SALES

1.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
EN BANC
G.R. No. L-12342
August 3, 1918
A.
A.
ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.
Thos.
D.
Aitken
for
appellant.
Modesto Reyes and Eliseo Ymzon for appellees.

arrears, at the stipulated rate of 8 per cent per annum. The defendant, jointly
with her husband, answered the complaint and alleged by way of special
defense that the plaintiff had absolutely failed to deliver to the defendant the
lands that were the subject matter of the sale, notwithstanding the demands
made upon him for this purpose. She therefore asked that she be absolved
from the complaint, and that, after a declaration of the rescission of the
contract of the purchase and sale of said lands, the plaintiff be ordered to
refund the P3,000 that had been paid to him on account, together with the
interest agreed upon, and to pay an indemnity for the losses and damages
which the defendant alleged she had suffered through the plaintiff's nonfulfillment of the contract.

FISHER, J.:

The evidence adduced shows that after the execution of the deed of the sale
the plaintiff, at the request of the purchaser, went to Lucena, accompanied by
a representative of the latter, for the purpose of designating and delivering
the lands sold. He was able to designate only two of the four parcels, and
more than two-thirds of these two were found to be in the possession of one
Juan Villafuerte, who claimed to be the owner of the parts so occupied by
him. The plaintiff admitted that the purchaser would have to bring suit to
obtain possession of the land (sten. notes, record, p. 5). In August, 1914, the
surveyor Santamaria went to Lucena, at the request of the plaintiff and
accompanied by him, in order to survey the land sold to the defendant; but he
surveyed only two parcels, which are those occupied mainly by the brothers
Leon and Julio Villafuerte. He did not survey the other parcels, as they were
not designated to him by the plaintiff. In order to make this survey it was
necessary to obtain from the Land Court a writ of injunction against the
occupants, and for the purpose of the issuance of this writ the defendant, in
June, 1914, filed an application with the Land Court for the registration in
her name of four parcels of land described in the deed of sale executed in her
favor by the plaintiff. The proceedings in the matter of this application were
subsequently dismissed, for failure to present the required plans within the
period of the time allowed for the purpose.

By a public instrument dated June 11, 1914, the plaintiff sold to the
defendant Marciana Felix, with the consent of her husband, the defendant
Balbino Tioco, four parcels of land, described in the instrument. The
defendant Felix paid, at the time of the execution of the deed, the sum of
P3,000 on account of the purchase price, and bound herself to pay the
remainder in installments, the first of P2,000 on July 15, 1914, and the
second of P5,000 thirty days after the issuance to her of a certificate of title
under the Land Registration Act, and further, within ten years from the date
of such title P10, for each coconut tree in bearing and P5 for each such tree
not in bearing, that might be growing on said four parcels of land on the date
of the issuance of title to her, with the condition that the total price should not
exceed P85,000. It was further stipulated that the purchaser was to deliver to
the vendor 25 per centum of the value of the products that she might obtain
from the four parcels "from the moment she takes possession of them until
the Torrens certificate of title be issued in her favor."
It was also covenanted that "within one year from the date of the certificate
of title in favor of Marciana Felix, this latter may rescind the present contract
of purchase and sale, in which case Marciana Felix shall be obliged to return
to me, A. A. Addison, the net value of all the products of the four parcels
sold, and I shall obliged to return to her, Marciana Felix, all the sums that she
may have paid me, together with interest at the rate of 10 per cent per
annum."
In January, 1915, the vendor, A. A. Addison, filed suit in Court of First
Instance of Manila to compel Marciana Felix to make payment of the first
installment of P2,000, demandable in accordance with the terms of the
contract of sale aforementioned, on July 15, 1914, and of the interest in

The trial court rendered judgment in behalf of the defendant, holding the
contract of sale to be rescinded and ordering the return to the plaintiff the
P3,000 paid on account of the price, together with interest thereon at the rate
of 10 per cent per annum. From this judgment the plaintiff appealed.
In decreeing the rescission of the contract, the trial judge rested his
conclusion solely on the indisputable fact that up to that time the lands sold
had not been registered in accordance with the Torrens system, and on the
terms of the second paragraph of clause (h) of the contract, whereby it is
1

SALES
stipulated that ". . . within one year from the date of the certificate of title in
favor of Marciana Felix, this latter may rescind the present contract of
purchase and sale . . . ."
The appellant objects, and rightly, that the cross-complaint is not founded on
the hypothesis of the conventional rescission relied upon by the court, but on
the failure to deliver the land sold. He argues that the right to rescind the
contract by virtue of the special agreement not only did not exist from the
moment of the execution of the contract up to one year after the registration
of the land, but does not accrue until the land is registered. The wording of
the clause, in fact, substantiates the contention. The one year's deliberation
granted to the purchaser was to be counted "from the date of the certificate of
title ... ." Therefore the right to elect to rescind the contract was subject to a
condition, namely, the issuance of the title. The record show that up to the
present time that condition has not been fulfilled; consequently the defendant
cannot be heard to invoke a right which depends on the existence of that
condition. If in the cross-complaint it had been alleged that the fulfillment of
the condition was impossible for reasons imputable to the plaintiff, and if this
allegation had been proven, perhaps the condition would have been
considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but this issue
was not presented in the defendant's answer.
However, although we are not in agreement with the reasoning found in the
decision appealed from, we consider it to be correct in its result. The record
shows that the plaintiff did not deliver the thing sold. With respect to two of
the parcels of land, he was not even able to show them to the purchaser; and
as regards the other two, more than two-thirds of their area was in the hostile
and adverse possession of a third person.
The Code imposes upon the vendor the obligation to deliver the thing sold.
The thing is considered to be delivered when it is placed "in the hands and
possession of the vendee." (Civ. Code, art. 1462.) It is true that the same
article declares that the execution of a public instruments is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold that, at the moment of
the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of possession. The
thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser
by the sole will of the vendor, symbolic delivery through the execution of a
public instrument is sufficient. But if, notwithstanding the execution of the

instrument, the purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will,
then fiction yields to reality the delivery has not been effected.
As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on
article 1604 of the French Civil code, "the word "delivery" expresses a
complex idea . . . the abandonment of the thing by the person who makes the
delivery and the taking control of it by the person to whom the delivery is
made."
The execution of a public instrument is sufficient for the purposes of the
abandonment made by the vendor; but it is not always sufficient to permit of
the apprehension of the thing by the purchaser.
The supreme court of Spain, interpreting article 1462 of the Civil Code, held
in its decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this
article "merely declares that when the sale is made through the means of a
public instrument, the execution of this latter is equivalent to the delivery of
the thing sold: which does not and cannot mean that this fictitious tradition
necessarily implies the real tradition of the thing sold, for it is
incontrovertible that, while its ownership still pertains to the vendor (and
with greater reason if it does not), a third person may be in possession of the
same thing; wherefore, though, as a general rule, he who purchases by means
of a public instrument should be deemed . . . to be the possessor in fact, yet
this presumption gives way before proof to the contrary."
It is evident, then, in the case at bar, that the mere execution of the instrument
was not a fulfillment of the vendors' obligation to deliver the thing sold, and
that from such non-fulfillment arises the purchaser's right to demand, as she
has demanded, the rescission of the sale and the return of the price. (Civ.
Code, arts. 1506 and 1124.)
Of course if the sale had been made under the express agreement of imposing
upon the purchaser the obligation to take the necessary steps to obtain the
material possession of the thing sold, and it were proven that she knew that
the thing was in the possession of a third person claiming to have property
rights therein, such agreement would be perfectly valid. But there is nothing
in the instrument which would indicate, even implicitly, that such was the
agreement. It is true, as the appellant argues, that the obligation was
incumbent upon the defendant Marciana Felix to apply for and obtain the
registration of the land in the new registry of property; but from this it cannot
2

SALES
be concluded that she had to await the final decision of the Court of Land
Registration, in order to be able to enjoy the property sold. On the contrary, it
was expressly stipulated in the contract that the purchaser should deliver to
the vendor one-fourth "of the products ... of the aforesaid four parcels from
the moment when she takes possession of them until the Torrens certificate of
title be issued in her favor." This obviously shows that it was not forseen that
the purchaser might be deprived of her possession during the course of the
registration proceedings, but that the transaction rested on the assumption
that she was to have, during said period, the material possession and
enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not
by contractual agreement, it is not the conventional but the legal interest that
is demandable.
It is therefore held that the contract of purchase and sale entered into by and
between the plaintiff and the defendant on June 11, 1914, is rescinded, and
the plaintiff is ordered to make restitution of the sum of P3,000 received by
him on account of the price of the sale, together with interest thereon at the
legal rate of 6 per annum from the date of the filing of the complaint until
payment, with the costs of both instances against the appellant. So ordered.

SALES
2.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
FIRST DIVISION
G.R. No. L-69970 November 28, 1988
FELIX
DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD,
assisted by her husband, JOSE TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.

CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which is
claimed by both the petitioner and the respondent. The trial court believed
the petitioner but the respondent court, on appeal, upheld the respondent. The
case is now before us for a resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner
in the then Court of First Instance of Cagayan for recovery of a farm lot and
a residential lot which she claimed she had purchased from Domingo Melad
in 1943 and were now being unlawfully withheld by the defendant. 1 In his
answer, the petitioner denied the allegation and averred that he was the
owner of the said lots of which he had been in open, continuous and adverse
possession, having acquired them from Domingo Melad in 1941 and
1943. 2 The case was dismissed for failure to prosecute but was refiled in
1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943,
purportedly signed by Domingo Melad and duly notarized, which conveyed
the said properties to her for the sum of P80.00. 4 She said the amount was
earned by her mother as a worker at the Tabacalera factory. She claimed to be
the illegitimate daughter of Domingo Melad, with whom she and her mother
were living when he died in 1945. She moved out of the farm only when in
1946 Felix Danguilan approached her and asked permission to cultivate the
land and to stay therein. She had agreed on condition that he would deliver
part of the harvest from the farm to her, which he did from that year to 1958.
The deliveries having stopped, she then consulted the municipal judge who

advised her to file the complaint against Danguilan. The plaintiff 's mother,
her only other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra Melad,
Domingo's niece, whom he and his wife Juana Malupang had taken into their
home as their ward as they had no children of their own. He and his wife
lived with the couple in their house on the residential lot and helped
Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a
private instrument in which he gave the defendant the farm and in 1943
another private instrument in which he also gave him the residential lot, on
the understanding that the latter would take care of the grantor and would
bury him upon his death. 6 Danguilan presented three other witnesses 7 to
corroborate his statements and to prove that he had been living in the land
since his marriage to Isidra and had remained in possession thereof after
Domingo Melad's death in 1945. Two of said witnesses declared that neither
the plaintiff nor her mother lived in the land with Domingo Melad. 8
The decision of the trial court was based mainly on the issue of possession.
Weighing the evidence presented by the parties, the judge 9 held that the
defendant was more believable and that the plaintiff's evidence was
"unpersuasive and unconvincing." It was held that the plaintiff's own
declaration that she moved out of the property in 1946 and left it in the
possession of the defendant was contradictory to her claim of ownership. She
was also inconsistent when she testified first that the defendant was her
tenant and later in rebuttal that he was her administrator. The decision
concluded that where there was doubt as to the ownership of the property, the
presumption was in favor of the one actually occupying the same, which in
this case was the defendant. 10
The review by the respondent court 11 of this decision was manifestly less
than thorough. For the most part it merely affirmed the factual findings of the
trial court except for an irrelevant modification, and it was only toward the
end that it went to and resolved what it considered the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which
Domingo Melad had conveyed the two parcels of land to the petitioner, were
null and void. The reason was that they were donations of real property and
as such should have been effected through a public instrument. It then set
aside the appealed decision and declared the respondents the true and lawful
owners of the disputed property.
The said exhibits read as follows:
4

SALES
EXHIBIT 2-b is quoted as follows: 12

WITNESSES:

I, DOMINGO MELAD, of legal age, married, do hereby declare in this

receipt the truth of my giving to Felix Danguilan, my agricultural land
located at Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine
Islands; that this land is registered under my name; that I hereby declare and
bind myself that there is no one to whom I will deliver this land except to
him as he will be the one responsible for me in the event that I will die and
also for all other things needed and necessary for me, he will be responsible
because of this land I am giving to him; that it is true that I have nieces and
nephews but they are not living with us and there is no one to whom I will
give my land except to Felix Danguilan for he lives with me and this is the
length175 m. and the width is 150 m.

(SGD.)
(SGD.) DANIEL ARAO

IN WITNESS WHEREOF, I hereby sign my name below and also those

present in the execution of this receipt this 14th day of September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1.
(T.M.)
2.
(SGD.)
3. (T.M.) ILLEGIBLE

ISIDRO
FELIX

MELAD
DANGUILAN

EXHIBIT 3-a is quoted as follows: 13

I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of
Cagayan, do hereby swear and declare the truth that I have delivered my
residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my sonin-law because I have no child; that I have thought of giving him my land
because he will be the one to take care of SHELTERING me or bury me
when I die and this is why I have thought of executing this document; that
the boundaries of this lot ison the east, Cresencio Danguilan; on the north,
Arellano Street; on the south by Pastor Lagundi and on the west, Pablo
Pelagio and the area of this lot is 35 meters going south; width and length
beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December
1943.

ILLEGIBLE

It is our view, considering the language of the two instruments, that Domingo
Melad did intend to donate the properties to the petitioner, as the private
respondent contends. We do not think, however, that the donee was moved
by pure liberality. While truly donations, the conveyances
were onerous donations as the properties were given to the petitioner in
exchange for his obligation to take care of the donee for the rest of his life
and provide for his burial. Hence, it was not covered by the rule in Article
749 of the Civil Code requiring donations of real properties to be effected
through a public instrument. The case at bar comes squarely under the
doctrine laid down in Manalo v. De Mesa, 14 where the Court held:
There can be no doubt that the donation in question was made for a valuable
consideration, since the donors made it conditional upon the donees' bearing
the expenses that might be occasioned by the death and burial of the donor
Placida Manalo, a condition and obligation which the donee Gregorio de
Mesa carried out in his own behalf and for his wife Leoncia Manalo;
therefore, in order to determine whether or not said donation is valid and
effective it should be sufficient to demonstrate that, as a contract, it embraces
the conditions the law requires and is valid and effective, although not
recorded in a public instrument.
The private respondent argues that as there was no equivalence between the
value of the lands donated and the services for which they were being
exchanged, the two transactions should be considered pure or gratuitous
donations of real rights, hence, they should have been effected through a
public instrument and not mere private writings. However, no evidence has
been adduced to support her contention that the values exchanged were
disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed
the factual allegation that the petitioner did take care of Domingo Melad and
later arranged for his burial in accordance with the condition imposed by the
donor. It is alleged and not denied that he died when he was almost one
hundred years old, 15 which would mean that the petitioner farmed the land
practically by himself and so provided for the donee (and his wife) during the
latter part of Domingo Melad's life. We may assume that there was a fair

(SGD.) DOMINGO MELAD

5

SALES
exchange between the donor and the donee that made the transaction an
onerous donation.
Regarding the private respondent's claim that she had purchased the
properties by virtue of a deed of sale, the respondent court had only the
following to say: "Exhibit 'E' taken together with the documentary and oral
evidence shows that the preponderance of evidence is in favor of the
appellants." This was, we think, a rather superficial way of resolving such a
basic and important issue.
The deed of sale was allegedly executed when the respondent was only three
years old and the consideration was supposedly paid by her mother, Maria
Yedan from her earnings as a wage worker in a factory. 16 This was itself a
suspicious circumstance, one may well wonder why the transfer was not
made to the mother herself, who was after all the one paying for the lands.
The sale was made out in favor of Apolonia Melad although she had been
using the surname Yedan her mother's surname, before that instrument was
signed and in fact even after she got married. 17 The averment was also made
that the contract was simulated and prepared after Domingo Melad's death in
1945. 18 It was also alleged that even after the supposed execution of the said
contract, the respondent considered Domingo Melad the owner of the
properties and that she had never occupied the same. 19
Considering these serious challenges, the appellate court could have devoted
a little more time to examining Exhibit "E" and the circumstances
surrounding its execution before pronouncing its validity in the manner
described above. While it is true that the due execution of a public instrument
is presumed, the presumption is disputable and will yield to contradictory
evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows
that the private respondent did not take possession of the disputed properties
and indeed waited until 1962 to file this action for recovery of the lands from
the petitioner. If she did have possession, she transferred the same to the
petitioner in 1946, by her own sworn admission, and moved out to another
lot belonging to her step-brother. 20 Her claim that the petitioner was her
tenant (later changed to administrator) was disbelieved by the trial court, and
properly so, for its inconsistency. In short, she failed to show that she
consummated the contract of sale by actual delivery of the properties to her
and her actual possession thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda: 21

Since in this jurisdiction it is a fundamental and elementary principle that

ownership does not pass by mere stipulation but only by delivery (Civil
Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the
execution of a public document does not constitute sufficient delivery where
the property involved is in the actual and adverse possession of third persons
(Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes
incontestable that even if included in the contract, the ownership of the
property in dispute did not pass thereby to Mariano Garchitorena. Not having
become the owner for lack of delivery, Mariano Garchitorena cannot
presume to recover the property from its present possessors. His action,
therefore, is not one of revindicacion, but one against his vendor for specific
performance of the sale to him.
In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa
declared for the Court:
Therefore, in our Civil Code it is a fundamental principle in all matters of
contracts and a well- known doctrine of law that "non mudis pactis sed
traditione dominia rerum transferuntur". In conformity with said doctrine as
established in paragraph 2 of article 609 of said code, that "the ownership
and other property rights are acquired and transmitted by law, by gift, by
testate or intestate succession, and, in consequence of certain contracts, by
tradition". And as the logical application of this disposition article 1095
prescribes the following: "A creditor has the rights to the fruits of a thing
from the time the obligation to deliver it arises. However, he shall not acquire
a real right" (and the ownership is surely such) "until the property has been
delivered to him."
In accordance with such disposition and provisions the delivery of a thing
constitutes a necessary and indispensable requisite for the purpose of
acquiring the ownership of the same by virtue of a contract. As Manresa
states in his Commentaries on the Civil Code, volume 10, pages 339 and 340:
"Our law does not admit the doctrine of the transfer of property by mere
consent but limits the effect of the agreement to the due execution of the
contract. ... The ownership, the property right, is only derived from the
delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed of
sale, which was a public instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing sold.
The thing is considered to be delivered when it is placed "in the hands and
6

SALES
possession of the vendee." (Civil Code, art. 1462). It is true that the same
article declares that the execution of a public instrument is equivalent to the
delivery of the thing which is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold that, at the moment of
the sale, its material delivery could have been made. It is not enough to
confer upon the purchaser the ownership and the right of possession. The
thing sold must be placed in his control.When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser
by the sole will of the vendor, symbolic delivery through the execution of a
public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of
the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will,
then fiction yields to realitythe delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent who
is in actual possession of the litigated properties. Even if the respective
claims of the parties were both to be discarded as being inherently weak, the
decision should still incline in favor of the petitioner pursuant to the doctrine
announced in Santos & Espinosa v. Estejada 24 where the Court announced:
If the claim of both the plaintiff and the defendant are weak, judgment must
be for the defendant, for the latter being in possession is presumed to be the
owner, and cannot be obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that
of the trial court REINSTATED, with costs against the private respondent. It
is so ordered.

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3.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
SECOND DIVISION
G.R. No. L-21998 November 10, 1975
CALIXTO PASAGUI and FAUSTA MOSAR, plaintiffs-appellants,
vs.
ESTER T. VILLABLANCA, ZOSIMO VILLABLANCA, EUSTAQUIA
BOCAR and CATALINA BOCAR defendants-appellees.
Julio Siayngco for plaintiffs-appellants.
Filomeno Arteche, Jr. for defendants-appellees. .

ANTONIO, J.:
The only issue posed by this appeal is whether or not, from the nature of the
action pleaded as appears in the allegations of the complaint, the aforesaid
action is one of forcible entry, within the exclusive jurisdiction of the
municipal court. .
On February 4, 1963, appellants Calixto Pasagui and Fausta Mosar filed a
complaint with the Court of First Instance at Tacloban City, alleging that
onNovember 15, 1962, for and in consideration of Two Thousand Eight
Hundred Pesos (P2,800.00), they bought from appellees Eustaquia Bocar and
Catalina Bocar a parcel of agricultural land with an area of 2.6814 hectares,
situated in Hamindangon, Pastrana, Leyte; that the corresponding document
of sale was executed, notarized on the same date, and recorded in the
Registry of Deeds of Tacloban, Leyte on November 16, 1962; that during the
first week of February, 1963, defendant spouses Ester T. Villablanca and
Zosimo Villablanca, "illegally and without any right, whatsoever, took
possession of the above property harvesting coconuts from the coconut
plantation thereon, thus depriving plaintiffs" of its possession; that despite
demands made by the plaintiffs upon the above-mentioned defendants "to
surrender to them the above-described property and its possession" the latter
failed or refused to return said parcel of land to the former, causing them
damage; and that Eustaquia and Catalina Bocar, vendors of the property, are
included defendants in the complaint by virtue of the warranty clause
contained in the document of sale. Plaintiffs prayed for a decision ordering
defendants to surrender the possession of the parcel of land above-described
to them and to pay damages in the amounts specified. .

