebecca Del Rosario then from the latter to Javier. Both deeds were not even
annotated in the title of the Langcaan Property.

Second, a perusal of the two deeds of absolute sale reveals that they were executed only about two (2)
months apart and that they contain identical provisions.

Third, it is undisputed that the Langcaan Property is in the possession of Ramon, the son of the
registered owner. Regardless of the representations given by the latter, this bare fact alone should have made
petitioner spouses suspicious as to the veracity of the alleged title of their vendor. Moreover, as noted by the
Court of Appeals, petitioner spouses could have easily verified the true status of the Langcaan Property from
Ramons wife, since the latter is their relative, as averred in paragraph 13 of their Answer in Civil Case No.
1199-95.[33] The case law is well settled, viz.:

The law protects to a greater degree a purchaser who buys from the registered owner
himself. Corollarily, it requires a higher degree of prudence from one who buys from a
person who is not the registered owner, although the land object of the transaction is
registered. While one who buys from the registered owner does not need to look behind the
certificate of title, one who buys from one who is not the registered owner is expected to
examine not only the certificate of title but all factual circumstances necessary for him to
determine if there are any flaws in the title of the transferor, or in his capacity to transfer
the land.

This Court has consistently applied the stricter rule when it comes to deciding the issue
of good faith of one who buys from one who is not the registered owner, but who exhibits a
certificate of title.[34] (Emphasis supplied)

Finally, as correctly pointed out by the Court of Appeals, the dismissal of Civil Case No. 1199-95 (the
action to annul the successive sales of the property) cannot serve to validate the sale to petitioner spouses
since the dismissal was ordered because Rebecca Del Rosario and Javier could no longer be found. Indeed,
the dismissal was without prejudice.

Based on the foregoing, therefore, petitioner spouses cannot be considered as innocent purchasers in
good faith.

We now go to the second issue.

Petitioner spouses argue that the decision of the Regional Trial Court in Civil Case No. 741-93 as to the rightful
owner of the Langcaan Property is conclusive and binding upon respondent even if the latter was not a party
thereto since it involved the question of possession and ownership of real property, and is thus not merely an
action in personam but an action quasi in rem.

In Domagas v. Jensen,[35] we distinguished between actions in personam and actions quasi in rem.

The settled rule is that the aim and object of an action determine its character. Whether
a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its
nature and purpose, and by these only. A proceeding in personam is a proceeding to
enforce personal rights and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose of it in
accordance with the mandate of the court. The purpose of a proceeding in personam is to
impose, through the judgment of a court, some responsibility or liability directly upon the person
of the defendant. Of this character are suits to compel a defendant to specifically perform some
act or actions to fasten a pecuniary liability on him. An action in personam is said to be one
which has for its object a judgment against the person, as distinguished from a judgment
against the propriety (sic) to determine its state. It has been held that an action in
personam is a proceeding to enforce personal rights or obligations; such action is brought
against the person.

xxx

On the other hand, a proceeding quasi in rem is one brought against persons seeking to
subject the property of such persons to the discharge of the claims assailed. In an action quasi
in rem, an individual is named as defendant and the purpose of the proceeding is to
subject his interests therein to the obligation or loan burdening the property.
Actions quasi in remdeal with the status, ownership or liability of a particular property but which
are intended to operate on these questions only as between the particular parties to the
proceedings and not to ascertain or cut off the rights or interests of all possible claimants. The
judgments therein are binding only upon the parties who joined in the action.

Civil Case No. 741-93 is an action for specific performance and damages filed by petitioner spouses against
Javier to compel performance of the latters undertakings under their Contract to Sell. As correctly held by the
Court of Appeals, its object is to compel Javier to accept the full payment of the purchase price, and to execute
a deed of absolute sale over the Langcaan Property in their favor. The obligations of Javier under the contract
to sell attach to him alone, and do not burden the Langcaan Property.[36]

We have held in an unbroken string of cases that an action for specific performance is an action in
personam.[37] In Cabutihan v. Landcenter Construction and Development Corporation,[38] we ruled that an
action for specific performance praying for the execution of a deed of sale in connection with an undertaking in
a contract, such as the contract to sell, in this instance, is an action in personam.

Being a judgment in personam, Civil Case No. 741-93 is binding only upon the parties properly impleaded
therein and duly heard or given an opportunity to be heard. [39]Therefore, it cannot bind respondent since he
was not a party therein. Neither can respondent be considered as privy thereto since his signature and that of
his late first wife, Angelita Chan, were forged in the deed of sale.

All told, we affirm the ruling of the Court of Appeals finding that, as between respondent and petitioner
spouses, respondent has a better right over the Langcaan Property as the true owner thereof.
IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is affirmed. Costs
against petitioners.

SO ORDERED.

FIRST DIVISION

CEBU WINLAND DEVELOPMENT G.R. No. 173215

CORPORATION,
Petitioner,

Present:

PUNO, C.J., Chairperson,

- versus - CARPIO,
CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

ONG SIAO HUA, Promulgated:

Respondent. May 21, 2009
x------------------------------------------------x
DECISION

PUNO, C.J.:

Before us is a Petition for Review [1] filed under Rule 45 of the Rules of Court assailing the Decision [2] dated
February 14, 2006 of the Court of Appeals and its Resolution [3]dated June 2, 2006 denying petitioners motion
for reconsideration of the said decision.

The facts are undisputed.

Petitioner, Cebu Winland Development Corporation, is the owner and developer of a condominium project
called the Cebu Winland Tower Condominium located in Juana Osmea Extension, Cebu City.

Respondent, Ong Siao Hua, is a buyer of two condominium units and four parking slots from petitioner.

Sometime before January 6, 1995 while the Cebu Winland Tower Condominium was under construction,
petitioner offered to sell to respondent condominium units at promotional prices. As an added incentive,
petitioner offered a 3% discount provided 30% of the purchase price is paid as down payment and the balance
paid in 24 equal monthly installments.

On January 6, 1995, respondent accepted the offer of petitioner and bought two condominium units designated
as Unit Nos. 2405 and 2406, as well as four parking slots designated as slots 91, 99, 101 and 103 (subject
properties).

The area per condominium unit as indicated in petitioners price list is 155 square meters and the price per
square meter is P22,378.95. The price for the parking slot is P240,000 each. Respondent, therefore,
paid P2,298,655.08 as down payment and issued 24 postdated checks in the amount of P223,430.70 per
check for the balance of the purchase price in the total amount of P5,362,385.19 computed as follows:[4]

155 sq.m./unit x 2 units x P22,378.95/sq.m.

P6,937,474.5
0

4 parking slots at P240,000/slot

960,000.00

Sub-total

P 7,897,474.50

Less: 3% discount

( 236,924.23)

Net purchase price

P 7,660,550.27

30% down payment

( 2,298,165.08)

Balance at P223,430.70 per month for 24 P 5,362,385.19

months

The parties did not execute any written document setting forth the said transaction.

On October 10, 1996, possession of the subject properties was turned over to respondent.[5]

After the purchase price was fully paid with the last check dated January 31, 1997, respondent requested
petitioner for the condominium certificates of title evidencing ownership of the units. Petitioner then sent to
respondent, for the latters signature, documents denominated as Deeds of Absolute Sale for the two
condominium units.

Upon examination of the deed of absolute sale of Unit No. 2405 and the identical document for Unit No. 2406,
respondent was distressed to find that the stated floor area is only 127 square meters contrary to the area
indicated in the price list which was 155 square meters. Respondent caused a verification survey of the said
condominium units and discovered that the actual area is only 110 square meters per unit. Respondent
demanded from petitioner to refund the amount of P2,014,105.50 representing excess payments for the
difference in the area, computed as follows:[6]

155 sq.m.-110 = 45 x 2 units = 90 sq.m. x P22,378.95 = P2,014,105.50

Petitioner refused to refund the said amount to respondent. Consequently, respondent filed a Complaint[7] on
August 7, 1998 in the Regional Office of the Housing and Land Use Regulatory Board (HLURB) in Cebu City,
praying for the refund of P2,014,105.50 plus interest, moral damages and attorneys fees, including the
suspension of petitioners license to sell. The case was docketed as HLURB Case No. REM-0220-080798.

On December 6, 1999, the Housing and Land Use Arbiter (the Arbiter) rendered a Decision [8] dismissing the
complaint. The Arbiter found petitioner not guilty of misrepresentation. Considering further that the subject
properties have been delivered on October 10, 1996 and respondent filed his complaint only on August 7,
1998, the Arbiter further ruled that respondents action had already prescribed pursuant to Article 1543, [9] in
relation to Articles 1539 and 1542,[10] of the Civil Code. The dispositive portion of the said decision reads:

WHEREFORE, Premises Considered, judgment is hereby rendered DISMISSING this

Complaint, and ordering the parties to do the following, to wit:

1.

For the Complainant to SIGN the two (2) Deed[s] of Absolute Sale which this Board finds
to be in order within 30 days from finality of this decision; and

2.

For the Respondent to DELIVER the corresponding condominium certificate of title for the
two units namely units 2405 and 2406 free from all liens and encumbrances.

Consequently, the counterclaim is likewise dismissed for it finds no evidence that

Complainant acted in bad faith in filing this complaint.

Cost against the parties.

SO ORDERED.[11]

Aggrieved, respondent filed a Petition for Review of said decision with the Board of Commissioners of the
HLURB (the Board). In the course of its proceedings, the Board ordered that an ocular inspection of Unit Nos.
2405 and 2406 be conducted by an independent engineer. The Board further ordered that there should be two
measurements of the areas in controversy, one based on the master deed and another based on the internal
surface of the perimeter wall. After the ocular inspection, the independent geodetic engineer found the
following measurements:

Unit 2405- Based on internal face of perimeter wall = 109 sq. m. Based on master deed = 115
sq. m.

Unit 2406- Based on internal face of perimeter wall = 110 sq. m.

Based on master deed = 116 sq. m.[12]

Thereafter, the Board rendered its Decision[13] dated June 8, 2004 affirming the Arbiters finding that
respondents action had already prescribed. However, the Board found that there was a mistake regarding the
object of the sale constituting a ground for rescission based on Articles 1330 and 1331 [14] of the Civil
Code. Hence, the Board modified the decision of the Arbiter as follows:
Wherefore[,] the decision of the [O]ffice below is hereby modified with the following additional
directive:

In the alternative, and at the option of the complainant, the contract is rescinded and the
respondent is directed to refund to (sic) P7,660,550[.]27 while complainant is directed to turn
over possession of the units 2405, 2406 and the four parking lots to the respondent.

So ordered.[15]

Not satisfied with the decision of the Board, petitioner filed an appeal to the Office of the President
arguing that the Board erred in granting relief to respondent considering that the latters action had already
prescribed. On March 11, 2005, the Office of the President rendered a Decision [16] finding that respondents
action had already prescribed pursuant to Article 1543 of the Civil Code. The dispositive portion of said
decision reads as follows:

WHEREFORE, premises considered, the Decision dated June 8, 2004 of the HLURB is
hereby MODIFIED and the Decision dated December 6, 1999 of the Housing and Land Use
Arbiter is hereby REINSTATED.

