G.R. No.

106251 November 19, 1993 understanding that he would keep the van for himself because CLT Industries was not in a
position to pay him. Hence, from the time of the purchase, he had been in possession of the
CHIAO LIONG TAN, petitioner, vehicle including the original registration papers thereof, but allowing petitioner from time to
vs. time to use the van for deliveries of machinery.
THE HONORABLE COURT OF APPEALS, HON MANUEL T. MURO, Presiding Judge, RTC
Tan Pit Sin who had known private respondent since 1968, not only because they were
of Manila, Branch 54 and TAN BAN YONG, respondents.
classmates but also because of their business dealings with each other, confirmed that
private respondent borrowed from him P140,000.00 in March, 1987 to buy an Isuzu Elf van.
NOCON, J.:
In fact, he had borrowed said vehicle for a few times.

Petitioner seeks in this petition the reversal of the Court of Appeals' decision dated May 15,
1
Gina Lu, an employee of the Balintawak Isuzu Motors, testified that private respondent paid
1992 in CA-G.R. CV No. 29982 affirming the unfavorable decision of the trial court in his
the balance of the purchase price of the Isuzu Elf van in the amount of P133,000.00 but the
suit for replevin and damages.
receipt was issued in the name of Chiao Liong Tan to make the records consistent because it
was the latter who made the deposit of P5,000.00. Thereafter, the Isuzu Elf van was released
Petitioner Chiao Liong Tan claims to be the owner of a motor vehicle, particularly described as
to him.
Isuzu Elf van, 1976 Model with Motor No. 44999-2 and Chassis No. 9646780 which he
purchased in March, 1987. As owner thereof, petitioner says he has been in possession,
After hearing, the trial court found for private respondent. The dispositive portion of the
enjoyment and utilization of the said motor vehicle until it was taken from him by his older
decision reads as follows:
brother, Tan Ban Yong, the private respondent herein.

WHEREFORE, judgment is hereby rendered declaring defendant Tan Ban

Petitioner relies principally on the fact that the Isuzu Elf van is registered in his name under
Yong to be the owner of and entitled to the possession of the vehicle
Certificate of Registration No. 1501909. He claims in his testimony before the trial court that
described in par. 2 of the Complaint, and the plaintiff is hereby ordered to
the said vehicle was purchased from Balintawak Isuzu Motor Center for a price of over
deliver possession thereof to the said defendant or in the alternative if such
P100,000.00; that he sent his brother to pay for the van and the receipt for payment was
delivery cannot be made, to the sum of P138,000.00 as the value of the
placed in his (petitioner's) name because it was his money that was used to pay for the
vehicle taking into account the depreciation of the vehicle but offset by the
vehicle; that he allowed his brother to use the van because the latter was working for his
inflation rate; in either alternative, plaintiff is also ordered to pay to said
company, the CLT Industries; and that his brother later refused to return the van to him and
defendant consequential damages of P20,000.00 for the latter having been
appropriated the same for himself.
deprived of the possession and use of the vehicle and to pay the costs. All
amounts adjudged herein, except costs, shall bear interest at the legal rate
On the other hand, private respondent testified that CLT Industries is a family business that
from the date of this decision, until delivery of the vehicle or the alternative
was placed in petitioner's name because at that time he was then leaving for the United
payment of the value thereof as well as payment of consequential damages is
States and petitioner is the remaining Filipino in the family residing in the Philippines. When
paid; the interest applies to the value of the vehicle if return thereof is
the family business needed a vehicle in 1987 for use in the delivery of machinery to its 2
delayed. No cost.
customers, he asked petitioner to look for a vehicle and gave him the amount of P5,000.00 to
be deposited as down payment for an Isuzu Elf Van which would be available in about a
Finding no merit in the appeal, the respondent Court of Appeals affirmed the decision of the
month. After a month, he himself paid the whole price out of a loan of P140,000.00 which he
trial court. Undaunted by his successive failures, petitioner comes to us and raised the
obtained from his friend Tan Pit Sin. Inasmuch as the receipt for the downpayment was
following error allegedly committed by the respondent Court of Appeals, to wit:
placed in the name of petitioner and since he was still on good terms with him, private
respondent allowed the registration of the vehicle in petitioner's name. It was also their
 1. . . . in finding the testimonies of private respondent's witnesses credible;
2. . . . in disregarding the Certificate of Registration of the subject motor
3
vehicle as proof of ownership by the petitioner-appellant.
Since the Court of Appeals merely affirmed the trial court's assessment of the credibility of
the witnesses that testified before it, petitioner is in effect questioning the factual findings of
said court and its appraisal of their testimony which this Court cannot review, its jurisdiction
being limited to questions of law. The considerable weight given to the findings of the trial
court is not without any reason. It had the opportunity to observe the demeanor of witnesses
which is usually not reflected in the transcript of records. The profundity of the conclusions
thus reached is just the result of such observance. When the Court of Appeals affirmed said
findings, it goes to show that no misapprehension of facts was committed as said Court has
the power to scrutinize said factual findings under existing rules of procedure.
In concluding that the testimonies of Tan Ban Yong, Tan Pit Sin and Gina Lu cast doubt on
the petitioner's ownership of the motor vehicle in question, both the trial court and the Court
of Appeals attached significance to their respective interlocking accounts on how the motor
vehicle was acquired, complete with the financing source and mode of repayment.
Respondent Tan Ban Yong's declaration that he borrowed P140,000.00 from Tan Pit Sin and
paid the balance of the purchase price of the motor vehicle himself to Gina Lu of the
Balintawak Isuzu Motors, is corroborated by the above-mentioned persons themselves. Tan
Pit Sin not only confirmed the loan but also stated that the same was paid in three (3)
months; P50,000.00 on the first payment; another P50,000.00 on the second payment and
4
P40,000.00 on the last payment. Gina Lu, who testified at the instance of petitioner,
declared that the downpayment of P5,000.00 was paid by petitioner and so the receipt for the
same was issued in his name but the balance of P133,000.00 was paid by private respondent
and to make the record consistent, she issued the receipt in the name of petitioner again.
In contrast to the clear and categorical averments of private respondent and the witnesses in
this case negating petitioner's ownership of the motor vehicle in question, petitioner's
averments before the trial court and this Court are not only disparate but conflicting. In his
testimony below, petitioner averred that he used his own money to purchase the motor vehicle
by paying the sum of P100,000.00, 5 which testimony is negated by his admission on page 5
of his petition 6 before this Court that private respondent borrowed money from Tan Pit Sin
with which to purchase the subject motor vehicle. Then, in his pleading before the court
below, particularly in his reply to the answer of private respondent, petitioner alleged that the
7
motor vehicle was intended for his exclusive use and not to service the family business. And
yet , in his petition before this Court, he claimed that the subject motor vehicle was
purchased for CLT Industries, which he solely owned and accordingly, registered in the
latter's name. 8 On top of these entangled averments, petitioner did not have in his possession
the Certificate of Registration of the motor vehicle and the official receipt of payment for the
same, thereby lending credence to the claim of private respondent who has possession
thereof, that he owns the subject motor vehicle.
A certificate of registration of a motor vehicle in one's name indeed creates a strong
presumption of ownership. For all practical purposes, the person in whose favor it has been
issued is virtually the owner thereof unless proved otherwise. In other words, such
presumption is rebuttable by competent proof.
The New Civil Code recognizes cases of implied trust other than those enumerated
therein. 9 Thus, although no specific provision could be cited to apply to the parties herein, it
is undeniable that an implied trust was created when the certificate of registration of the
motor vehicle was placed in the name of the petitioner although the price thereof was not
paid by him but by private respondent. The principle that a trustee who puts a certificate of
registration in his name cannot repudiate the trust by relying on the registration is one of the
well-known limitations upon a title. A trust, which derives its strength from the confidence
one reposes on another especially between brothers, does not lose that character simply
because of what appears in a legal document.
Even under the Torrens System of land registration, this Court in some instances did away
with the irrevocability or indefeasibility of a certificate of title to prevent injustice against the
rightful owner of the property. 10
It is true that the judgment 11
in a replevin suit must only resolve in whom is the right of
possession. Primarily, the action of replevin is possessory in character and determined
nothing more than the right of possession. However, when the title to the property is
distinctly put in issue by the defendant's plea and by reason of the policy to settle in one
action all the conflicting claims of the parties to the possession of the property in controversy,
the question of ownership may be resolved in the same proceeding.
Procedure-wise, the Court observes that the action by petitioner as plaintiff in the trial court
was only one for Replevin and Damages. Since replevin is only a provisional remedy where the
replevin plaintiff claims immediate delivery of personal property pending the judgment of the
trial court in a principal case, 12
the petitioner should have filed in the trial court as a main
case an action to recover possession of the Isuzu Elf van which was in the possession of the
private respondent. Logically, the basis of petitioner's cause of action should have been his
13
ownership of said van.In the State of California, from whose Code of Procedure we copied
our rule on replevin, their old replevin rule which allowed the immediate delivery of the FACTS:
chattel at the commencement of the action upon application with bond by the replevin Chiao Long Tan claims to be the owner of a 1976 Isuzu Elf van. As owner thereof, petitioner
plaintiff had already been struck down as early as July 1, 1971 in the case of Blair v. says he has been in possession, enjoyment, and utilization of the van until his older
Pitchess. 14
As in fact, on June 12, 1972 when the United States Supreme Court struck down brother, Tan Ban Yong, unlawfully took it away from him.
as unconstitutional the Florida and Pennsylvania replevin statutes in Fuentes v.
Shevin, 15
most of the states, on their own, changed their replevin statutes to include a Petitioner relies on the fact:
mandatory preliminary hearing before the writ could be issued, similar to our mandatory 1. That the van is registered under his name.

preliminary hearing before the writ of preliminary injunction can be issued. 16 2. He claims to have bought the vehicle from isuzu balintawak;
3. That he sent his brother to pay for the van and the receipt was issued in his
name because it was his money that was used to pay for the vehicle;
If that had been the case in this jurisdiction, then the trial judge would have discovered right
away at the preliminary hearing that private respondent should have immediately staked his
4. That he allowed his brother to use the vehicle because the latter was working for the
claim of ownership and that would have created serious doubts about petitioner's claim of
company;
ownership. Most likely, the writ would not have been issued and the complaint would have
5. And that his brother later refused to return the vehicle and appropriated the same
been dismissed motu proprio by the trial court upon the discovery that the petitioner did not
for himself.
have a principal case therein. As it is, the complaint proceeded its course to the detriment of
private respondent.