On February 21, 1963, appellees moved to dismiss the complaint on the

ground that the Court of First Instance had no jurisdiction over the subject
matter, the action being one of forcible entry. Appellants opposed the Motion
to Dismiss asserting that the action is not one for forcible entry inasmuch as
in the complaint, there is no allegation that the deprivation of possession was
effected through "force, intimidation, threat, strategy or stealth." .
On May 13, 1963, the trial court issued an order dismissing the complaint for
lack of jurisdiction, it appearing from the allegations in the complaint that the
case is one for forcible entry which belongs to the exclusive jurisdiction of
the Justice of the Peace (now Municipal Court) of Pastrana, Leyte. The first
Motion for Reconsideration was denied on May 27, 1963 and the second was
likewise denied on July 5, 1963. From the aforementioned orders, appeal on
a pure question of law was interposed to this Court. .
It is well-settled that what determines the jurisdiction of the municipal court
in a forcible entry case is the nature of the action pleaded as appears from the
allegations in the complaint. In ascertaining whether or not the action is one
of forcible entry within the original exclusive jurisdiction of the municipal
court, the averments of the complaint and the character of the relief sought
are the ones to be consulted.. 1 .
In the case at bar, the complaint does not allege that the plaintiffs were in
physical possession of the land and have been deprived of that possession
through force, intimidation, threat, strategy, or stealth. It simply avers that
plaintiffs-appellants bought on November 12, 1962 from defendantsappellees Eustaquia Bocar and Catalina Bocar the parcel of land in question
for the amount of P2,800.00; that a deed of sale was executed, notarized and
registered;that "during this first week of February, 1963, defendants Ester T.
Villablanca and her husband, Zosimo Villablanca, illegally and without any
right whatsoever, took possession of the above described property, harvesting
coconuts from the coconut plantation therein, thus depriving of its possession
herein plaintiffs, and causing them damages for the amount of EIGHT
HUNDRED PESOS (P800.00)"; that for the purpose of enforcing the
vendors' warranty in case of eviction, Eustaquia Bocar and Catalina Bocar
were also included as defendants; and, therefore, plaintiffs-appellants pray
that a decision be rendered, ordering (a) defendants Ester T. Villablanca and
her husband, Zosimo Villablanca, "to surrender the possession of the above
described property to said plaintiffs"; (b) defendants Ester T. Villablanca and
her husband, Zosimo Villablanca, "to pay to said plaintiffs the amount of
EIGHT HUNDRED PESOS (P800.00) as damages for the usurpation by
them of said property"; and (c) defendants Eustaquia Bocar and Catalina
8

SALES
Bocar "to pay the plaintiffs the amount of P2,800.00, plus incidental
expenses, as provided for by Art. 1555 of the Civil Code, in case of eviction
or loss of ownership to said above described property on the part of
plaintiffs." .
It is true that the execution of the deed of absolute sale in a public instrument
is equivalent to delivery of the land subject of the sale. 2 This presumptive
delivery only holds true when there is no impediment that may prevent the
passing of the property from the hands of the vendor into those of the vendee.
It can be negated by the reality that the vendees actually failed to obtain
material possession of the land subject of the sale.. 3 It appears from the
records of the case at bar that plaintiffs-appellants had not acquired physical
possession of the land since its purchase on November 12, 1962. As a matter
of fact, their purpose in filing the complaint in Civil Case No. 3285 is
precisely to "get the possession of the property." 4 In order that an action may
be considered as one for forcible entry, it is not only necessary that the
plaintiff should allege his prior physical possession of the property but also
that he was deprived of his possession by any of the means provided in
section 1, Rule 70 of the Revised Rules of Court, namely: force, intimidation,
threats, strategy and stealth. For, if the dispossession did not take place by
any of these means, the courts of first instance, not the municipal courts,
have jurisdictions.. 5 The bare allegation in the complaint that the plaintiff
has been "deprived" of the land of which he is and has been the legal owner
for a long period has been held to be insufficient. 6 It is true that the mere act
of a trespasser in unlawfully entering the land, planting himself on the
ground and excluding therefrom the prior possessor would imply the use of
force. In the case at bar, no such inference could be made as plaintiffsappellants had not claimed that they were in actual physical possession of the
property prior to the entry of the Villablancas. Moreover, it is evident that
plaintiffs-appellants are not only seeking to get the possession of the
property, but as an alternative cause of action, they seek the return of the
price and payment of damages by the vendors "in case of eviction or loss of
ownership" of the said property. It is, therefore, not the summary action of
forcible entry within the context of the Rules. .
WHEREFORE, the order of dismissal is hereby set aside, and the case
remanded to the court a quo for further proceedings. Costs against
defendants-appellees. .

SALES
4.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
THIRD DIVISION
G.R. No. 92989 July 8, 1991
PERFECTO
DY,
JR. petitioner,
vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V.
GONZALES, respondents.
Zosa & Quijano Law Offices for petitioner.
Expedito P. Bugarin for respondent GELAC Trading, Inc.

financing not only for said tractor but also for a truck and Libra insisted on
full payment for both.

GUTIERREZ, JR., J.:p

On the strength of an alias writ of execution issued on December 27, 1979,

the provincial sheriff was able to seize and levy on the tractor which was in
the premises of Libra in Carmen, Cebu. The tractor was subsequently sold at
public auction where Gelac Trading was the lone bidder. Later, Gelac sold
the tractor to one of its stockholders, Antonio Gonzales.

This is a petition for review on certiorari seeking the reversal of the March
23, 1990 decision of the Court of Appeals which ruled that the petitioner's
purchase of a farm tractor was not validly consummated and ordered a
complaint for its recovery dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979,
Wilfredo Dy purchased a truck and a farm tractor through financing extended
by Libra Finance and Investment Corporation (Libra). Both truck and tractor
were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20,
1979, he wrote a letter to Libra requesting that he be allowed to purchase
from Wilfredo Dy the said tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares
approved the petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in
favor of the petitioner over the tractor in question.
At this time, the subject tractor was in the possession of Libra Finance due to
Wilfredo Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the
immediate release could not be effected because Wilfredo Dy had obtained

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the
truck so that full payment could be made for both. On November 22, 1979, a
PNB check was issued in the amount of P22,000.00 in favor of Libra, thus
settling in full the indebtedness of Wilfredo Dy with the financing firm.
Payment having been effected through an out-of-town check, Libra insisted
that it be cleared first before Libra could release the chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading,
Inc. v. Wilfredo Dy", a collection case to recover the sum of P12,269.80 was
pending in another court in Cebu.

It was only when the check was cleared on January 17, 1980 that the
petitioner learned about GELAC having already taken custody of the subject
tractor. Consequently, the petitioner filed an action to recover the subject
tractor against GELAC Trading with the Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The
dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, pronouncing that the plaintiff is the owner of the
tractor, subject matter of this case, and directing the defendants Gelac
Trading Corporation and Antonio Gonzales to return the same to the plaintiff
herein; directing the defendants jointly and severally to pay to the plaintiff
the amount of P1,541.00 as expenses for hiring a tractor; P50,000 for moral
damages; P50,000 for exemplary damages; and to pay the cost. (Rollo, pp.
35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and
dismissed the complaint with costs against the petitioner. The Court of
Appeals held that the tractor in question still belonged to Wilfredo Dy when
it was seized and levied by the sheriff by virtue of the alias writ of execution
issued in Civil Case No. R-16646.
10

SALES
The petitioner now comes to the Court raising the following questions:
A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT AFFIRMING
THE TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM
TRACTOR HAD ALREADY PASSED TO HEREIN PETITIONER WHEN
SAID TRACTOR WAS LEVIED ON BY THE SHERIFF PURSUANT TO
AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER CASE IN
FAVOR OF RESPONDENT GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
EMBARKED ON MERE CONJECTURE AND SURMISE IN HOLDING
THAT THE SALE OF THE AFORESAID TRACTOR TO PETITIONER
WAS DONE IN FRAUD OF WILFREDO DY'S CREDITORS, THERE
BEING NO EVIDENCE OF SUCH FRAUD AS FOUND BY THE TRIAL
COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING
THE FINDING OF THE TRIAL COURT THAT THE SALE OF THE
TRACTOR BY RESPONDENT GELAC TRADING TO ITS CORESPONDENT ANTONIO V. GONZALES ON AUGUST 2, 1980 AT
WHICH TIME BOTH RESPONDENTS ALREADY KNEW OF THE
FILING OF THE INSTANT CASE WAS VIOLATIVE OF THE HUMAN
RELATIONS PROVISIONS OF THE CIVIL CODE AND RENDERED
THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES
SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale
depended upon the clearance and encashment of the check which was issued
in payment of the subject tractor.

The rule is settled that the chattel mortgagor continues to be the owner of the
property, and therefore, has the power to alienate the same; however, he is
obliged under pain of penal liability, to secure the written consent of the
mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the
Philippines, (1972), Volume IV-B Part 1, p. 525). Thus, the instruments of
mortgage are binding, while they subsist, not only upon the parties executing
them but also upon those who later, by purchase or otherwise, acquire the
properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the
mortgaged property in favor of a third person, therefore, affects not the
validity of the sale but only the penal liability of the mortgagor under the
Revised Penal Code and the binding effect of such sale on the mortgagee
under the Deed of Chattel Mortgage.
xxx xxx xxx
The mortgagor who gave the property as security under a chattel mortgage
did not part with the ownership over the same. He had the right to sell it
although he was under the obligation to secure the written consent of the
mortgagee or he lays himself open to criminal prosecution under the
provision of Article 319 par. 2 of the Revised Penal Code. And even if no
consent was obtained from the mortgagee, the validity of the sale would still
not be affected.
Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not
sell the subject tractor. There is no dispute that the consent of Libra Finance
was obtained in the instant case. In a letter dated August 27, 1979, Libra
allowed the petitioner to purchase the tractor and assume the mortgage debt
of his brother. The sale between the brothers was therefore valid and binding
as between them and to the mortgagee, as well.
Article 1496 of the Civil Code states that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the
ways specified in Articles 1497 to 1501 or in any other manner signing an
agreement that the possession is transferred from the vendor to the vendee.
We agree with the petitioner that Articles 1498 and 1499 are applicable in the
case at bar.

In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court.

(174 SCRA 80 [1989]), we stated that:

Article 1498 states:

xxx xxx xxx

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
11

SALES
the contract, if from the deed the contrary does not appear or cannot clearly
be inferred.
xxx xxx xxx
Article 1499 provides:
Article 1499. The delivery of movable property may likewise be made by the
mere consent or agreement of the contracting parties, if the thing sold cannot
be transferred to the possession of the vendee at the time of the sale, or if the
latter already had it in his possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made.
However, there was constructive delivery already upon the execution of the
public instrument pursuant to Article 1498 and upon the consent or
agreement of the parties when the thing sold cannot be immediately
transferred to the possession of the vendee. (Art. 1499)
The respondent court avers that the vendor must first have control and
possession of the thing before he could transfer ownership by constructive
delivery. Here, it was Libra Finance which was in possession of the subject
tractor due to Wilfredo's failure to pay the amortization as a preliminary step
to foreclosure. As mortgagee, he has the right of foreclosure upon default by
the mortgagor in the performance of the conditions mentioned in the contract
of mortgage. The law implies that the mortgagee is entitled to possess the
mortgaged property because possession is necessary in order to enable him to
have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of
the subject tractor, his right of ownership was not divested from him upon his
default. Neither could it be said that Libra was the owner of the subject
tractor because the mortgagee can not become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088, Civil Code)
Said property continues to belong to the mortgagor. The only remedy given
to the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by the
mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no
showing that Libra Finance has already foreclosed the mortgage and that it
was the new owner of the subject tractor. Undeniably, Libra gave its consent
to the sale of the subject tractor to the petitioner. It was aware of the transfer
of rights to the petitioner.

Where a third person purchases the mortgaged property, he automatically

steps into the shoes of the original mortgagor. (See Industrial Finance Corp.
v. Apostol, 177 SCRA 521 [1989]). His right of ownership shall be subject to
the mortgage of the thing sold to him. In the case at bar, the petitioner was
fully aware of the existing mortgage of the subject tractor to Libra. In fact,
when he was obtaining Libra's consent to the sale, he volunteered to assume
the remaining balance of the mortgage debt of Wilfredo Dy which Libra
undeniably agreed to.
The payment of the check was actually intended to extinguish the mortgage
obligation so that the tractor could be released to the petitioner. It was never
intended nor could it be considered as payment of the purchase price because
the relationship between Libra and the petitioner is not one of sale but still a
mortgage. The clearing or encashment of the check which produced the
effect of payment determined the full payment of the money obligation and
the release of the chattel mortgage. It was not determinative of the
consummation of the sale. The transaction between the brothers is distinct
and apart from the transaction between Libra and the petitioner. The
contention, therefore, that the consummation of the sale depended upon the
encashment of the check is untenable.
The sale of the subject tractor was consummated upon the execution of the
public instrument on September 4, 1979. At this time constructive delivery
was already effected. Hence, the subject tractor was no longer owned by
Wilfredo Dy when it was levied upon by the sheriff in December, 1979. Well
settled is the rule that only properties unquestionably owned by the judgment
debtor and which are not exempt by law from execution should be levied
upon or sought to be levied upon. For the power of the court in the execution
of its judgment extends only over properties belonging to the judgment
debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No.
78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the
tractor and took legal custody thereof no one ever protested or filed a third
party claim.
It is inconsequential whether a third party claim has been filed or not by the
petitioner during the time the sheriff levied on the subject tractor. A person
other than the judgment debtor who claims ownership or right over levied
properties is not precluded, however, from taking other legal remedies to
prosecute his claim. (Consolidated Bank and Trust Corp. v. Court of
12

SALES
Appeals, supra) This is precisely what the petitioner did when he filed the
action for replevin with the RTC.
Anent the second and third issues raised, the Court accords great respect and
weight to the findings of fact of the trial court. There is no sufficient
evidence to show that the sale of the tractor was in fraud of Wilfredo and
creditors. While it is true that Wilfredo and Perfecto are brothers, this fact
alone does not give rise to the presumption that the sale was fraudulent.
Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA 663
[1963]). Moreover, fraud can not be presumed; it must be established by
clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading
were indeed violative of the provisions on human relations. As found by the
trial court, GELAC knew very well of the transfer of the property to the
petitioners on July 14, 1980 when it received summons based on the
complaint for replevin filed with the RTC by the petitioner. Notwithstanding
said summons, it continued to sell the subject tractor to one of its
stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court
of Appeals promulgated on March 23, 1990 is SET ASIDE and the decision
of the Regional Trial Court dated April 8, 1988 is REINSTATED.
SO ORDERED.

13

SALES
5.) [G.R. No. 119745. June 20, 1997]
POWER
COMMERCIAL
AND
INDUSTRIAL
CORPORATION, petitioner, vs. COURT OF APPEALS, SPOUSES
REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE
NATIONAL BANK, respondents.
DECISION
PANGANIBAN, J.:
Is the sellers failure to eject the lessees from a lot that is the subject of a
contract of sale with assumption of mortgage a ground (1) for rescission of
such contract and (2) for a return by the mortgagee of the amortization
payments made by the buyer who assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for
review on certiorari of the March 27, 1995 Decision[1] of the Court of
Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding the
validity of the contract of sale with assumption of mortgage and absolving
the mortgagee from the liability of returning the mortgage payments already
made.[2]
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an
industrial asbestos manufacturer, needed a bigger office space and warehouse
for its products. For this purpose, on January 31, 1979, it entered into a
contract of sale with the spouses Reynaldo and Angelita R. Quiambao, herein
private respondents. The contract involved a 612-sq. m. parcel of land
covered by Transfer Certificate of Title No. S-6686 located at the corner of
Bagtican and St. Paul Streets, San Antonio Village, Makati City. The parties
agreed that petitioner would pay private respondents P108,000.00 as down
payment, and the balance of P295,000.00 upon the execution of the deed of
transfer of the title over the property. Further, petitioner assumed, as part of
the purchase price, the existing mortgage on the land. In full satisfaction
thereof, he paid P79,145.77 to Respondent Philippine National Bank (PNB
for brevity).
On June 1, 1979, respondent spouses mortgaged again said land to PNB to
guarantee a loan of P145,000.00, P80,000.00 of which was paid to
respondent spouses. Petitioner agreed to assume payment of the loan.

On June 26, 1979, the parties executed a Deed of Absolute Sale With
Assumption of Mortgage which contained the following terms and
conditions:[3]
That for and in consideration of the sum of Two Hundred Ninety-Five
Thousand Pesos (P295,000.00) Philippine Currency, to us in hand paid in
cash, and which we hereby acknowledge to be payment in full and received
to our entire satisfaction, by POWER COMMERCIAL AND INDUSTRIAL
DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized
and existing under and by virtue of Philippine Laws with offices located at
252-C Vito Cruz Extension, we hereby by these presents SELL, TRANSFER
and CONVEY by way of absolute sale the above described property with all
the improvements existing thereon unto the said Power Commercial and
Industrial Development Corporation, its successors and assigns, free from all
liens and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by
the provisions of the Land Reform Code -- the same having no agricultural
lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession thereof
in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided
to wit:
That the above described property is mortgaged to the Philippine National
Bank, Cubao, Branch, Quezon City for the amount of one hundred forty-five
thousand pesos, Philippine, evidenced by document No. 163, found on page
No. 34 of Book No. XV, Series of 1979 of Notary Public Herita L.
Altamirano registered with the Register of Deeds of Pasig (Makati),
Rizal xxx;
That the said Power Commercial and Industrial Development Corporation
assumes to pay in full the entire amount of the said mortgage above
described plus interest and bank charges, to the said mortgagee bank, thus
holding the herein vendor free from all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval
of the said Philippine National Bank to the herein sale of this property,
hereby agreeing to abide by any and all requirements of the said bank,
14

SALES
agreeing that failure to do so shall give to the bank first lieu (sic) over the
herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of
petitioner-corporation, submitted to PNB said deed with a formal application
for assumption of mortgage.[4]
On February 15, 1980, PNB informed respondent spouses that, for petitioners
failure to submit the papers necessary for approval pursuant to the formers
letter dated January 15, 1980, the application for assumption of mortgage
was considered withdrawn; that the outstanding balance of P145,000.00 was
deemed fully due and demandable; and that said loan was to be paid in full
within fifteen (15) days from notice.[5]
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on
December 23, 1980, payments which were to be applied to the outstanding
loan. On December 23, 1980, PNB received a letter from petitioner which
reads:[6]
With regard to the presence of the people who are currently in physical
occupancy of the (l)ot xxx it is our desire as buyers and new owners of this
lot to make use of this lot for our own purpose, which is why it is our desire
and intention that all the people who are currently physically present and in
occupation of said lot should be removed immediately.
For this purpose we respectfully request that xxx our assumption of mortgage
be given favorable consideration, and that the mortgage and title be
transferred to our name so that we may undertake the necessary procedures
to make use of this lot ourselves.
It was our understanding that this lot was free and clear of problems of this
nature, and that the previous owner would be responsible for the removal of
the people who were there. Inasmuch as the previous owner has not been
able to keep his commitment, it will be necessary for us to take legal
possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows: [7]
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was
assumed by you on June 4, 1979 for P101,500.00. It was last renewed on
December 24, 1980 to mature on June 4, 1981.

A review of our records show that it has been past due from last maturity
with interest arrearages amounting to P25,826.08 as of February 19,
1982. The last payment received by us was on December 24, 1980
for P20,283.14. In order to place your account in current form, we request
you to remit payments to cover interest, charges, and at least part of the
principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent
spouses for rescission and damages before the Regional Trial Court of Pasig,
Branch 159. Then, in its reply to PNBs letter of February 19, 1982, petitioner
demanded the return of the payments it made on the ground that its
assumption of mortgage was never approved. On May 31, 1983,[8] while this
case was pending, the mortgage was foreclosed. The property was
subsequently bought by PNB during the public auction. Thus, an amended
complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court[9] ruled that the failure of respondent spouses
to deliver actual possession to petitioner entitled the latter to rescind the sale,
and in view of such failure and of the denial of the latters assumption of
mortgage, PNB was obliged to return the payments made by the latter. The
dispositive portion of said decision states:[10]
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment
in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of
Mortgage executed between plaintiff and defendants Spouses Quiambao,
dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount
of P187,144.77 (P108,000.00 plus P79,145.77) with legal interest of 12% per
annum from date of filing of herein complaint, that is, March 17, 1982 until
the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59
(P41,880.45 and P20,283.14) with 12% interest thereon from date of herein
judgment until the same is fully paid.
No award of other damages and attorneys fees, the same not being warranted
under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are
dismissed for lack of merit.
15

SALES
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of Appeals
reversed the trial court. In the assailed Decision, it held that the deed of sale
between respondent spouses and petitioner did not obligate the former to
eject the lessees from the land in question as a condition of the sale, nor was
the occupation thereof by said lessees a violation of the warranty against
eviction. Hence, there was no substantial breach to justify the rescission of
said contract or the return of the payments made. The dispositive portion of
said Decision reads:[11]
WHEREFORE, the Decision appealed from is hereby REVERSED and the
complaint filed by Power Commercial and Industrial Development
Corporation against the spouses Reynaldo and Angelita Quiambao and the
Philippine National Bank is DISMISSED. No costs.
Hence, the recourse to this Court .
Issues
Petitioner contends that: (1) there was a substantial breach of the contract
between the parties warranting rescission; and (2) there was a mistake in
payment made by petitioner, obligating PNB to return such payments. In its
Memorandum, it specifically assigns the following errors of law on the part
of Respondent Court:[12]
A. Respondent Court of Appeals gravely erred in failing to consider in its
decision that a breach of implied warranty under Article 1547 in relation to
Article 1545 of the Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider in its
decision that a mistake in payment giving rise to a situation where the
principle of solutio indebiti applies is obtaining in the case-at-bar.
The Courts Ruling
The petition is devoid of merit. It fails to appreciate the difference between a
condition and a warranty and the consequences of such distinction.
Conspicuous Absence of an Imposed Condition

The alleged failure of respondent spouses to eject the lessees from the lot in
question and to deliver actual and physical possession thereof cannot be
considered a substantial breach of a condition for two reasons: first, such
failure was not stipulated as a condition -- whether resolutory or suspensive
-- in the contract; and second, its effects and consequences were not specified
either.[13]
The provision adverted to by petitioner does not impose a condition or an
obligation to eject the lessees from the lot. The deed of sale provides in part:
[14]