SO ORDERED.[17]

Respondent filed a Motion for Reconsideration but the same was denied by the Office of the President
in a Resolution[18] dated June 20, 2005. Hence, respondent filed a Petition for Review before the Court of
Appeals.

On February 14, 2006, the Court of Appeals rendered the assailed Decision finding that respondents
action has not prescribed. The dispositive portion of the Decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by

us GRANTING the petition filed in this case, REVERSING and SETTING ASIDE the assailed
Decision and Resolution of the Office of the President dated March 11, 2005 and June 20, 2005,
respectively, and reinstating the Decision promulgated by the Board of Commissioners of the
HLURB on June 8, 2004.

SO ORDERED.[19]

Petitioners Motion for Reconsideration[20] of the assailed decision having been denied in the Resolution
dated June 2, 2006, petitioner is now before us, in this petition for review raising the following grounds:

I.

The Court of Appeals Erred in Holding That in A Contract of Sale Ownership Is Not Transferred
by Delivery[.]

II.

The Court of Appeals Erred in Holding That Respondents Action Has Not Prescribed.

III.

The Court of Appeals Erred And Exceeded Its Jurisdiction When It Found Petitioner Guilty Of
Misrepresentation As The Decision Of The HLURB Board of Commissioners On The Same
Matter Is Final With Respect To Respondent Who Did Not Appeal Said Decision That Petitioner
Did Not Commit Misrepresentation.[21]

The issue before us is whether respondents action has prescribed pursuant to Article 1543, in relation to
Articles 1539 and 1542 of the Civil Code, to wit:

ARTICLE 1539. The obligation to deliver the thing sold includes that of placing in the control of
the vendee all that is mentioned in the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a
certain price for a unit of measure or number, the vendor shall be obliged to deliver to the
vendee, if the latter should demand it, all that may have been stated in the contract; but, should
this be not possible, the vendee may choose between a proportional reduction of the price and
the rescission of the contract, provided that, in the latter case, the lack in the area be not less
than one-tenth of that stated.

The same shall be done, even when the area is the same, if any part of the immovable is
not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the vendee, when the
inferior value of the thing sold exceeds one-tenth of the price agreed upon.

Nevertheless, if the vendee would not have bought the immovable had he known of its
smaller area or inferior quality, he may rescind the sale. (1469a) [Emphasis supplied]

ARTICLE 1542. In the sale of real estate, made for a lump sum and not at the rate of a
certain sum for a unit of measure or number, there shall be no increase or decrease of the price,
although there be a greater or lesser area or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price;
but if, besides mentioning the boundaries, which is indispensable in every conveyance of real
estate, its area or number should be designated in the contract, the vendor shall be bound to
deliver all that is included within said boundaries, even when it exceeds the area or number
specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the
price, in proportion to what is lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver what has been stipulated. (1471)
[Emphasis supplied]

ARTICLE 1543. The actions arising from Articles 1539 and 1542 shall prescribe in six
months, counted from the day of delivery. (1472a) [Emphasis supplied]

Petitioner argues that it delivered possession of the subject properties to respondent on October 10, 1996,
hence, respondents action filed on August 7, 1998 has already prescribed.

Respondent, on the one hand, contends that his action has not prescribed because the prescriptive period has
not begun to run as the same must be reckoned from the execution of the deeds of sale which has not yet
been done.

The resolution of the issue at bar necessitates a scrutiny of the concept of delivery in the context of the Law on
Sales or as used in Article 1543 of the Civil Code. Under the Civil Code, the vendor is bound to transfer the
ownership of and deliver the thing which is the object of the sale. The pertinent provisions of the Civil Code on
the obligation of the vendor to deliver the object of the sale provide:

ARTICLE 1495. The vendor is bound to transfer the ownership of and deliver, as well as
warrant the thing which is the object of the sale. (1461a)

ARTICLE 1496. The ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any
other manner signifying an agreement that the possession is transferred from the vendor to the
vendee. (n)

ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the
control and possession of the vendee. (1462a)

ARTICLE 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from
the deed the contrary does not appear or cannot clearly be inferred.

xxxx
Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.
[22]

Manresa explains, the delivery of the thing . . . signifies that title has passed from the seller to the

buyer."[23] According to Tolentino, the purpose of delivery is not only for the enjoyment of the thing but also a
mode of acquiring dominion and determines the transmission of ownership, the birth of the real right. The
delivery under any of the forms provided by Articles 1497 to 1505 of the Civil Code signifies that the
transmission of ownership from vendor to vendee has taken place.[24]

Article 1497 above contemplates what is known as real or actual delivery, when the thing sold is placed in the
control and possession of the vendee. Article 1498, on the one hand, refers to symbolic delivery by the
execution of a public instrument. It should be noted, however, that Article 1498 does not say that the execution
of the deed provides a conclusive presumption of the delivery of possession. It confines itself to providing that
the execution thereof is equivalent to delivery, which means that the presumption therein can be rebutted by
means of clear and convincing evidence. Thus, the presumptive delivery by the execution of a public
instrument can be negated by the failure of the vendee to take actual possession of the land sold.[25]
In Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.,[26] the concept of delivery was explained as
follows:

Delivery has been described as a composite act, a thing in which both parties must join and the
minds of both parties concur. It is an act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession of the
same. In its natural sense, delivery means something in addition to the delivery of property or
title; it means transfer of possession. In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate "the absolute giving up of the

control and custody of the property on the part of the vendor, and the assumption of the
same by the vendee." (Emphasis supplied)

In light of the foregoing, delivery as used in the Law on Sales refers to the concurrent transfer
of two things: (1) possession and (2) ownership. This is the rationale behind the jurisprudential doctrine
that presumptive delivery via execution of a public instrument is negated by the reality that the vendee actually
failed to obtain material possession of the land subject of the sale. [27] In the same vein, if the vendee is
placed in actual possession of the property, but by agreement of the parties ownership of the same is
retained by the vendor until the vendee has fully paid the price, the mere transfer of the possession of
the property subject of the sale is not the delivery contemplated in the Law on Sales or as used in
Article 1543 of the Civil Code.

In the case at bar, it appears that respondent was already placed in possession of the subject
properties. However, it is crystal clear that the deeds of absolute sale were still to be executed by the parties
upon payment of the last installment. This fact shows that ownership of the said properties was withheld by
petitioner. Following case law, it is evident that the parties did not intend to immediately transfer ownership of
the subject properties until full payment and the execution of the deeds of absolute sale. [28]Consequently, there
is no delivery to speak of in this case since what was transferred was possession only and not ownership of
the subject properties.

We, therefore, hold that the transfer of possession of the subject properties on October 10, 1996 to
respondent cannot be considered as delivery within the purview of Article 1543 of the Civil Code. It follows that
since there has been no transfer of ownership of the subject properties since the deeds of absolute sale have
not yet been executed by the parties, the action filed by respondent has not prescribed.

The next issue is whether the sale in the case at bar is one made with a statement of its area or at the
rate of a certain price for a unit of measure and not for a lump sum.Article 1539 provides that If the sale of real
estate should be made with a statement of its area, at the rate of a certain price for a unit of measure or
number, the vendor shall be obliged to deliver to the vendeeall that may have been stated in the contract; but,
should this be not possible, the vendee may choose between a proportional reduction of the price and the
rescission of the contract. Article 1542, on the one hand, provides that In the sale of real estate, made for a
lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or
decrease of the price, although there be a greater or lesser area or number than that stated in the contract."

The distinction between Article 1539 and Article 1542 was explained by Manresa[29] as follows:

. . . If the sale was made for a price per unit of measure or number, the consideration of
the contract with respect to the vendee, is the number of such units, or, if you wish, the thing
purchased as determined by the stipulated number of units. But if, on the other hand, the sale
was made for a lump sum, the consideration of the contract is the object sold, independently of
its number or measure, the thing as determined by the stipulated boundaries, which has been
called in law a determinate object.

This difference in consideration between the two cases implies a distinct regulation of
the obligation to deliver the object, because, for an acquittance delivery must be made in
accordance with the agreement of the parties, and the performance of the agreement must
show the confirmation, in fact, of the consideration which induces each of the parties to enter
into the contract.

In Rudolf Lietz, Inc. v. Court of Appeals,[30] we held:

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit
area. In a unit price contract, the statement of area of immovable is not conclusive and the price
may be reduced or increased depending on the area actually delivered. If the vendor delivers
less than the area agreed upon, the vendee may oblige the vendor to deliver all that may be
stated in the contract or demand for the proportionate reduction of the purchase price if delivery
is not possible. If the vendor delivers more than the area stated in the contract, the vendee has
the option to accept only the amount agreed upon or to accept the whole area, provided he pays
for the additional area at the contract rate.

In some instances, a sale of an immovable may be made for a lump sum and not at a
rate per unit. The parties agree on a stated purchase price for an immovable the area of which
may be declared based on an estimate or where both the area and boundaries are stated.

In the case where the area of the immovable is stated in the contract based on an
estimate, the actual area delivered may not measure up exactly with the area stated in the
contract. According to Article 1542 of the Civil Code, in the sale of real estate, made for a lump
sum and not at the rate of a certain sum for a unit of measure or number, there shall be no
increase or decrease of the price although there be a greater or lesser area or number than that
stated in the contract. However, the discrepancy must not be substantial. A vendee of land,
when sold in gross or with the description "more or less" with reference to its area, does not
thereby ipso facto take all risk of quantity in the land. The use of "more or less" or similar words
in designating quantity covers only a reasonable excess or deficiency.

Where both the area and the boundaries of the immovable are declared, the area
covered within the boundaries of the immovable prevails over the stated area. In cases of
conflict between areas and boundaries, it is the latter which should prevail. What really defines a
piece of ground is not the area, calculated with more or less certainty, mentioned in its
description, but the boundaries therein laid down, as enclosing the land and indicating its limits.
In a contract of sale of land in a mass, it is well established that the specific boundaries stated in
the contract must control over any statement with respect to the area contained within its

boundaries. It is not of vital consequence that a deed or contract of sale of land should disclose
the area with mathematical accuracy. It is sufficient if its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as to the superficial area is immaterial.
Thus, the obligation of the vendor is to deliver everything within the boundaries, inasmuch as it
is the entirety thereof that distinguishes the determinate object.

In the case at bar, it is undisputed by the parties that the purchase price of the subject properties was
computed based on the price list prepared by petitioner, or P22,378.95 per square meter. Clearly, the parties
agreed on a sale at a rate of a certain price per unit of measure and not one for a lump sum. Hence, it is Article
1539 and not Article 1542 which is the applicable law. Accordingly, respondent is entitled to the relief afforded
to him under Article 1539, that is, either a proportional reduction of the price or the rescission of the contract, at
his option. Respondent chose the former remedy since he prayed in his Complaint for the refund of the amount
of P2,014,105.50 representing the proportional reduction of the price paid to petitioner.