Finally, although a "replevin" action is primarily one for the possession of personality, yet it is Private respondent on the other hand testifies:

sufficiently flexible to authorize a settlement of all equities between the parties, arising from 1. CLT Industries is the family business and it was under the name of petitioner since at
17 the that time, he was leaving for the US and petitioner is the only Filipino left in the
or growing out of the main controversy. Thus, in an action for replevin where the defendant
Philippines
is adjudged entitled to possession, he need not go to another forum to procure relief for the
2. When the family business needed a vehicle, he asked petitioner to look for a vehicle
return of the replevied property or secure a judgment for the value of the property in case the
and gave him money as downpayment for an Isuzu Elf van
adjudged return thereof could not be had. Appropriately, the trial court rendered an
3. After a month, he paid for the van by getting a loan from a friend
alternative judgment.

4. As much as the receipt was placed in the name of petitioner, private respondent
WHEREFORE, the questioned decision being in accordance with the law, the instant petition
allowed the registration under the name of petitioner
for review is hereby DENIED for lack of merit.
5. There was also agreement that he would use the vehicle as he paid for the same

SO ORDERED.
All the abovementioned allegations of private respondent has been corroborated by
witnesses. The trial court hence ruled in favor of the private respondent and the CA
affirmed this decision.

HELD:
It is true that the judgment in a replevin suit must only resolve in whom is the right of
possession. Primarily, the action of replevin is possessory in character and determines
nothing more than the right of possession. However, when the title to the property is
distinctly put in issue by the defendants plea and by reason of this policy to settle in one
action all the conflicting claims of the parties to the possession of the property in
controversy, the question of ownership may be resolved in the same proceeding.

Furthermore, a replevin action is primarily one for the possession of personalty, yet it
is sufficiently flexible to authorize a settlement of all equities between the parties,
arising or growing out of the main controversy. Thus, in an action for replevin
where the defendant is adjudged to possession, he need not go to another forum to procure
relief for the return of the replevined property or secure judgment for the value of the
property in case the adjudged return thereof could not be had. FIRST DIVISION

G.R. No. L-63575 January 20, 1988

ROSA GICANO and NENITA GEOLLEGUE, petitioners,

vs.
ROSA GEGATO, RESURRECCION GEGATO and CATALINA GEGATO, respondents.

NARVASA, J.:

An action to recover an immovable from a defendant allegedly holding it under a constructive

trust prescribes in ten (10) years, counted from the issuance of title to said defendant: so we
1
have ruled in a number of cases; and so We rule in this case.

This case concerns a rather large tract of land, with an area of 225,322 square meters,
situated in Hinigaran, Negros Occidental. The land, known as Lot 818, was originally owned,
at least as far as this case is concerned, by two co-owners in equal shares: (1) Maximo
Juanico, married to Rosa Gegato, and (2) Matilde Geolingo, married to Dionisio Mongcal. Their
2
co-ownership was so set out in their certificate of title, TCT No. 30009.

Maximo Juanico died on May 21, 1942, survived by his wife, the aforenamed Rosa Gegato,
3
and three (3) minor children: Presentacion, Resurreccion, and Catalina.

The other co-owner, Matilde Geolingo, and her husband, Dionisio Mongcal, also died; and
their only child, Loreto Mongcal, executed an affidavit adjudicating to herself, as sole heir, her
mother's one-half (1/2) share in Lot 818. 4That share she sold on December 14, 1951 to Rosa

Gicano. In virtue thereof, TCT No. 30009 of the original co-owners was cancelled and a new
one, TCT No. 8878, was issued in the names of (1) Maximo Juanico, married to Rosa Gegato
5
(1/2 share) and (2) Rosa Gicano, married to Gorgonio Geollegue (1/2 share).
On August 23, 1952, a document was executed which gave rise to the controversy at bar.
That document purported to be a Deed of Sale, or more properly, a deed of dacion en pago de
deuda, intended to satisfy a debt of P2,333.33 of the late Maximo Juanico to Rosa Gicano by
the conveyance, according to the express terms of the document, of said Maximo Juanico's
one-half (1/2) share in Lot 818. It was signed by Rosa Gegato and her second husband,
Raymundo Pundon. The latter took part in the transaction as judicial guardian of two (2) of
Rosa's surviving minor children, Resurreccion and Catalina the third, Presentacion, having
earlier died without issue. It was acknowledged by them before Notary Public Vicente T.
Remitio. The sale was registered, TCT No. 8878 was cancelled, and on September 8, 1952 the
Register of Deeds issued TCT No. 10189, covering the entirety of Lot 818, solely in the name
6
of Rosa Gicano, married to Gorgonio Geollegue.
Twenty-three (23) years afterwards, or on February 13, 1976, Rosa Gegato and her daughters,
Resurreccion and Catalina, brought an action in the Court of First Instance of Negros
Occidental against Rosa Gicano and her husband, Gorgonio Geollegue, to compel the latter to
7
reconvey Lot No. 818 to them and/or pay damages. Rosa Gegato and her daughters alleged
that it had never been their intention to transfer the entire one-half (1/2) share in Lot No. 818
to Rosa Gicano in payment of Maximo Juanico's debt in the sum of P2,333.33, but only one-
third of the share of the minors in said undivided half of the property; that they were deceived
into believing that it was only this one-third interest which was really being conveyed by the
Deed of Sale of August 23, 1952, and it was on that understanding that Rosa Gegato and her
minor children's judicial guardian, Raymundo Pundon, had signed the deed, both of them
being unable to read and write English; that they discovered the fraud perpetrated on them
only in 1975, when they hired a surveyor to partition the property and the latter informed
them that title to Lot No. 818 had long since issued solely in the name of Nenita Geollegue,
who had purchased it from her mother, Rosa Gegato Geollegue and had in due course
obtained title in her name, TCT 31543, on June 23, 1964; and that on October 17, 1974, said
Nenita Geollegue had mortgaged the lot to the Philippine Commercial and Industrial Bank as
security for a loan of P156,000.00. 8 being represented by their judicial guardian, Ramundo Pundon) had executed a deed of sale
Rosa Gicano and her co-defendants filed a motion to dismiss the complaint alleging as
grounds therefor, plaintiffs' lack of cause of action, laches, estoppel, and prescription. 9
The
Trial court denied the motion in so far as it was based on the first ground, lack of cause of
10
action. It deferred resolution thereon as regards the other grounds until after trial on the
11
merits. Subsequently, however, after considering the pre-trial briefs and memoranda
submitted by the parties in connection with the pre-trial, and without scheduling the case for
trial on the merits any longer, the Trial Court promulgated an Order dismissing the complaint
12
on the ground of prescription and laches. It opined that the action, being one for
reconveyance predicated on an implied trust, prescribed in 10 years, commencing from the
date that the initial document of transfer was registered and title issued; and since 23 years
had already elapsed on the day of the institution of the action at bar, reckoned from the
registration of the deed of sale and issuance of title, the suit was time-barred.
The Trial Court's Order was however reversed by the Court of Appeals, on an appeal taken by
Rosa Gegato, et al., and the case was remanded with instructions that a full dress trial on the
merits be conducted. In its Decision promulgated on May 26, 1982, 13
the Appellate Court
declared that the outright dismissal of complaint on the ground of prescription was
premature and violative of due process because it denied the parties the opportunity to prove
their claims and defenses. It also held that the action was not in truth time-barred. The
Appellate Court's reasoning does not however appear persuasive. It said that absent any proof
to the contrary, the one-half (1/2) share of the deceased Maximo Juanico in Lot 818,
originally owned in common by him with Matilde Geolingo, must be presumed to be conjugal
in character; hence, only one-half (1/2) of said half constituted the estate of Maximo Juanico
upon his death, the other half pertaining in ownership to his widow, Rosa Gegato, as her
conjugal share; hence, Rosa Gegato's conjugal share could not have been meant to be
included in the Deed of Sale of August 23, 1952, there being nothing in its language in fact to
show this, and that deed was valid only in so far as concerned the transfer of 1/3 of her
children's inheritance, but void as regards the remaining 2/3 for lack of cause or object in
accordance with Article 1409 of the Civil Code, the action to declare its illegality being
imprescriptible under Article 1410 of the same Code.
But the action instituted by the plaintiffs Rosa Gegato, et al. was not one to declare the deed
of sale of August 23, 1952 void ab initio, for lack of cause or object in accordance with Article
1409 of the Civil Code, which is really imprescriptible, but to annul it on account of fraud, on
the theory of constructive trust, which prescribes in ten (10) years. In the case at bar, Rosa
Gegato and her minor children by her deceased husband, Maximo Juanico (said children
and acknowledged it before a notary public which, upon its face, transferred the entirety of
Maximo Juanico's right, share and interest in Lot 181 to Rosa Gicano. Now, if it be true that
they were deceived into executing that deed of sale by Rosa Gicano, who taking advantage of
their ignorance had made them believe that the deed conveyed only 1/3 of the children's
share in their inheritance from their father, they certainly had the right to sue Rosa Gicano,
and after presenting evidence of the fraud perpetrated upon them, recover so much of the
property as they had never intended to transfer, and recover the damages thereby suffered by
them. But they certainly did not have all the time in the world to bring that suit. They had to
do it within ten (10) years from the issuance to Rosa Gicano of title to the property on the
14
strength of the supposedly fraudulent deed of sale. They did not file their action within this
statutory period. They filed it only after twenty-three (23) years. When filed, their action had
already been extinguished by prescription. They had slept on their rights. Time eroded their
right of action and ultimately erased it, as a sand castle on a shore is slowly and inexorably
obliterated by the rising tide.