We hereby also warrant that we are the lawful and absolute owners of the
above described property, free from any lien and/or encumbrance, and we
hereby agree and warrant to defend its title and peaceful possession thereof
in favor of the said Power Commercial and Industrial Development
Corporation, its successors and assigns, against any claims whatsoever of any
and all third persons; subject, however, to the provisions hereunder provided
to wit:
By his own admission, Anthony Powers, General Manager of petitionercorporation, did not ask the corporations lawyers to stipulate in the contract
that Respondent Reynaldo was guaranteeing the ejectment of the occupants,
because there was already a proviso in said deed of sale that the sellers were
guaranteeing the peaceful possession by the buyer of the land in question.
[15]
Any obscurity in a contract, if the above-quoted provision can be so
described, must be construed against the party who caused it. [16] Petitioner
itself caused the obscurity because it omitted this alleged condition when its
lawyer drafted said contract.
If the parties intended to impose on respondent spouses the obligation to
eject the tenants from the lot sold, it should have included in the contract a
provision similar to that referred to in Romero vs. Court of Appeals,[17] where
the ejectment of the occupants of the lot sold by private respondent was the
operative act which set into motion the period of petitioners compliance with
his own obligation, i.e., to pay the balance of the purchase price. Failure to
remove the squatters within the stipulated period gave the other party the
right to either refuse to proceed with the agreement or to waive that condition
of ejectment in consonance with Article 1545 of the Civil Code. In the case
cited, the contract specifically stipulated that the ejectment was a condition to
be fulfilled; otherwise, the obligation to pay the balance would not arise.This
is not so in the case at bar.
16

SALES
Absent a stipulation therefor, we cannot say that the parties intended to make
its nonfulfillment a ground for rescission. If they did intend this, their
contract should have expressly stipulated so. In Ang vs. C.A.,[18] rescission
was sought on the ground that the petitioners had failed to fulfill their
obligation to remove and clear the lot sold, the performance of which would
have given rise to the payment of the consideration by private
respondent. Rescission was not allowed, however, because the breach was
not substantial and fundamental to the fulfillment by the petitioners of the
obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual
warranty against eviction, and not to a condition that was not met. The terms
of the contract are so clear as to leave no room for any other interpretation. [19]
Futhermore, petitioner was well aware of the presence of the tenants at the
time it entered into the sales transaction. As testified to by Reynaldo,
[20]
petitioners counsel during the sales negotiation even undertook the job of
ejecting the squatters. In fact, petitioner actually filed suit to eject the
occupants. Finally, petitioner in its letter to PNB of December 23, 1980
admitted that it was the buyer(s) and new owner(s) of this lot.
Effective Symbolic Delivery
The Court disagrees with petitioners allegation that the respondent spouses
failed to deliver the lot sold. Petitioner asserts that the legal fiction of
symbolic delivery yielded to the truth that, at the execution of the deed of
sale, transfer of possession of said lot was impossible due to the presence of
occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary
purpose of sale, delivery remains an indispensable requisite as our law does
not admit the doctrine of transfer of property by mere consent. [21] The Civil
Code provides that delivery can either be (1) actual (Article 1497) or (2)
constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a
species of constructive delivery, effects the transfer of ownership through the
execution of a public document. Its efficacy can, however, be prevented if the
vendor does not possess control over the thing sold, [22] in which case this
legal fiction must yield to reality.
The key word is control, not possession, of the land as petitioner would like
us to believe. The Court has consistently held that:[23]

x x x (I)n order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over the
thing sold that xxx its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no
impediment whatever to prevent the thing sold passing into the tenancy of
the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the
execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in
his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality -- the delivery has
not been effected.
Considering that the deed of sale between the parties did not stipulate or infer
otherwise, delivery was effected through the execution of said deed. The lot
sold had been placed under the control of petitioner; thus, the filing of the
ejectment suit was subsequently done. It signified that its new owner
intended to obtain for itself and to terminate said occupants actual possession
thereof. Prior physical delivery or possession is not legally required and the
execution of the deed of sale is deemed equivalent to delivery. [24] This deed
operates as a formal or symbolic delivery of the property sold and authorizes
the buyer to use the document as proof of ownership. Nothing more is
required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish
any breach of the warranty against eviction. Despite its protestation that its
acquisition of the lot was to enable it to set up a warehouse for its asbestos
products and that failure to deliver actual possession thereof defeated this
purpose, still no breach of warranty against eviction can be appreciated
because the facts of the case do not show that the requisites for such breach
have been satisfied. A breach of this warranty requires the concurrence of the
following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the
vendor; and
17

SALES
(4) The vendor has been summoned and made co-defendant in the suit for
eviction at the instance of the vendee.[25]
In the absence of these requisites, a breach of the warranty against eviction
under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants
of said lot, and not that it has been evicted therefrom. As correctly pointed
out by Respondent Court, the presence of lessees does not constitute an
encumbrance of the land, [26] nor does it deprive petitioner of its control
thereof.
We note, however, that petitioners deprivation of ownership and control
finally occurred when it failed and/or discontinued paying the amortizations
on the mortgage, causing the lot to be foreclosed and sold at public
auction. But this deprivation is due to petitioners fault, and not to any act
attributable to the vendor-spouses.

in whose favor the alienation or encumbrance is to be made, should take the

property subject to the obligation of this mortgage in the same terms and
condition under which it is constituted, it being understood that the
Mortgagor is not in any manner relieved of his obligation to the Mortgagee
under this mortgage by such sale, alienation or encumbrance; on the contrary
both the vendor and the vendee, or the party in whose favor the alienation or
encumbrance is made shall be jointly and severally liable for said mortgage
obligations. xxx.
Therefore, it cannot be said that it did not have a duty to pay to PNB the
amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake
because PNB disapproved its assumption of mortgage after it failed to submit
the necessary papers for the approval of such assumption.

Absence of Mistake In Payment

But even if petitioner was a third party in regard to the mortgage of the land
purchased, the payment of the loan by petitioner was a condition clearly
imposed by the contract of sale. This fact alone disproves petitioners
insistence that there was a mistake in payment. On the contrary, such
payments were necessary to protect its interest as a the buyer(s) and new
owner(s) of the lot.

Contrary to the contention of petitioner that a return of the payments it made

to PNB is warranted under Article 2154 of the Code, solutio indebiti does not
apply in this case. This doctrine applies where: (1) a payment is made when
there exists no binding relation between the payor, who has no duty to pay,
and the person who received the payment, and (2) the payment is made
through mistake, and not through liberality or some other cause. [27]

The quasi-contract of solutio indebiti is one of the concrete manifestations of

the ancient principle that no one shall enrich himself unjustly at the expense
of another.[31] But as shown earlier, the payment of the mortgage was an
obligation petitioner assumed under the contract of sale. There is no unjust
enrichment where the transaction, as in this case, is quid pro quo, value for
value.

In this case, petitioner was under obligation to pay the amortizations on the
mortgage under the contract of sale and the deed of real estate
mortgage. Under the deed of sale (Exh. 2), [28] both parties agreed to abide by
any and all the requirements of PNB in connection with the real estate
mortgage. Petitioner was aware that the deed of mortgage (Exh. C) made it
solidarily and, therefore, primarily[29] liable for the mortgage obligation:[30]

All told, respondent Court did not commit any reversible error which would
warrant the reversal of the assailed Decision.

Because petitioner failed to impugn its integrity, the contract is presumed,

under the law, to be valid and subsisting.

(e) The Mortgagor shall neither lease the mortgaged property xxx nor sell or
dispose of the same in any manner, without the written consent of the
Mortgagee. However, if not withstanding this stipulation and during the
existence of this mortgage, the property herein mortgaged, or any portion
thereof, is xxx sold, it shall be the obligation of the Mortgagor to impose as a
condition of the sale, alienation or encumbrance that the vendee, or the party

WHEREFORE, the petition is hereby DENIED, and the assailed Decision

is AFFIRMED.
SO ORDERED.

18

SALES
6.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
EN BANC
G.R. No. L-40195 May 29, 1987
VICTORIA
R.
VALLARTA, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and THE HONORABLE
JUDGE FRANCISCO LLAMAS, Pasay City Court, respondents.
Francisco G.H. Salva for petitioner.
CORTES, J.:
The petitioner seeks a reversal of the Court of Appeals decision dated
December 13, 1974 affirming the Trial Court's judgment convicting her of
estafa. We denied the petition initially but granted a motion for
reconsideration and gave the petition due course.
As found by the trial court and the Court of Appeals, Rosalinda Cruz, the
private offended party, and accused Victoria Vallarta are long time friends
and business acquaintances. On November 20, 1968, Cruz entrusted to
Victoria Vallarta seven pieces of jewelry. In December of the same year,
Vallarta decided to buy some items, exchanged one item with another, and
issued a post-dated check in the amount of P5,000 dated January 30, 1969.
Rosalinda Cruz deposited said check with the bank. However, upon
presentment, the check was dishonored and Cruz was informed that Vallarta's
account had been closed. Cruz apprised Vallarta of the dishonor and the latter
promised to give another check. Later, Vallarta pleaded for more time. Still
later, she started avoiding Cruz. Hence, this criminal action was instituted.
Based on the foregoing facts, both the trial court and the Court of Appeals
found Vallarta guilty beyond reasonable doubt of the crime of estafa.
WE affirm.
Petitioner is charged under Art. 315 (2) (d) as amended by Rep. Act No.
4885, of the Revised Penal Code, which penalizes any person who shall
defraud another "(b)y postdating a check, or issuing a check in payment of an
obligation when the offender had no funds in the bank, or his funds deposited
therein were not sufficient to cover the amount of the check."

By virtue of Rep. Act No. 4885, "(t)he failure of the drawer of the check to
deposit the amount necessary to cover his check within three (3) days from
receipt of notice from the bank and/or the payee or holder that said check has
been dishonored for lack or insufficiency of funds" is deemed prima
facie evidence of deceit constituting false pretense or fraudulent act.
To constitute estafa under this provision the act of post-dating or issuing a
check in payment of an obligation must be the efficient cause of
defraudation, and as such it should be either prior to, or simultaneous with
the act of fraud. The offender must be able to obtain money or property from
the offended party because of the issuance of a check whether post-dated or
not. That is, the latter would not have parted with his money or other
property were it not for the issuance of the check. likewise, the check should
not be, issued in payment of a pre-existing obligation (People v. Lilius, 59
Phil. 339 [1933]).
In seeking acquittal, petitioner stresses that the transaction between her and
Cruz was a "sale or return," perfected and consummated on November 20,
1968 when the seven pieces of jewelry were delivered. The check issued in
December 1968 was therefore in payment of a pre-existing obligation. Thus,
even if it was dishonored, petitioner claims that she can only be held civilly
liable, but not criminally liable under Art. 315 (2) (d), Revised Penal Code.
She also argues that at any rate, what prompted Cruz to deliver the jewelry
was the social standing of petitioner Vallarta and not the postdated check.
She thus assigns as errors the finding of that Court a quo that the jewelries
were entrusted on November 20, 1968, but the sale was perfected in
December 1968, and the finding that there was deceit in the issuance of the
postdated check.
In order to arrive at the proper characterization of the transaction between
Vallarta and Cruz, that is, whether it was a "sale or return" or some other
transaction, it is necessary to determine the intention of the parties.
The following excerpts from the transcript of stenographic notes are
significant:
I. Direct Examination of Rosalinda Cruz
Q: Now, what happened with that business transaction of yours with Mrs.
Vallarta?

19

SALES
A: After that and after she finally agreed to buy two sets and changed the
ruby ring with another ring, she gave me postdated check; I waited for
January 30, 1969. 1 deposited the check in the Security Bank. And after that I
knew (learned) that it was closed account (TSN, June 29, 1972, p. 9)
(Emphasis supplied).
II. Cross-Examination of Rosalinda Cruz
Q: Now, you mentioned about certain jewelries in Exh. "A. Could you tell
under your oath whether all the jewelries listed here (Exh. "A") were taken
by Mrs. Vallarta at one single instance?
A: Yes, Sir. It was on one (1) day when I entrusted them to her so she
can select what she wants (Id at p. 22) (Emphasis supplied).
III. Cross-Examination of Rosalinda Cruz
COURT: But could you still recall or you cannot recall whether you agreed to
reduce the cost to Five Thousand Eight Hundred ( P5,800.00) Pesos?
A Yes, Sir. I agreed to reduce it to Five Thousand Eight Hundred (P5,800.00)
Pesos, Sir, when I went to see her in her house to finalize what jewelries she
wanted (Id. at p. 26).

tradition. Thus, the delivery made on November 20, 1968 was not a delivery
for purposes of transferring ownership the prestation incumbent on the
vendor. If ownership over the jewelry was not transmitted on that date, then it
could have been transmitted only in December 1968, the date when the check
was issued. In which case, it was a "sale on approval" since ownership
passed to the buyer. Vallarta, only when she signified her approval or
acceptance to the seller, Cruz, and the price was agreed upon.
Thus, when the check which later bounced was issued, it was not in payment
of a pre-existing obligation. Instead the issuance of the check was
simultaneous with the transfer of ownership over the jewelry. But was the
check issued simultaneously with the fraud?
Republic Act No. 4885, amending Art. 315 (2) (d), Revised Penal Code,
establishes a prima facie evidence of deceit upon proof that the drawer of the
check failed to deposit the amount necessary to cover his check within three
(3) days from receipt of notice of dishonor for lack or insufficiency of funds.
Admittedly, (1) the check was dishonored as Vallarta's account had been
earlier closed; (2) she was notified by Cruz of the dishonor: and, (3) Vallarta
failed to make it good within three days. Deceit is therefore presumed.

Note that Vallarta changed the ruby ring because it was not acceptable to her,
and chose another ring. Likewise, the price to be paid for the jewelry was
finally agreed upon only in December 1968. Thus, there was a meeting of the
minds between the parties as to the object of the contract and the
consideration therefore only in December 1968, the same time that the check
was issued. The delivery made on November 20, 1968 was only for the
purpose of enabling Vallarta to select what jewelry she wanted.

Petitioner lays stress on her being an alumna of a reputable school, on her

having a husband who is a bank manager, and on the big land-holdings of her
father, and argues that it was these qualifications and not the post-dated
check which prompted Cruz to deliver the jewelry (Rollo, pp. 78-79: Motion
for Reconsideration, pp. 10-11). Hence, there was no deceit. It is thus
suggested that a person of petitioner's social standing cannot be guilty of
deceit, at least in so far as issuing bouncing checks is concerned. This
reasoning does not merit serious consideration. If accepted, it could result in
a law that falls unequally on persons depending on their social position.

Properly, then, the transaction entered into by Cruz and Vallarta was not a
"sale or return." Rather, it was a "sale on approval " (also called " sale on
acceptance, " "sale on trial." or "sale on satisfaction" [CIVIL CODE, art.
1502]). In a "sale or return," the ownership passes to the buyer on delivery
(CIVIL CODE, art. 1502). (The subsequent return of the goods reverts
ownership in the seller [CIVIL CODE, art. 1502]). Delivery, or tradition. as a
mode of acquiring ownership must be in consequence of a contract (CIVIL
CODE, art. 712), e.g. sale.

Did Cruz part with the jewelry solely because she knew Vallarta to be rich, or
did she do so because of the check issued to her? As the trial court and the
Court of Appeals found, petitioner was able to obtain the jewelry because she
issued the check. Her failure to deposit the necessary amount to cover it
within three days from notice of dishonor created the prima
facie presumption established by the amendatory law, Rep. Act No. 4885,
which she failed to rebut.

If there was no meeting of the minds on November 20, 1968, then, as of that
date, there was yet no contract of sale which could be the basis of delivery or

Petitioner, however, contends that Rep. Act No. 4885 is unconstitutional. She
claims that even as the presumption of deceit established by Rep. Act No.
4885 is stated under the guise of being prima facie. It is in effect a conclusive
20

SALES
presumption, because after the prosecution has proved that: (1) the check has
been dishonored; (2) notice has been given to the drawer; and, (3) three days
from notice, the check is not funded or the obligation is not paid, the accused
is held guilty. Thus, it is alleged, the constitutional presumption of innocence
is violated.
Contrary to petitioner's assertion, the presumption of deceit under Rep. Act
No. 4885 is not conclusive. It is rebuttable. For instance, We ruled in the case
of People v. Villapando (56 Phil. 31 [1931]) that good faith is a defense to a
charge of estafa by postdating a check, as when the drawer, foreseeing his
inability to pay the check at maturity, made an arrangement with his creditor
as to the manner of payment of the debt.*
Moreover, it is now well settled that "there is no constitutional objection to
the passage of a law providing that the presumption of innocence may be
overcome by a contrary presumption founded upon the experience of human
conduct, and enacting what evidence shall be sufficient to overcome such
presumption of innocence" (People v. Mingoa, 92 Phil. 856 [1953] at 858-59,
citing I COOLEY, A TREATISE ON THE CONSTITUTIONAL
LIMITATIONS, 639-641). And the "legislature may enact that when certain
facts have been proved they shall be prima facie evidence of the existence of
the guilt of the accused and shift the burden of proof provided there be a
rational connection between the facts proved and the ultimate fact presumed
so that the inference of the one from proof of the others is not unreasonable
and arbitrary because of lack of connection between the two in common
experience" (People v. Mingoa, supra. See also US v. Luling, 34 Phil. 725
[1916]).
There can be no doubt that the "postdating or issuing of a check in payment
of an obligation when the offender had no funds in the bank, or his funds
deposited therein were not sufficient to cover the amount of the check," is a
false pretense or a fraudulent act. It is so characterized by Art. 315 (2) (d),
Revised Penal Code. Republic Act No. 4885 does nothing more than limit the
period within which the drawer/issuer must pay the creditor.

In People v. Sabio (No. L-45490, November 20, 1978, 86 SCRA 568), this
Court ruled that Rep. Act No. 4885 has not changed the rule established in
Art. 315 (2) (d) prior to the amendment; that Republic Act No. 4885 merely
established the prima facie evidence of deceit, and eliminated the
requirement that the drawer inform the payee that he had no funds in the
bank or the funds deposited by him were not sufficient to cover the amount
of the check. Thus, even with the amendment introduced by Rep. Act No.
4885 it is still criminal fraud or deceit in the issuance of a check which is
made punishable under the Revised Penal Code, and not the non-payment of
the debt.
Petitioner also assigns as error the denial by the trial court of her motion for
reconsideration. Her motion was directed at the finding of the trial court that
no payments were made. Alleging that a check drawn by one Sison was
given by petitioner to Cruz in payment of the rubber check, petitioner claims
that had her motion for reconsideration been granted, she would have called
to the witness stand the Branch Manager of Security Bank and Trust
Company, Pasay City, where the check was allegedly deposited by Cruz, for
said bank manager to Identify the owner-holder of the savings account to
which the amount in Sison's check had been credited (Brief for Petitioner, p.
46).
Granting that the bank manager's testimony would have been as alleged by
petitioner, Our decision would remain. As correctly observed by both the trial
court and the Court of Appeals (Court of Appeals Decision, pp. 2-3), the
payments petitioner allegedly made were not shown to have any relevance to
the obligation in question.
WHEREFORE, finding no error in the assailed decision of the Court of
Appeals, the same is AFFIRMED. Costs against the petitioner.
SO ORDERED.