In its decision, the Court of Appeals held that the action filed by respondent has not prescribed and reinstated
the decision of the Board. It is an error to reinstate the decision of the Board. The Board, in its decision, held
that there was a mistake regarding the object of the sale constituting a ground for rescission based on Articles
1330 and 1331 of the Civil Code. It then granted the relief of rescission at the option of respondent. Articles
1330 and 1331 of the Civil Code provide:

ARTICLE 1330. A contract where consent is given through mistake, violence,

intimidation, undue influence, or fraud is voidable. (1265a)

ARTICLE 1331. In order that mistake may invalidate consent, it should refer to the
substance of the thing which is the object of the contract, or to those conditions which have
principally moved one or both parties to enter into the contract.

We find that these articles are inapplicable to the case at bar. In order that mistake may invalidate consent and
constitute a ground for annulment of contract based on Article 1331, the mistake must be material as to go to
the essence of the contract; that without such mistake, the agreement would not have been made. [31] The effect
of error must be determined largely by its influence upon the party. If the party would have entered into the
contract even if he had knowledge of the true fact, then the error does not vitiate consent.[32]

In the case at bar, the relief sought by respondent was for a refund and he continued to occupy the subject
properties after he found out that the same were smaller in area. All these show that respondent did not

consider the error in size significant enough to vitiate the contract. Hence, the Court of Appeals erred in
affirming the Boards decision to grant rescission based on Articles 1330 and 1331 of the Civil Code.

IN VIEW WHEREOF, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED but
with the MODIFICATION that the decision of the HLURB is not reinstated. Petitioner is ordered to refund the
amount of Two Million Fourteen Thousand One Hundred Five Pesos and Fifty Centavos (P2,014,105.50) to
respondent with legal interest of six percent (6%) per annum from August 7, 1998, the date of judicial
demand. A twelve percent (12%) interest per annum, in lieu of six percent (6%), shall be imposed on such
amount from the date of promulgation of this decision until the payment thereof. Costs against petitioner.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

ANTHONY ORDUA, DENNIS ORDUA, and

ANTONITA ORDUA,
Petitioners,

- versus -

G.R. No. 176841

Present:

CORONA, C.J., Chairperson,

VELASCO, JR.,
LEONARDO-DE CASTRO,

EDUARDO J. FUENTEBELLA, MARCOS S.

CID, BENJAMIN F. CID, BERNARD G.
BANTA, and ARMANDO GABRIEL, JR.,

DEL CASTILLO, and

PEREZ, JJ.

Respondents.
Promulgated:

June 29, 2010

x-----------------------------------------------------------------------------------------x
DECISION

VELASCO, JR., J.:

In this Petition for Review[1] under Rule 45 of the Rules of Court, Anthony Ordua, Dennis Ordua and
Antonita Ordua assail and seek to set aside the Decision [2] of the Court of Appeals (CA) dated December 4,
2006 in CA-G.R. CV No. 79680, as reiterated in its Resolution of March 6, 2007, which affirmed the May 26,
2003 Decision[3] of the Regional Trial Court (RTC), Branch 3 in Baguio City, in Civil Case No. 4984-R, a suit
for annulment of title and reconveyance commenced by herein petitioners against herein respondents.

Central to the case is a residential lot with an area of 74 square meters located at Fairview Subdivision,
Baguio City, originally registered in the name of Armando Gabriel, Sr. (Gabriel Sr.) under Transfer Certificate of
Title (TCT) No. 67181 of the Registry of Deeds of Baguio City.[4]

As gathered from the petition, with its enclosures, and the comments thereon of four of the five
respondents,[5] the Court gathers the following relevant facts:

Sometime in 1996 or thereabouts, Gabriel Sr. sold the subject lot to petitioner Antonita Ordua
(Antonita), but no formal deed was executed to document the sale. The contract price was apparently payable
in installments as Antonita remitted from time to time and Gabriel Sr. accepted partial payments. One of the
Orduas would later testify that Gabriel Sr. agreed to execute a final deed of sale upon full payment of the
purchase price.[6]

As early as 1979, however, Antonita and her sons, Dennis and Anthony Ordua, were already occupying
the subject lot on the basis of some arrangement undisclosed in the records and even constructed their house
thereon. They also paid real property taxes for the house and declared it for tax purposes, as evidenced by Tax
Declaration No. (TD) 96-04012-111087[7] in which they place the assessed value of the structure at PhP
20,090.

After the death of Gabriel Sr., his son and namesake, respondent Gabriel Jr., secured TCT No. T71499[8] over the subject lot and continued accepting payments from the petitioners. On December 12, 1996,
Gabriel Jr. wrote Antonita authorizing her to fence off the said lot and to construct a road in the adjacent lot.
[9]

On December 13, 1996, Gabriel Jr. acknowledged receipt of a PhP 40,000 payment from petitioners.

[10]

Through a letter[11] dated May 1, 1997, Gabriel Jr. acknowledged that petitioner had so far made an

aggregate payment of PhP 65,000, leaving an outstanding balance of PhP 60,000. A receipt Gabriel Jr. issued
dated November 24, 1997 reflected a PhP 10,000 payment.

Despite all those payments made for the subject lot, Gabriel Jr. would later sell it to Bernard Banta
(Bernard) obviously without the knowledge of petitioners, as later developments would show.

As narrated by the RTC, the lot conveyance from Gabriel Jr. to Bernard was effected against the
following backdrop: Badly in need of money, Gabriel Jr. borrowed from Bernard the amount of PhP 50,000,
payable in two weeks at a fixed interest rate, with the further condition that the subject lot would answer for the

loan in case of default.Gabriel Jr. failed to pay the loan and this led to the execution of a Deed of Sale [12] dated
June 30, 1999 and the issuance later of TCT No. T-72782 [13] for subject lot in the name of Bernard upon
cancellation of TCT No. 71499 in the name of Gabriel, Jr. As the RTC decision indicated, the reluctant Bernard
agreed to acquire the lot, since he had by then ready buyers in respondents Marcos Cid and Benjamin F. Cid
(Marcos and Benjamin or the Cids).

Subsequently, Bernard sold to the Cids the subject lot for PhP 80,000. Armed with a Deed of Absolute
Sale of a Registered Land[14] dated January 19, 2000, the Cids were able to cancel TCT No. T-72782 and
secure TCT No. 72783[15] covering the subject lot. Just like in the immediately preceding transaction, the deed
of sale between Bernard and the Cids had respondent Eduardo J. Fuentebella (Eduardo) as one of the
instrumental witnesses.

Marcos and Benjamin, in turn, ceded the subject lot to Eduardo through a Deed of Absolute
Sale[16] dated May 11, 2000. Thus, the consequent cancellation of TCT No. T-72782 and issuance on May 16,
2000 of TCT No. T-3276[17] over subject lot in the name of Eduardo.

As successive buyers of the subject lot, Bernard, then Marcos and Benjamin, and finally Eduardo,
checked, so each claimed, the title of their respective predecessors-in-interest with the Baguio Registry and
discovered said title to be free and unencumbered at the time each purchased the property. Furthermore,
respondent Eduardo, before buying the property, was said to have inspected the same and found it unoccupied
by the Orduas.[18]

Sometime in May 2000, or shortly after his purchase of the subject lot, Eduardo, through his lawyer,
sent a letter addressed to the residence of Gabriel Jr. demanding that all persons residing on or physically
occupying the subject lot vacate the premises or face the prospect of being ejected.[19]

Learning of Eduardos threat, petitioners went to the residence of Gabriel Jr. at No. 34 Dominican
Hill, Baguio City. There, they met Gabriel Jr.s estranged wife, Teresita, who informed them about her having
filed an affidavit-complaint against her husband and the Cids for falsification of public documents on March 30,
2000. According to Teresita, her signature on the June 30, 1999 Gabriel Jr.Bernard deed of sale was a forgery.
Teresita further informed the petitioners of her intent to honor the aforementioned 1996 verbal agreement
between Gabriel Sr. and Antonita and the partial payments they gave her father-in-law and her husband for the
subject lot.

On July 3, 2001, petitioners, joined by Teresita, filed a Complaint [20] for Annulment of Title,
Reconveyance with Damages against the respondents before the RTC, docketed as Civil Case No. 4984-R,
specifically praying that TCT No. T-3276 dated May 16, 2000 in the name of Eduardo be annulled. Corollary to
this prayer, petitioners pleaded that Gabriel Jr.s title to the lot be reinstated and that petitioners be declared as
entitled to acquire ownership of the same upon payment of the remaining balance of the purchase price
therefor agreed upon by Gabriel Sr. and Antonita.

While impleaded and served with summons, Gabriel Jr. opted not to submit an answer.

Ruling of the RTC

By Decision dated May 26, 2003, the RTC ruled for the respondents, as defendants a quo, and against
the petitioners, as plaintiffs therein, the dispositive portion of which reads:

WHEREFORE, the instant complaint is hereby DISMISSED for lack of merit. The four (4)
plaintiffs are hereby ordered by this Court to pay each defendant (except Armando Gabriel, Jr.,
Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Moral
Damages of Twenty Thousand (P20,000.00) Pesos, so that each defendant shall receive Moral
Damages of Eighty Thousand (P80,000.00) Pesos each. Plaintiffs shall also pay all defendants
(except Armando Gabriel, Jr., Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify
on these damages), Exemplary Damages of Ten Thousand (P10,000.00) Pesos each so
that each defendant shall receive Forty Thousand (P40,000.00) Pesos as Exemplary
Damages. Also, plaintiffs are ordered to pay each defendant (except Armando Gabriel, Jr.,
Benjamin F. Cid, and Eduardo J. Fuentebella who did not testify on these damages), Fifty
Thousand (P50,000.00) Pesos as Attorneys Fees, jointly and solidarily.

Cost of suit against the plaintiffs.[21]

On the main, the RTC predicated its dismissal action on the basis of the following grounds and/or premises:

1. Eduardo was a purchaser in good faith and, hence, may avail himself of the provision of Article
1544[22] of the Civil Code, which provides that in case of double sale, the party in good faith who is able to
register the property has better right over the property;

2. Under Arts. 1356[23] and 1358[24] of the Code, conveyance of real property must be in the proper form,
else it is unenforceable;

3. The verbal sale had no adequate consideration; and

4. Petitioners right of action to assail Eduardos title prescribes in one year from date of the issuance of
such title and the one-year period has already lapsed.

From the above decision, only petitioners appealed to the CA, their appeal docketed as CA-G.R. CV
No. 79680.

The CA Ruling

On December 4, 2006, the appellate court rendered the assailed Decision affirming the RTC
decision. The fallo reads:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the
26 May 2003 Decision of the Regional Trial Court, Branch 3 of Baguio City in Civil Case No.
4989-R is hereby AFFIRMED.