Their action was therefore correctly dismissed, even without a trial on the merits being first
had. We have ruled that trial courts have authority and discretion to dismiss an action on the
ground of prescription when the parties' pleadings or other facts on record show it to be
indeed time-barred; (Francisco v. Robles, Feb. 15, 1954; Sison v. McQuaid, 50 O.G. 97;
Bambao v. Lednicky, Jan. 28, 1961; Cordova v. Cordova, Jan. 14, 1958; Convets,, Inc. v. NDC,
Feb. 28, 1958; 32 SCRA 529; Sinaon v. Sorongan, 136 SCRA 408); and it may do so on the
15
basis of a motion to dismiss, or an answer which sets up such ground as an affirmative
16
defense; or even if the ground is alleged after judgment on the merits, as in a motion for
17
reconsideration; or even if the defense has not been asserted at all, as where no statement
18
thereof is found in the pleadings, or where a defendant has been declared in
19
default. What is essential only, to repeat, is that the facts demonstrating the lapse of the
prescriptive period, be otherwise sufficiently and satisfactorily apparent on the record: either
in the averments of the plaintiffs complaint, or otherwise established by the evidence.

WHEREFORE, the Decision of the Court of Appeals promulgated on May 26, 1982 is
REVERSED, and the Order of the Trial Court dated October 29, 1976 dismissing the action
for reconveyance and damages instituted by respondents Rosa Gegato, et al. on the ground of
prescription is REINSTATED and AFFIRMED as being in accord with the relevant facts and
the law. Costs against respondents.

SECOND DIVISION
G.R. NO. 145470 December 9, 2005
SPS. LUIS V. CRUZ and AIDA CRUZ, Petitioners,
- versus -
SPS. ALEJANDRO FERNANDO,
SR., and RITA FERNANDO, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
AUSTRIA-MARTINEZ, J.:
For resolution is a petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the Decision[1] dated October 3, 2000 of the Court of Appeals (CA) in CA-
G.R. CV No. 61247, dismissing petitioners appeal and affirming the decision of the
Regional Trial Court (RTC) of Malolos, Bulacan, Branch 79, in Civil Case No. 877-M-94.
The antecedent facts are as follows:
Luis V. Cruz and Aida Cruz (petitioners) are occupants of the front portion of a 710-square
meter property located in Sto. Cristo, Baliuag, Bulacan. On October 21, 1994, spouses
Alejandro Fernando, Sr. and Rita Fernando (respondents) filed before the RTC a complaint
for accion publiciana against petitioners, demanding the latter to vacate the premises and
to pay the amount of P500.00 a month as reasonable rental for the use thereof.
Respondents alleged in their complaint that: (1) they are owners of the property, having
bought the same from the spouses Clodualdo and Teresita Glorioso (Gloriosos) per Deed of
Sale dated March 9, 1987; (2) prior to their acquisition of the property, the Gloriosos
offered to sell to petitioners the rear portion of the property but the transaction did not
materialize due to petitioners failure to exercise their option; (3) the offer to sell is
embodied in a Kasunduan dated August 6, 1983 executed before the Barangay Captain; (4)
due to petitioners failure to buy the allotted portion, respondents bought the whole
property from the Gloriosos; and (5) despite repeated demands, petitioners refused to
vacate the property.[2]
Petitioners filed a Motion to Dismiss but the RTC dismissed it for lack of merit in its Order
dated March 6, 1995.[3] Petitioners then filed their Answer setting forth the affirmative
defenses that: (1) the Kasunduan is a perfected contract of sale; (2) the agreement has
already been partially consummated as they already relocated their house from the rear
portion of the lot to the front portion that was sold to them; (3) Mrs. Glorioso prevented the
complete consummation of the sale when she refused to have the exact boundaries of the
lot bought by petitioners surveyed, and the existing survey was made without their
knowledge and participation; and (4) respondents are buyers in bad faith having bought
that portion of the lot occupied by them (petitioners) with full knowledge of the prior sale
to them by the Gloriosos.[4]
After due proceedings, the RTC rendered a Decision on April 3, 1998 in favor of
respondents. The decretal portion of the decision provides:
PREMISES CONSIDERED, the herein plaintiffs was able to prove by
preponderance of evidence the case of accion publiciana, against the defendants and judgment
is hereby rendered as follows:
1. Ordering defendants and all persons claiming under them to vacate placefully
(sic) the premises in question and to remove their house therefore (sic);
2. Ordering defendants to pay plaintiff the sum of P500.00 as reasonable rental per
month beginning October 21, 1994 when the case was filed before this Court and every month
thereafter until they vacate the subject premises and to pay the costs of suit.
The counter claim is hereby DISMISSED for lack of merit. SO ORDERED. [5]
Petitioners appealed the RTC decision but it was affirmed by the CA per its Decision dated October 3, 2000.
Hence, the present petition raising the following issues:
1. Whether the Honorable Court of Appeals committed an error of law in holding
that the Agreement (Kasunduan) between the parties was a mere offer to sell, and not a
perfected Contract of Purchase and Sale?
2. Whether the Honorable Court of Appeals committed an error of law in not
holding that where the parties clearly gave the petitioners a period of time within which to pay
the price, but did not fix said period, the remedy of the vendors is to ask the Court to fix the
period for the payment of the price, and not an accion publiciana?
3. Whether the Honorable Court of Appeals committed an error of law in not
ordering respondents to at least deliver the back portion of the lot in question upon payment of
the agreed price thereof by petitioners, assuming that the Regional Trial Court was correct in
finding that the subject matter of the sale was said back portion, and not the front portion of
the property?
4. Whether the Honorable Court of Appeals committed an error of law in affirming
the decision of the trial court ordering the petitioners, who are possessors in good faith, to pay
rentals for the portion of the lot possessed by them? [6]
The RTC dwelt on the issue of which portion was being sold by the Gloriosos to petitioners, finding that
it was the rear portion and not the front portion that was being sold; while the CA construed the Kasunduan as a
mere contract to sell and due to petitioners failure to pay the purchase price, the Gloriosos were not obliged to
deliver to them (petitioners) the portion being sold.
 Petitioners, however, insist that the agreement was a perfected contract of sale, and their failure to pay
the purchase price is immaterial. They also contend that respondents have no cause of action against them, as the
obligation set in the Kasunduan did not set a period, consequently, there is no breach of any obligation by
petitioners.
The resolution of the issues in this case principally is dependent on the interpretation of the Kasunduan dated
August 6, 1983 executed by petitioners and the Gloriosos. The Kasunduan provided the following pertinent
stipulations:
a. Na pumayag ang mga maysumbong (referring to the Gloriosos) na pagbilhan ang mga
ipinagsumbong (referring to petitioners) na bahagi ng lupa at ang ipagbibili ay may
sukat na 213 metrong parisukat humigit kumulang sa halagang P40.00 bawat
metrong parisukat;
b. Na sa titulong papapanaugin ang magiging kabuuang sukat na mauukol sa mga
ipinagsusumbong ay 223 metrong parisukat at ang 10 metro nito ay bilang kaloob ng
mga maysumbong sa mga Ipinagsusumbong na bahagi ng right of way;
c. Na ang right of way ay may luwang na 1.75 meters magmula sa daang Lopez
Jaena patungo sa likuran ng lote na pagtatayuan ng bahay ng mga
Ipinagsusumbong na kanyang bibilhin;
d. Na ang gugol sa pagpapasukat at pagpapanaog ng titulo ay paghahatian ng magkabilang
panig na ang panig ay magbibigay ng halagang hindi kukulanging sa halagang tig-
AAPAT NA DAANG PISO (P400.00);
e. Na ang ipinagsusumbong ay tiyakang ililipat ang bahay sa bahaging kanilang nabili o
mabibili sa buwan ng Enero 31, 1984;[7] (Emphasis supplied)
Under Article 1458 of the Civil Code, a contract of sale is a contract by which one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price
certain in money or its equivalent. Article 1475 of the Code further provides that the contract of sale is perfected at
the moment there is meeting of the minds upon the thing which is the object of the contract and upon the price.
From that moment the parties may reciprocally demand performance subject to the provisions of the law
governing the form of contracts.
In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold, as
distinguished from a contract to sell where ownership is, by agreement, reserved in the vendor and is not to pass to
the vendee until full payment of the purchase price. [8] Otherwise stated, in a contract of sale, the vendor loses
ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas,
in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of
the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective.
The Kasunduan provides for the following terms and conditions: (a) that the Gloriosos agreed to sell to
petitioners a portion of the property with an area of 213 meters at the price of P40.00 per square meter; (b) that in
the title that will be caused to be issued, the aggregate area is 223 square meters with 10 meters thereof serving as
right of way; (c) that the right of way shall have a width of 1.75 meters from Lopez Jaena road going towards the
back of the lot where petitioners will build their house on the portion of the lot that they will buy; (d) that the
expenses for the survey and for the issuance of the title will be divided between the parties with each party giving
an amount of no less than P400.00; and (e) that petitioners will definitely relocate their house to the portion they
bought or will buy by January 31, 1984.
The foregoing terms and conditions show that it is a contract to sell and not a contract of sale. For one,
the conspicuous absence of a definite manner of payment of the purchase price in the agreement confirms the
conclusion that it is a contract to sell. This is because the manner of payment of the purchase price is an
essential element before a valid and binding contract of sale can exist.[9] Although the Civil Code does not
expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the
same is needed, otherwise there is no sale. [10] As held in Toyota Shaw, Inc. vs. Court of Appeals,[11] a definite
agreement on the manner of payment of the price is an essential element in the formation of a binding and
enforceable contract of sale.
The Kasunduan does not establish any definite agreement between the parties concerning the terms of
payment. What it merely provides is the purchase price for the 213-square meter property at P40.00 per square
meter.
For another, the telltale provision in the Kasunduan that: Na pumayag ang mga maysumbong
na pagbilhan ang mga ipinagsumbong na bahagi ng lupa at ang ipagbibili ay may sukat na 213 metrong
parisukat humigit kumulang sa halagang P40.00 bawat metrong parisukat, simply means that the Gloriosos
only agreed to sell a portion of the property and that the portion to be sold measures 213 square meters.
Another significant provision is that which reads: Na ang ipinagsusumbong ay tiyakang ililipat ang
bahay sa bahaging kanilang nabili o mabibili sa buwan ng Enero 31, 1984. The foregoing indicates that a contract
of sale is yet to be consummated and ownership of the property remained in the Gloriosos. Otherwise, why would
the alternative term mabibili be used if indeed the property had already been sold to petitioners.
In addition, the absence of any formal deed of conveyance is a strong indication that the parties did not
intend immediate transfer of ownership.[12]
Normally, in a contract to sell, the payment of the purchase price is the positive suspensive condition
upon which the transfer of ownership depends. [13] The parties, however, are not prohibited from stipulating other
lawful conditions that must be fulfilled in order for the contract to be converted from a contract to sell or at the
most an executory sale into an executed one. [14]
In the present case, aside from the payment of the purchase price, there existed another suspensive
condition, i.e.: that petitioners will relocate their house to the portion they bought or will buy by January 31, 1984.
Petitioners failed to abide by the express condition that they should relocate to the rear portion of the
property being bought by January 31, 1984. Indeed, the Kasunduandiscloses that it is the rear portion that was
being sold by the Gloriosos, and not the front portion as petitioners stubbornly claim. This is evident from the
provisions establishing a right of way from Lopez Jaena road going towards the back of the lot, and requiring
them to relocate their house to the portion being sold by January 31, 1984. Petitioners are presently occupying the
front portion of the property. Why the need for a right of way and for petitioners to relocate if the front portion on
which their house stands is the portion being sold?
This condition is a suspensive condition noncompliance of which prevented the Gloriosos from
proceeding with the sale and ultimately transferring title to petitioners; and the Kasunduan from having obligatory
force.[15] It is established by evidence that the petitioners did not transfer their house located in the front portion of
the subject property to the rear portion which, under the Kasunduan, they intended to buy. Thus, no obligation
arose on the part of the Gloriosos to consider the subject property as having been sold to petitioners because the
latters non-fulfillment of the suspensive condition rendered the contract to sell ineffective and unperfected.
Petitioners admit that they have not paid a single centavo to the Gloriosos. However, petitioners argue
that their nonpayment of the purchase price was due to the fact that there is yet to be a survey made of the
property. But evidence shows, and petitioners do not dispute, that as early as August 12, 1983, or six days after the
execution of the Kasunduan, a survey has already been made and the property was subdivided into Lot Nos. 565-
B-1 (front portion) and 565-B-2 (rear portion), with Lot No. 565-B-2 measuring 223 square meters as the portion
to be bought by petitioners.
Petitioners question the survey made, asserting that it is a table survey made without their knowledge
and participation. It should be pointed out that the Kasunduan merely provides that the expenses for the survey
will be divided between them and that each party should give an amount of no less than P400.00. Nowhere is it
stated that the survey is a condition precedent for the payment of the purchase price.
Petitioners further claim that respondents have no cause of action against them because their obligation
to pay the purchase price did not yet arise, as the agreement did not provide for a period within which to pay the
purchase price. They argue that respondents should have filed an action for specific performance or judicial
rescission before they can avail of accion publiciana.
A person who occupies the land of another at the latter's forbearance or permission without any contract
between them is necessarily bound by an implied promise that he will vacate upon demand. [22]
Considering that petitioners continued possession of the property has already been rendered unlawful,
they are bound to pay reasonable rental for the use and occupation thereof, which in this case was appropriately
pegged by the RTC at P500.00 per month beginning October 21, 1994 when respondents filed the case against
them until they vacate the premises.
Finally, petitioners seek compensation for the value of the improvements introduced on the property.
Again, this is the first time that they are raising this point. As such, petitioners are now barred from seeking such
relief.[23]
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated October 3, 2000
in CA-G.R. CV No. 61247 is AFFIRMED.