Petitioner also argues that Rep. Act No. 4885 violates the constitutional
injunction against imprisonment for non-payment of debt. Ironically, she
does not question the constitutionality of Art. 315 (2) (d), Revised Penal
Code, which defines the crime she is being accused of, and provides for its
punishment. In fact, she concedes the constitutionality of the latter statute.
She further concedes that a person may be imprisoned for "criminal fraud"
covered by Art. 315 (2) of the Revised Penal Code.
21

SALES
7.)
Republic
of
the
Philippines
SUPREME
COURT
Manila
EN BANC
G.R. No. L-16394
December 17, 1966
JOSE SANTA ANA, JR. and LOURDES STO. DOMINGO, petitioners,
vs.
ROSA HERNANDEZ, respondent.
Manuel
J.
Serapio
for
petitioners..
J. T. de los Santos for respondent.
REYES, J.B.L., J.:
Appeal from the decision of the Court of Appeals in its Case CA-G.R. No.
20582-R, in effect reversing the decision of the Court of First Instance of
Bulacan in its Civil Case No. 1036.
The petitioners herein, spouses Jose Santa Ana, Jr. and Lourdes Sto.
Domingo, owned a 115,850-square meter parcel of land situated in barrio
Balasing, Sta. Maria, Bulacan, and covered by Transfer Certificate of Title
No. T-3598. On 28 May 1954, they sold two (2) separate portions of the land
for P11,000.00 to the herein respondent Rosa Hernandez. These portions
were described in the deed of sale as follows:
Bahaguing nasa gawing Hilagaan. Humahanga sa Hilaga, kina Maria Perez,
at Aurelio Perez; sa Timugan, sa lupang kasanib; sa Silanganan, kay Mariano
Flores at Emilio Ignacio; sa Kanluran, kay Cornelio Ignacio; Mayroong
(12,500), m.c. humigit kumulang.
Bahaguing nasa gawing Silanganan Humahanga sa Hilagaan, sa kay Rosa
Hernandez; sa Silanganan, kay Domingo Hernandez at Antonio Hernandez;
sa Timugan, sa Sta. Maria-Tigbi Road; at sa Kanluran, sa lupang kasanib
(Jose Sta. Ana, Jr.), mayroong (26,500) metros cuadrados, humigit kumulang.
After the sale (there were two other previous sales to different vendees of
other portions of the land), the petitioners-spouses caused the preparation of
a subdivision plan, Psd-43187, was approved on 13 January 1955 by the
Director of Lands. Rosa Hernandez, however, unlike the previous vendees,
did not conform to the plan and refused to execute an agreement of
subdivision and partition for registration with the Register of Deeds of
Bulacan; and she, likewise, refused to vacate the areas that she had occupied.
Instead, she caused the preparation of a different subdivision plan, which was
approved by the Director of Lands on 24 February 1955. This plan, Psd-

42844, tallied with the areas that the defendant, Rosa Hernandez, had
actually occupied.
On 28 February 1955, herein petitioners-spouses filed suit against respondent
Rosa Hernandez in the Court of First Instance of Bulacan, claiming that said
defendant was occupying an excess of 17,000 square meters in area of what
she had bought from them. Defendant Rosa Hernandez, on the other hand,
claimed that the alleged excess, was part of the areas that she bought.
The trial court observed:
The only question, therefore, to be determined by the Court is whether or not
the plaintiffs had sold two portions without clear boundaries but with exact
areas (12,500 sq. m. and 26,000 sq. m.) at the rate of P.29 per square meter
or, as defendant Rosa Hernandez claimed, two portions, the areas of which
were not definite but which were well defined on the land and with definite
boundaries and sold for the lump sum of P11,000.00.
Finding for the plaintiffs, the said court ordered the defendant, among other
things, to vacate "the excess portions actually occupied by her and to confine
her occupation only to Lots 4-a and 4-b as shown in the plan, Exhibit E, of
the plaintiffs . . .," referring to Psd-43187.
Not satisfied with the judgment, defendant Hernandez appealed to the Court
of Appeals.
The Court of Appeals dismissed the complaint and declared Rosa Hernandez
the owner of lots 4-a and 4-b in her plan, Psd-42844, upon the following
findings:
The contract between appellees and appellant (Exhibit D) provided for the
sale of two separate portions of the same land for the single consideration of
P11,000.00. Appellee Jose Santa Ana, Jr. said the transaction was by a unit of
measure or per square meter, and that although the actual total purchase price
of the two parcels of land was P11,300.00 at P0.29 per square meter the
parties agreed to the sale at the reduced price of P11,000.00. The appellant
denied this claim of appellees. Gonzalo V. Ignacio, the notarial officer before
the contract of sale was executed, failed to corroborate Sta. Ana upon this
point. Upon the contrary, Ignacio testified that appellant complained to him
and the appellees to the effect that the areas stated in the contract were less
than the actual areas of the parcels of land being sold and here we quote the
notarial officer's own words:
22

SALES
"That the area stated in the document will not be the one to prevail but the
one to prevail is the boundary of the land which you already know." (p. 74,
Innocencio).
Sta. Ana is the nephew of the appellant, and the former's assurance probably
appeased the latter against insisting in the correction of the areas stated in the
contract of sale.
Two witnesses testified for the appellant. Jesus Policarpio divulged that the
same parcels of land involved in this case were previously offered to him by
the appellees for the single purchase price of P12,000.00. Julio Hernandez
stated that his sister, the herein appellant, had offered P10,000.00 as against
the appellees' price of P12,000.00, and that he was able to persuade the
parties to meet halfway on the price. Furthermore the previous conveyances
made by the appellees for other portions of the same property (Exhibits B
and C) are also for lump sums.
The difference in area of 17,000 square meters is about one-half of the total
area of the two parcels of land stated in the document, but not for this alone
may we infer gross mistake on the part of appellees. The appellees admit the
lands in question were separated from the rest of their property by a long and
continuous "pilapil" or dike, and there is convincing proof to show that the
bigger lot (Lot 4-a) was wholly tenanted for appellees by Ciriaco Nicolas and
Santiago Castillo and the smaller lot (Lot 4-b) was wholly tenanted for said
appellees by Gregorio Gatchalian. These facts support the theory that the two
parcels of land sold to the appellant were identified by the conspicuous
boundaries and the extent or area each tenant used to till for the vendors.
Again, appellees should not be heard to complain about the deficiency in the
area because as registered owners and possessors of the entire land since
1949 they can rightly be presumed to have acquired a good estimate of the
value and areas of the portions they subsequently sold.
The Court of Appeals concluded by applying to the case Article 1542 of the
new 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 greater or less 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.
and declared Rosa Hernandez the owner of the whole of lots 4-a and 4-b of
her own subdivision Plan Psd-42844, notwithstanding their increased area as
compared to that specified in the deed of sale.
In turn, the Sta. Ana spouses appealed to this Court, assigning the following
errors:
The Court of Appeals committed a grave error of law when it departed from
the accepted and usual course of judicial proceedings, by disturbing the
findings of fact of the trial court, made upon conflicting testimonies of the
witnesses for the plaintiffs, now in the petitioners, and the defendant, now the
respondent, Rosa Hernandez.
The Court of Appeals committed a grave error of law when it held that the
deed of sale, Exhibit D, was for a lump sum, despite the fact that the
boundaries given therein were not sufficiently certain and the boundaries
indicated did not clearly identify the land, thereby erroneously deciding a
question of substance in a way not in accord with law and the applicable
decisions of this Honorable Court.
On the face of the foregoing assignments of error and the petitioners'
discussions thereabout, their position can be summarized as follows: that the
Court of Appeals erred in substituting its own findings of fact for that of the
trial court's, without strong and cogent reasons for the substitution, contrary
to the rule that appellate courts shall not disturb the findings of fact of trial
courts in the absence of such strong and cogent reasons; and that Article 1542
of the Civil Code of the Philippines does not apply, allegedly because the
boundaries, as shown in the deed of sale, are not definite.
In the first assignment of error, the petitioner spouses complain against the
failure of the Court of Appeals to accept the findings of fact made by the
Court of First Instance. The credibility of witnesses and the weighing of
conflicting evidence are matters within the exclusive authority of the Court
of Appeals, and it is not necessarily bound by the conclusions of the trial
court. Both the Judiciary Act (R.A. 296, section 29) and the Rules of Court
(Rule 45, section 2) only allow a review of decisions of the Court of Appeals
23

SALES
on questions of law; and numerous decisions of this Court have invariably
and repeatedly held that findings of fact by the Court of Appeals are
conclusive and not reviewable by the Supreme Court (Galang vs. Court of
Appeals, L-17248, 29 January 1962; Fonacier vs. Court of Appeals, 96 Phil.
418, 421; and cases therein cited; Onglengco vs. Ozaeta, 70 Phil. 43;
Nazareno vs. Magwagi, 71 Phil. 101). Barring, therefore, a showing that the
findings complained of are totally devoid of support in the record, or that
they are so glaringly erroneous as to constitute serious abuse of discretion,
such findings must stand, for this Court is not expected or required to
examine and contrast the oral and documentary evidence submitted by the
parties. As pointed out by former Chief Justice Moran in his Comments on
the Rules of Court (1963 Ed., Vol. 2, p. 412), the law creating the Court of
Appeals was intended mainly to take away from the Supreme Court the work
of examining the evidence, and confine its task for the determination of
questions which do not call for the reading and study of transcripts
containing the testimony of witnesses.
The first assignment of error must, therefore, be overruled. We now turn to
the second.
Despite the incontestable fact that the deed of sale in favor of Rosa
Hernandez recites a price in a lump sum (P11,000.00) for both lots (Annex
"C", Complaint, Rec. on App., p. 21), appellants insist that the recited area
should be taken as controlling. They combat the application of Article 1542
of the Civil Code, on the ground that the boundaries given in the deed are
indefinite. They point out that the southern boundary of the small parcel is
merely given as "lupang kasanib" and that the same occurs with the western
boundary of the bigger lot, which is recited as "lupang kasanib (Jose Sta.
Ana, Jr.)". The Court of Appeals, however, found as a fact that
the two parcels of land sold to appellant (i.e., appellee herein, Rosa
Hernandez) were identified by the conspicuous boundaries. (Emphasis
supplied)
consisting in a long and continuous pilapil or dike that separated the lands in
question from the rest of the property. On the basis of such findings, that can
not be questioned at this stage, for reasons already shown, it is
unquestionable that the sale made was of a definite and identified tract,
a corpus certum, that obligated the vendors to deliver to the buyer all the land
within the boundaries, irrespective of whether its real area should be greater
or smaller than what is recited in the deed (Goyena vs. Tambunting, 1 Phil.
490; Teran vs. Villanueva, 56 Phil. 677; Azarraga vs. Gay, 52 Phil. 599;

Mondragon vs. Santos, 87 Phil. 471). And this is particularly true where, as
in the case now before this Court, the area given is qualified to be
approximate only ("humigit kumulang", i.e., more or less Rec. on App., p.
22).
To hold the buyer to no more than the area recited on the deed, it must be
made clear therein that the sale was made by unit of measure at a definite
price for each unit.
If the defendant intended to buy by the meter be should have so stated in the
contract (Goyena vs. Tambunting, supra).
The ruling of the Supreme Court of Spain, in construing Article 1471 of the
Spanish Civil Code (copied verbatim in our Article 1542) is highly
persuasive that as between the absence of a recital of a given price per unit of
measurement, and the specification of the total area sold, the former must
prevail and determines the applicability of the norms concerning sales for a
lump sum.
La venta a cuerpo cierto indudablemente se verifica cuando en el contrato no
solo no es precisado el precio singular por unidad de medida, sino que
tampoco son indicadas los dimensiones globales bales del inmueble, pero
tambien se verifica cuando aun ng habiendo sido indicado un precio singular
por unidad de medida, sin embargo es especificada la dimension total del
inmueble, en cuyo ultimo caso entre los dos indices en contraste, constituido
uno por la falta de un precio singular por unidad de medida, y otro por la
concrecion de las dimensiones globales del unmueble, la Ley da prevalencia
al mero y presume que aquella individualizacion no habia tenido para las
partes valor esencial, que solo constituia una superabundancia, y no significa
que las partes hayan convenido aquel precio global solo en cuanto el
inmueble tuviese efectivamente aquellas dimensiones totales, siendo de
estimar que esta es una presuncion absoluta, contra la cual ni el comprador
ni el vendedor pueden articular prueba contraria.
Por tanto, ni el comprador ni el vendedor pueden pretender una
disminucicion o, respectivamente un suplemento de precio, cuando las
dimensiones globales del unmueble resulten despues mayores o menores de
las indicadas en el contrato, aunque aduzcan que solo en tanto han convenido
el aquel precio en cuanto creian que las dimensiones de la cosa fueran las
precisadas en el contrato. (Tribunal Supreme de Espaa, Sent. de 26 Junio
1956; Rep. Jurisp. Aranzadi, 2.729) (Emphasis supplied)
24

SALES
The Civil Code's rule as to sales "a cuerpo cierto" was not modified by Act
496, section 58, prohibiting the issuance of a certificate of title to a grantee of
part of a registered tract until a subdivision plan and technical description are
duly approved by the Director of Lands, and authorizing only the entry of a
memorandum on the grantor's certificate of title in default of such plan. The
latter provision is purely a procedural directive to Registers of Deeds that
does not attempt to govern the rights of vendor and vendee inter se, that
remain controlled by the Civil Code of the Philippines. It does not even bar
the registration of the contract itself to bind the land.
WHEREFORE, the decision of the Court of Appeals, in its case No. 20582R, is hereby affirmed. Costs against the appellants, Jose Santa Ana, Jr. and
Lourdes Sto. Domingo.

8.)
Republic
SUPREME
Manila
FIRST DIVISION

of

the

Philippines
COURT

25

SALES
G.R. No. L-29972 January 26, 1976
ROSARIO
CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA
INFANTE and RAMON INFANTE, respondents.
MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of Appeals (Special
Division of Five) dated October 30, 1968, reversing its decision of November
2, 1967 (Fifth Division), and its resolution of December 6, 1968 denying
petitioner's motion for reconsideration.
The dispositive part of the challenged resolution reads:
Wherefore, the motion for reconsideration filed on behalf of appellee Emma
Infante, is hereby granted and the decision of November 2, 1967, is hereby
annulled and set aside. Another judgement shall be entered affirming in
toto that of the court a quo, dated January 20, 1965, which dismisses the
plaintiff's complaint and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes
Islands, was the owner of the parcel of land herein involve with
improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of
some one hundred ninety-five (195) square meters, more or less, covered by
TCT No. 5040 and subject to mortgage in favor of the Republic Savings
Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and
adjacent neighbor of respondent Poncio, and also from the Batanes Islands,
lived in the adjoining lot at 177 V. Agan Street.
Both petitioners Rosario Carbonell and respondent Emma Infante offered to
buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the
mortgage, approached petitioner one day and offered to sell to the latter the
said lot, excluding the house wherein respondent lived. Petitioner accepted
the offer and proposed the price of P9.50 per square meter. Respondent
Poncio, after having secured the consent of his wife and parents, accepted the

price proposed by petitioner, on the condition that from the purchase price
would come the money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings
Bank and secured the consent of the President thereof for her to pay the
arrears on the mortgage and to continue the payment of the installments as
they fall due. The amount in arrears reached a total sum of P247.26. But
because respondent Poncio had previously told her that the money, needed
was only P200.00, only the latter amount was brought by petitioner
constraining respondent Jose Poncio to withdraw the sum of P47.00 from his
bank deposit with Republic Savings Bank. But the next day, petitioner
refunded to Poncio the sum of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the presence of a
witness, made and executed a document in the Batanes dialect, which,
translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living on the lot
sold by him to me, Rosario Carbonell, until after one year during which time
he will not pa anything. Then if after said one can he could not find an place
where to move his house, he could still continue occupying the site but he
should pay a rent that man, be agreed.
(Sgd)
(Sgd.)
(Sgd)
Witness

JOSE
ROSARIO
CONSTANCIO

PONCIO
CARBONELL
MEONADA

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes
Islands, to prepare the formal deed of sale, which she brought to respondent
Poncio together with the amount of some P400.00, the balance she still had
to pay in addition to her assuming the mortgaged obligation to Republic
Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told
petitioner that he could not proceed any more with the sale, because he had
already given the lot to respondent Emma Infants; and that he could not
26

SALES
withdraw from his deal with respondent Mrs. Infante, even if he were to go
to jail. Petitioner then sought to contact respondent Mrs. Infante but the latter
refused to see her.

started only in 1959 years after the litigation actually began and during its
pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the
lot with a gate.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second

amended complaint against private respondents, praying that she be declared
the lawful owner of the questioned parcel of land; that the subsequent sale to
respondents Ramon R. Infante and Emma L. Infante be declared null and
void, and that respondent Jose Poncio be ordered to execute the
corresponding deed of conveyance of said land in her favor and for damages
and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).

Petitioner then consulted Atty. Jose Garcia, who advised her to present an
adverse claim over the land in question with the Office of the Register of
Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of
Deeds and demand letters to private respondents Jose Poncio and Emma
Infante.
In his answer to the complaint Poncio admitted "that on January 30, 1955,
Mrs. Infante improved her offer and he agreed to sell the land and its
improvements to her for P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955, respondent
Poncio indeed bound himself to sell to his corespondent Emma Infante, the
property for the sum of P2,357.52, with respondent Emma Infante still
assuming the existing mortgage debt in favor of Republic Savings Bank in
the amount of P1,177.48. Emma Infante lives just behind the houses of
Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of
sale in favor of respondent Mrs. Infante in the total sum of P3,554.00 and on
the same date, the latter paid Republic Savings Bank the mortgage
indebtedness of P1,500.00. The mortgage on the lot was eventually
discharged.
Informed that the sale in favor of respondent Emma Infante had not yet been
registered, Atty. Garcia prepared an adverse claim for petitioner, who signed
and swore to an registered the same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was registered only
on February 12, 1955. As a consequence thereof, a Transfer Certificate of
Title was issued to her but with the annotation of the adverse claim of
petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved,
covered the same with 500 cubic meters of garden soil and built therein a
wall and gate, spending the sum of P1,500.00. She further contracted the
services of an architect to build a house; but the construction of the same

Respondents first moved to dismiss the complaint on the ground, among

others, that petitioner's claim is unenforceable under the Statute of Frauds,
the alleged sale in her favor not being evidenced by a written document (pp.
7-13, rec. on appeal in the C.A.); and when said motion was denied without
prejudice to passing on the question raised therein when the case would be
tried on the merits (p. 17, ROA in the C.A.), respondents filed separate
answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA
in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of the
land in question to her by respondent Poncio, part of which evidence was the
agreement written in the Batanes dialect aforementioned, respondent Infantes
objected to the presentation by petitioner of parole evidence to prove the
alleged sale between her and respondent Poncio. In its order of April 26,
1966, the trial court sustained the objection and dismissed the complaint on
the ground that the memorandum presented by petitioner to prove said sale
does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme Court
(G.R. No. L-11231) which ruled in a decision dated May 12, 1958, that the
Statute of Frauds, being applicable only to executory contracts, does not
apply to the alleged sale between petitioner and respondent Poncio, which
petitioner claimed to have been partially performed, so that petitioner is
entitled to establish by parole evidence "the truth of this allegation, as well as
the contract itself." The order appealed from was thus reversed, and the case
remanded to the court a quo for further proceedings (pp. 26-49, ROA in the
C.A.).
After trial in the court a quo; a decision was, rendered on December 5, 1962,
declaring the second sale by respondent Jose Poncio to his co-respondents
27

SALES
Ramon Infante and Emma Infante of the land in question null and void and
ordering respondent Poncio to execute the proper deed of conveyance of said
land in favor of petitioner after compliance by the latter of her covenants
under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the

Special Division of Five, which motion was denied by Minute Resolution of
December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for
reconsideration) [Appendix "C" of Petition].

On January 23, 1963, respondent Infantes, through another counsel, filed a

motion for re-trial to adduce evidence for the proper implementation of the
court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in
the C.A.), which motion was opposed by petitioner for being premature (pp.
61-64, ROA in the C.A.). Before their motion for re-trial could be resolved,
respondent Infantes, this time through their former counsel, filed another
motion for new trial, claiming that the decision of the trial court is contrary to
the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was
also opposed by petitioner (pp. 78-89, ROA in the C.A.).

Hence, this appeal by certiorari.

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which rehearing only the respondents introduced additional evidence consisting
principally of the cost of improvements they introduced on the land in
question (p. 9, ROA in the C.A.).

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 (emphasis
supplied).

After the re-hearing, the trial court rendered a decision, reversing its decision
of December 5, 1962 on the ground that the claim of the respondents was
superior to the claim of petitioner, and dismissing the complaint (pp. 91-95,
ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed
to the respondent Court of Appeals (p. 96, ROA in the C.A.).

It is essential that the buyer of realty must act in good faith in registering his
deed of sale to merit the protection of the second paragraph of said Article
1544.

On November 2, 1967, the Court of Appeals (Fifth Division composed of

Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica,
speaking through Justice Magno Gatmaitan), rendered judgment reversing
the decision of the trial court, declaring petitioner therein, to have a superior
right to the land in question, and condemning the defendant Infantes to
reconvey to petitioner after her reimbursement to them of the sum of
P3,000.00 plus legal interest, the land in question and all its improvements
(Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on
the motion for reconsideration, the Appellate Court, three Justices (Villamor,
Esguerra and Nolasco) of Special Division of Five, granted said motion,
annulled and set aside its decision of November 2, 1967, and entered another
judgment affirming in toto the decision of the court a quo, with Justices
Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Article 1544, New Civil Code, which is decisive of this case, recites:
If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession thereof
in good faith, if it should movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property.