SO ORDERED.[25]

Hence, the instant petition on the submission that the appellate court committed reversible error of law:

1. xxx WHEN IT HELD THAT THE SALE OF THE SUBJECT LOT BY ARMANDO
GABRIEL, SR. AND RESPONDENT ARMANDO GABRIEL, JR. TO THE PETITIONERS
IS UNENFORCEABLE.

2. xxx IN NOT FINDING THAT THE SALE OF THE SUBJECT LOT BY

RESPONDENT ARMANDO GABRIEL, JR. TO RESPONDENT BERNARD BANTA AND
ITS SUBSEQUENT SALE BY THE LATTER TO HIS CO-RESPONDENTS ARE NULL
AND VOID.

3. xxx IN NOT FINDING THAT THE RESPONDENTS ARE BUYERS IN BAD

FAITH

4. xxx IN FINDING THAT THE SALE OF THE SUBJECT LOT BETWEEN

GABRIEL, SR. AND RESPONDENT GABRIEL, JR. AND THE PETITIONERS HAS NO
ADEQUATE CONSIDERATION.

5. xxx IN RULING THAT THE INSTANT ACTION HAD ALREADY PRESCRIBED.

6. xxx IN FINDING THAT THE PLAINTIFFS-APPELLANTS ARE LIABLE FOR

MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.[26]

The Courts Ruling

The core issues tendered in this appeal may be reduced to four and formulated as follows, to wit: first,
whether or not the sale of the subject lot by Gabriel Sr. to Antonita is unenforceable under the Statute of
Frauds; second, whether or not such sale has adequate consideration; third, whether the instant action has
already prescribed; and, fourth, whether or not respondents are purchasers in good faith.
The petition is meritorious.

Statute of Frauds Inapplicable

to Partially Executed Contracts

It is undisputed that Gabriel Sr., during his lifetime, sold the subject property to Antonita, the purchase
price payable on installment basis. Gabriel Sr. appeared to have been a recipient of some partial payments.
After his death, his son duly recognized the sale by accepting payments and issuing what may be considered
as receipts therefor. Gabriel Jr., in a gesture virtually acknowledging the petitioners dominion of the property,
authorized them to construct a fence around it. And no less than his wife, Teresita, testified as to the fact of
sale and of payments received.

Pursuant to such sale, Antonita and her two sons established their residence on the lot, occupying the
house they earlier constructed thereon. They later declared the property for tax purposes, as evidenced by the
issuance of TD 96-04012-111087 in their or Antonitas name, and paid the real estates due thereon, obviously
as sign that they are occupying the lot in the concept of owners.

Given the foregoing perspective, Eduardos assertion in his Answer that persons appeared in the
property[27] only after he initiated ejectment proceedings [28] is clearly baseless. If indeed petitioners entered and
took possession of the property after he (Eduardo) instituted the ejectment suit, how could they explain the fact
that he sent a demand letter to vacate sometime in May 2000?

With the foregoing factual antecedents, the question to be resolved is whether or not the Statute of
Frauds bars the enforcement of the verbal sale contract between Gabriel Sr. and Antonita.
The CA, just as the RTC, ruled that the contract is unenforceable for non-compliance with the Statute of
Frauds.

We disagree for several reasons. Foremost of these is that the Statute of Frauds expressed in Article
1403, par. (2),[29] of the Civil Code applies only to executory contracts, i.e., those where no performance has
yet been made. Stated a bit differently, the legal consequence of non-compliance with the Statute does not
come into play where the contract in question is completed, executed, or partially consummated.[30]

The Statute of Frauds, in context, provides that a contract for the sale of real property or of an interest
therein shall be unenforceable unless the sale or some note or memorandum thereof is in writing and
subscribed by the party or his agent. However, where the verbal contract of sale has been partially executed
through the partial payments made by one party duly received by the vendor, as in the present case, the
contract is taken out of the scope of the Statute.

The purpose of the Statute is to prevent fraud and perjury in the enforcement of obligations depending
for their evidence on the unassisted memory of witnesses, by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the party to be charged. [31] The Statute requires certain
contracts to be evidenced by some note or memorandum in order to be enforceable.

The

term Statute of Frauds is descriptive of statutes that require certain classes of contracts to be in writing. The

Statute does not deprive the parties of the right to contract with respect to the matters therein involved, but
merely regulates the formalities of the contract necessary to render it enforceable.[32]

Since contracts are generally obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present, [33] the Statute simply provides the method by which the
contracts enumerated in Art. 1403 (2) may be proved but does not declare them invalid because they are not
reduced to writing. In fine, the form required under the Statute is for convenience or evidentiary purposes
only.

There can be no serious argument about the partial execution of the sale in question. The records show
that petitioners had, on separate occasions, given Gabriel Sr. and Gabriel Jr. sums of money as partial
payments of the purchase price. These payments were duly receipted by Gabriel Jr. To recall, in his letter of
May 1, 1997, Gabriel, Jr. acknowledged having received the aggregate payment of PhP 65,000 from
petitioners with the balance of PhP 60,000 still remaining unpaid. But on top of the partial payments thus
made, possession of the subject of the sale had been transferred to Antonita as buyer. Owing thus to its partial
execution, the subject sale is no longer within the purview of the Statute of Frauds.

Lest it be overlooked, a contract that infringes the Statute of Frauds is ratified by the acceptance of
benefits under the contract.[34] Evidently, Gabriel, Jr., as his father earlier, had benefited from the partial
payments made by the petitioners. Thus, neither Gabriel Jr. nor the other respondentssuccessive purchasers
of subject lotscould plausibly set up the Statute of Frauds to thwart petitioners efforts towards establishing their
lawful right over the subject lot and removing any cloud in their title. As it were, petitioners need only to pay the
outstanding balance of the purchase price and that would complete the execution of the oral sale.

There was Adequate Consideration

Without directly saying so, the trial court held that the petitioners cannot sue upon the oral sale since in
its own words: x x x for more than a decade, [petitioners] have not paid in full Armando Gabriel, Sr. or his
estate, so that the sale transaction between Armando Gabriel Sr. and [petitioners] [has] no adequate
consideration.

The trial courts posture, with which the CA effectively concurred, is patently flawed. For starters, they
equated incomplete payment of the purchase price with inadequacy of price or what passes as lesion, when

both are different civil law concepts with differing legal consequences, the first being a ground to rescind an
otherwise valid and enforceable contract. Perceived inadequacy of price, on the other hand, is not a sufficient
ground for setting aside a sale freely entered into, save perhaps when the inadequacy is shocking to the
conscience.[35]

The Court to be sure takes stock of the fact that the contracting parties to the 1995 or 1996 sale agreed
to a purchase price of PhP 125,000 payable on installments. But the original lot owner, Gabriel Sr., died before
full payment can be effected. Nevertheless, petitioners continued remitting payments to Gabriel, Jr., who sold
the subject lot to Bernard on June 30, 1999. Gabriel, Jr., as may be noted, parted with the property only for
PhP 50,000. On the other hand, Bernard sold it for PhP 80,000 to Marcos and Benjamin. From the foregoing
price figures, what is abundantly clear is that what Antonita agreed to pay Gabriel, Sr., albeit in installment, was
very much more than what his son, for the same lot, received from his buyer and the latters buyer later. The
Court, therefore, cannot see its way clear as to how the RTC arrived at its simplistic conclusion about the
transaction between Gabriel Sr. and Antonita being without adequate consideration.

The Issues of Prescription and the Bona

Fides of the Respondents as Purchasers

Considering the interrelation of these two issues, we will discuss them jointly.

There can be no quibbling about the fraudulent nature of the conveyance of the subject lot effected by
Gabriel Jr. in favor of Bernard. It is understandable that after his fathers death, Gabriel Jr. inherited subject lot
and for which he was issued TCT No. No. T-71499. Since the Gabriel Sr. Antonita sales transaction called for
payment of the contract price in installments, it is also understandable why the title to the property remained
with the Gabriels. And after the demise of his father, Gabriel Jr. received payments from the Orduas and even
authorized them to enclose the subject lot with a fence. In sum, Gabriel Jr. knew fully well about the sale and is
bound by the contract as predecessor-in-interest of Gabriel Sr. over the property thus sold.

Yet, the other respondents (purchasers of subject lot) still maintain that they are innocent purchasers
for value whose rights are protected by law and besides which prescription has set in against petitioners action
for annulment of title and reconveyance.

The RTC and necessarily the CA found the purchaser-respondents thesis on prescription correct
stating in this regard that Eduardos TCT No. T-3276 was issued on May 16, 2000 while petitioners filed their
complaint for annulment only on July 3, 2001. To the courts below, the one-year prescriptive period to assail
the issuance of a certificate of title had already elapsed.

We are not persuaded.

The basic complaint, as couched, ultimately seeks the reconveyance of a fraudulently registered piece
of residential land. Having possession of the subject lot, petitioners right to the reconveyance thereof, and the
annulment of the covering title, has not prescribed or is not time-barred. This is so for an action for annulment
of title or reconveyance based on fraud is imprescriptible where the suitor is in possession of the property
subject of the acts,[36] the action partaking as it does of a suit for quieting of title which is imprescriptible.
[37]

Such is the case in this instance. Petitioners have possession of subject lots as owners having purchased

the same from Gabriel, Sr. subject only to the full payment of the agreed price.

The prescriptive period for the reconveyance of fraudulently registered real property is 10 years,
reckoned from the date of the issuance of the certificate of title, if the plaintiff is not in possession, but
imprescriptible if he is in possession of the property.[38] Thus, one who is in actual possession of a piece of land
claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking
steps to vindicate his right.[39] As it is, petitioners action for reconveyance is imprescriptible.

This brings us to the question of whether or not the respondent-purchasers, i.e., Bernard, Marcos and
Benjamin, and Eduardo, have the status of innocent purchasers for value, as was the thrust of the trial courts
disquisition and disposition.

We are unable to agree with the RTC.

It is the common defense of the respondent-purchasers that they each checked the title of the subject
lot when it was his turn to acquire the same and found it clean, meaning without annotation of any
encumbrance or adverse third party interest. And it is upon this postulate that each claims to be an innocent

purchaser for value, or one who buys the property of another without notice that some other person has a right
to or interest in it, and who pays therefor a full and fair price at the time of the purchase or before receiving
such notice.[40]

The general rule is that one dealing with a parcel of land registered under the Torrens System may
safely rely on the correctness of the certificate of title issued therefor and is not obliged to go beyond the
certificate.[41] Where, in other words, the certificate of title is in the name of the seller, the innocent purchaser
for value has the right to rely on what appears on the certificate, as he is charged with notice only of burdens or
claims on the res as noted in the certificate. Another formulation of the rule is that (a) in the absence of
anything to arouse suspicion or (b) except where the party has actual knowledge of facts and circumstances
that would impel a reasonably cautious man to make such inquiry or (c) when the purchaser has knowledge of
a defect of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status
of the title of the property,[42] said purchaser is without obligation to look beyond the certificate and investigate
the title of the seller.
Eduardo and, for that matter, Bernard and Marcos and Benjamin, can hardly claim to be innocent
purchasers for value or purchasers in good faith. For each knew or was at least expected to know that
somebody else other than Gabriel, Jr. has a right or interest over the lot. This is borne by the fact that the initial
seller, Gabriel Jr., was not in possession of subject property. With respect to Marcos and Benjamin, they knew
as buyers that Bernard, the seller, was not also in possession of the same property. The same goes with
Eduardo, as buyer, with respect to Marcos and Benjamin.