Notably, petitioners never raised these arguments during the proceedings before the RTC. Suffice it to SO ORDERED.
say that issues raised for the first time on appeal and not raised timely in the proceedings in the lower court are
barred by estoppel.[16] Matters, theories or arguments not brought out in the original proceedings cannot be
considered on review or appeal where they are raised for the first time. To consider the alleged facts and
arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due process.
[17]

Moreover, it would be inutile for respondents to first petition the court to fix a period for the
performance of the contract. In the first place, respondents are not parties to the Kasunduan between petitioners
and the Gloriosos, and they have no standing whatsoever to seek such recourse. In the second place, such recourse
properly pertains to petitioners. It was they who should have sought the courts intercession. If petitioners believed
that they have an actionable contract for the sale of the property, prudence and common sense dictate that they
should have sought its enforcement forthwith. Instead, petitioners whiled away their time.

Furthermore, there is no need for a judicial rescission of the Kasunduan for the simple reason that the
obligation of the Gloriosos to transfer the property to petitioners has not yet arisen. There can be no rescission of
an obligation that is nonexistent, considering that the suspensive conditions therefor have not yet happened. [18]

Hence, petitioners have no superior right of ownership or possession to speak of. Their occupation of the
property was merely through the tolerance of the owners. Evidence on record shows that petitioners and their
predecessors were able to live and build their house on the property through the permission and kindness of the
previous owner, Pedro Hipolito, who was their relative, [19] and subsequently, Teresita Glorioso, who is also their
relative. They have no title or, at the very least, a contract of lease over the property. Based as it was on mere
tolerance, petitioners possession could neither ripen into ownership nor operate to bar any action by respondents to
recover absolute possession thereof.[20]

There is also no merit to petitioners contention that respondents are buyers in bad faith. As explained
in Coronel vs. Court of Appeals:

In a contract to sell, there being no previous sale of the property, a third person
buying such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and
the prospective buyer cannot seek the relief of reconveyance of the property. There is no
double sale in such case. Title to the property will transfer to the buyer after registration
because there is no defect in the owner-sellers title per se, but the latter, of course, may be
sued for damages by the intending buyer.[21] (Emphasis supplied)
 The material facts of this case are simple and undisputed.

Petitioner Vicente Pingol is the owner of Lot No. 3223 of the Cadastral Survey of
Caloocan, with an area of 549 square meters, located at Bagong Barrio, Caloocan
City and more particularly described in Transfer Certificate of Title (TCT) No. 7435
of the Registry of Deeds of Caloocan City. On 17 February 1969, he executed a
"DEED OF ABSOLUTE SALE OF ONE-HALF OF (1/2) [OF] AN UNDIVIDED PORTION
OF A PARCEL OF LAND" in favor of Francisco N. Donasco which was acknowledged
before a notary public. The parcel of land referred to herein is Lot No. 3223 and
the pertinent portions of the document read as follows:

That for and in consideration of the sum of TWENTY THOUSAND

AND FIVE HUNDRED THIRTY (P20,530.00) PESOS, Philippine
Currency, the VENDOR hereby these presents SELL, CONVEY AND
CONVEY by way of Absolute Sale the one-half (1/2) portion,
equivalent to Two Hundred Seventy Four and point Fifty (274.50)
square meters, to VENDEE, the above-mentioned property, his
heirs, assigns and successors-in- interest;
FIRST DIVISION
That the VENDOR hereby confesses and acknowledges the receipt
G.R. No. 102909 September 6, 1993 of TWO THOUSAND (P2,000.00) PESOS from VENDEE as advanced
(sic) and partial payment to the above-cited consideration of the
SPOUSES VICENTE and LOURDES PINGOL, petitioners, Sale herein mentioned, leaving therefor a balance of Eighteen
vs. Thousand and Five Hundred Thirty (P18,530) Pesos to be paid in
HON. COURT OF APPEALS and HEIRS OF FRANCISCO N. DONASCO, several equal installments within a period of six (6) years,
namely: MELINDA D. PELAYO, MARIETTA D. SINGSON, MYRNA D. CUEVAS, beginning January, 1970;
NATIVIDAD D. PELAYO, YOLANDA D. CACERES and MARY
DONASCO, respondents. That after computing the above-mentioned equal installments, the
VENDEE agrees and undertakes to pay unto the VENDOR a monthly
DAVIDE, JR., J.: amount equivalent to Two Hundred Fifty Seven (sic) and Thirty Six
Centavos (P257.36) within a period of Seventy One (71) months
An action denominated as one for specific performance and damages was and on the Seven Two [sic] (72) month, the amount of (P257.44) as
brought by the private respondents against the petitioners before the Regional the last and final installment thereof;
Trial Court (RTC) of Caloocan City which, after due trial, rendered a decision in
favor of the petitioners. On appeal, the respondent Court reversed the trial court's That the VENDEE agrees that in case of default in the payment of
decision. the installment due the same shall earn a legal rate of interest, and
to which the VENDOR likewise agrees;
It is from this judgment that the petitioners have appealed to this Court by way of
a petition for review on certiorari. That the VENDEE undertakes to pay unto the VENDOR the herein
monthly installment within the first five (5) days of each month and
 the same shall be made available and to be paid at the residence of
the VENDOR, payment to be made either directly to the VENDOR,
his wife or his authorized representative or factor;
That in case of partition of the above-described property between
herein VENDOR and VENDEE the same shall be divided into two (2)
equal parts, the VENDOR gets the corner facing J. De Jesus and
Malolos Avenue and the VENDEE shall get the portion with fifteen
15 meters frontage facing J. De Jesus Street only. 1
Pursuant to the contract, Donasco paid P2,000.00 to Pingol. The one-half portion,
designated as Lot No. 3223-A, was then segregated from the mother lot, and the
parties prepared a subdivision plan (Exhibit "C") which was approved by the Land
Registration Commission. 2
Francisco immediately took possession of the subject lot and constructed a house
thereon. In January 1970, he started paying the monthly installments but was
able to pay only up to 1972.
On 13 July 1984, Francisco Donasco died. At the time of his demise, he had paid
P8,369.00, plus the P2,000.00 advance payment, leaving a balance of P10,161.00
on the contract price. 3 Lot No. 3223-A remained in the possession of Donasco's
heirs.
On 19 October 1988, the heirs of Francisco Donasco filed an action for "Specific
Performance and Damages, with Prayer for Writ of Preliminary Injunction" against
the spouses Vicente and Lourdes Pingol (petitioners herein) before the RTC of
Caloocan City. The action was docketed as Civil Case No. 13572 and raffled off to
Branch 125 of the said court.
In their complaint, 4 the plaintiffs (private respondents herein) averred that after
the death of their father, they offered to pay the balance of P10,161.00 plus the
stipulated legal rate of interest thereon to Vicente Pingol but the latter rebuffed
their offer and has "been demanding for a bigger and unreasonable amount, in
complete variance to what is lawfully due and payable." They stated that they
had "exerted earnest efforts to forge or reach an amicable and peaceful
settlement with the defendants" for the payment of the property in question but
to no avail. They further alleged that the defendants were committing "acts of
forcible entry and encroachment" upon their land and asked that a writ of
preliminary injunction be issued to restrain the defendants from the acts
complained of.
Plaintiffs then prayed that the defendants be ordered, inter alia:
a. . . . to accept the amount of P10,161.00, more or less, plus the
stipulated legal rate of interest due thereon, as full and complete
payment of the balance for the agreed price/consideration on the
one- half (1/2) portion of the parcel of land . . .; [and]
b. . . . to execute the final deed of sale on the one-half (1/2) portion
of the lot . . . in accordance with the partition reflected in the
survey and subdivision plan, . . . . 5
In their answer with counterclaim, 6 defendants admitted the execution of the
aforementioned deed of sale, the segregation of the portion sold and the
preparation and approval of the subdivision plan, but set up the following special
and affirmative defenses: (1) plaintiffs' cause of action had already prescribed; (2)
the deed of sale embodied a conditional contract of sale "as the consideration is
to be paid on installment basis within a period of six years beginning January,
1970"; (3) the subdivision plan was prepared on the assumption that Francisco
Donasco would be able to comply with his obligation; (4) when Francisco died, he
had not fully paid the total consideration agreed upon; and (5) considering the
breach by Francisco of his contractual obligation way back in 1976, the sale was
deemed to have been cancelled and the continuous occupancy of Francisco after
1976 and by his heirs thereafter was by mere tolerance of Vicente Pingol. They
then asked that the plaintiffs be ordered to vacate the premises and to pay them
attorney's fees and a reasonable compensation for the use of the land.
In their Reply and Answer to Counterclaim, 7 the plaintiffs pointed out that there is
no provision in the deed of sale for its cancellation in case of default in the
payment of the monthly installments and invoked Article 1592 of the New Civil
Code. They specifically denied the allegations in the counterclaim.
The issues having been joined, the case was then tried on the merits.
On 22 January 1990, the trial court rendered a decision 8 dismissing the complaint
and ordering the plaintiffs to pay the defendants P350.00 as reasonable monthly
rental for the use of the premises from the filing of the complaint, P10,000.00 by
way of attorney's fees, and the costs of the suit. It held that: (1) the deed of
absolute sale in question, marked and offered in evidence as Exhibit "A," is
a contract to sell, not a contract of sale, since Vicente Pingol had no intention to
part with the ownership of the loan unless the full amount of the agreed price had
been paid; (2) the contract was deemed to have been cancelled from the moment
the late father of the plaintiffs defaulted in the payment of the monthly
installments; (3) title and ownership over the lot did not pass to Francisco
Donasco and his heirs since the contract to sell was never consummated; and (5)
assuming, arguendo, that the plaintiffs have a cause of action for specific
performance, such action had already prescribed since the complaint was filed
only on 19 October 1988 or more than ten years from the time that they could
have lawfully demanded performance. 9
Plaintiffs elevated the case to the Court of Appeals where the appeal was
docketed as CA-G.R. CV No. 25967. On 12 November 1991, the said court
rendered a decision 10 reversing the appealed decision and decreeing as follows:
WHEREFORE, the decision appealed from is hereby REVERSED and
SET ASIDE and another one is rendered:
(1) Ordering appellee-vendor Vicente Pingol to accept the sum of
P10,161.00, plus the legal interest due thereon from the date of
institution of this action on October 19, 1988;
(2) Upholding the validity of the "DEED OF ABSOLUTE SALE OF ONE-
HALF (1/2) (of) AN UNDIVIDED PORTION OF A PARCEL OF LAND"
(Exh. A), and by virtue and on the strength of which declaring the
"Heirs of the Deceased Francisco N. Domingo" as the owners of the
274.50 sq. m. land, denominated as Lot 3223-A, (LRC) Psd-146255
under the technical description (exh. D) and reflected in the Plan of
Subdivision Survey which was approved By Commissioner of Land
Registration on August 13, 1971 (exh. C), representing one-half
portion [of] lot 3223, situated at the corner of Malolos Avenue and
G. de Jesus St., Bagong Barrio, Caloocan City, and covered by TCT
No. 7435 of the Registry of Deeds of Caloocan City (exh. B); and
(3) Ordering the defendants-appellees to pay the costs.
SO ORDERED. 11
The Court of Appeals ruled that the deed of sale in question reveals the clear
intention of Vicente Pingol to part with the ownership of the one-half portion of
the land by way of an absolute sale; that the failure to fully pay the agreed price
was not a ground for the cancellation of the sale; and that the plaintiffs' action is
imprescriptible since it is akin to an action to quiet title to property in one's
possession. 12
Dissatisfied with the decision of the Court of Appeals, the defendants, hereinafter
referred to as the petitioners, filed this petition for certiorari on 9 January 1992.
Plaintiffs, hereinafter referred to as the private respondents, filed their comment
thereto on 10 September 1992 to which the petitioners filed a reply 11 November
1992. We gave due course to the petition and required the parties to submit their
respective memoranda, 13 which they subsequently complied with.
Petitioners contend that the Court of Appeals erred:
I
IN HOLDING THAT THE DOCUMENT (EXHIBIT "A") DENOMINATED AS
"ABSOLUTE DEED OF SALE OF ONE-HALF () OF AN UNDIVIDED
PORTION OF A PARCEL OF LAND" IS AN ABSOLUTE DEED OF SALE
SUFFICIENT TO CONFER OWNERSHIP ON THE VENDEE AND HIS
SUCCESSORS-IN-INTEREST, DESPITE THE FACT THAT BY ITS TERMS
AND CONDITIONS, LIKE THE PRICE BEING PAYABLE ON
INSTALLMENTS WITHIN A FIXED PERIOD, THE SAME IS A
CONDITIONAL DEED OF SALE.
II
IN HOLDING THAT NOTWITHSTANDING THE FACT THAT THE VENDEE
FAILED TO COMPLY WITH THE TERMS OF THE CONTRACT (EXHIBIT
"A") SPECIFICALLY TO COMPLETE THE PAYMENT OF THE
CONSIDERATION ON THE DATE STIPULATED IN THE CONTRACT
WHICH WAS SUPPOSED TO BE IN JANUARY 1976, COMPLETE
PAYMENT THEREOF CAN STILL BE ENFORCED IN AN ACTION
INSTITUTED BY THE HEIRS OF THE VENDEE FILED ON OCTOBER 19,
1988 OR A PERIOD OF MORE THAN TWELVE (12) YEARS FROM THE
TIME COMPLETE PAYMENT SHOULD HAVE BEEN MADE;
III
 IN HOLDING THAT THE PRIVATE RESPONDENTS' ACTION IS ONE
WHICH IS AN OFFER TO COMPLETE THE PAYMENT LEFT UNPAID BY
PRIVATE RESPONDENTS' FATHER WHICH DOES NOT PRESCRIBE;
IV
IN HOLDING THAT PRIVATE RESPONDENTS' CAUSE OF ACTION HAS
NOT PRESCRIBE. 14
The decisive issue in this case is whether Exhibit "A" embodies a contract of sale
or a contract to sell. The distinction between the two is important for in a contract
of sale, the title passes to the vendee upon the delivery of the thing sold, whereas
in a contract to sell, by agreement, ownership is reserved in the vendor and is not
to pass until the full payment of the price. In a contract of sale, the vendor has
lost and cannot recover ownership until and unless the contract is resolved or
rescinded, whereas in a contract to sell, title is retained by the vendor until the
full payment of the price, such payment being a positive suspensive condition,
failure of which is not a breach but an event that prevented the obligation of the
vendor to convey title from becoming
effective. 15
A perusal of Exhibit "A" leads to no other conclusion than that it embodies a
contract of sale. The plain and clear tenor of the "DEED OF ABSOLUTE SALE OF
ONE-HALF (1/2) [OF] AN UNDIVIDED PORTION OF A PARCEL OF LAND" is that "the
VENDOR hereby . . . SELL, CONVEY AND CONVEY by way Absolute Sale the one-
half (1/2) portion . . . to the VENDEE . . . his heirs, assigns and successors-in-
interest." That the vendor, petitioner Vicente Pingol, had that clear intention was
further evidenced by his failure to reserve his title thereto until the full payment
of the price.
In Dignos vs. Court of Appeals, 16 we held that a deed of sale is absolute in nature
although denominated as a "Deed of Conditional Sale" where there is no
stipulation in the deed that title to the property sold is reserved in the seller until
the full payment of the price, nor is there a stipulation giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay within a
fixed period. Exhibit "A" contains neither stipulation. What is merely stated
therein is that "the VENDEE agrees that in case of default in the payment of the
installments due the same shall earn a legal rate of interest, and to which the
VENDOR likewise agrees."
Furthermore, as found by the Court of Appeals, the acts of the parties,
contemporaneous and subsequent to the contract, clearly show that an absolute
deed of sale was intended, by the parties and not a contract to sell:
[P]ursuant to the deed, the vendor delivered actual and
constructive possession of the property to the vendee, who
occupied and took such possession, constructed a building thereon,
had the property surveyed and subdivided and a plan of the
property was prepared and submitted to the Land Registration
Commission which approved it preparatory to segregating the
same and obtaining the corresponding TCT in his name. Since the
sale, appellee continuously possessed and occupied the property as
owner up to his death on July 13, 1984 and his heirs, after his
death, continued the occupancy and possession of the property up
to the present. Those contemporaneous and subsequent events are
demonstrative acts that the vendor since the sale recognized the
vendee as the absolute owner of the property sold. All those
attributes of ownership are admitted by defendants in their answer,
specifically in paragraphs 7 and 9 of their special and affirmative
defenses. 17
The contract here being one of absolute sale, the ownership of the subject lot was
transferred to the buyer upon the actual and constructive delivery thereof. The
constructive delivery of the subject lot was made upon the execution of the deed
of sale 18 while the actual delivery was effected when the private respondents
took possession of and constructed a house on Lot No. 3223-A.
The delivery of the object of the contract divested the vendor of the ownership
over the same and he cannot recover the title unless the contract is resolved or
rescinded pursuant to Article 1592 of the New Civil Code which provides that:
In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed
upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as
no demand for rescission of the contract has been made upon him
either judicially or by a notarial act. After the demand, the court
may not grant him a new term.
Both the trial court and the Court of Appeals did not find that a notarial or judicial
rescission of the contract had been made. Although Vicente Pingol asserts that he
had declared to Francisco Donasco that he was cancelling the contract, he did not
prove that his demand for rescission was made either judicially or by a notarial
act.
Petitioners fault the respondent Court for holding that the action of the petitioners
is not barred by the statute of limitations. They argue that the private
respondents' action, being based upon a written contract, has prescribed since it
was brought only in 1988 or more than ten years from the time when the latter
could have lawfully demanded performance. 19
We disagree.
Although the private respondents' complaint before the trial court was
denominated as one for specific performance, it is in effect an action to quiet title.
In this regard, the following excerpt from Bucton vs. Gabar 20 is apropos:
The real and ultimate basis of petitioners' action is their ownership
of one- half of the lot coupled with their possession thereof, which
entitles them to a conveyance of the property. In Sapto, et al. v.
Fabiana [103 Phil. 683, 686-87 (1958)], this Court, speaking thru
Mr. Justice J.B.L. Reyes, explained that under the circumstances no
enforcement of the contract is needed, since the delivery of
possession of the land sold had consummated the sale and
transferred title to the purchaser, and that, actually, the action for
conveyance is one to quiet title, i.e., to remove the cloud upon the
appellee's ownership by the refusal of the appellants to recognize
the sale made by their predecessors.
That a cloud has been cast on the title of the private respondents is indubitable.
Despite the fact that the title had been transferred to them by the execution of
the deed of sale and the delivery of the object of the contract, the petitioners
adamantly refused to accept the tender of payment by the private respondents
and steadfastly insisted that their obligation to transfer title had been rendered
ineffective.
A vendee in an oral contract to convey land who had made part payment thereof,
entered upon the land and had made valuable improvements thereon, is entitled
to bring suit to clear his title against the vendor who had refused to transfer the
title to him. It is not necessary that the vendee has an absolute title, an equitable
title being sufficient to clothe him with personality to bring an action to quiet
title. 21
Prescription thus cannot be invoked against the private respondents for it is
aphoristic that an action to quiet title to property in one's possession is
imprescriptible. 22 The rationale for this rule has been aptly stated thus:
The owner of real property who is in possession thereof may wait
until his possession is invaded or his title is attacked before taking
steps to vindicate his right. A person claiming title to real property,
but not in possession thereof, must act affirmatively and within the
time provided by the statute. Possession is a continuing right as is
the right to defend such possession. So it has been determined that
an owner of real property in possession has a continuing right to
invoke a court of equity to remove a cloud that is a continuing
menace to his title. Such a menace is compared to a continuing
nuisance or trespass which is treated as successive nuisances or
trespasses, not barred by statute until continued without
interruption for a length of time sufficient to affect a change of title
as a matter of law. 23
Private respondents shall, however, be liable to pay the legal rate of interest on
the unpaid balance of the purchase price from the date default or on 6 January
1976, when the entire balance should have been paid, pursuant to the provision
in the deed of sale.
WHEREFORE, except as above modified, the Decision appealed from is hereby
AFFIRMED. As modified, the interest on the unpaid balance of P10,161.00, at the
legal rate, shall be computed from 6 January 1976. Upon the payment by the
private respondents to the petitioners of the said amount and the interest
thereon, the latter are ordered to deliver Transfer Certificate of Title No. 7435 to
the Register of Deeds of Caloocan City who shall cancel the same and issue two
new transfer certificates of title in lieu thereof, one of which shall be in the name
of the herein private respondents covering Lot No. 3223-A and the other in the
name of the petitioners covering the remainder of the lot.
SO ORDERED.
 Among these were a parcel of residential land situated in Poblacion, Gen.
Trias, Cavite, designated as Lot No. 3201, consisting of 2,069 square meters,
more or less, and covered by T.C.T. No. RT-9355, in their names, and an
agricultural land located at Pasong Kawayan, Gen. Trias, Cavite, with an area
of 43,587 square meters, more or less, known as Lot No. 2337, and also
registered in their names under T.C.T. No. RT-9356 of the Registry of Deeds for
the Province of Cavite.