Unlike the first and third paragraphs of said Article 1544, which accord
preference to the one who first takes possession in good faith of personal or
real property, the second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good faith first
recorded" his right. Under the first and third paragraph, good faith must
characterize the act of anterior registration (DBP vs. Mangawang, et al., 11
SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If
there is inscription, as in the case at bar, prior registration in good faith is a
pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the
only buyer thereof and the title of Poncio was still in his name solely
encumbered by bank mortgage duly annotated thereon. Carbonell was not
aware and she could not have been aware of any sale of Infante as
there was no such sale to Infante then. Hence, Carbonell's prior purchase of
the land was made in good faith. Her good faith subsisted and continued to
28

SALES
exist when she recorded her adverse claim four (4) days prior to the
registration of Infantes's deed of sale. Carbonell's good faith did not cease
after Poncio told her on January 31, 1955 of his second sale of the same lot to
Infante. Because of that information, Carbonell wanted an audience with
Infante, which desire underscores Carbonell's good faith. With an aristocratic
disdain unworthy of the good breeding of a good Christian and good
neighbor, Infante snubbed Carbonell like a leper and refused to see her. So
Carbonell did the next best thing to protect her right she registered her
adversed claim on February 8, 1955. Under the circumstances, this recording
of her adverse claim should be deemed to have been done in good faith and
should emphasize Infante's bad faith when she registered her deed of sale
four (4) days later on February 12, 1955.
Bad faith arising from previous knowledge by Infante of the prior sale to
Carbonell is shown by the following facts, the vital significance and
evidenciary effect of which the respondent Court of Appeals either
overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she
was informed by Poncio that he sold the lot to Infante but several days before
Infante registered her deed of sale. This indicates that Infante knew from
Poncio and from the bank of the prior sale of the lot by Poncio to
Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante lives just
behind the house of Carbonell. Her refusal to talk to Carbonell could only
mean that she did not want to listen to Carbonell's story that she (Carbonell)
had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not
Poncio's saving deposit passbook Exhibit "1" Infantes] and Poncio's
copy of the mortgage contract, when Poncio sold the lot Carbonell who, after
paying the arrearages of Poncio, assumed the balance of his mortgaged
indebtedness to the bank, which in the normal course of business must have
necessarily informed Infante about the said assumption by Carbonell of the
mortgage indebtedness of Poncio. Before or upon paying in full the mortgage
indebtedness of Poncio to the Bank. Infante naturally must have demanded
from Poncio the delivery to her of his mortgage passbook as well as Poncio's
mortgage contract so that the fact of full payment of his bank mortgage will
be entered therein; and Poncio, as well as the bank, must have inevitably
informed her that said mortgage passbook could not be given to her because
it was already delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of
the mortgage contract at the time he executed a deed of sale in favor of the
Infantes and when the Infantes redeemed his mortgage indebtedness from the
bank, Poncio would have surrendered his mortgage passbook and his copy of
the mortgage contract to the Infantes, who could have presented the same as
exhibits during the trial, in much the same way that the Infantes were able to
present as evidence Exhibit "1" Infantes, Poncio's savings deposit
passbook, of which Poncio necessarily remained in possession as the said
deposit passbook was never involved in the contract of sale with assumption
of mortgage. Said savings deposit passbook merely proves that Poncio had to
withdraw P47.26, which amount was tided to the sum of P200.00 paid by
Carbonell for Poncio's amortization arrearages in favor of the bank on
January 27, 1955; because Carbonell on that day brought with her only
P200.00, as Poncio told her that was the amount of his arrearages to the bank.
But the next day Carbonell refunded to Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage
passbook and that the said mortgage passbook was already in possession of
Carbonell, should have compelled Infante to inquire from Poncio why he was
no longer in possession of the mortgage passbook and from Carbonell why
she was in possession of the same (Paglago, et. al vs. Jara et al 22 SCRA
1247, 1252-1253). The only plausible and logical reason why Infante did not
bother anymore to make such injury , w because in the ordinary course of
business the bank must have told her that Poncio already sold the lot to
Carbonell who thereby assumed the mortgage indebtedness of Poncio and to
whom Poncio delivered his mortgage passbook. Hoping to give a semblance
of truth to her pretended good faith, Infante snubbed Carbonell's request to
talk to her about the prior sale to her b Poncio of the lot. As aforestated, this
is not the attitude expected of a good neighbor imbued with Christian charity
and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was
accordingly annotated on Poncio's title, four [4] days before Infante
registered on February 12, 1955 her deed of sale executed on February 2,
1955. Here she was again on notice of the prior sale to Carbonell. Such
registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta,
L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court
of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell
offered to buy the lot at P15.00 per square meter, which offers he rejected as
he believed that his lot is worth at least P20.00 per square meter. It is
29

SALES
therefore logical to presume that Infante was told by Poncio and
consequently knew of the offer of Carbonell which fact likewise should have
put her on her guard and should have compelled her to inquire from Poncio
whether or not he had already sold the property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in
the preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and
Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer:
... that he had consistently turned down several offers, made by plaintiff, to
buy the land in question, at P15 a square meter, for he believes that it is
worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to
buy the land at P15 a square meter; that, on or about January 27, 1955,
Poncio was advised by plaintiff that should she decide to buy the property at
P20 a square meter, she would allow him to remain in the property for one
year; that plaintiff then induced Poncio to sign a document, copy of which if
probably the one appended to the second amended complaint; that Poncio
signed it 'relying upon the statement of the plaintiff that the document was a
permit for him to remain in the premises in the event defendant decided to
sell the property to the plaintiff at P20.00 a square meter'; that on January
30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its
improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell
his property, worth at least P4,000, for the paltry sum P1,177.48, the amount
of his obligation to the Republic Saving s Bank; and that plaintiff's action is
barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).
II
EXISTENCE
OF
THE
DULY ESTABLISHED

PRIOR

SALE

TO

CARBONELL

(1) In his order dated April 26, 1956 dismissing the complaint on the ground
that the private document Exhibit "A" executed by Poncio and Carbonell and
witnessed by Constancio Meonada captioned "Contract for One-half Lot
which I Bought from Jose Poncio," was not such a memorandum in writing
within the purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in the
property which he had sold to the plaintiff. There is no mention of the
reconsideration, a description of the property and such other essential
elements of the contract of sale. There is nothing in the memorandum which
would tend to show even in the slightest manner that it was intended to be an

evidence of contract sale. On the contrary, from the terms of the

memorandum, it tends to show that the sale of the property in favor of the
plaintiff is already an accomplished act. By the very contents of the
memorandum itself, it cannot therefore, be considered to be the
memorandum which would show that a sale has been made by Poncio in
favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial
court, to repeat the said memorandum states "that Poncio is allowed to stay
in the property which he had sold to the plaintiff ..., it tends to show that the
sale of the property in favor of the plaintiff is already an accomplished
act..."
(2) When the said order was appealed to the Supreme Court by Carbonell in
the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and
Emma
Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice,
speaking for a unanimous Court, reversed the aforesaid order of the trial
court dismissing the complaint, holding that because the complaint alleges
and the plaintiff claims that the contract of sale was partly performed, the
same is removed from the application of the Statute of Frauds and Carbonell
should be allowed to establish by parol evidence the truth of her allegation of
partial performance of the contract of sale, and further stated:
Apart from the foregoing, there are in the case at bar several circumstances
indicating that plaintiff's claim might not be entirely devoid of factual basis.
Thus, for instance, Poncio admitted in his answer that plaintiff had offered
several times to purchase his land.
Again, there is Exhibit A, a document signed by the defendant. It is in the
Batanes dialect, which, according to plaintiff's uncontradicted evidence, is
the one spoken by Poncio, he being a native of said region. Exhibit A states
that Poncio would stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a place where to
transfer his house thereon, he may remain upon. Incidentally, the allegation
in Poncio's answer to the effect that he signed Exhibit A under the belief that
it "was a permit for him to remain in the premises in the" that "he decided to
sell the property" to the plaintiff at P20 a sq. m." is, on its face, somewhat
difficult to believe. Indeed, if he had not decided as yet to sell the land to
plaintiff, who had never increased her offer of P15 a square meter, there was
no reason for Poncio to get said permit from her. Upon the other hand, if
plaintiff intended to mislead Poncio, she would have caused Exhibit A to be
drafted, probably, in English , instead of taking the trouble of seeing to it that
it was written precisely in his native dialect, the Batanes. Moreover, Poncio's
30

SALES
signature on Exhibit A suggests that he is neither illiterate nor so ignorant as
to sign document without reading its contents, apart from the fact that
Meonada had read Exhibit A to him and given him a copy thereof, before he
signed thereon, according to Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any relation to her
claim that there has been partial performance of the supposed contract of
sale, is the notation of the sum of P247.26 in the bank book of defendant Jose
Poncio. The noting or jotting down of the sum of P247.26 in the bank book
of Jose Poncio does not prove the fact that the said amount was the purchase
price of the property in question. For all we knew, the sum of P247.26 which
plaintiff claims to have paid to the Republic Savings Bank for the account of
the defendant, assuming that the money paid to the Republic Savings Bank
came from the plaintiff, was the result of some usurious loan or
accomodation, rather than earnest money or part payment of the land. Neither
is it competent or satisfactory evidence to prove the conveyance of the land
in question the fact that the bank book account of Jose Poncio happens to be
in the possession of the plaintiff. (Defendants-Appellees' brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in plaintiffs
possession, or whether there is any relation between the P247.26 entry
therein and the partial payment of P247.26 allegedly made by plaintiff to
Poncio on account of the price of his land, if we do not allow the plaintiff to
explain it on the witness stand? Without expressing any opinion on the merits
of plaintiff's claim, it is clear, therefore, that she is entitled , legally as well
as from the viewpoint of equity, to an opportunity to introduce parol evidence
in support of the allegations of her second amended complaint. (pp. 46-49,
ROA, emphasis supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale
in favor of the Infantes and ordering Poncio to execute a deed of conveyance
in favor of Carbonell, the trial judge found:
... A careful consideration of the contents of Exh. 'A' show to the satisfaction
of the court that the sale of the parcel of land in question by the defendant
Poncio in favor of the plaintiff was covered therein and that the said Exh. "a'
was also executed to allow the defendant to continue staying in the premises
for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him
to me' and having been written originally in a dialect well understood by the
defendant Poncio, he signed the said Exh. 'A' with a full knowledge and

consciousness of the terms and consequences thereof. This therefore,

corroborates the testimony of the plaintiff Carbonell that the sale of the land
was made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of the plaintiff,
when the latter paid P247.26 to the Republic Savings Bank on account of
Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of
the defendant Poncio's passbook of the Republic Savings Bank also adds
credibility to her testimony. The defendant contends on the other hand that
the testimony of the plaintiff, as well as her witnesses, regarding the sale of
the land made by Poncio in favor of the plaintiff is inadmissible under the
provision of the Statute of Fraud based on the argument that the note Exh.
"A" is not the note or memorandum referred to in the to in the Statute of
Fraud. The defendants argue that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to qualify it as the note or memorandum
referred to therein and open the way for the presentation of parole evidence
to prove the fact contained in the note or memorandum. The defendant
argues that there is even no description of the lot referred to in the note,
especially when the note refers to only one half lot. With respect to the latter
argument of the Exhibit 'A', the court has arrived at the conclusion that there
is a sufficient description of the lot referred to in Exh. 'A' as none other than
the parcel of land occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. "A". For a while, this
court had that similar impression but after a more and thorough consideration
of the context in Exh. 'A' and for the reasons stated above, the Court has
arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on
January 20, 1965 another decision dismissing the complaint, although he
found
1. That on January 27, 1955, the plaintiff purchased from the defendant
Poncio a parcel of land with an area of 195 square meters, more or less,
covered by TCT No. 5040 of the Province of Rizal, located at San Juan del
Monte, Rizal, for the price of P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to writing except
for a short note or memorandum Exh. A, which also recited that the
defendant Poncio would be allowed to continue his stay in the premises,
among other things, ... (pp. 91-92, ROA, emphasis supplied).

31

SALES
From such factual findings, the trial Judge confirms the due execution of
Exhibit "A", only that his legal conclusion is that it is not sufficient to
transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the
Court of Appeals composed of Justices Esguerra (now Associate Justice of
the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the
Court of Appeals found that:
... the testimony of Rosario Carbonell not having at all been attempted to be
disproved by defendants, particularly Jose Poncio, and corroborated as it is
by the private document in Batanes dialect, Exhibit A, the testimony being to
the effect that between herself and Jose there had been celebrated a sale of
the property excluding the house for the price of P9.50 per square meter, so
much so that on faith of that, Rosario had advanced the sum of P247.26 and
binding herself to pay unto Jose the balance of the purchase price after
deducting the indebtedness to the Bank and since the wording of Exhibit
A, the private document goes so far as to describe their transaction as one of
sale, already consummated between them, note the part tense used in the
phrase, "the lot sold by him to me" and going so far even as to state that from
that day onwards, vendor would continue to live therein, for one year, 'during
which time he will not pay anything' this can only mean that between
Rosario and Jose, there had been a true contract of sale, consummated by
delivery constitutum possession, Art. 1500, New Civil Code;vendor's
possession having become converted from then on, as a mere tenant of
vendee, with the special privilege of not paying rental for one year, it is
true that the sale by Jose Poncio to Rosario Carbonell corroborated
documentarily only by Exhibit A could not have been registered at all, but it
was a valid contract nonetheless, since under our law, a contract sale is
consensual, perfected by mere consent, Couto v. Cortes, 8 Phil 459, so much
so that under the New Civil Code, while a sale of an immovable is ordered to
be reduced to a public document, Art. 1358, that mandate does not render an
oral sale of realty invalid, but merely incapable of proof, where still
executory and action is brought and resisted for its performance, 1403, par. 2,
3; but where already wholly or partly executed or where even if not yet, it is
evidenced by a memorandum, in any case where evidence to further
demonstrate is presented and admitted as the case was here, then the oral
sale becomes perfectly good, and becomes a good cause of action not only to
reduce it to the form of a public document, but even to enforce the contract in
its entirety, Art. 1357; and thus it is that what we now have is a case
wherein on the one hand Rosario Carbonell has proved that she had an
anterior sale, celebrated in her favor on 27 January, 1955, Exhibit

A, annotated as an adverse claim on 8 February, 1955, and on other, a sale is

due form in favor of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante,
and registered in due form with title unto her issued on 12 February, 1955;
the vital question must now come on which of these two sales should prevail;
... (pp. 74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals
Justice Esguerra (now a member of this Court), concurred in by Justices
Villamor and Nolasco, constituting the majority of a Special Division of
Five, the Court of Appeals, upon motion of the Infantes, while reversing the
decision of November 2, 1967 and affirming the decision of the trial court of
January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27,
1955, although it did not consider the same as satisfying "the essential
elements of a contract of sale," because it "neither specifically describes the
property and its boundaries, nor mention its certificate of title number, nor
states the price certain to be paid, or contrary to the express mandate of
Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan
maintains his decision of November 2, 1967 as well as his findings of facts
therein, and reiterated that the private memorandum Exhibit "A", is a
perfected sale, as a sale is consensual and consummated by mere consent,
and is binding on and effective between the parties. This statement of the
principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION
IN FAVOR OF CARBONELL

OR

PRICE

FOR

THE

SALE

It should be emphasized that the mortgage on the lot was about to be

foreclosed by the bank for failure on the part of Poncio to pay the
amortizations thereon. To forestall the foreclosure and at the same time to
realize some money from his mortgaged lot, Poncio agreed to sell the same
to Carbonell at P9.50 per square meter, on condition that Carbonell [1]
should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the
amount of P247.26 to the bank; and [2] should assume his mortgage
indebtedness. The bank president agreed to the said sale with assumption of
mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of
P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank
because that was the amount that Poncio told her as his arrearages and
32

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Poncio advanced the sum of P47.26, which amount was refunded to him by
Carbonell the following day. This conveyance was confirmed that same day,
January 27, 1955, by the private document, Exhibit "A", which was prepared
in the Batanes dialect by the witness Constancio Meonada, who is also from
Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the
right to continue staying on the land without paying any rental for one year,
after which he should pay rent if he could not still find a place to transfer his
house. All these terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and not merely the
sum of P200.00, for the sale of Poncio to Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante, reneged
on his commitment to Carbonell and told Carbonell, who confronted him
about it, that he would not withdraw from his deal with Infante even if he is
sent to jail The victim, therefore, "of injustice and outrage is the widow
Carbonell and not the Infantes, who without moral compunction exploited
the greed and treacherous nature of Poncio, who, for love of money and
without remorse of conscience, dishonored his own plighted word to
Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of
Emma Infante from the time she enticed Poncio to dishonor his contract with
Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a
much higher price than the price for which he sold the same to Carbonell.
Being guilty of bad faith, both in taking physical possession of the lot and in
recording their deed of sale, the Infantes cannot recover the value of the
improvements they introduced in the lot. And after the filing by Carbonell of
the complaint in June, 1955, the Infantes had less justification to erect a
building thereon since their title to said lot is seriously disputed by Carbonell
on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A"
under the belief that it was a permit for him to remain in the premises in ease
he decides to sell the property to Carbonell at P20.00 per square meter, the
observation of the Supreme Court through Mr. Chief Justice Concepcion in
G.R. No. L-11231, supra, bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect that he signed
Exhibit A under the belief that it 'was a permit for him to remain in the
premises in the event that 'he decided to sell the property' to the plaintiff at

P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he had
not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit
from her. Upon the they if plaintiff intended to mislead Poncio, she would
have Exhibit A to be drafted, probably, in English, instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is
neither illiterate nor so ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had read Exhibit A to him-and
given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony. (pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965,
which he reiterated in his dissent from the resolution of the majority of the
Special Division. of Five on October 30, 1968, Exhibit A, the private
document in the Batanes dialect, is a valid contract of sale between the
parties, since sale is a consensual contract and is perfected by mere consent
(Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between
the parties and accords to the vendee the right to compel the vendor to
execute the proper public document As a matter of fact, Exhibit A, while
merely a private document, can be fully or partially performed, to it from the
operation of the statute of frauds. Being a all consensual contract, Exhibit A
effectively transferred the possession of the lot to the vendee Carbonell
by constitutum possessorium (Article 1500, New Civil Code); because
thereunder the vendor Poncio continued to retain physical possession of the
lot as tenant of the vendee and no longer as knew thereof. More than just the
signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as
witness to fact the contract of sale, the transition was further confirmed when
Poncio agreed to the actual payment by at Carbonell of his mortgage
arrearages to the bank on January 27, 1955 and by his consequent delivery of
his own mortgage passbook to Carbonell. If he remained owner and
mortgagor, Poncio would not have surrendered his mortgage passbook to'
Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN
THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe
the disputed lot as the subject matter of the sale, was correctly disposed of in
the first decision of the trial court of December 5, 1962, thus: "The defendant
33

SALES
argues that there is even no description of the lot referred to in the note (or
memorandum), especially when the note refers to only one-half lot. With
respect to the latter argument of the defendant, plaintiff points out that onehalf lot was mentioned in Exhibit 'A' because the original description carried
in the title states that it was formerly part of a bigger lot and only segregated
later. The explanation is tenable, in (sic) considering the time value of the
contents of Exh. 'A', the court has arrived at the conclusion that there is
sufficient description of the lot referred to in Exh. As none other than the
parcel of lot occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. 'A'. For a while, this
court had that similar impression but after a more and through consideration
of the context in Exh. 'A' and for the reasons stated above, the court has
arrived to (sic) the conclusion stated earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same
area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by
him to the Republic Savings Bank. The transaction therefore between Poncio
and Carbonell can only refer and does refer to the lot involved herein. If
Poncio had another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any rent for one
year and thereafter to pay rental in case he cannot find another place to
transfer his house.

improvements if such removal can be done without damage to the land,

unless the person with the superior right elects to pay for the useful
improvements or reimburse the expenses therefor under paragraph 2 of
Article 546. These provisions seem to imply that the possessor in bad faith
has neither the right of retention of useful improvements nor the right to a
refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by the
possessor in bad faith for pure luxury or mere pleasure only by paying the
value thereof at the time he enters into possession (Article 549 NCC), as a
matter of equity, the Infantes, although possessors in bad faith, should be
allowed to remove the aforesaid improvements, unless petitioner Carbonell
chooses to pay for their value at the time the Infantes introduced said useful
improvements in 1955 and 1959. The Infantes cannot claim reimbursement
for the current value of the said useful improvements; because they have
been enjoying such improvements for about two decades without paying any
rent on the land and during which period herein petitioner Carbonell was
deprived of its possession and use.

It appearing that the Infantes are possessors in bad faith, their rights to the
improvements they introduced op the disputed lot are governed by Articles
546 and 547 of the New Civil Code. Their expenses consisting of P1,500.00
for draining the property, filling it with 500 cubic meters of garden soil,
building a wall around it and installing a gate and P11,929.00 for erecting a b
' bungalow thereon, are useful expenditures, for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277;
Valencia vs. Ayala de Roxas, 13 Phil. 45).

WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE

OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY
REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY
DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN
QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO
PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND
FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS
FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF
DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER
CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE
RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH
CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE
NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER
CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO
CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY
HER TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE
THOUSAND FIVE HUNDRED PESOS (P1,500.00).

Under the second paragraph of Article 546, the possessor in good faith can
retain the useful improvements unless the person who defeated him in his
possession refunds him the amount of such useful expenses or pay him the
increased value the land may have acquired by reason thereof. Under Article
547, the possessor in good faith has also the right to remove the useful

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR

AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL
ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE

While petitioner Carbonell has the superior title to the lot, she must however
refund to respondents Infantes the amount of P1,500.00, which the Infantes
paid to the Republic Savings Bank to redeem the mortgage.

34

SALES
AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTYNINE PESOS (P13,429.00) WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL
FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED
PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS
DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH
THE
RESPONDENTS
INFANTES
MAY
REMOVE
THEIR
AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE
FROM THE EXPIRATION OF THE THREE (3) MONTHS GIVEN
PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL
IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
Castro, C.J, Aquino and Martin, JJ., concur.

So it was that when the first buyer Carbonell saw the seller a few days
afterwards bringing the formal deed of sale for the seller's signature and the
balance of the agreed cash payment, the seller told her that he could not
proceed anymore with formalizing the first sale because he had already
formalized the second sale in favor of the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of
sale, she did the next best thing to protect her legal rights and registered on
February 8, 1955 with the Rizal Register of Deeds her adverse claim as first
buyer entitled to the property. The second buyer Infante registered the deed
of sale in her favor with the Rizal Register of Deeds only on February 12,
1955 (notwithstanding its having been executed ten days earlier on February
2, 1955), and therefore the transfer certificate of title issued in her favor
carried the duly annotated adverse claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the
cited code article, the first buyer Carbonell as also the first registrant is
legally entitled to the property.

Separate Opinions

TEEHANKEE, J., concurring:

I concur. My concurrence proceeds from the same premise as the dissenting
opinion of Justice Munoz Palma that both the conflicting buyers of the real
property in question, namely, petitioner Rosario Carbonell as the first buyer
may be deemed purchasers in good faith at the respective dates of their
purchase.
The answer to the question of who between the two buyers in good faith
should prevail is provided in the second paragraph of Article 1544 of the
Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that
"the ownership of the immovable property shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private
memorandum of sale of the property in favor of the first buyer Carbonell,
However, six days later on February 2, 1955, the seller sold the property for a
second time for an improved price, this time executing a formal registrable
deed of sale in favor of the second buyer Infante.