Basic is the rule that a buyer of a piece of land which is in the actual possession of persons other than
the seller must be wary and should investigate the rights of those in possession. Otherwise, without such
inquiry, the buyer can hardly be regarded as a buyer in good faith. When a man proposes to buy or deal with
realty, his duty is to read the public manuscript, i.e., to look and see who is there upon it and what his rights
are. A want of caution and diligence which an honest man of ordinary prudence is accustomed to exercise in
making purchases is, in contemplation of law, a want of good faith. The buyer who has failed to know or
discover that the land sold to him is in adverse possession of another is a buyer in bad faith.[43]

Where the land sold is in the possession of a person other than the vendor, the purchaser must go
beyond the certificates of title and make inquiries concerning the rights of the actual possessor.[44] And where,
as in the instant case, Gabriel Jr. and the subsequent vendors were not in possession of the property, the
prospective vendees are obliged to investigate the rights of the one in possession. Evidently, Bernard, Marcos
and Benjamin, and Eduardo did not investigate the rights over the subject lot of the petitioners who, during the
period material to this case, were in actual possession thereof. Bernard, et al. are, thus, not purchasers in good

faith and, as such, cannot be accorded the protection extended by the law to such purchasers. [45] Moreover, not
being purchasers in good faith, their having registered the sale, will not, as against the petitioners, carry the
day for any of them under Art. 1544 of the Civil Code prescribing rules on preference in case of double sales of
immovable property. Occea v. Esponilla[46] laid down the following rules in the application of Art. 1544: (1)
knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when the second
buyer first register 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.

Upon the facts obtaining in this case, the act of registration by any of the three respondent-purchasers
was not coupled with good faith. At the minimum, each was aware or is at least presumed to be 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.

The award by the lower courts of damages and attorneys fees to some of the herein respondents was
predicated on the filing by the original plaintiffs of what the RTC characterized as an unwarranted suit. The
basis of the award, needless to stress, no longer obtains and, hence, the same is set aside.

WHEREFORE, the petition is hereby GRANTED. The appealed December 4, 2006 Decision and the
March 6, 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 79680 affirming the May 26, 2003
Decision of the Regional Trial Court, Branch 3 in Baguio City are hereby REVERSED and SET
ASIDE. Accordingly, petitioner Antonita Ordua is hereby recognized to have the right of ownership over subject
lot covered by TCT No. T-3276 of the Baguio Registry registered in the name of Eduardo J. Fuentebella. The
Register of Deeds of Baguio City is hereby ORDERED to cancel said TCT No. T-3276 and to issue a new one
in the name of Armando Gabriel, Jr. with the proper annotation of the conditional sale of the lot covered by said
title in favor of Antonita Ordua subject to the payment of the PhP 50,000 outstanding balance. Upon full
payment of the purchase price by Antonita Ordua, Armando Gabriel, Jr. is ORDERED to execute a Deed of
Absolute Sale for the transfer of title of subject lot to the name of Antonita Ordua, within three (3) days from
receipt of said payment.

No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 192486

November 21, 2012

RUPERTA CANO VDA. DE VIRAY and JESUS CARLO GERARD VIRAY, Petitioners,
vs.
SPOUSES JOSE USI and AMELITA USI, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Petitioners have availed of Rule 45 to assail and nullify the Decision1 dated July 24, 2009, as effectively
reiterated in a Resolution2 of June 2, 2010, both rendered by the Court of Appeals (CA) in CA-G.R. CV No.
90344, setting aside the Decision3 dated June 21, 2007 of the Regional Trial Court (RTC), Branch 55 in
Macabebe, Pampanga, in Civil Case No. 01-1118(M), an accion publiciana/reivindicatoria, which respondents
commenced with, but eventually dismissed by, that court.
The Facts
At the core of the present controversy are several parcels of land which form part of what was once Lot No.
733, Cad-305-D, Masantol Cadastre (Lot 733 hereinafter), registered in the name of Ellen P. Mendoza
(Mendoza), married to Moses Mendoza, under Transfer Certificate of Title No. (TCT) 141-RP of the Registry of
Deeds of Pampanga. With an area of 9,137 square meters, more or less, Lot 733 is located in Brgy. Bebe
Anac, Masantol, Pampanga.
On April 28, 1986, Geodetic Engineer Abdon G. Fajardo prepared a subdivision plan4 (Fajardo Plan, for short)
for Lot 733, in which Lot 733 was divided into six (6) smaller parcels of differing size dimensions, designated
as: Lot 733-A, Lot 733-B, Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F consisting of 336, 465, 3,445, 683,
677 and 3,501 square meters, respectively.
The following day, April 29, 1986, Mendoza executed two separate deeds of absolute sale, the first,
transferring Lot 733-F to Jesus Carlo Gerard Viray (Jesus Viray),5 and the second deed conveying Lot 733-A to
spouses Avelino Viray and Margarita Masangcay (Sps. Viray).6 The names McDwight Mendoza, Mendozas
son, and one Ernesto Bustos appear in both notarized deeds as instrumental witnesses. As of that time, the
Fajardo Plan has not been officially approved by the Land Management Bureau (LMB), formerly the Bureau of
Lands. And at no time in the course of the controversy did the spouses Viray and Jesus Viray, as purchasers of
Lots 733-A and 733-F, respectively, cause the annotations of the conveying deeds of sale on TCT 141-RP.
Herein petitioner, Ruperta Cano Vda. de Viray (Vda. de Viray), is the surviving spouse of Jesus Viray, who died
in April 1992.
As of April 29, 1986, the dispositions made on and/or the ownership profile of the subdivided lots appearing
under the Fajardo Plan are as follows:
Lot No.

Area

Conveyances by Mendoza

Lot 733-A

366 square meters

Sold to Sps. Avelino and

Margarita Viray

Lot 733-B

465 square meters

Unsold

Lot 733-C

3,445 square meters

Unsold

Lot 733-D

683 square meters

Proposed Road

Lot 733-E

677 square meters

Unsold

Lot 733-F

3,501 square meters

Sold to Jesus Viray

The aforementioned conveyances notwithstanding, Mendoza, Emerenciana M. Vda. de Mallari (Vda. de

Mallari) and respondent spouses Jose Usi and Amelita T. Usi (Sps. Usi or the Usis), as purported co-owners of
Lot 733, executed on August 20, 1990 a Subdivision Agreement,7 or the
1st subdivision agreement (1st SA). Pursuant to this agreement which adopted, as base of reference, the LMBapproved subdivision plan prepared by Geodetic Engineer Alfeo S. Galang (Galang Plan), Lot 733 was
subdivided into three lots, i.e., Lots A to C, with the following area coverage: Lots 733-A, 465 square meters,
733-B, 494 square meters, and 733-C, 6,838 square meters. In its pertinent parts, the 1st SA reads:
That the above-parties are the sole and exclusive owners of a certain parcel of land situated in the Bo. of Bebe
Anac, Masantol, Pampanga, which is known as Lot No. 733 under TCT No. 141 R.P. of the Registry of Deeds
of Pampanga, under Psd-No. 03-10-025242;
That for the convenience of the parties hereto that the existing community of the said Lot be terminated and
their respective share be determined by proper adjudication;
That the parties hereto agreed to subdivided (sic) the above-mentioned property by Geodetic Engineer Alfeo S.
Galang, as per tracing cloth and blue print copy of plan Psd-03-025242 and technical description duly
approved by the Bureau of Lands, hereto Attached and made internal part of this instrument in the following
manner:
Lot 733-A - - - - - - - To Emerencia M. Vda. Mallari;
Lot 733-B - - - - - - - To Sps. Jose B. Usi and Amelita B. Usi;
Lot 733-C - - - - - - - To Ellen P. Mendoza8 (Emphasis added.)
TCT 141-RP would eventually be canceled and, in lieu thereof, three derivative titles were issued to the
following, as indicated: TCT 1584-RP for Lot 733-A to Mallari; TCT 1585-RP9 for Lot 733-B to Sps. Usi; and
TCT 1586-RP for Lot 733-C to Mendoza.
On April 5, 1991, Mendoza, McDwight P. Mendoza, Bismark P. Mendoza, Beverly P. Mendoza, Georgenia P.
Mendoza, Sps. Alejandro Lacap and Juanita U. Lacap, Sps. Nestor Coronel and Herminia Balingit, Sps. Bacani
and Martha Balingit, Sps. Ruperto and Josefina Jordan, and Sps.
Jose and Amelita Usi executed another Subdivision Agreement10 (2nd SA) covering and under which the
8,148-sq. m. Lot 733-C was further subdivided into 13 smaller lots (Lot 733-C-1 to Lot 733-C-13 inclusive). The
subdivision plan11 for Lot 733-C, as likewise prepared by Engr. Galang on October 13, 1990, was officially
approved by the LMB on March 1, 1991.
The 2nd SA partly reads:
1. That we are the sole and exclusive undivided co-owners of a parcel of land situated at Barrio Putat and
Arabia, Bebe Anac, Masantol, Pampanga, identified as Lot No. 733-C of Psd-No. 03-041669, containing an
area of 8,148 sq. meters and covered by T.C.T. No. 1586 R.P. of the
Register of Deeds of Pampanga;

2. That it is for the benefit and best interest of the parties herein that the [sic] their co-ownership relation over
the above-mentioned parcel of land be terminated and their respective share over the co-ownership be allotted
[sic] to them;
Wherefore, by virtue of the foregoing premises, we have agreed, as we hereby agree to subdivide our said
parcel of land x x x.12 (Emphasis added.)
Consequent to the subdivision of Lot 733-C in line with the Galang Plan and its subsequent partition and
distribution to the respective allotees pursuant to the 2nd SA, the following individuals appeared as owners of
the subdivided units as indicated in the table below:

Lot No.