Sometime in January, 1967, the private respondent Hugo Portugal, a son of

the spouses, borrowed from his mother, Cornelia, the certificates of title to
the above-mentioned parcels of land on the pretext that he had to use them
in securing a loan that he was negotiating. Cornelia, the loving and helpful
SECOND DIVISION mother that she was, assented and delivered the titles to her son. The matter
was never again brought up until after Pascual Portugal died on November 17,
G.R. No. 73564 March 25, 1988 1974. (Cornelia herself died on November 12, 1987.) When the other heirs of
the deceased Pascual Portugal, the petitioners herein, for the purposes of
CORNELIA CLANOR VDA. DE PORTUGAL, FRANCISCO C. PORTUGAL, executing an extra-judicial partition of Pascual's estate, wished to have all the
PETRONA C. PORTUGAL, CLARITA PORTUGAL, LETICIA PORTUGAL, and properties of the spouses collated, Cornelia asked the private respondent for
BENEDICTO PORTUGAL, JR., petitioners, the return of the two titles she previously loaned, Hugo manifested that the
vs. said titles no longer exist. When further questioned, Hugo showed the
INTERMEDIATE APPELLATE COURT and HUGO C. petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his and
PORTUGAL, respondents. his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two
previous ones. This falsification was triggered by a deed of sale by which the
SARMIENTO, J.: spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00
the two parcels of land adverted to earlier to their two sons, Hugo and
Seeking the reversal of the decision 1 dated October 21, 1985 of the former Emiliano. Confronted by his mother of this fraud, Emiliano denied any
Intermediate Appellate Court in CA-G.R. CV No. 70247, entitled "Cornelia Clanor participation. And to show his good faith, Emiliano caused the reconveyance
Vda. de Portugal, et al. vs. Hugo Portugal, and the reinstatement of the of Lot No. 2337 previously covered by TCT No. RT-9356 and which was
decision 2 in their favor, dated June 30, 1980, of the Court of First Instance of conveyed to him in the void deed of sale. Hugo, on the other hand, refused to
Cavite in Civil Case No. NC-699 entitled "Cornelia Vda. de Portugal, et al. vs. Hugo make the necessary restitution thus compelling the petitioners, his mother
Portugal," the petitioners now come to us by way of this petition for review by and his other brothers and sisters, to institute an action for the annulment of
certiorari. the controversial deed of sale and the reconveyance of the title over Lot No.
3201 (the residential land). After hearing, the trial court rendered its decision,
The factual background that gave rise to the present controversy is the dispositive portion of which reads:
summarized as follows:
xxx xxx xxx
Petitioner Cornelia Clanor and her late husband Pascual Portugal, during the
lifetime of the latter, were able to accumulate several parcels of real property.
WHEREFORE, under our present perspectives, judgment is hereby rendered;
and the Court hereby declares inoperative the Deed of Sale (Exhibit A and
Exhibit 1) and all its appertaining and subsequent documents corresponding
with Transfer Certificate of Title No. T-23539 of the Register of Deeds for the
Province of Cavite, as well as all subsequent Transfer Certificates of Title
which may have been produced corresponding to the parcels of land, subject
matter hereof.
SO ORDERED. 3
From this decision, Hugo Portugal, the private respondent herein and the
defendant in the trial court, appealed to the respondent appellate court which
reversed, hence the present petition.
The issues raised by the petitioners are:
1. Whether or not the present action has prescribed;
2. Whether or not the respondent court was justified in disturbing the trial
court's findings on the credibility of the witnesses presented during the trial;
and
3. Whether or not the appellate court could entertain the defense of
prescription which was not raised by the private respondents in their answer
to the complaint nor in a motion to dismiss.
We find the petition meritorious.
There is really nothing novel in this case as an the issues raised had been, on
several occasions, ruled upon by the Court. Apropos the first issue, which is
the timeliness of the action, the trial court correctly ruled that the action
instituted by the petitioners has not yet prescribed. Be that as it may, the
conclusion was reached through an erroneous rationalization, i.e., the case is
purely for reconveyance based on an implied or constructive trust. Obviously,
the trial court failed to consider the lack of consideration or cause in the
purported deed of sale by which the residential lot was allegedly transferred
to the private respondent by his parents. On the other hand, the respondent
Intermediate Appellate Court held that since the action for reconveyance was
fathered by a fraudulent deed of sale, Article 1391 of the Civil Code which
lays down the rule that an action to annul a contract based on fraud
prescribes in four years, applies. Hence, according to the respondent court, as
more than four years had elapsed from January 23, 1967 when the assailed
deed was registered and the petitioners' cause of action supposedly accrued,
the suit has already become stale when it was commenced on October 26,
1976, in the Court of First Instance of Cavite. For reasons shortly to be shown,
we can not give our imprimatur to either view.
The case at bar is not purely an action for reconveyance based on an implied
or constructive trust. Neither is it one for the annullment of a fraudulent
contract. A closer scrutiny of the records of the case readily supports a finding
that fraud and mistake are not the only vices present in the assailed contract
of sale as held by the trial court. More than these, the alleged contract of sale
is vitiated by the total absence of a valid cause or consideration. The
petitioners in their complaint, assert that they, particularly Cornelia, never
knew of the existence of the questioned deed of sale. They claim that they
came to know of the supposed sale only after the private respondent, upon
their repeated entreaties to produce and return the owner's duplicate copy of
the transfer certificate of title covering the two parcels of land, showed to
them the controversial deed. And their claim was immeasurably bolstered
when the private respondent's co-defendant below, his brother Emiliano
Portugal, who was allegedly his co-vendee in the transaction, disclaimed any
knowledge or participation therein. If this is so, and this is not contradicted by
the decisions of the courts below, the inevitable implication of the allegations
is that contrary to the recitals found in the assailed deed, no consideration
was ever paid at all by the private respondent. Applying the provisions of
Articles 1350, 1352, and 1409 of the new Civil Code in relation to the
indispensable requisite of a valid cause or consideration in any contract, and
what constitutes a void or inexistent contract, we rule that the disputed deed
of sale is void ab initio or inexistent, not merely voidable. And it is provided in
Article 1410 of the Civil Code, that '(T)he action or defense for the declaration
of the inexistence of a contract does not prescribe.
But even if the action of the petitioners is for reconveyance of the parcel of
land based on an implied or constructive trust, still it has been seasonably
filed. For as heretofore stated, it is now settled that actions of this nature
prescribe in ten years, the point of reference being the date of registration of
the deed or the date of the issuance of the certificate of titIe over the
property. 4 In this case, the petitioner commenced the instant action for
reconveyance in the trial court on October 26, 1976, or less than ten years from
January 23, 1967 when the deed of sale was registered with the Register of
Deeds. 5 Clearly, even on this basis alone, the present action has not yet
prescribed.