The fact that Carbonell registered only an adverse claim as she had no
registrable deed of sale is of no moment. The facts of record amply show that
she had a written memorandum of sale, which was partially executed with
the advance payment made by her for the seller's mortgage account with the
bank, and which was perfected and binding in law by their accord on the
subject matter and price. Carbonell could in law enforce in court her rights as
first buyer under the memorandum agreement and compel the seller to
execute in her favor a formal registrable deed of sale which would relate
back to the date of the original memorandum agreement.
And under the cited code provision, Carbonell had to duly register such
adverse claim as first buyer, as otherwise the subsequent registration of the
second buyer's deed of sale would have obliterated her legal rights and
enable the seller to achieve his fraudulent act of selling the property a second
time for a better price in derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in
Carbonell's favor and (as was only to be expected) informed her that he could
not proceed anymore with the sale because he had sold it for a second time
for a better price did not convert her prior registration of her adverse claim
into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully
sold his property for a second time cannot work out to his own advantage and
35

SALES
to the detriment of the innocent first buyer (by being considered as an
"automatic registration" of the second sale) and defeat the first buyer's right
of priority, in time in right and in registration.
The governing principle here is prius tempore, portior jure 2 (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the
second sale ahead of the first. 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 other so 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.
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 buyer's rights)
from the time of acquisition until the title is transferred to him by registration
or failing registration, by delivery of possession. The second buyer must
showcontinuing good faith and innocence or lack of knowledge of the first
sale until his contract ripens into full ownership through prior registration as
provided by law.
The above principles were aptly restated in a 1948 Court of Appeals decision
in the case of Gallardo, vs. Gallardopenned by Justice J.B.L. Reyes, then a
member of the appellate court. 3 The facts of that case and the case at bar are
virtually Identical, except that the earlier case was decided under the old
Civil Code (Article 1473 thereof now reproduced as Article 1544 of the
present Civil Code), and the ratio decidendi thereof, mutatis mutandis, is
fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows that before a second
vendee can obtain priority over the first, it is indispensable that he should
have acted in good faith, (that is to say, in ignorance of the rights of the first
vendee's rights) until the title is transferred to him by actual or constructive
delivery of the thing sold. This is the price exacted by law for his being able
to displace the first vendee; and the mere fact that the second contract of sale
was perfected in good faith is not sufficient if, before the title passes, the
second vendee acquires knowledge of the first transaction. That the second
buyer innocently agreed to purchase the land may protect him against

responsibility of conspiring with his vendor to defraud the established rights

of the first purchaser; but to defeat the latter's priority in time (based on the
old principle "prius tempore, potior jure," first in time, better in right) the
good faith or innocence of the posterior vendee must needs continue until his
contract ripens into ownership by tradition or recording (Palanca vs. Director
of lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was executed after
that of Caoagas is of no moment, the contract of sale being perfected and
binding by mere accord on the subject matter and the price, even if neither is
delivered (Article 1450, Civil Code), the deed of conveyance will relate
back to the date of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955)
concededly preceded the second buyer's registration (February 12, 1955) by
four days, and therefore, as provided by the Civil Code, the first buyer
thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under
review should be affirmed, this dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his 195square meter lot located at V. Again St., San Juan, Rizal, covered by Transfer
Certificate of Title No. 5040, the solution to which is found in Art. 1544 of
the Civil Code, more particularly the second paragraph thereof which
provides that should the thing sold be immovable property, the ownership
shall belong to the person acquiring it who in good with first recorded it in
the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and respondent
Emma Infante, are both purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at the
time negotiations for the purchase of the lot were being made between her
and the vendor, Jose Poncio, as of January 27, 1955, there was no indication
at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an
express finding of the trial court in its decision of January 20, 1965, to the
effect that when the vendor and purchaser. Infante consummated the sale on
or about January 29, 1955, an examination of the original of T.C.T. 5040 on
36

SALES
file with the Register of Deeds of Rizal as well as the owner's duplicate
revealed no annotation of any encumbrance or lien other than the mortgage
in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the
findings of fact of the Court of Appeals given in the decision penned by then
Justice Salvador V. Esguerra as well as in the first decision written by Justice
Magno Gatmaitan which subsequently became the basis of the dissenting
opinion to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it must have to
be remembered that the first vendee, Rosario Carbonell, certainly was an
innocent purchaser ... but also must it be remembered that Emma L. Infante,
when she bought the property on 2 February, 1955, under Exhibit 3-Infante,
neither had she before then been, preliminary informed of the first sate to
Rosario ...; indeed as Emma has testified on this detail, it is easy to accept
her declaration:
Q. When Mr. Jose Poncio offered you this land in question, did he tell you
that the land was sold or otherwise promised to Mrs. Carbonell?
A. Of course not, otherwise will never buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees,
Rosario and Emma, were innocent and had acted in the best of good faith ...
(pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo; see also
p. 7 of his dissenting opinion found on p. 95, rollo).
Departing from a well-entrenched rule set down in a long array of decisions
of this Court that factual findings of the trial court and of the Court -of
Appeals are generally binding and conclusive, 1 and that on appeal by
certiorari, questions of fact are not to be determined nor reviewed by Us 2 the
Majority Opinion of my colleagues however undertakes a fact-finding
process of its own, and draws the conclusion that Emma Infante was a buyer
in bad faith because, among other things: (a) Emma allegedly refused to talk
to Rosario Carbonell when the latter went to see her about the sale of the lot,
which "is not the attitude expected of a good neighbor imbued with Christian
charity and goodwill as well as a clean conscience" (p. 10, Majority
Opinion); (b) "(B)efore or upon paying in full the mortgage indebtedness of
Poncio to the bank. Infante naturally must have demanded from Poncio the
delivery to her of his mortgage passbook as well as Poncio's mortgage
contract. . and Poncio as well as the bank, must have inevitably informed
here that said mortgage passbook could not be given to her because it was

already delivered to Carbonell" (p. 9, Ibid); and (c) "... (T)he victim,
therefore, 'of injustice and outrage is the widow Carbonell and not the
Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without remorse of
conscience, dishonored his own plighted word to Carbonell, his own
cousin. ... Inevitably evident therefore from the foregoing discussion, is the
bad faith of Emma Infantefrom the time she enticed Poncio to dishonor his
contract with Carbonell, and instead to sell the lot to her (Infante) by
offering Poncio a much higher price than the price for which he sold the
same to Carbonell ..." (p. 20, Majority Opinion; all italicized portions
supplied) all of which are unsupported by the evidence and diametrically
contrary to the findings of the court a quo and the appellate court sustaining
the good faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next
question to be resolved is who of the twofirst registered her purchase or
title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer
bought the property in good faith, but that the registration of her title must
also be accomplished in good faith. This requirement of good faith is not
only applicable to the second or subsequent purchaser but to the first as
well. 3
Construing and applying the second paragraph of Art. 1473 of the Spanish
Civil Code which has been adoptedverbatim in Art. 1544 of the Civil Code of
the Philippines, this Court in Leung Lee vs. FL Strong Machinery Co., et al
37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
title but contain no express requirement as to 'good faith' in relation to the
"inscription" of the property in the registry, it must he presumed that good
faith is not an essential requisite of registration in order that it may have the
effect contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the preferential
right secured under this article of the code upon an inscription of title in bad
faith. Such an interpretation placed upon the language of this section would
open wide the door to fraud and collusion. The public records cannot be
converted into instruments of fraud and oppression by one who secures an
inscription therein in bad faith. The force and effect given by law to an
inscription in a public record presupposes the good faith of him who enters
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such inscription; and rights created by statute, which are predicated upon an
inscription in a public registry, do not and cannot accrue under an inscription
"in bad faith," to the benefit of the person who thus makes the inscription.
(pp. 648-649, supra)
Good faith means "freedom from knowledge and circumstances which ought
to put a person on inquiry"; 3* it consists of an honest intention to abstain
from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a
title superior to that of Emma Infante for even if We were to concede that the
notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same was
not accomplished in good faith. This is obvious from occurrences narrated in
the Majority Opinion, thus: that on January 27, 1955, Carbonell and Jose
Poncio made and executed the memorandum of sale, Exhibit A; that
thereafter Carbonell asked Atty. Salvador Reyes to prepare the formal deed
of sale which she brought to Poncio together with the amount of some
P400.00, the balance she had to pay in addition to her assuming the mortgage
obligation to Republic Savings Bank; that upon arriving at Poncio's house the
latter told Carbonell that he could not proceed anymore with the sale because
he had already given the lot to Emma Infants; that onFebruary 5, 1955,
Carbonell saw Emma Infante erecting a wall around the lot with a gate; that
Carbonell consulted Atty. Jose Garcia who advised her to present an adverse
claim with the office of the Register of Deeds, and that being
informed that the sale in favor of Emma Infante had not yet been
registered, Atty. Garcia prepared the notice of adverse claim which was
signed and sworn to by Rosario Carbonell and registered on February 8,
1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim she
was, therefore, cognizant of facts which impaired her title to the property in
question, and taking advantage of the situation that the second purchaser had
not as yet registered her deed of sale, she went ahead of the second buyer and
annotated what was only in the nature of an adverse claim inasmuch as she
had no registrable document of sale at the time. That annotation of
Carbonell's adverse claim did not produce any legal effects as to place her in
a preferential situation to that of Infante, the second purchaser, for the simple
reason that a registration made in bad faith is equivalent to no registration at
all. It is a settled rule that the inscription in the registry, to be effective, must
be made in good faith. (Pena, supra, p. 164)

3. One last point to be considered is the theory advanced by the dissenting

opinion of Justice Gatmaitan that while Carbonell's registration of her
adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of the
latter's deed of sale there was already inscribed on the original of the title on
file with the Register of Deeds the adverse claim of Rosario Carbonell.
With due respect to the foregoing conclusion of highly respected Colleague, I
hold the view that the act of the registration of Infante's deed of sale
on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is,
the registration of Infantes purchase as against Carbonell when the latter
inquired knowledge of the second sale on or about January 27, 1955, when
she brought the memorandum of sale, Exh. A, to Jose Poncio and was
informed by the latter that he could not go through with the sale because he
had already sold it to Emma Infante, which information was bolstered by the
fact that Carbonell saw Infante erecting a wall around the lot on February 5.
We have long accepted the rule that knowledge is equivalent to
registration. What would be the purpose of registration other than to give
notice to interested parties and to the whole world of the existence of rights
or liens against the property under question?
What has been clearly and succinctly postulated in T. de Winkleman and
Winkleman vs. Veluz 1922, 43 Phil. 604, 609, is applicable to the case before
Us, and We quote therefrom:
. . . The purpose of registering an instrument relating to land, annuities,
mortgages, liens or any other class of real rights is to give notice to persons
interested of the existence of these various liens against the property. If the
parties interested have actual notice of the existence of such liens then the
necessity for registration does not exist. Neither can one who has actual
notice of existing liens acquire any rights in such property free from such
liens by the mere fact that such liens have not been proven recorded. (citing
Obras Pias vs. Devera Ignacio, 17 Phil. 45, 47).
We cannot overlook the fact that while it may be true that the vendor Poncio
had signed the memorandum, Exh. A, from which it may be implied that he
sold a lot to Carbonell, there were other things to be accomplished for
purposes of binding third parties, the lot in question being registered land,
such as the execution of a formal deed of sale. Such a document of sale was
never signed by Poncio for according to petitioner Carbonell, when she
38

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presented to Poncio the corresponding document together with the sum of
P400.00 which according to her was the balance of the purchase price after
she had assumed the mortgage with the Republic Bank, she was informed by
the vendor that the property had been sold to another. That sale was
confirmed when Carbonell saw Infante erecting a wall around the lot on
February 5, 1955. As of that moment when Carbonell had notice or actual
knowledge of the second sale in favor of Emma Infante a valid registration of
the latter's deed of sale was constituted as against Carbonell. Accordingly,
Infante has a preferential right to the property, the registration of her sale
having been effected in the foregoing manner, prior to the annotation of
Carbonell's adverse claim on February 8, 1955.
The circumstances of the present case are strikingly similar to the
hypothetical problem posed in Commentator Edgardo Paras' Book on the
Civil Code of the Philippines and I wholeheartedly concur with his solution
of the problem which is based on law. From him I quote: 6
A sold a parcel of land with a torrens title to B on January 5. A week later, A
sold the same land to C. Neither sale was registered. As soon as B learned of
the sale in favor of C, he (B) registered an adverse claim stating that he was
making the claim because the second sale was in fraud of his rights as first
buyer. Later, C registered the deed of sale that had been made in his favor.
Who is now the owner B or C?

On top of all these, equity is on the side of Emma Infante. Under the
Majority Opinion, Emma Infante stands to lose the lot she bought in good
faith which was fully paid for plus the building she erected thereon for which
she spent the total sun of a little less than P14,000.00, or equivalent to about
P40,000.00 at the time the case was decided by the Appellate Court,
considering that Rosario Carbonell is being given the option either to order
the removal of the house or to acquire it at P13,429.00. On this point I agree
with the following statement of Justice Esguerra who penned the decision of
the Appellate Court, thus:
It is indeed inequitable and re revolting to one's sense of justice and fairness
that Rosario Carbonell who paid out of her own money the sum of only
P200.00 to the Republic Savings Bank for the account of Jose Poncio, which
was the motivation for the execution of the private instrument, Exhibit A,
should have a superior right to the land involved. The property has been
improved at a great expense and a building of strong materials has been
constructed thereon Emma Infants ho spent for her lot and building the total
sum of P13,429.00 made, up of P11,929.00 for cost of land and
improvements and the building and P1,500.00 to discharge the mortgage in
favor of the Republic Savings Bank. with the present purchasing power of
the peso this aft i more than 13 years, would be not equivalent to about
P40,000.00. Courts should not lend a hand to the perpetration of such kind of
injustice and outrage (see page 88, rollo)

Ans. C is clearly the owner, although he was the second buyer. This is so, not
because of the registration of the sale itself but because of the AUTOMATIC
registration in his favor caused by Bs knowledge of the first sale (actual
knowledge being equivalent to registration). The purpose of registration is to
notify. This notification was done because of Bs knowledge. It is wrong to
assert that B was only trying to protect his right-for there was no more right
to be protected. He should have registered the sale BEFORE knowledge
came to him. It is now too late. It is clear from this that with respect to the
principle "actual knowledge is equivalent to registration of the sale about
which knowledge has been obtained' the knowledge may be that-of either
the FIRST or the SECOND buyer. (pp. 142-143, Vol. V, 1972 Ed.)

I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime,

et al., 217 p. 376; 377, that "equity is a right wiseneth that considerate all of
the particular circumstances of the case and is also tempered with the
sweetness of mercy." (quoting from St. Germain) In this case now before Us
there is no need to invoke mercy, for all that is required is a wise
consideration of the particular circumstances narrated above which warrant
a judgment in favor of respondents Infants.

Aside from the fact that the sale to Infante was considered registered prior to
the registration of Carbonell's notice of adverse claim, Infante also took
immediate physical possession of the property by erecting a fence with a gate
around the lot on February 5, at least tree days prior to Carbonell Is
registration on February 8, 1955.

Separate Opinions

With all the foregoing, I vote for the affirmance of the decision under review.

TEEHANKEE, J., concurring:

I concur. My concurrence proceeds from the same premise as the dissenting
opinion of Justice Munoz Palma that both the conflicting buyers of the real
property in question, namely, petitioner Rosario Carbonell as the first buyer
39

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may be deemed purchasers in good faith at the respective dates of their
purchase.
The answer to the question of who between the two buyers in good faith
should prevail is provided in the second paragraph of Article 1544 of the
Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that
"the ownership of the immovable property shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private
memorandum of sale of the property in favor of the first buyer Carbonell,
However, six days later on February 2, 1955, the seller sold the property for a
second time for an improved price, this time executing a formal registrable
deed of sale in favor of the second buyer Infante.
So it was that when the first buyer Carbonell saw the seller a few days
afterwards bringing the formal deed of sale for the seller's signature and the
balance of the agreed cash payment, the seller told her that he could not
proceed anymore with formalizing the first sale because he had already
formalized the second sale in favor of the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of
sale, she did the next best thing to protect her legal rights and registered on
February 8, 1955 with the Rizal Register of Deeds her adverse claim as first
buyer entitled to the property. The second buyer Infante registered the deed
of sale in her favor with the Rizal Register of Deeds only on February 12,
1955 (notwithstanding its having been executed ten days earlier on February
2, 1955), and therefore the transfer certificate of title issued in her favor
carried the duly annotated adverse claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the
cited code article, the first buyer Carbonell as also the first registrant is
legally entitled to the property.
The fact that Carbonell registered only an adverse claim as she had no
registrable deed of sale is of no moment. The facts of record amply show that
she had a written memorandum of sale, which was partially executed with
the advance payment made by her for the seller's mortgage account with the
bank, and which was perfected and binding in law by their accord on the
subject matter and price. Carbonell could in law enforce in court her rights as
first buyer under the memorandum agreement and compel the seller to
execute in her favor a formal registrable deed of sale which would relate
back to the date of the original memorandum agreement.

And under the cited code provision, Carbonell had to duly register such
adverse claim as first buyer, as otherwise the subsequent registration of the
second buyer's deed of sale would have obliterated her legal rights and
enable the seller to achieve his fraudulent act of selling the property a second
time for a better price in derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in
Carbonell's favor and (as was only to be expected) informed her that he could
not proceed anymore with the sale because he had sold it for a second time
for a better price did not convert her prior registration of her adverse claim
into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully
sold his property for a second time cannot work out to his own advantage and
to the detriment of the innocent first buyer (by being considered as an
"automatic registration" of the second sale) and defeat the first buyer's right
of priority, in time in right and in registration.
The governing principle here is prius tempore, portior jure 2 (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the
second sale ahead of the first. 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 other so 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.
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 buyer's rights)
from the time of acquisition until the title is transferred to him by registration
or failing registration, by delivery of possession. The second buyer must
showcontinuing good faith and innocence or lack of knowledge of the first
sale until his contract ripens into full ownership through prior registration as
provided by law.
The above principles were aptly restated in a 1948 Court of Appeals decision
in the case of Gallardo, vs. Gallardopenned by Justice J.B.L. Reyes, then a
member of the appellate court. 3 The facts of that case and the case at bar are
40

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virtually Identical, except that the earlier case was decided under the old
Civil Code (Article 1473 thereof now reproduced as Article 1544 of the
present Civil Code), and the ratio decidendi thereof, mutatis mutandis, is
fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows that before a second
vendee can obtain priority over the first, it is indispensable that he should
have acted in good faith, (that is to say, in ignorance of the rights of the first
vendee's rights) until the title is transferred to him by actual or constructive
delivery of the thing sold. This is the price exacted by law for his being able
to displace the first vendee; and the mere fact that the second contract of sale
was perfected in good faith is not sufficient if, before the title passes, the
second vendee acquires knowledge of the first transaction. That the second
buyer innocently agreed to purchase the land may protect him against
responsibility of conspiring with his vendor to defraud the established rights
of the first purchaser; but to defeat the latter's priority in time (based on the
old principle "prius tempore, potior jure," first in time, better in right) the
good faith or innocence of the posterior vendee must needs continue until his
contract ripens into ownership by tradition or recording (Palanca vs. Director
of lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was executed after
that of Caoagas is of no moment, the contract of sale being perfected and
binding by mere accord on the subject matter and the price, even if neither is
delivered (Article 1450, Civil Code), the deed of conveyance will relate
back to the date of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955)
concededly preceded the second buyer's registration (February 12, 1955) by
four days, and therefore, as provided by the Civil Code, the first buyer
thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under
review should be affirmed, this dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his 195square meter lot located at V. Again St., San Juan, Rizal, covered by Transfer
Certificate of Title No. 5040, the solution to which is found in Art. 1544 of
the Civil Code, more particularly the second paragraph thereof which
provides that should the thing sold be immovable property, the ownership

shall belong to the person acquiring it who in good with first recorded it in
the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and respondent
Emma Infante, are both purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at the
time negotiations for the purchase of the lot were being made between her
and the vendor, Jose Poncio, as of January 27, 1955, there was no indication
at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an
express finding of the trial court in its decision of January 20, 1965, to the
effect that when the vendor and purchaser. Infante consummated the sale on
or about January 29, 1955, an examination of the original of T.C.T. 5040 on
file with the Register of Deeds of Rizal as well as the owner's duplicate
revealed no annotation of any encumbrance or lien other than the mortgage
in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the
findings of fact of the Court of Appeals given in the decision penned by then
Justice Salvador V. Esguerra as well as in the first decision written by Justice
Magno Gatmaitan which subsequently became the basis of the dissenting
opinion to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it must have to
be remembered that the first vendee, Rosario Carbonell, certainly was an
innocent purchaser ... but also must it be remembered that Emma L. Infante,
when she bought the property on 2 February, 1955, under Exhibit 3-Infante,
neither had she before then been, preliminary informed of the first sate to
Rosario ...; indeed as Emma has testified on this detail, it is easy to accept
her declaration:
Q. When Mr. Jose Poncio offered you this land in question, did he tell you
that the land was sold or otherwise promised to Mrs. Carbonell?
A. Of course not, otherwise will never buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees,
Rosario and Emma, were innocent and had acted in the best of good faith ...
(pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo; see also
p. 7 of his dissenting opinion found on p. 95, rollo).
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Departing from a well-entrenched rule set down in a long array of decisions
of this Court that factual findings of the trial court and of the Court of
Appeals are generally binding and conclusive, 1 and that on appeal by
certiorari, questions of fact are not to be determined nor reviewed by Us 2 the
Majority Opinion of my colleagues however undertakes a fact-finding
process of its own, and draws the conclusion that Emma Infante was a buyer
in bad faith because, among other things: (a) Emma allegedly refused to talk
to Rosario Carbonell when the latter went to see her about the sale of the lot,
which "is not the attitude expected of a good neighbor imbued with Christian
charity and goodwill as well as a clean conscience" (p. 10, Majority
Opinion); (b) "(B)efore or upon paying in full the mortgage indebtedness of
Poncio to the bank. Infante naturally must have demanded from Poncio the
delivery to her of his mortgage passbook as well as Poncio's mortgage
contract. . and Poncio as well as the bank, must have inevitably informed
here that said mortgage passbook could not be given to her because it was
already delivered to Carbonell" (p. 9, Ibid); and (c) "... (T)he victim,
therefore, 'of injustice and outrage is the widow Carbonell and not the
Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without remorse of
conscience, dishonored his own plighted word to Carbonell, his own
cousin. ... Inevitably evident therefore from the foregoing discussion, is the
bad faith of Emma Infantefrom the time she enticed Poncio to dishonor his
contract with Carbonell, and instead to sell the lot to her (Infante) by
offering Poncio a much higher price than the price for which he sold the
same to Carbonell ..." (p. 20, Majority Opinion; all italicized portions
supplied) all of which are unsupported by the evidence and diametrically
contrary to the findings of the court a quo and the appellate court sustaining
the good faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next
question to be resolved is who of the twofirst registered her purchase or
title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer
bought the property in good faith, but that the registration of her title must
also be accomplished in good faith. This requirement of good faith is not
only applicable to the second or subsequent purchaser but to the first as
well. 3