Land Area

Partitioned to:

Lot 733-C-1

200 square meters

Sps. Jose and Amelita Usi

Lot 733-C-2

1,000 square meters

Sps. Alejandro & Juanita

Lacap

Lot 733-C-3

300 square meters

Sps. Nestor & Herminia

Coronel

Lot 733-C-4

500 square meters

Sps. Nestor & Herminia

Coronel and Sps. Bacani &
Martha Balingit

Lot 733-C-5

400 square meters

Sps. Ruperto & Josefina

Jordan

Lot 733-C-6

500 square meters

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza

Lot 733-C-7

220 square meters

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza

Lot 733-C-8

1,000 square meters

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza

Lot 733-C-9

500 square meters

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza

Lot 733-C-10

1,000 square meters

Sps. Jose and Amelita Usi

Lot 733-C-11

668 square meters

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza

Lot 733-C-12

550 square meters

[Lot 733-C-13]

[1,310 square meters]

Ellen, McDwight, Bismark,

Beverly and Georgenia
Mendoza
[Allotted for a proposed road]

In net effect, the two subdivision agreements paved the way for the issuance, under the Sps. Usis name, of
TCT Nos. 1585-RP,13 2092-RP,14 and 2101-RP,15 covering Lots 733-B, 733-C-1 and 733-C-10, respectively.
On the other hand, the subdivision of Lot 733, per the Galang Plan, and the two subdivision agreements
concluded based on that plan, virtually resulted in the loss of the identity of what under the Fajardo Plan were
Lot 733-A and Lot 733-F. The Sps. Viray and the late Jesus Viray, to recall, purchased Lot 733-A and Lot 733F, respectively, from Mendoza.
Then came the ocular inspection and survey16 conducted on Lot 733, as an undivided whole, by Geodetic
Engr. Angelito Nicdao of the LMB. Some highlights of his findings:
(a) Lot 733-A of the Fajardo Plan with an area of 336 square meters that Sps. Viray bought is within Lot
733-B (Galang Plan) allotted under 1st SA to Sps. Jose and Amelita Usi; and
(b) Lot 733-F of the Fajardo Plan with an area of 3,501 square meters is almost identical to the
combined area of Lots 733-C-8 to 733-C-12 awarded to Ellen Mendoza and her childrenMcDwight,
Bismark, Beverly and Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 of the Galang
Plan awarded to Sps. Jose and Amelita Usi.
As to be expected, the foregoing overlapping transactions involving the same property or portions thereof
spawned several suits and counter- suits featuring, in particular, herein petitioners and respondents, viz:
(a) A suit for Annulment of Deed of Absolute Sale filed before the RTC, Branch 55 in Macabebe, Pampanga,
docketed as Civil Case No. 88-0265-M, in which the Usis and Mendoza, as plaintiffs, assailed the validity and
sought the annulment of the deed of absolute sale executed by Mendoza on April 29, 1986 conveying Lot 733A (Fajardo Plan) to defendants Sps. Viray.
(b) A similar suit for Annulment of Deed of Absolute Sale commenced by Mendoza against Jesus Viray before
RTC-Br. 55 in Macabebe, Pampanga, docketed as Civil Case No. 88-0283-M, entitled Ellen P. Mendoza v.
Jesus Carlo Gerard Viray, also seeking to nullify the April 29, 1986 Deed of Absolute Sale conveying Lot 733-F
(Fajardo Plan) to Jesus Viray and to declare the plaintiff as entitled to its possession.
The adverted Civil Case Nos. 88-0265-M and 88-0283-M were jointly tried by RTC-Br. 55, which, on August 1,
1989, rendered a Joint Decision17 finding for the Sps. Viray and Jesus Viray, as defendants, and accordingly
dismissing the separate complaints to annul the deeds of sale subject of the joint cases.
On appeal, the CA, in CA-G.R. CV Nos. 24981-82, and later this Court, in its Decision of December 11, 1995,
in G.R. No. 122287 in effect affirmed in toto the RTC dismissal decision.18 The Court, via its Resolution of April
17, 1998, would eventually deny with finality19 Mendoza and the Usis motion for reconsideration of the
aforesaid December 11, 1995 Decision.
(c) A forcible entry case filed on November 19, 1991 by the late Jesus Viray against the Sps. Usi before the
Municipal Circuit Trial Court (MCTC) in Macabebe, Pampanga, docketed as Civil Case No. 91 (13), entitled
Jesus Carlo Gerard Viray v. Spouses Jose Usi and Emelita Tolentino, to eject the Usis from Lot 733-F (Fajardo
Plan).
On July 29, 1998, the MCTC rendered a Decision20 in favor of Jesus Viray, the dispositive portion of which
pertinently reads:
WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff the late petitioner Jesus
Viray, and accordingly, the defendants Sps. Usi and any other persons claiming under them are hereby
ordered to vacate the subject premises, Lot 733-F embraced in T.C.T. No. 141-R.P., Register of Deeds

Pampanga, and Lot 733-A, both situated at Bebe Anac, Masantol, Pampanga and to remove at their own
expense, all structures or improvements they built and introduced thereon.
Defendants are likewise sentenced to pay plaintiff the amount of THREE HUNDRED (P300.00) PESOS per
month from November 19, 1991, until they vacate the premises, as reasonable compensation for the use and
occupation thereof x x x.
xxxx
SO ORDERED.21
The Decision eventually became final and executory, the Usis having opted not to appeal it.
(d) A Petition for Annulment of the MCTCs July 29, 1998 Decision filed by the Sps. Usi before the RTC,
docketed as Civil Case No. 99-0914M, entitled Sps. Jose & Amelita Usi v. Hon. Pres. Judge MCTC,
Macabebe, Pampanga, the Court Sheriff, MCTC, Macabebe, Pampanga and
Ruperta Cano Vda. de Viray, which decision placed Jesus Virays widow, Ruperta, in possession of Lot 733-F
of the Fajardo Plan.
As may be noted, the spouses Usi, instead of appealing from the July 29, 1998 MCTC Decision in Civil Case
No. 91 (13), sought, after its finality, its annulment before the RTC. By Decision22 dated June 29, 2000, the
RTC dismissed the petition to annul. The Usis appeal to the CA, docketed as CA-G.R. CV No. 67945, merited
the same dismissal action.23 And finally, in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano
Vda. de Viray), the Court denied, on February 12, 2003, Sps. Usis petition for review of the CAs Decision. The
denial became final on April 8, 2003 and an Entry of Judgment24 issued in due course.
(e) A Petition for Accion Publiciana/ Reivindicatoria 25 instituted on December 12, 2001 by Sps. Usi against the
late Jesus Viray, as substituted by Vda. de Viray, et al., before the RTC in Macabebe, Pampanga, docketed as
Civil Case No. 01-1118(M), involving Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan) covered by TCT Nos.
1585-RP, 2092-RP and 2101-RP.
The execution of the July 29, 1998 MCTC Decision in Civil Case No. 91 (13), as the Sps. Usi asserted in their
petition, would oust them from their own in fee simple lots even though the dispositive portion of said forcible
entry Decision mentioned Lots 733-A and 733-F (Fajardo Plan) and not Lots 733-B, 733-C-1 and 733-C-10
(Galang Plan) which are registered in their names per TCT Nos. 1585-RP, 2092-RP and 2101-RP.
In time, Vda. de Viray moved for the dismissal26 of these publiciana/ reivindicatoria actions on grounds, among
others, of litis pendentia and res judicata, on account of (1) the Sps. Usis appeal, then pending before the CA,
from the dismissal by the RTC of Civil Case No. 99-0914M;27 and (2) the August 1, 1989 RTC Decision in Civil
Case Nos. 88-0265-M and 88-0283-M, as effectively affirmed by the CA, and finally by the Court in G.R. No.
122287. This motion to dismiss would, however, be denied by the RTC through an Order28 of March 8, 2002,
compelling Vda. de Viray to file an answer,29 again invoking in defense the doctrine of res judicata. Sps. Usis
Reply to Answer30 contained an averment that their titles over the subject lots are the best evidence of their
ownership.
(f) An action for Cancellation of Titles or Surrender of Original Titles with Damages31 commenced by Vda. de
Viray, et al., against the Sps. Usi, Mendoza and eight others before the RTC, Branch 54 in Macabebe,
Pampanga, docketed as Civil Case No. (02)-1164(M), seeking the cancellation of TCT Nos. 3614-R.P., 2099R.P., 2101-R.P., 7502-R.P. and 2103-R.P. covering Lots 733-C-8 to 733-C-12 as subdivided under the 2nd SA
of April 5, 1991 which taken together is basically identical to Lot 733-F (Fajardo Plan) sold to Jesus Viray.
To recap, the six (6) cases thus filed involving portions of Lot 733 and their status are:
Civil Case
No.
88-0265-M

The Parties

Sps. Usi v. Sps.

Action/Suit for

Annulment of

Subject Lot(s)

733-A

Disposition

Decision in

88-0283-M

Viray

Deed of
Absolute Sale

(Fajardo Plan)

favor of Sps.
Viray.
Decision is
now final.

Mendoza v.
Jesus Viray

Annulment of
Deed of
Absolute Sale

733-F

Decision in
favor of Sps.
Viray.

(Fajardo Plan)

Subject of
CA-G.R. CV
Nos. 2498182 denied.
Subject of
G.R. No.
122287
petition
denied.
91 (13)

Jesus Viray v.
Sps. Usi

Forcible Entry

733-F
(Fajardo Plan)

90-0914M

Sps. Usi v. Vda.

de Viray

Petition for
Annulment of
MCTC

733-F
(Fajardo Plan)

Decision in CC
No. 91 (13)

(02)1164(M)

Vda. de Viray v.
Mendoza, et al.

Cancellation of
Titles before
RTC, Br. 55,
Pampanga

Judgment in
favor of Viray.
No appeal.
RTC
dismissed
petition.
CA-G.R. CV
No. 67945
appeal
dismissed.
G.R. No.
154538
petition
denied.

Lots 733-C-8
To 733-C-12

Pending
before the
RTC.