On the credibility of witnesses presented in court, there is no doubt that the

trial court's findings on this score deserves full respect and we do not have
any reason to disturb it here now. 6 After all, the trial court judge is in a better
position to make that appreciation for having heard personally the witnesses and
observed their deportment and manner of testifying during the trial. 7 The
exceptions to this time honored policy are: when the trial court plainly overlooked
certain facts of substantial import and value which if only correctly considered by
the court might change the outcome of the case; 8 and, if the judge who rendered
the decision was not the one who heard the evidence. 9 Neither of these
exceptions is present here. Therefore, the respondent appellate court's ruling
questioning the credibility of petitioner Cornelia Clanor Vda. de Portugal must be EN BANC
reversed.
G.R. No. L-25494 June 14, 1972
Anent the last issue raised by the petitioner, we have already ruled that the
defense of prescription although not raised by the defendant may NICOLAS SANCHEZ, plaintiff-appellee,
nevertheless be passed upon by the court when its presence is plainly vs.
apparent on the face of the complaint itself. 10 At any rate, in view of our earlier SEVERINA RIGOS, defendant-appellant.
finding that the deed of sale in controversy is not simply fraudulent but void ab
initio or inexistent our ruling on this third issue would not have any material CONCEPCION, C.J.:p
bearing on the overall outcome of this petition. The petitioner's action remains to
be seasonably instituted. Appeal from a decision of the Court of First Instance of Nueva Ecija to the
Court of Appeals, which certified the case to Us, upon the ground that it
WHEREFORE, the petition is hereby GRANTED; the Decision dated October 21, involves a question purely of law.
1985 and the Resolution dated January 24, 1986 of the Intermediate Appellate
Court are hereby REVERSED and SET ASIDE; the deed of sale dated January The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and
23, 1967 evidencing the sale of Lot No. 3201 to private respondent Hugo defendant Severina Rigos executed an instrument entitled "Option to
Portugal is declared VOID AB INITIO; and the private respondent is ORDERED Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to sell" to
to reconvey to petitioners the title over the said Lot No. 3201 which is now Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar
under TCT No. T-23539. Costs against the private respondent. and Sibot, municipality of San Jose, province of Nueva Ecija, and more
particularly described in Transfer Certificate of Title No. NT-12528 of said
SO ORDERED. province, within two (2) years from said date with the understanding that said
option shall be deemed "terminated and elapsed," if "Sanchez shall fail to
exercise his right to buy the property" within the stipulated period. Inasmuch
as several tenders of payment of the sum of Pl,510.00, made by Sanchez
within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former
deposited said amount with the Court of First Instance of Nueva Ecija and
commenced against the latter the present action, for specific performance
and damages.
After the filing of defendant's answer admitting some allegations of the
complaint, denying other allegations thereof, and alleging, as special defense,
that the contract between the parties "is a unilateral promise to sell, and the
same being unsupported by any valuable consideration, by force of the New
Civil Code, is null and void" on February 11, 1964, both parties, assisted by
their respective counsel, jointly moved for a judgment on the pleadings.
Accordingly, on February 28, 1964, the lower court rendered judgment for
Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him
and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos
was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs.
Hence, this appeal by Mrs. Rigos.
This case admittedly hinges on the proper application of Article 1479 of our
Civil Code, which provides:
ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the
promise is supported by a consideration distinct from the price.
In his complaint, plaintiff alleges that, by virtue of the option under
consideration, "defendant agreed and committed to sell" and "the plaintiff
agreed and committed to buy" the land described in the option, copy of which
was annexed to said pleading as Annex A thereof and is quoted on the
margin. 1 Hence, plaintiff maintains that the promise contained in the contract is
"reciprocally demandable," pursuant to the first paragraph of said Article 1479.
Although defendant had really "agreed, promised and committed" herself to sell
the land to the plaintiff, it is not true that the latter had, in turn, "agreed and
committed himself " to buy said property. Said Annex A does not bear out
plaintiff's allegation to this effect. What is more, since Annex A has been made
"an integral part" of his complaint, the provisions of said instrument form part
"and parcel" 2 of said pleading.
The option did not impose upon plaintiff the obligation to
purchase defendant's property. Annex A is not a "contract to buy and sell." It
merely granted plaintiff an "option" to buy. And both parties so understood it,
as indicated by the caption, "Option to Purchase," given by them to said
instrument. Under the provisions thereof, the defendant "agreed, promised
and committed" herself to sell the land therein described to the plaintiff for
P1,510.00, but there is nothing in the contract to indicate that her
aforementioned agreement, promise and undertaking is supported by a
consideration "distinct from the price" stipulated for the sale of the land.
Relying upon Article 1354 of our Civil Code, the lower court presumed the
existence of said consideration, and this would seem to be the main factor
that influenced its decision in plaintiff's favor. It should be noted, however,
that:
(1) Article 1354 applies to contracts in general, whereas the second
paragraph of Article 1479 refers to "sales" in particular, and, more
specifically, to "an accepted unilateral promise to buy or to sell." In other
words, Article 1479 is controlling in the case at bar.
(2) In order that said unilateral promise may be "binding upon the promisor,
Article 1479 requires the concurrence of a condition, namely, that the promise
be "supported by a consideration distinct from the price." Accordingly, the
promisee can not compel the promisor to comply with the promise, unless the
former establishes the existence of said distinct consideration. In other words,
the promisee has the burden of proving such consideration. Plaintiff herein
has not even alleged the existence thereof in his complaint.
(3) Upon the other hand, defendant explicitly averred in her answer, and
pleaded as a special defense, the absence of said consideration for her
promise to sell and, by joining in the petition for a judgment on the pleadings,
plaintiff has impliedly admitted the truth of said averment in defendant's
answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v.
Casas, 3 that:
 One who prays for judgment on the pleadings without offering
proof as to the truth of his own allegations, and without giving
the opposing party an opportunity to introduce evidence, must
be understood to admit the truth of all the material and relevant
allegations of the opposing party, and to rest his motion for
judgment on those allegations taken together with such of his
own as are admitted in the pleadings. (La Yebana Company vs.
Sevilla, 9 Phil. 210). (Emphasis supplied.)
This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's
Incorporated v. Herminia Verde. 5
Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf &
Pacific Co., 6 from which We quote:
The main contention of appellant is that the option granted to appellee
to sell to it barge No. 10 for the sum of P30,000 under the terms stated
above has no legal effect because it is not supported by any
consideration and in support thereof it invokes article 1479 of the new
Civil Code. The article provides:
"ART. 1479. A promise to buy and sell a determinate thing for a
price certain is reciprocally demandable.
An accepted unilateral promise to buy or sell a determinate
thing for a price certain is binding upon the promisor if the
promise is supported by a consideration distinct from the price."
On the other hand, Appellee contends that, even granting that the
"offer of option" is not supported by any consideration, that option
became binding on appellant when the appellee gave notice to it of its
acceptance, and that having accepted it within the period of option,
the offer can no longer be withdrawn and in any event such withdrawal
is ineffective. In support this contention, appellee invokes article 1324
of the Civil Code which provides:
"ART. 1324. When the offerer has allowed the offeree a certain
period to accept, the offer may be withdrawn any time before
acceptance by communicating such withdrawal, except when
the option is founded upon consideration as something paid or
promised."
There is no question that under article 1479 of the new Civil Code "an
option to sell," or "a promise to buy or to sell," as used in said article,
to be valid must be "supported by a consideration distinct from the
price." This is clearly inferred from the context of said article that a
unilateral promise to buy or to sell, even if accepted, is only binding if
supported by consideration. In other words, "an accepted unilateral
promise can only have a binding effect if supported by a
consideration which means that the option can still be
withdrawn, even if accepted, if the same is not supported by any
consideration. It is not disputed that the option is without
consideration. It can therefore be withdrawn notwithstanding the
acceptance of it by appellee.
It is true that under article 1324 of the new Civil Code, the general
rule regarding offer and acceptance is that, when the offerer gives to
the offeree a certain period to accept, "the offer may be withdrawn at
any time before acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted
as modified by the provision of article 1479 above referred to, which
applies to "a promise to buy and sell" specifically. As already stated,
this rule requires that a promise to sell to be valid must be supported
by a consideration distinct from the price.
We are not oblivious of the existence of American authorities which
hold that an offer, once accepted, cannot be withdrawn, regardless of
whether it is supported or not by a consideration (12 Am. Jur. 528).
These authorities, we note, uphold the general rule applicable to
offer and acceptance as contained in our new Civil Code. But we are
prevented from applying them in view of the specific provision
embodied in article 1479. While under the "offer of option" in
question appellant has assumed a clear obligation to sell its barge to
appellee and the option has been exercised in accordance with its
terms, and there appears to be no valid or justifiable reason for
appellant to withdraw its offer, this Court cannot adopt a different
 attitude because the law on the matter is clear. Our imperative duty
is to apply it unless modified by Congress.
However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian
Tek, 8 decided later that Southwestern Sugar & Molasses Co. v. Atlantic Gulf &
Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code
and applied the former where a unilateral promise to sell similar to the one sued
upon here was involved, treating such promise as an option which, although not
binding as a contract in itself for lack of a separate consideration, nevertheless
generated a bilateral contract of purchase and sale upon acceptance. Speaking
through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said:
Furthermore, an option is unilateral: a promise to sell at the price
fixed whenever the offeree should decide to exercise his option within
the specified time. After accepting the promise and before he
exercises his option, the holder of the option is not bound to buy. He
is free either to buy or not to buy later. In this case, however, upon
accepting herein petitioner's offer a bilateral promise to sell and to
buy ensued, and the respondent ipso facto assumed the obligation of
a purchaser. He did not just get the right subsequently to buy or not
to buy. It was not a mere option then; it was a bilateral contract of
sale.
Lastly, even supposing that Exh. A granted an option which is
not binding for lack of consideration, the authorities hold that:
"If the option is given without a consideration, it is a mere
offer of a contract of sale, which is not binding until
accepted. If, however, acceptance is made before a
withdrawal, it constitutes a binding contract of sale, even
though the option was not supported by a sufficient
consideration. ... . (77 Corpus Juris Secundum, p. 652.
See also 27 Ruling Case Law 339 and cases cited.)
"It can be taken for granted, as contended by the
defendant, that the option contract was not valid for lack
of consideration. But it was, at least, an offer to sell,
which was accepted by letter, and of the acceptance the
offerer had knowledge before said offer was withdrawn.
The concurrence of both acts the offer and the
acceptance could at all events have generated a
contract, if none there was before (arts. 1254 and 1262
of the Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)
In other words, since there may be no valid contract without a cause or
consideration, the promisor is not bound by his promise and may, accordingly,
withdraw it. Pending notice of its withdrawal, his accepted promise partakes,
however, of the nature of an offer to sell which, if accepted, results in a
perfected contract of sale.
This view has the advantage of avoiding a conflict between Articles 1324
on the general principles on contracts and 1479 on sales of the Civil
Code, in line with the cardinal rule of statutory construction that, in construing
different provisions of one and the same law or code, such interpretation
should be favored as will reconcile or harmonize said provisions and avoid a
conflict between the same. Indeed, the presumption is that, in the process of
drafting the Code, its author has maintained a consistent philosophy or
position. Moreover, the decision in Southwestern Sugar & Molasses Co. v.
Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of
the Civil Code, in effect, considers the latter as an exception to the former, and
exceptions are not favored, unless the intention to the contrary is clear, and it is
not so, insofar as said two (2) articles are concerned. What is more, the reference,
in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise
supported by or founded upon a consideration, strongly suggests that the two (2)
provisions intended to enforce or implement the same principle.
Upon mature deliberation, the Court is of the considered opinion that it
should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll &
Co. case, and that, insofar as inconsistent therewith, the view adhered to in
the Southwestern Sugar & Molasses Co. case should be deemed abandoned
or modified.
WHEREFORE, the decision appealed from is hereby affirmed, with costs
against defendant-appellant Severina Rigos. It is so ordered.
 PCI LEASING AND FINANCE, INC., Respondent.
x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before us is a petition for review on certiorari[1] of the Decision[2] dated June 30, 1999, of the Court of
Appeals (CA) in CA-G.R. SP No. 56081 affirming the decision of the Regional Trial Court (RTC) of
Dagupan City, Branch 44, holding the spouses Alfredo and Brigida Rosario, jointly and severally,
liable to PCI Leasing and Finance, Inc. (PCI Leasing) for the sum of P338,786.03, with interest,
attorneys fees and costs.