Construing and applying the second paragraph of Art. 1473 of the Spanish
Civil Code which has been adoptedverbatim in Art. 1544 of the Civil Code of
the Philippines, this Court in Leung Lee vs. FL Strong Machinery Co., et al37
Phil. 644, declared:
It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
title but contain no express requirement as to 'good faith' in relation to the
"inscription" of the property in the registry, it must he presumed that good
faith is not an essential requisite of registration in order that it may have the
effect contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the preferential
right secured under this article of the code upon an inscription of title in bad
faith. Such an interpretation placed upon the language of this section would
open wide the door to fraud and collusion. The public records cannot be
converted into instruments of fraud and oppression by one who secures an
inscription therein in bad faith. The force and effect given by law to an
inscription in a public record presupposes the good faith of him who enters
such inscription; and rights created by statute, which are predicated upon an
inscription in a public registry, do not and cannot accrue under an inscription
"in bad faith," to the benefit of the person who thus makes the inscription.
(pp. 648-649,supra)
Good faith means "freedom from knowledge and circumstances which ought
to put a person on inquiry"; 3* it consists of an honest intention to abstain
from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a
title superior to that of Emma Infante for even if We were to concede that the
notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same was
not accomplished in good faith. This is obvious from occurrences narrated in
the Majority Opinion, thus: that on January 27, 1955, Carbonell and Jose
Poncio made and executed the memorandum of sale, Exhibit A; that
thereafter Carbonell asked Atty. Salvador Reyes to prepare the formal deed
of sale which she brought to Poncio together with the amount of some
P400.00, the balance she had to pay in addition to her assuming the mortgage
obligation to Republic Savings Bank; that upon arriving at Poncio's house the
latter told Carbonell that he could not proceed anymore with the sale because
he had already given the lot to Emma Infants; that onFebruary 5, 1955,
Carbonell saw Emma Infante erecting a wall around the lot with a gate; that
Carbonell consulted Atty. Jose Garcia who advised her to present an adverse
42

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claim with the office of the Register of Deeds, and that being
informed that the sale in favor of Emma Infante had not yet been
registered, Atty. Garcia prepared the notice of adverse claim which was
signed and sworn to by Rosario Carbonell and registered on February 8,
1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim she
was, therefore, cognizant of facts which impaired her title to the property in
question, and taking advantage of the situation that the second purchaser had
not as yet registered her deed of sale, she went ahead of the second buyer and
annotated what was only in the nature of an adverse claim inasmuch as she
had no registrable document of sale at the time. That annotation of
Carbonell's adverse claim did not produce any legal effects as to place her in
a preferential situation to that of Infante, the second purchaser, for the simple
reason that a registration made in bad faith is equivalent to no registration at
all. It is a settled rule that the inscription in the registry, to be effective, must
be made in good faith. (Pena, supra, p. 164)
3. One last point to be considered is the theory advanced by the dissenting
opinion of Justice Gatmaitan that while Carbonell's registration of her
adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of the
latter's deed of sale there was already inscribed on the original of the title on
file with the Register of Deeds the adverse claim of Rosario Carbonell.
With due respect to the foregoing conclusion of highly respected Colleague, I
hold the view that the act of the registration of Infante's deed of sale
on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is,
the registration of Infantes purchase as against Carbonell when the latter
inquired knowledge of the second sale on or about January 27, 1955, when
she brought the memorandum of sale, Exh. A, to Jose Poncio and was
informed by the latter that he could not go through with the sale because he
had already sold it to Emma Infante, which information was bolstered by the
fact that Carbonell saw Infante erecting a wall around the lot on February 5.
We have long accepted the rule that knowledge is equivalent to
registration. What would be the purpose of registration other than to give
notice to interested parties and to the whole world of the existence of rights
or liens against the property under question?

What has been clearly and succinctly postulated in T. de Winkleman and

Winkleman vs. Veluz 1922, 43 Phil. 604, 609, is applicable to the case before
Us, and We quote therefrom:
... The purpose of registering an instrument relating to land, annuities,
mortgages, liens or any other class of real rights is to give notice to persons
interested of the existence of these various liens against the property. If the
parties interested have actual notice of the existence of such liens then the
necessity for registration does not exist. Neither can one who has actual
notice of existing liens acquire any rights in such property free from such
liens by the mere fact that such liens have not been proven recorded. (citing
Obras Pias vs. Devera Ignacio, 17 Phil. 45, 47).
We cannot overlook the fact that while it may be true that the vendor Poncio
had signed the memorandum, Exh. A, from which it may be implied that he
sold a lot to Carbonell, there were other things to be accomplished for
purposes of binding third parties, the lot in question being registered land,
such as the execution of a formal deed of sale. Such a document of sale was
never signed by Poncio for according to petitioner Carbonell, when she
presented to Poncio the corresponding document together with the sum of
P400.00 which according to her was the balance of the purchase price after
she had assumed the mortgage with the Republic Bank, she was informed by
the vendor that the property had been sold to another. That sale was
confirmed when Carbonell saw Infante erecting a wall around the lot on
February 5, 1955. As of that moment when Carbonell had notice or actual
knowledge of the second sale in favor of Emma Infante a valid registration of
the latter's deed of sale was constituted as against Carbonell. Accordingly,
Infante has a preferential right to the property, the registration of her sale
having been effected in the foregoing manner, prior to the annotation of
Carbonell's adverse claim on February 8, 1955.
The circumstances of the present case are strikingly similar to the
hypothetical problem posed in Commentator Edgardo Paras' Book on the
Civil Code of the Philippines and I wholeheartedly concur with his solution
of the problem which is based on law. From him I quote: 6
A sold a parcel of land with a torrens title to B on January 5. A week later, A
sold the same land to C. Neither sale was registered. As soon as B learned of
the sale in favor of C, he (B) registered an adverse claim stating that he was
making the claim because the second sale was in fraud of his rights as first
buyer. Later, C registered the deed of sale that had been made in his favor.
Who is now the owner B or C?
43

SALES
Ans. C is clearly the owner, although he was the second buyer. This is so, not
because of the registration of the sale itself but because of the AUTOMATIC
registration in his favor caused by Bs knowledge of the first sale (actual
knowledge being equivalent to registration). The purpose of registration is to
notify. This notification was done because of Bs knowledge. It is wrong to
assert that B was only trying to protect his right-for there was no more right
to be protected. He should have registered the sale BEFORE knowledge
came to him. It is now too late. It is clear from this that with respect to the
principle "actual knowledge is equivalent to registration of the sale about
which knowledge has been obtained' the knowledge may be that-of either
the FIRST or the SECOND buyer. (pp. 142-143, Vol. V, 1972 Ed.)

I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime,

et al., 217 p. 376; 377, that "equity is a right wiseneth that considerate all of
the particular circumstances of the case and is also tempered with the
sweetness of mercy." (quoting from St. Germain) In this case now before Us
there is no need to invoke mercy, for all that is required is a wise
consideration of the particular circumstances narrated above which warrant
a judgment in favor of respondents Infants.
With all the foregoing, I vote for the affirmance of the decision under review.

Aside from the fact that the sale to Infante was considered registered prior to
the registration of Carbonell's notice of adverse claim, Infante also took
immediate physical possession of the property by erecting a fence with a gate
around the lot on February 5, at least tree days prior to Carbonell Is
registration on February 8, 1955.
On top of all these, equity is on the side of Emma Infante. Under the
Majority Opinion, Emma Infante stands to lose the lot she bought in good
faith which was fully paid for plus the building she erected thereon for which
she spent the total sun of a little less than P14,000.00, or equivalent to about
P40,000.00 at the time the case was decided by the Appellate Court,
considering that Rosario Carbonell is being given the option either to order
the removal of the house or to acquire it at P13,429.00. On this point I agree
with the following statement of Justice Esguerra who penned the decision of
the Appellate Court, thus:
It is indeed inequitable and re revolting to one's sense of justice and fairness
that Rosario Carbonell who paid out of her own money the sum of only
P200.00 to the Republic Savings Bank for the account of Jose Poncio, which
was the motivation for the execution of the private instrument, Exhibit A,
should have a superior right to the land involved. The property has been
improved at a great expense and a building of strong materials has been
constructed thereon Emma Infants ho spent for her lot and building the total
sum of P13,429.00 made, up of P11,929.00 for cost of land and
improvements and the building and P1,500.00 to discharge the mortgage in
favor of the Republic Savings Bank. with the present purchasing power of
the peso this aft i more than 13 years, would be not equivalent to about
P40,000.00. Courts should not lend a hand to the perpetration of such kind of
injustice and outrage (see page 88, rollo)

9.)
SUPREME
Manila

Republic

of

the

Philippines
COURT
44

SALES
EN BANC
G.R. No. L-2397
August 9, 1950
TOMASA
QUIMSON
and
MARCOS
vs.
FRANCISCO ROSETE, respondent.
Marcelino
Lontok
for
Ignacio Mangosing for respondent.

We do not deem it necessary to pass upon the first issue in the light of the
view we take of the last, to which we will address ourselves presently.
SANTOS, petitioners,
petitioners.

TUASON, J.:
This is an appeal by certiorari from a decision of the Court of Appeals
reversing the judgment of the Court of First Instance of Zambales. The case
involves s dispute over a parcel of land sold to two different persons.
The Facts as found by the Court of Appeals are these:
Esta finca pertenecia originalmente al hoy difunto Dionisio Quimson, quien,
en 7 de junio de 1932, otorgo la escritura Exhibit A de trespaso de la misma a
favor de su hija Tomasa Quimson, pero continuo en su posesion y goce. La
vendio a los esposos Magno Agustin y Paulina Manzano en 3 de Mayo de
1935, con pacto de recomprar dentro del plazo de seis aos; y dos aos
escasos despues, en 5 de abril de 1937, la volvio a vender a Francisco Rosete,
tambien con pacto de retro por el termino de cinco aos, despues de haber
verificado su recompra de Agustin y Manzano, con dinero que le habla
facilitado Rosete, otorgandose a este facto la escritura de venta Exhibit 1.
Desde entoces Rosete es el que esta en su posesion y disfrute, de una manera
pacifica y quieta, aun despues de la muerte de Dionisio Quimson, ocurrida en
6 de junio de 1939, hasta el enero de 1943, en que Tomasa Quimson acudio
al Juez de Paz de San Marcelino , Zambales, para que este interviniera en un
arreglo con Rosete sobre dicha finca, cuyo fracaso motivo una carrera hacia
Iba, la capital de Zambales, para ganar la prioridad del registro e inscripcion
de las escrituras de venta Exhibits A y 1 que Dionisio Quimson otorgara a
favor de Tomasa Quimson y Francisco Rosete, respectivamente, carreraque
aquella gano por haber llegado a la meta una hora antes, a las 9:30 a.m. del
17 de febrero de 1943, en tanto que este la alcanzo a las 10:30 a.m. de ese
mismo dia.
Two questions are raised: (1) What were the effects of the registration of
plaintiff's document? and (2) Who was prior in possession? The Court of
Appeals' answer to the question is , None, and to the second, the defendant or
second purchaser.

Articles 1462 and 1473 of the Civil Code provide:

ART. 1462. The thing sold shall be deemed delivered, when it is placed in the
control and possession of the vendee.
When the sale is made by means of a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the
contract, if from the said instrument the contrary does not appear or may not
be clearly inferred.
ART. 1473. If the same thing should have been sold to different vendees, the
ownership shall be transferred to the person who may have first taken
possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person
acquiring it who first recorded it in the registry.
Should there be no inscription, the ownership shall belong to the person who
in good faith was first in the possession; and, in the absence of this, to the
person who represents the oldest title, provided there is good faith.
In the case of Buencamino vs. Viceo (13 Phil., 97), Mr. Justice Willard,
speaking for the court and citing article 1462 says: "Upon a sale of real estate
the execution of a notarial document of sale is a sufficient delivery of the
property sold.".
In the case of Florendo vs. Foz (20 Phil., 388), the court, through Mr. Chief
Justice Arellano, rules that "When the sale is made by menas of a public
instrument, the execution thereof is tantamount to conveyance of the subject
matter, unless the contrary clearly follows or be deduced from such
instrument itself, and in the absence of this condition such execution by the
vendor is per se a formal or symbolical conveyance of the property sold, that
is, the vedor in the instrument itself authorizes the purchaser to used the title
of ownership as proof that latter is thenceforth the owner of the property."
More decisive of the case at the bar, being almost on all fours with it, is the
case of Sanchez vs. Ramon (40 Phil., 614). There. appeared that one
Fernandez sold a piece of land to Marcelino Gomez and Narcisa Sanchez
underpacto de retro in a public instrument. The purchasers neither recorded
the deed in the registry of property nor ever took materials possession of the
45

SALES
land. Later, Fernandez sold the same property by means of a private
document to Ramos who immediately entered upon the possession of it. It
was held that, according to article 1473 of the Civil Code, Gomez and
Sanchez were the first in possession and. consequently, that the sale in their
favor was superior. Says the court, through Mr. Justice Avancea, later chief
justice:
To what kind of possession is acquired by the materials occupancy of the
thing or right possessed, or by the fact that the latter is subjected to the action
of our will, or by the appropriate acts and legal formalities established for
acquiring possession (art. 438, Civil Code). by a simple reasoning, it appears
that, because the law does not mention to which of these kinds of the
possession the article refers, it must be understood that it refers to all of these
kinds. The proposition that this article, according to its letter, refers to the
materials possession and excludes the symbolic does not seem to be founded
upon a solid ground. It is said that the law, in the first possession and then the
date of the date of the title and as a public instruments is a title, it is claimed
that the inference is that the law has deliberately intented to place the
symbolic possession, which the execution of the public document implies,
after the materials possession. This argument, however, would only be
forceful if the title, mentioned by this article, includes public instruments,
and this would only be true if public instruments are not included in the idea
of the possession spoken of in said article. In other words the strength of the
arguments rests in that this possession is precisely the materials and does not
include the symbolic. Consequently, the argument is deficient for it is
begging the same question, because if this possession includes the symbolic,
which is acquired by the execution of a public instruments, it should be
understood that the title, mentioned by the law as the next cause of
preference, does not include instruments.
Furthermore, our interpretation of this article 1473 is more in consonance
with the principles of the justice. The execution of the public instrument is
equivalent to the delivery of the realty sold (art. 1462, Civil Code ) and its
possession by the vedee (art. 438).Under these conditions the sale is
considered consummated and completely transfers to the vendee all of the
thing. the vendee by virtue of this sale has acquired everything and nothing,
absolutely nothing, is left to the vendor. Form this moment the vendor is a
stranger to the thing sold like any other who has never been its owner. As the
obligation of even delivering it. If he continues taking materials possession
of it, is simply on account of the vendee's tolerance and, in this sense, his
possession is vendor's possession. And if the latter should have to ask him for
the delivery of this materials possession it would not be by virtue of the sale,

because this has been already consummated and has produced all its effects,
but by virtue of the vendee's ownership, in the same were not the vendor.
This means that after the sale of the realty by means of a public instruments,
the vendor, who resells it to another, does not transmitted anything to this
second sale, takes materials possession of the thing, he does it as mere
detainer, and it would be unjust to protect this detention against the rights to
the thing lawfully acquired by the first vendee.
We are of the opinion that the possession mentioned in the article 1473 (for
determining who has better right when the same piece of land has been sold
several times by the vendor ) includes not the materials but also the symbolic
possession, which is acquired by the execution of a public instrument.
The Supreme Court of Spain and Mr. Manresa are of the same opinion. On
pp. 157 ,158 Vol. X, of his treatise on the Spanish Civil Code. Manresa
comments:
II. Observacion comun a la venta de muebles y a la de inmuebles. Hemos
interpretado el precepto de articulo 1.473, en sus parrafos 1. y 3. en el sentido
mas racional mas racional, aunque no tal vez en el mas adecuado a las
palabras que se emplean. Las palabras tomar posesion, y primero en la
posesion las hemos considerado como equivalentes a la de la tradicion real o
fingida a que se refieren los articulos 1.462 al 1. 464 porque si la posesion
materials del objeto puede otorgar preferencia e cuestiones de possesion y asi
lo re-conoe el articulo 445. no debe darla nunca en cuestiones de propiedad y
de la propiedad habla expresamente el articulo 1.473. Asi en nuestra opinion,
robustecida por la doctrine que rectamente se deriva de la sentencia de 24 de
Novembre de 1894, vendida una finca A. en escritura publica despues a B.,
aunque se incate materialmente este del inmueble, la etrega de la cosa
elvendedor carecia ya de la facultad de disponer de ella .
The statement of Sr. Manresa which is said to sustain the theory of the Court
of Appeals, expresses, as we under stand that statement, the literal meaning
of article 1473, for the decision of November 24, 1894 reflects, according to
the learned author, the intention of the lawmaker and is in the conformity
with the principles of justice. now under both the a Spanish and Philippine
rules of interpretation, the spirit, the intent, the law prevails over its letter.
Counsel for defendant denies that the land was sold to plaintiff's Tomasa
Quimson or that the Court of Appeals so founds. All that latter court
declared, he says, was that a deed of the land was executed by the original
owner on June 7, 1932.
46

SALES
The findings that a deed of conveyance was made by Dionisio Quimson in
favor of his daughter could have no other meaning, in the absence of any
qualifying statement , that the land was sold by the father to his daughter.
Furthermore, this was the trial court's explicit finding which was not reversed
by the Court of Appeals and stand as the fact of the case. Looking into the
documents itself Exhibits A states categorically that the vendor received form
the vendee the consideration of sale, P 250, acknowledge before the notary
public the notary public having executed the instruments of his own free will.
The expression in the court's decision in the case of Cruzado vs. Escaler (34
Phil., 17), cited by the Court of Appeals, Apparently to the effect that
physical possession by the purchaser is essential to the consummation of a
sale of real of estate, is at best obiter dictum; for the court distinctly found
that the sale to plaintiff's Cruzado's father was a sham, execution with the
sole purpose of enabling the senior Cruzado to mortgage the property and
becomeprocurador. And with reference to the failure of the second vendee,
Escaler, to register his purchase, the court disregarded the omission as well as
the entry of the first sale in the registry because that entry was made by the
plaintiff, son and heir of the first supposed vendee, more than a score years
after the alleged transaction, when the plaintiff was no longer or had any
right therein (in the land). Because it already belonged to the defendant
Escaler, its lawful owner." When Escaler, the second purchase was sued he
had become the owner of the land by prescription. The defendant's
possession in the present case fell far short of having ripened into title by
prescription when the plaintiff commenced her action.
For the reasons above stated, we are constrained to set aside the decision of
the Court of Appeals. Because the Appellate Court found for the defendant, it
made no findings on damages for the latter's used of the property in
controversy. Not being authorized in this appeal to examine the evidence we
have to accept the trials court's appraisal of the damages. Judge Llanes
assessed the damages of P 180 for the occupation of the agricultural years
143-44,1944-45 and 1945-46, and P 60 a year thereafter until the possession
of the property was restituted to the plaintiffs.
Let judgment be entered in accordance with the tenor of this decision, with
costs against the defendant.