(Lot 733-F
(Fajardo Plan)
01-1118(M)

Sps. Usi v. Vda.

de Viray

Petition for

733-B, 733-C-

Accion
Publiciana and
Reivindicatoria
before RTC, Br.
55, Pampanga

1 and 733-C10 (Galang

Plan)

Petition
dismissed.
CA-G.R. CV
No. 90344
reversed RTC
Decision.
Subject of
instant case,
G.R. No.
192486

In sum, of the six (6) cases referred to above, the first four (4) have been terminated and the main issue/s
therein peremptorily resolved. To a precise point, the matter of the validity of the April 29, 1986 deeds of
absolute sale conveying Lots 733-A and 733-F under the Fajardo Plan to Sps. Viray and Vda. de Viray (vice
Jesus Viray), respectively, is no longer a contentious issue by force of the Courts Decision in G.R. No. 122287
effectively upholding the dismissal of the twin complaints to nullify the deeds aforementioned. Likewise, the
issue of who has the better possessory right independent of title over the disputed lots has been resolved in
favor of Vda. de Viray and the Sps. Viray and against the Usis and veritably put to rest by virtue of the Courts
final, affirmatory Decision in G.R. No. 154538.
Only two cases of the original six revolving around Lot 733 remained unresolved. The first refers to the petition
for review of the decision of the CA in CA-G.R. CV No. 90344 which, in turn, is an appeal from the decision of
the RTC in Civil Case No. 01-1118(M), a Petition for Accion Publiciana/ Reivindicatoria and Damages, and the
second is Civil Case No. (02)-1164(M) for Cancellation of Titles or Surrender of Original Titles with Damages.
The first case is subject of the present recourse, while the second is, per records, still pending before the RTC,
Branch 54 in Macabebe, Pampanga, its resolution doubtless on hold in light of the instant petition.
In the meantime, the Sps. Usi have remained in possession of what in the Galang Plan are designated as Lots
733-B, 733-C-1 and 733-C-10.
The Ruling of the RTC in Civil Case No. 01-1118(M)
As may be recalled, on June 21, 2007 in Civil Case No. 01-1118(M), the Macabebe, Pampanga RTC rendered
judgment dismissing the petition of the Sps. Usi32 for Accion Publiciana/Reivindicatoria. In its dismissal action,
the RTC held that the Sps. Usi failed to establish by preponderance of evidence to support their claim of title,
possession and ownership over the lots subject of their petition.
Following the denial of their motion for reconsideration per the RTCs Order33 of September 25, 2007, the Sps.
Usi interposed an appeal before the CA, docketed as CA-G.R. CV No. 90344.
The Ruling of the CA
On July 24, 2009, the CA rendered the assailed decision, reversing and setting aside the appealed June 21,
2007 RTC decision. The fallo of the CA decision reads:
WHEREFORE, the instant appeal is GRANTED and the assailed Decision of the Regional Trial Court,
REVERSED and SET ASIDE. Judgment is hereby rendered declaring as legal and valid, the right of ownership
of petitioner-appellant respondents herein spouses Jose Usi and Amelita T. Usi over Lot Nos. 733-B, 733-C-1
and 733-C-10 covered by TCT Nos. 1585-R.P., 2092-R.P, and 2101-R.P., respectively. Consequently,
respondents-appellees herein petitioners are hereby ordered to cease and desist from further committing acts
of dispossession or from disturbing possession and ownership of petitioners-appellants of the said property as
herein described and specified. Claims for damages, however, are hereby denied x x x.
SO ORDERED.
The CA predicated its ruling on the interplay of the following premises and findings: (a) the validity of the two
(2) duly notarized subdivision agreements, or the 1st SA and 2nd SA, which the LMB later approved; (b) the
subdivisions of Lot 733 on the basis of the Galang Plan actually partook the nature of the partition of the
shares of its co-owners; (c) what Mendoza conveyed through the April 29, 1986 deeds of absolute sale is only
her ideal, abstract or pro-indiviso share of Lot 733 of which she had full ownership, the conveyance or sale
subject to the eventual delineation and partition of her share; (d) Vda. de Viray has not shown that fraud
surrounded the execution of the partition of Lot 733 through the subdivision agreements of August 20, 1990
and April 5, 1991; (e) the certificates of title of the Sps. Usi constitute indefeasible proof of their ownership of
Lots 733-B, 733-C-1 and 733-C-10; (f) said certificate entitled the Sps. Usi to take possession thereof, the right
to possess being merely an attribute of ownership; (g) Vda. de Viray can only go after the partitioned shares of
Mendoza in Lot 733; and (h) the issue of possessory right has been mooted by the judgment of ownership in
favor of the Sps. Usi over Lots 733-B, 733-C-1 and 733-C-10.
Vda. de Viray sought but was denied reconsideration per the assailed June 2, 2010 CA Resolution.
Hence, We have this petition.

The Issue
WHETHER OR NOT THE COURT A QUO GRAVELY AND SERIOUSLY ERRED IN REVERSING AND
SETTING ASIDE THE DECISION OF THE RTC DISMISSING RESPONDENTS PETITION.34
The Courts Ruling
In the main, the issue tendered in this proceeding boils down to the question of whether the two (2) subdivision
agreements dated August 20, 1990 and April 5, 1991, respectively, partake of a bona fide and legally binding
partition contracts or arrangements among co-owners that validly effectuated the transfer of the subject lots to
respondent spouses Usi. Intertwined with the main issue is the correlative question bearing on the validity of
the deeds of absolute sale upon which the petitioners hinged their claim of ownership and right of possession
over said lots.
The Court rules in favor of petitioners.
Petitioners contend first off that the CA erred in its holding that the partitions of Lot 733 and later of the divided
unit Lot 733-C following the Galang Plan were actually the partitions of the pro-indiviso shares of its co-owners
effectively conveying to them their respective specific shares in the property.
We agree with petitioners.
First, the CAs holding aforestated is neither supported by, nor deducible from, the evidentiary facts on record.
He who alleges must prove it. Respondents have the burden to substantiate the factum probandum of their
complaint or the ultimate fact which is their claimed ownership over the lots in question. They were, however,
unsuccessful in adducing the factum probans or the evidentiary facts by which the factum probandum or
ultimate fact can be established. As shall be discussed shortly, facts and circumstances obtain arguing against
the claimed co-ownership over Lot 733.
Second, the earlier sale of Lot 733-A and Lot 733-F (Fajardo Plan) on April 29, 1986 was valid and effective
conveyances of said portions of Lot 733. The subsequent transfers to the Sps. Usi of substantially the same
portions of Lot 733 accomplished through the subdivision agreements constitute in effect double sales of those
portions. This aberration was brought to light by the results of the adverted survey conducted sometime in
June 22, 1999 of Engr. Nicdao of the LMB.
Third, even granting arguendo that the subject subdivision agreements were in fact but partitions of the proindiviso shares of co-owners, said agreements would still be infirm, for the Sps. Viray and Vda. de Viray (vice
Jesus Viray) were excluded from the transaction. Like Vda. de Mallari, Sps. Viray and Jesus Viray had validly
acquired and, hence, owned portions of Lot 733 and are themselves co-owners of Lot 733.
And last, over and above the foregoing considerations, the instant petition must be resolved in favor of
petitioners, the underlying reinvindicatory and possessory actions in Civil Case No. 01-1118 (M) being barred
by the application of the res judicata principle. What is more, the issue of superior possessory rights of
petitioner Vda. de Viray over Lot 733-F (Fajardo Plan) has been laid to rest with finality in Civil Case No. 91
(13). Besides, Sps. Usis action to assail the final and executory July 29, 1998 MCTC Decision in Civil Case
No. 91 (13) has been denied with finality in G.R. No. 154538.
The subdivision agreements not partition of co-owners
Partition, in general, is the separation, division, and assignment of a thing held in common by those to whom it
may belong.35
Contrary to the finding of the CA, the subdivision agreements forged by Mendoza and her alleged co-owners
were not for the partition of pro-indiviso shares of co-owners of Lot 733 but were actually conveyances,
disguised as partitions, of portions of Lot 733 specifically Lots 733-A and 733-B, and portions of the
subsequent subdivision of Lot 733-C.
Notably, after a full-blown trial in Civil Case No. 01-1118 (M) wherein the spouses Usi merged an accion
publiciana with an accion reinvindicatoria in one petition, the RTC held that Sps. Usi failed to prove their case.
However, in CA G.R. CV No. 90344, an appeal from said RTC decision, the CA, while acknowledging the

existence of the April 29, 1986 deeds of absolute sale, nonetheless accorded validity to the August 20, 1990
and April 5, 1991 subdivision agreements. This is incorrect. The CA held that the two (2) subdivision
agreements, as notarized, enjoy the presumption of regularity and effectuated the property transfers covered
thereby, obviously glossing over the mala fides attendant the execution of the two subdivision agreements. It
cannot be overemphasized enough that the two (2) deeds of absolute sale over portions of substantially the
same parcel of land antedated the subdivision agreements in question and their execution acknowledged too
before a notary public.
The appellate court found and so declared the subdivision agreements valid without so much as explaining, let
alone substantiating, its determination. The CA never elucidated how the Sps. Usi became, in the first place
co-owners, with Mendoza over Lot 733. On its face, TCT 141-RP covering Lot 733 was in the name of spouses
Ellen and Moses Mendoza only. Then too, the CA did not explain how under the 2nd SA the Sps. Usi, the Sps.
Lacap, the Sps. Balingit and the Sps. Jordan became co-owners with Mendoza over Lot 733-C, when
Mendoza, under the 1st SA, virtually represented herself as the sole owner of Lot 733-C.
A scrutiny of the records with a fine-tooth comb likewise fails to substantially show a partition of Lot 733 by its
co-owners. While the 1st and 2nd SAs purport to be deeds of partition by and among co-owners of the lot/s
covered thereby, partition as a fact is belied by the evidence extant on record. Consider:
It is undisputed that TCT 141 RP covering Lot 733 was originally in the name of Ellen P. Mendoza and
husband, Moses.36 The joint decision of the RTC in Civil Case Nos. 88-0265 and 88-0283-M narrated how the
couple came to own Lot 733, thus: "Lot 733 was acquired by Spouses Moses Mendoza and Ellen Mendoza
and Spouses Pacifico Bustos and Maria Roman from Donato Lacap for P5,000.00 (Exh. "1") in 1977. After two
years, Spouses Pacifico Bustos and Maria Roman sold one-half pro-indiviso portion of Lot 733 to spouses
Moses Mendoza and Ellen Mendoza for P6,000.00 (Exh. "2") and the acquisition cost of the whole lot is only
P8,500.00 and x x x."37
Mendoza and the Sps. Usi, in their separate complaints for annulment of deeds of sale, docketed as Civil Case
Nos. 88-0265 and 88-0283-M of the Macabebe, Pampanga RTC, alleged that Moses Mendoza authorized Atty.
Venancio Viray to sell the subject lot for at least PhP 200 per square meter, and that after his (Moses) death
on April 5, 1986, Lot 733 was included in the proceedings for the settlement of his estate docketed as Sp. Proc.
Case No. 86-0040-M of the RTC, Branch 55 in Macabebe, Pampanga, The events thus alleged by Mendoza
and the Usis can be gleaned from the final and executory joint decision in Civil Case Nos. 88-0265-M and 880283-M which petitioner Vda. de Viray attached as Annex "5" in her Answer with Counterclaim38 to the Usis
petition for accion publicana/reivindicatoria. Said Joint Decision amply shows, in gist, the allegations39 of both
the Sps. Usi and Mendoza in Civil Case Nos. 88-0265-M and 88-0283-M asserting said facts. And these
assertions, made in their complaints, are judicial admissions under Sec. 4,40 Rule 129 of the Rules of Court.
Unlike Vda. de Mallari who, per Vda. de Virays own admission, purchased the 416-square meter portion of Lot
733 on February 14, 1984, thus constituting her (Vda. de Mallari) as co-owner of Mendoza to the extent of said
area purchased,41 the Sps. Usi have not been shown to be co-owners with Mendoza. There is simply nothing in
the records to demonstrate how the Sps. Usi became co-owners of Lot 733 before or after the death of Moses
Mendoza. Elsewise put, no evidence had been adduced to show how the alleged interest of the Sps. Usi, as
co-owner, came about, except for the bare assertions in the 1st and 2nd SAs that they co-owned Lot 733 and
Lot 733-C (Galang Plan).
It is fairly clear that Lot 733, even from the fact alone of its being registered under the name of the late Moses
Mendoza and Ellen Mendoza, formed part of the couples conjugal property at the time Moses demise on April
5, 1986. Equally clear, too, is that Vda. de Mallari became a co-owner of Lot 733 by virtue of the purchase of its
416-square meter portion on February 14, 1984, during the lifetime of Moses. Be that as it may and given that
the Sps. Usi have not been shown to be co-owners of Mendoza and Vda. de Mallari prior to the sale by
Mendoza on April 29, 1986 of Lots 733-A and 733-F (Fajardo Plan) to the Sps. Viray and Jesus Viray,
respectively, then the execution of the 1st SA on August 20, 1990 could not have been a partition by co-owners
of Lot 733. The same could be said of the 2nd SA of April 5, 1991 vis--vis Lot 733-C, for the records are
similarly completely bereft of any evidence to show on how the purported participating co-owners, namely Sps.
Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan became co-owners with Mendoza and her children,
i.e., McDwight, Bismark, Beverly and Georgenia.
The April 29, 1986 Deeds of Absolute Sale