10.) [G.R. No. 129760. December 29, 1998]

RICARDO CHENG, petitioner, vs. RAMON B. GENATO
ERNESTO R. DA JOSE & SOCORRO B. DA JOSE, respondents.

and

DECISION
MARTINEZ, J.:
47

SALES
This petition for review on certiorari seeks to annul and set aside the
Decision of the Court of Appeals (CA) [1] dated July 7, 1997 in CA-G.R. No.
CV No. 44706 entitled Ricardo Cheng, plaintiff-appellee vs. Ramon B.
Genato, defendant-appellant, Ernesto R. Da Jose & Socorro B. Da Jose,
Intervenors-Appellants which reversed the ruling of the Regional Trial Court,
Branch 96 of Quezon City dated January 18, 1994. The dispositive portion of
the CA Decision reads:
WHEREFORE, based on the foregoing, appealed decision is hereby
REVERSED and SET ASIDE and judgment is rendered ordering;
1. The dismissal of the complaint;
2. The cancellation of the annotations of the defendant-appellants Affidavit to
Annul Contract to Sell and plaintiff-appellees Notice of Adverse Claim in the
subject TCTs, namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3. Payment by the intervenors-appellants of the remaining balance of the
purchase price pursuant to their agreement with the defendant-appellant to
suspend encashment of the three post-dated checks issued since 1989.
4. Ordering the execution by the defendant-appellant Genato of the Deed of
Absolute Sale over the subject two lots covered by TCT No. T-76.196 (M)
and TCT No. T-76.197 (M) in favor of intervenors-appellants Spouses Da
Jose;
5. The return by defendant-appellant Genato of P50,000.00 paid to him by
the plaintiff-appellee Cheng, and
6. Payment by plaintiff-appellee Cheng of moral damages to herein
intervenors-appellants Da Jose of P100,000.00, exemplary damages
of P50,000.00, attorneys fees of P50,000.00, and costs of suit; and to
defendant-appellant, ofP100,000.00 in exemplary damages, P50,000.00 in
attorneys fees. The amounts payable to the defendant-appellant may be
compensated by plaintiff-appellee with the amount ordered under the
immediately foregoing paragraph which defendant-appellant has to pay the
plaintiff-appellee.
SO ORDERED.[2]
The antecedents of the case are as follows:

Respondent Ramon B. Genato(Genato) is the owner of two parcels of land

located at Paradise Farms, San Jose Del Monte, Bulacan covered by TCT No.
T-76.196 (M)[3] and TCT No. T-76.197 (M) [4] with an aggregate area of
35,821 square meters, more or less.
On September 6, 1989, respondent Genato entered into an agreement with
respondent-spouses Ernesto R. Da Jose and Socorro B. Da Jose (Da Jose
spouses) over the above-mentioned two parcels of land. The agreement
culminated in the execution of a contract to sell for which the purchase price
was P80.00 per square meter. The contract was in a public instrument and
was duly annotated at the back of the two certificates of title on the same
day.Clauses 1 and 3 thereof provide:
'1. That the purchase price shall be EIGHTY (P80.00) PESOS, Philippine
Currency per square meter, of which the amount of FIFTY THOUSAND
(P50,000.00) Pesos shall be paid by the VENDEE to the VENDOR as partial
down payment at the time of execution of this Contract to Sell.
xxx xxx xxx
'3. That the VENDEE, thirty (30) DAYS after the execution of this contract,
and only after having satisfactorily verified and confirmed the truth and
authenticity of documents, and that no restrictions, limitations, and
developments imposed on and/or affecting the property subject of this
contract shall be detrimental to his interest, the VENDEE shall pay to the
VENDOR, NINE HUNDRED FIFTY THOUSAND (P950,000.00) PESOS,
Philippine Currency, representing the full payment of the agreed Down
Payment, after which complete possession of the property shall be given to
the VENDEE to enable him to prepare the premises and any development
therein.[5]
On October 4, 1989, the Da Jose spouses, not having finished verifying the
titles mentioned in clause 3 as aforequoted, asked for and was granted by
respondent Genato an extension of another 30 days or until November 5,
1989.However, according to Genato, the extension was granted on condition
that a new set of documents is made seven (7) days from October 4, 1989.
[6]
This was denied by the Da Jose spouses.
Pending the effectivity of the aforesaid extension period, and without due
notice to the Da Jose spouses, Genato executed an Affidavit to Annul the
Contract to Sell,[7] on October 13, 1989. Moreover, no annotation of the said
affidavit at the back of his titles was made right away. The affidavit
contained, inter alia, the following paragraphs;
48

SALES
xxx xxx xxx

Check # 470393

That it was agreed between the parties that the agreed downpayment
of P950,000.00 shall be paid thirty (30) days after the execution of the
Contract, that is on or before October 6, 1989;

10/24/89[9]

The supposed VENDEES failed to pay the said full downpayment even up to
this writing, a breach of contract.
That this affidavit is being executed to Annul the aforesaid Contract to Sell
for the vendee having committed a breach of contract for not having
complied with the obligation as provided in the Contract to Sell; [8]
On October 24, 1989, herein petitioner Ricardo Cheng (Cheng) went to
Genatos residence and expressed interest in buying the subject properties. On
that occasion, Genato showed to Ricardo Cheng copies of his transfer
certificates of title and the annotations at the back thereof of his contract to
sell with the Da Jose spouses. Genato also showed him the aforementioned
Affidavit to Annul the Contract to Sell which has not been annotated at the
back of the titles.
Despite these, Cheng went ahead and issued a check for P50,000.00 upon the
assurance by Genato that the previous contract with the Da Jose spouses will
be annulled for which Genato issued a handwritten receipt (Exh. D), written
in this wise.
10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50,000 -)
as partial for T-76196 (M)
T-76197 (M) area 35,821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte
P70/m2 Bulacan
Plus C.G.T. etc
(SGD) Ramon B. Genato

On October 25, 1989, Genato deposited Chengs check. On the same day,
Cheng called up Genato reminding him to register the affidavit to annul the
contract to sell.[10]
The following day, or on October 26, 1989, acting on Chengs request,
Genato caused the registration of the Affidavit to Annul the Contract to Sell
in the Registry of Deeds, Meycauayan, Bulacan as primary entry No.
262702.[11]
While the Da Jose spouses were at the Office of the Registry of Deeds of
Meycauaya, Bulacan on October 27, 1989, they met Genato by
coincidence. It was only then that the Da Jose spouses discovered about the
affidavit to annul their contract. The latter were shocked at the disclosure and
protested against the rescission of their contract. After being reminded that
he (Genato) had given them (Da Jose spouses) an additional 30-day period to
finish their verification of his titles, that the period was still in effect, and that
they were willing and able to pay the balance of the agreed down payment,
later on in the day, Genato decided to continue the Contract he had with
them. The agreement to continue with their contract was formalized in a
conforme letter dated October 27, 1989.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to continue
his contract with the Da Jose spouses and the return of Chengs P50,000.00
check. Consequently, on October 30, 1989, Chengs lawyer sent a letter [12]to
Genato demanding compliance with their agreement to sell the property to
him stating that the contract to sell between him and Genato was already
perfected and threatening legal action.
On November 2, 1989, Genato sent a letter [13] to Cheng (Exh. 6) enclosing a
BPI Cashiers Check for P50,000.00 and expressed regret for his inability to
consummate his transaction with him. After having received the letter of
Genato on November 4, 1989, Cheng, however, returned the said check to
the former via RCPI telegram[14] dated November 6, 1989, reiterating that our
contract to sell your property had already been perfected.
Meanwhile, also on November 2, 1989, Cheng executed an affidavit of
adverse claim[15] and had it annotated on the subject TCTs.

49

SALES
On the same day, consistent with the decision of Genato and the Da Jose
spouses to continue with their Contract to Sell of September 6, 1989, the Da
Jose spouses paid Genato the complete down payment of P950,000.00 and
delivered to him three (3) postdated checks (all dated May 6, 1990, the
stipulated due date) in the total amount of P1,865,680.00 to cover full
payment of the balance of the agreed purchase price. However, due to the
filing of the pendency of this case, the three (3) postdated checks have not
been encashed.
On December 8, 1989, Cheng instituted a complaint [16] for specific
performance to compel Genato to execute a deed of sale to him of the subject
properties plus damages and prayer for preliminary attachment. In his
complaint, Cheng averred that the P50,000.00 check he gave was a partial
payment to the total agreed purchase price of the subject properties and
considered as an earnest money for which Genato acceded. Thus, their
contract was already perfected.
In Answer[17] thereto, Genato alleged that the agreement was only a simple
receipt of an option-bid deposit, and never stated that it was a partial
payment, nor is it an earnest money and that it was subject to the condition
that the prior contract with the Da Jose spouses be first cancelled.
[18]

The Da Jose spouses, in their Answer in Intervention, asserted that they

have a superior right to the property as first buyers. They alleged that the
unilateral cancellation of the Contract to Sell was without effect and
void.They also cited Chengs bad faith as a buyer being duly informed by
Genato of the existing annotated Contract to Sell on the titles.
After trial on the merits, the lower court ruled that the receipt issued by
Genato to Cheng unerringly meant a sale and not just a priority or an option
to buy. It cannot be true that the transaction was subjected to some condition
or reservation, like the priority in favor of the Da Jose spouses as first buyer
because, if it were otherwise, the receipt would have provided such material
condition or reservation, especially as it was Genato himself who had made
the receipt in his own hand. It also opined that there was a valid rescission of
the Contract to Sell by virtue of the Affidavit to Annul the Contract to
Sell. Time was of the essence in the execution of the agreement between
Genato and Cheng, under this circumstance demand, extrajudicial or judicial,
is not necessary. It falls under the exception to the rule provided in Article
1169[19] of the Civil Code. The right of Genato to unilaterally rescind the
contract is said to be under Article 1191 [20] of the Civil Code. Additionally,
after reference was made to the substance of the agreement between Genato

and the Da Jose spouses, the lower court also concluded that Cheng should
be preferred over the intervenors-Da Jose spouses in the purchase of the
subject properties. Thus, on January 18, 1994 the trial court rendered its
decision the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring the contract to sell dated September 6, 1989 executed between
defendant Ramon Genato, as vendor, and intervenors Spouses Ernesto and
Socorro Da Jose, as vendees, resolved and rescinded in accordance with Art.
1191, Civil Code, by virtue of defendants affidavit to annul contract to sell
dated October 13, 1989 and as the consequence of intervenors failure to
execute within seven (7) days from October 4, 1989 another contract to sell
pursuant to their mutual agreement with the defendant;
2. Ordering defendant to return to the intervenors the sum of P1,000,000.00,
plus interest at the legal rate from November 2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three (3) postdated
checks immediately upon finality of this judgment;
4. Commanding defendant to execute with and in favor of the plaintiff
Ricardo Cheng, as vendee, a deed of conveyance and sale of the real
properties described and covered in Transfer Certificates of Title No. T-76196 (M) and T-76.197 (M) of the Registry of Deeds of Bulacan, Meycauyan
Branch, at the rate of P70.00/sqaure meter, less the amount of P50,000.00
already paid to defendant, which is considered as part of the purchase price,
with the plaintiff being liable for payment of the capital gains taxes and other
expenses of the transfer pursuant to the agreement to sell dated October 24,
1989; and
5. Ordering defendant to pay the plaintiff and the intervenors as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorneys fees, to plaintiff;
d/ P20,000.00, as and for attorneys fees, to intervenors; and
e/ Cost of the suit.
xxx xxx xxx
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Not satisfied with the aforesaid decision, herein respondents Ramon Genato
and Da Jose spouses appealed to the court a quo which reversed such
judgment and ruled that the prior contract to sell in favor of the Da Jose
spouses was not validly rescinded, that the subsequent contract to sell
between Genato and Cheng, embodied in the handwritten receipt, was
without force and effect due to the failure to rescind the prior contract; and
that Cheng should pay damages to the respondents herein being found to be
in bad faith.
Hence this petition.[21]
This petition for review, assails the Court of Appeals Decision on the
following grounds: (1) that the Da Jose spouses Contract to Sell has been
validly rescinded or resolved; (2) that Ricardo Chengs own contract with
Genato was not just a contract to sell but one of conditional contract of sale
which gave him better rights, thus precluding the application of the rule on
double sales under Article 1544, Civil Code; and (3) that, in any case, it was
error to hold him liable for damages.
The petition must be denied for failure to show that the Court of Appeals
committed a reversible error which would warrant a contrary ruling.
No reversible error can be ascribed to the ruling of the Court of Appeals that
there was no valid and effective rescission of resolution of the Da Jose
spouses Contract to Sell, contrary to petitioners contentions and the trial
courts erroneous ruling.

spouses contention that no further condition was agreed when they were
granted the 30-days extension period from October 7, 1989 in connection
with clause 3 of their contract to sell dated September 6, 1989 should be
upheld for the following reason, to wit; firstly, If this were not true, Genato
could not have been persuaded to continue his contract with them and later
on agree to accept the full settlement of the purchase price knowing fully
well that he himself imposed such sine qua non condition in order for the
extension to be valid; secondly, Genato could have immediately annotated
his affidavit to annul the contract to sell on his title when it was executed on
October 13, 1989 and not only on October 26, 1989 after Cheng reminded
him of the annotation; thirdly, Genato could have sent at least a notice of
such fact, there being no stipulation authorizing him for automatic rescission,
so as to finally clear the encumbrance of his titles and make it available to
other would be buyers. It likewise settles the holding of the trial court that
Genato needed money urgently.
Even assuming in gratia argumenti that the Da Jose spouses defaulted, as
claimed by Genato, in their Contract to Sell, the execution by Genato of the
affidavit to annul the contract is not even called for. For with or without the
aforesaid affidavit their non-payment to complete the full downpayment of
the purchase price ipso facto avoids their contract to sell, it being subjected
to a suspensive condition. When a contract is subject to a suspensive
condition, its birth or effectivity can take place only if and when the event
which constitutes the condition happens or is fulfilled. [25] If the suspensive
condition does not take place, the parties would stand as if the conditional
obligation had never existed.[26]

In a Contract to Sell, the payment of the purchase price is a positive

suspensive condition, the failure of which is not a breach, casual or serious,
but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force.[22] It is one where the happening of the event
gives rise to an obligation. Thus, for its non-fulfillment there will be no
contract to speak of, the obligor having failed to perform the suspensive
condition which enforces a juridical relation. In fact with this circumstance,
there can be no rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet. [23] Emphasis should be made
that the breach contemplated in Article 1191 of the New Civil Code is the
obligors failure to comply with an obligation already extant, not a failure of a
condition to render binding that obligation.[24]

Nevertheless, this being so Genato is not relieved from the giving of a notice,
verbal or written, to the Da Jose spouses for decision to rescind their
contract. In many cases,[27] even though we upheld the validity of a
stipulation in a contract to sell authorizing automatic rescission for a
violation of its terms and conditions, at least a written notice must be sent to
the defaulter informing him of the same. The act of a party in treating a
contract as cancelled should be made known to the other. [28] For such act is
always provisional. It is always subject to scrutiny and review by the courts
in case the alleged defaulter brings the matter to the proper
courts. In University of the Philippines vs. De Los Angeles,[29] this Court
stressed and we quote:

Obviously, the foregoing jurisprudence cannot be made to apply to the

situation in the instant case because no default can be ascribed to the Da Jose
spouses since the 30-day extension period has not yet expired. The Da Jose

In other words, the party who deems the contract violated may consider it
resolved or rescinded, and act accordingly, without previous court action, but
it proceeds at its own risk. For it is only the final judgment of the
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corresponding court that will conclusively and finally settle whether the
action taken was or was not correct in law. But the law definitely does not
require that the contracting party who believes itself injured must first file
suit and wait for a judgment before taking extajudicial steps to protect its
interest. Otherwise, the party injured by the others breach will have to
passively sit and watch its damages accumulate during the pendency of the
suit until the final judgment of rescission is rendered when the law itself
requires that he should exercise due diligence to minimize its own damages
(Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such as the one at
bat, in order to avoid and prevent the defaulting party from assuming the
offer as still in effect due to the obligees tolerance for such nonfulfillment.Resultantly, litigations of this sort shall be prevented and the
relations among would-be parties may be preserved. Thus, Ricardo Chengs
contention that the Contract to Sell between Genato and the Da Jose spouses
was rescinded or resolved due to Genatos unilateral rescission finds no
support in this case.
Anent the issue on the nature of the agreement between Cheng and Genato,
the records of this case are replete with admissions [30] that Cheng believed it
to be one of a Contract to Sell and not one of Conditionl Contract of Sale
which he, in a transparent turn-around, now pleads in this Petition. This
ambivalent stance of Cheng is even noted by the appellate court, thus:
At the outset, this Court notes that plaintiff-appellee was inconsistent in
characterizing the contract he allegedly entered into. In his complaint,
[31]
Cheng alleged that the P50,000.00 down payment was earnest
money. And next, his testimony[32] was offered to prove that the transaction
between him and Genato on October 24, 1989 was actually a perfected
contract to sell.[33]
Settled is the rule that an issue which was not raised during the trial in the
court below cannot be raised for the first time on appeal. [34] Issues of fact and
arguments not adequately brought to the attention of the trial court need not
be and ordinarily will not be considered by a reviewing court as they cannot
be raised for the first time on appeal. [35] In fact, both courts below correctly
held that the receipt which was the result of their agreement, is a contract to
sell. This was, in fact Chengs contention in his pleadings before said
courts. This patent twist only operates against Chengs posture which is
indicative of the weakness of his claim.

But even if we are to assume that the receipt, Exh. D, is to be treated as a

conditional contract of sale, it did not acquire any obligatory force since it
was subject to suspensive condition that the earlier contract to sell between
Genato and the Da Jose spouses should first be cancelled or rescinded a
condition never met, as Genato, to his credit, upon realizing his error,
redeemed himself by respecting and maintaining his earlier contract with the
Da Jose spouses. In fact a careful reading of the receipt, Exh. D, alone would
not even show that a conditional contract of sale has been entered by Genato
and Cheng. When the requisites of a valid contract of sale are lacking in said
receipt, therefore the sale is neither valid or enforceable. [36]
To support his now new theory that the transaction was a conditional contract
of sale, petitioner invokes the case of Coronel vs. Court of Appeals[37] as the
law that should govern their Petition. We do not agree. Apparently, the
factual milieu in Coronel is not on all fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly intended to
transfer title to the buyer which petitioner themselves admitted in their
pleading. The agreement of the parties therein was definitively outline in the
Receipt of Down Payment both as to property, the purchase price, the
delivery of the seller of the property and the manner of the transfer of title
subject to the specific condition that upon the transfer in their names of the
subject property the Coronels will execute the deed of absolute sale.
Whereas, in the instant case, even by a careful perusal of the receipt, Exh. D,
alone such kind of circumstances cannot be ascertained without however
resorting to the exceptions of the Rule on Parol Evidence.
To our mind, the trial court and the appellate court correctly held that the
agreement between Genato and Cheng is a contract to sell, which was, in
fact, petitioner connection in his pleadings before the said
courts. Consequently, both to mind, which read:
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 possession; and in the absence thereof, to the person
who presents the oldest title, provided there is good faith
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However, a meticulous reading of the aforequoted provision shows that said
law is not apropos to the instant case. This provision connotes that the
following circumstances must concur:
(a) The two (or more) sales transactions in the issue must pertain to exactly
the same subject matter, and must be valid sales transactions.
(b) The two (or more) buyers at odds over the rightful ownership of the
subject matter must each represent conflicting interests; and
(c) The two (or more) buyers at odds over the rightful ownership of the
subject matter must each have bought from the very same seller.
These situations obviously are lacking in a contract to sell for neither a
transfer of ownership nor a sales transaction has been consummated. The
contract to be binding upon the obligee or the vendor depends upon the
fulfillment or non-fulfillment of an event.
Notwithstanding this contrary finding with the appellate court, we are of the
view that the governing principle of Article 1544, Civil Code, should apply
in this situation. Jurisprudence[38] teaches us that the governing principle
is PRIMUS TEMPORE, PORTIOR JURE (first in time, stronger in right). For
not only was the contract between herein respondents first in time; it was also
registered long before petitioners intrusion as a second buyer. This principle
only applies when the special rules provided in the aforcited article of Civil
Code do not apply or fit the specific circumstances mandated under said law
or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the second buyer to be
able to displace the first buyer are:
(1) that the second buyer must show that he acted in good faith (i.e. in
ignorance of the first sale and of the first buyers rights) from the time of
acquisition until title is transferred to him by registration or failing
registration, by delivery of possession;[39]
(2) the second buyer must show continuing good faith and innocence or lack
of knowledge of the first sale until his contract ripens into full ownership
through prior registration as provided by law.[40]
Thus, in the case at bar, the knowledge gained by the Da Jose spouses, as
first buyers, of the new agreement between Cheng and Genato will not defeat
their rights as first buyers except where Cheng, as second buyer, registers or

annotates his transaction or agreement on the title of the subject properties in

good faith ahead of the Da Jose spouses. Moreover, although the Da Jose
spouses, as first buyers, knew of the second transaction it will not bar them
from availing of their rights granted by law, among them, to register first
their agreement as against the second buyer.
In contrast, knowledge gained by Cheng of the first transaction between the
Da Jose spouses and Genato defeats his rights even if he is first to register the
second transaction, since such knowledge taints his prior registration with
bad faith.
Registration, as defined by Soler and Castillo, means any entry made in the
books of the registry, including both registration in its ordinary and strict
sense and cancellation, annotation, and even marginal notes.[41] In its strict
acceptation, it is the entry made in the registry which records solemnly and
permanently the right of ownership and other real rights. [42] We have
ruled[43] before that when a Deed of Sale is inscribed in the registry of
property on the original document itself, what was done with respect to said
entries or annotations and marginal notes amounted to a registration of the
sale. In this light, we see no reason why we should not give priority in right
the annotation made by the Da Jose spouses with respect to their Contract to
Sell dated September 6, 1989.
Moreover, registration alone in such cases without good faith is not
sufficient. Good faith must concur with registration for such prior right to be
enforceable. In the instant case, the annotation made by the Da Jose spouses
on the titles of Genato of their Contract to Sell more than satisfies this
requirement. Whereas in the case of Genatos agreement with Cheng such is
unavailing. For even before the receipt, Exh. D, was issued to Cheng
information of such pre-existing agreement has been brought to his
knowledge which did not deter him from pursuing his agreement with
Genato. We give credence to the factual finding of the appellate court that
Cheng himself admitted that it was he who sought Genato in order to inquire
about the property and offered to buy the same. [44] And since Cheng was fully
aware, or could have been if he had chosen to inquire, of the rights of the Da
Jose spouses under the Contract to Sell duly annotated on the transfer
certificates of titles of Genato, it now becomes unnecessary to further
elaborate in detail the fact that he is indeed in bad faith in entering into such
agreement. As we have held in Leung Yee vs. F.L. Strong Machinery Co.:[45]
One who purchases real estate with knowledge of a defect x x x of title in his
vendor cannot claim that he has acquired title thereto in good faith as
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against x x x x an interest therein; and the same rule must be applied to one
who has knowledge of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him with the defects in
the title of his vendor. A purchaser cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in
good faith under the belief that there was no defect in the title of the
vendor. His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his
vendors title, will not make him an innocent purchaser for value, if it
afterwards develops that the title was in fact defective, and it appears that he
had such notice of the defect as would have led to its discovery had he acted
with that measure of precaution which may reasonably be required of a
prudent man in a like situation. Good faith, or lack of it, is in its last analysis
a question of intention; but in ascertaining the intention by which one is
actuated on a given occasion, we are necessarily controlled by the evidence
as to the conduct and outward acts by which alone the inward motive may,
with safety, be determined. So it is that the honesty of intention, the honest
lawful intent, which constitutes good faith implies a freedom from knowledge
and circumstances which ought to put a person on inquiry, and so it is that
proof of such knowledge overcomes the presumption of good faith in which
the courts always indulge in the absence of the proof to the contrary. Good
faith, or the want of it, is not a visible, tangible fact that can be seen or
touched, but rather a state or condition of mind which can only be judge of

by actual or fancied tokens or signs. (Wilder vs. Gilman, 55 Vt. 504, 505; Cf.
Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co.
vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromely, 119
Mich., 8, 10, 17.) Emphasis ours
Damages were awarded by the appellate court on the basis of its finding that
petitioner was in bad faith when he filed the suit for specific performance
knowing fully well that his agreement with Genato did not push through.
[46]
Such bad faith, coupled with his wrongful interference with the contractual
relations between Genato and the Da Jose spouses, which culminated in his
filing of the present suit and thereby creating what the counsel for the
respondents describes as a prolonged and economically unhealthy
gridlock[47] on both the land itself and the respondents rights provides ample
basis for the damages awarded. Based on these overwhelming evidence of
bad faith on the part of herein petitioner Ricardo Cheng, we find that the
award of damages made by the appellate court is in order.
WHEREFORE, premises considered, the instant petition for review is
DENIED and the assailed decision is hereby AFFIRMED EN TOTO.
SO ORDERED.

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