of Lot 733-A and Lot 733-F are Valid

It must be noted that the RTC, in its decision in Civil Case Nos. 88-0265-M and 88-0283-M, upheld the validity
of the separate April 29, 1986 deeds of absolute sale of Lots 733-A and 733-F (Fajardo Plan). The combined
area of Lot 733-A (366 sq. m.) and Lot 733-F (3,501) is less than one half of the total area coverage of Lot 733
(9,137). The sale of one-half portion of the conjugal property is valid as a sale. It cannot be gainsaid then that
the deeds, executed as they were by the property owner, were sufficient to transfer title and ownership over the
portions covered thereby. And the aforesaid RTC decision had become final and executory as far back as
December 11, 1995 when the Court, in G.R. No. 122287, in effect, affirmed the RTC decision. Likewise, the
MCTCs decision in Civil Case No. 91 (13) for forcible entry, declaring Vda. de Viray, as successor-in-interest of
Jesus Viray, as entitled to the physical possession, or possession de facto, of Lot 733-F (Fajardo Plan), and
the RTCs decision in Civil Case No. 99-0914M, disposing of the belated appeal of the MCTC decision in the
forcible entry case, have become final and executory on February 12, 2003 under G.R. No. 154538.
In light of the convergence of the foregoing disposed-of cases, there can be no question as to the ownership of
the Sps. Viray and Vda. de Viray (vice Jesus Viray) over the specified and delineated portions of Lot 733 which
they purchased for value from Mendoza. And Mendoza, as vendor, was bound to transfer the ownership of and
deliver, as well as warrant, the thing which is the object of the sale.42
In the instant case, the April 29, 1986 deeds of absolute sale indeed included the technical description of that
part of Lot 733 subject of the transactions, thus clearly identifying the portions (Lots 733-A and 733-F under the
Fajardo Plan) sold by Mendoza to the Sps. Viray and Vda. de Viray (vice Jesus Viray). Hence, there can be no
mistaking as to the identity of said lots.
The deeds in question were, to reiterate, not only valid but constitute prior conveyances of the disputed
portions of Lot 733. Accordingly, the subsequent conveyances in 1990 and 1991 to the Sps. Usi through
transfer contracts, styled as subdivision agreements, resulted, in effect, in a double sale situation involving
substantially the same portions of Lot 733.
The survey report of LMB surveyor, Engr. Nicdao, would support a finding of double sale. His report, as earlier
indicated, contained the following key findings: (1) Lot 733-A (Fajardo Plan) with an area of 336 square meters
thus sold to the Sps. Viray is within Lot 733-B (Galang Plan), the part assigned to Sps. Usi under the division;
and (2) Lot 733-F (Fajardo Plan) with an area of 3,501 square meters is almost identical to the combined area
of Lots 733-C-8 to 733-C-12 awarded to Ellen Mendoza and her children, McDwight, Bismark, Beverly and
Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 (Galang Plan) adjudicated to Sps. Usi.
A double sale situation, which would call, if necessary, the application of Art. 1544 of the Civil Code, arises
when, as jurisprudence teaches, the following requisites concur:
(a) The two (or more) sales transactions must constitute valid sales;
(b) The two (or more) sales transactions must pertain to exactly the same subject matter;
(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each
represent conflicting interests; and
(d) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have
bought from the very same seller.43
From the facts, there is no valid sale from Mendoza to respondents Usi. The parties did not execute a valid
deed of sale conveying and transferring the lots in question to respondents. What they rely on are two
subdivision agreements which do not explicitly chronicle the transfer of said lots to them. Under the 1st SA, all
that can be read is the declaration that respondents, together with others, are the "sole and exclusive owners"
of the lots subject of said agreement. Per the 2nd SA, it simply replicates the statement in the 1st SA that
respondents are "sole and exclusive undivided co-owners" with the other parties. While respondents may claim
that the SAs of 1990 and 1991 are convenient conveying vehicles Mendoza resorted to in disposing portions of
Lot 733 under the Galang Plan, the Court finds that said SAs are not valid legal conveyances of the subject
lots due to non-existent prestations pursuant to Article 1305 which prescribes "a meeting of minds between two
persons whereby one binds himself, with respect to the other, to give something or to render some service."
The third element of cause of the obligation which is established under Art. 1318 of the Civil Code is likewise

visibly absent from the two SAs. The transfer of title to respondents based on said SAs is flawed, irregular, null
and void. Thus the two SAs are not "sales transactions" nor "valid sales" under Art. 1544 of the Civil Code and,
hence, the first essential element under said legal provision was not satisfied.1wphi1
Given the above perspective, the Sps. Viray and Vda. de Viray (vice Jesus Viray) have, as against the Sps.
Usi, superior rights over Lot 733-A and Lot 733-F (Fajardo Plan) or portions thereof.
Res Judicata Applies
Notably, the Sps. Viray and Vda. de Viray, after peremptorily prevailing in their cases supportive of their claim
of ownership and possession of Lots 733-A and 733-F (Fajardo Plan), cannot now be deprived of their rights by
the expediency of the Sps. Usi maintaining, as here, an accion publiciana and/or accion reivindicatoria, two of
the three kinds of actions to recover possession of real property. The third, accion interdictal, comprises two
distinct causes of action, namely forcible entry and unlawful detainer,44 the issue in both cases being limited to
the right to physical possession or possession de facto, independently of any claim of ownership that either
party may set forth in his or her pleadings,45 albeit the court has the competence to delve into and resolve the
issue of ownership but only to address the issue of priority of possession.46 Both actions must be brought
within one year from the date of actual entry on the land, in case of forcible entry, and from the date of last
demand to vacate following the expiration of the right to possess, in case of unlawful detainer.47
When the dispossession or unlawful deprivation has lasted more than one year, one may avail himself of
accion publiciana to determine the better right of possession, or possession de jure, of realty independently of
title. On the other hand, accion reivindicatoria is an action to recover ownership which necessarily includes
recovery of possession.48
Now then, it is a hornbook rule that once a judgment becomes final and executory, it may no longer be
modified in any respect, even if the modification is meant to correct an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court rendering it or by the highest court
of the land, as what remains to be done is the purely ministerial enforcement or execution of the
judgment.49 Any attempt to reopen a close case would offend the principle of res judicata.
Res judicata embraces two concepts or principles, the first is designated as "bar by prior judgment" and the
other, "conclusiveness of judgment." Tiongson v. Court of Appeals50 describes the effects of res judicata, as a
bar by prior judgment, in the following manner:
There is no question that where as between the first case where the judgment is rendered and the second
where such judgment is invoked, there is identity of parties, subject matter and cause of action, the judgment
on the merits in the first case constitutes an absolute bar to the subsequent action not only as to every matter
which was offered and received to sustain or defeat the claim or demand, but also as to any other admissible
matter which might have been offered for that purpose and to all matters that could have been adjudged in that
case. x x x
Res judicata operates as bar by prior judgment if the following requisites concur: (1) the former judgment or
order must be final; (2) the judgment or order must be on the merits; (3) the decision must have been rendered
by a court having jurisdiction over the subject matter and the parties; and (4) there must be, between the first
and second action, identity of parties, of subject matter and of causes of action.51 All the requisites are present
in the instant case.
The better right to possess and the right of ownership of Vda. de Viray (vice Jose Viray) and the Sps. Viray
over the disputed parcels of land cannot, by force of the res judicata doctrine, be re-litigated thru actions to
recover possession and vindicate ownership filed by the Sps. Usi. The Court, in G.R. No. 122287 (Ellen P.
Mendoza and Jose and Amelita Usi v. Spouses Avelino Viray and Margarita Masangcay and Jesus Carlo
Gerard Viray), has in effect determined that the conveyances and necessarily the transfers of ownership made
to the Sps. Viray and Vda. de Viray (vice Jose Viray) on April 29, 1986 were valid. This determination operates
as a bar to the Usis reivindicatory action to assail the April 29, 1986 conveyances and precludes the relitigation
between the same parties of the settled issue of ownership and possession arising from ownership. It may be
that the spouses Usi did not directly seek the recovery of title or possession of the property in question in their
action for annulment of the deed sale of sale. But it cannot be gainsaid that said action is closely intertwined
with the issue of ownership, and affects the title, of the lot covered by the deed. The prevalent doctrine, to
borrow from Fortune Motors, (Phils.), Inc. v. Court of Appeals,52 "is that an action for the annulment or

rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature
of the case, which is to recover said real property."
And lest it be overlooked, the Court, in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano Vda.
de Viray), again in effect ruled with finality that petitioner Vda. de Viray has a better possessory right over Lot
733-F (Fajardo Plan). Thus, the Courts decision in G.R. No. 122287 juxtaposed with that in G.R. No. 154538
would suffice to bar the Sps. Usis accion publiciana, as the spouses had invoked all along their ownership
over the disputed Lot 733-F as basis to defeat any claim of the right of possessiOn. While an accion
reivindicatoria is not barred by a judgment in an ejectment case, such judgment constitutes a bar to the
institution of the accion publiciana, because the matter of possessioq between the same parties has become
res judicata and cannot be delved into in a new action.53
The doctrine of res judicata is a basic postulate to the end that controversies and issues once decided on the
merits by a court of competent jurisdiction shall remain in repose. It is simply unfortunate that the RTC, in Civil
Case No. 01-1118(M), did not apply the doctrine of res judicata to the instant case, despite petitioners, as
respondents below, had raised that ground both in their motion to dismiss and answer to the underlying
petition.
WHEREFORE, the instant petition is GRANTED. The assailed Decision dated July 24, 2009 and Resolution
dated June 2, 2010 of the Court of Appeals in CA-G.R. CV No. 90344 are REVERSED and SET ASIDE. The
Decision dated June 21, 2007 in Civil Case No. 01-1118(M) of the RTC, Branch 55 in Macabebe, Pampanga is
accordingly REINSTATED.
Costs against respondents.
SO ORDERED.