The antecedent facts of the case are as follows:

On April 18, 1994, the spouses Rosario purchased an Isuzu Elf Pick-up Utility vehicle from
CarMerchants, Inc. The transaction was covered by a Purchase Agreement whereby the spouses
undertook to make a downpayment of P190,000.00 of the total purchase price of P380,000.00. The
spouses then applied for a loan with PCI Leasing to pay for the balance of P190,000.00.

Upon the approval of their loan application, the spouses Rosario executed a Promissory Note [3] on May
6, 1994, in favor of PCI Leasing covering the amount of the loan plus P84,008.00 as finance charges,
in the total amount of P274,008.00. The spouses undertook to pay the loan in monthly installments
of P11,417.00, payable on the 29th day of each month starting on May 29, 1994 to April 29, 1996, at
22.10% annual interest. The spouses Rosario also agreed that, in case of default, the payment of the
outstanding sum with interest shall immediately become due and payable. To secure the payment of the
loan, they executed, on the same day, a Chattel Mortgage[4] in favor of PCI Leasing over the Isuzu Elf
4BD1. The motor vehicle was delivered to the spouses and it was registered in their names on May 16,
1994.[5]

Despite demands,[6] the spouses Rosario failed to pay the amortizations on their loan to PCI Leasing
which, as of November 29, 1995, amounted to P338,786.03, inclusive of P20,000.00 attorneys fees.[7]

On January 25, 1995, PCI Leasing filed a Complaint [8] against the spouses Rosario in the RTC of
Dagupan City for Sum of Money with Damages with a Prayer for a Writ of Replevin. The case was
docketed as CV-95-00408-D.

After PCI Leasing posted the necessary bond for the manual delivery of the motor vehicle, [9] the RTC
issued an Order[10] for the issuance of a writ of replevin. On April 21, 1995, the Sheriff [11] seized the
SECOND DIVISION motor vehicle. After five (5) days, without the court issuing an order discharging the writ, the Sheriff
turned over the possession of the vehicle to PCI Leasing.[12]
G.R. No. 139233 November 11, 2005
SPOUSES ALFREDO and In their Answer to the complaint, the spouses Rosario alleged that the chattel mortgage they executed
BRIGIDA ROSARIO, Petitioners, in favor of PCI Leasing covering the motor vehicle was in effect a contract of sale of personal property,
- versus -
payable in installments to be governed by Article 1484 [13] of the New Civil Code of the Philippines.
They further alleged that since PCI Leasing opted to foreclose the chattel mortgage, it was estopped
from collecting the balance of their account under the promissory note and chattel mortgage. [14] By way
of counterclaim, the spouses Rosario claimed P100,000.00 as moral damages and P25,000.00 as
attorneys fees, thus:
WHEREFORE, it is respectfully prayed that the Complaint be dismissed, the
writ of replevin quashed or dissolved, and the motor vehicle referred to therein
returned and restored to the possession of the defendants. It is further prayed that the
plaintiff be made to pay the defendants the sum of P100,000.00 as moral damages
and P25,000.00 as reimbursable attorneys fees. It is finally prayed that the
defendants be granted such other measures of relief as this Honorable Court may
deem just and equitable in the premises.[15]
PCI Leasing presented its evidence. When it was time for the spouses Rosario to present their
own evidence, they failed to appear despite notice and were consequently declared in default.[16]
The trial court rendered judgment on September 12, 1996 in favor of PCI Leasing. The trial
court declared that the spouses Rosario were only able to pay the monthly installments on their loan
from May to November 1994, and that, as of November 29, 1995, their account was overdue
by P338,786.03, inclusive of attorneys fees and liquidated damages. The trial court did not, however,
resolve the issue of whether Article 1484 of the New Civil Code was applicable. The decretal portion
of the decision reads:
WHEREFORE, judgment is rendered in favor of the plaintiff and against
the defendants, sentencing the defendants to pay plaintiff the sum of P338,786.03
with interest as stipulated in the contract plus the sum of 22.10% of the total amounts
due for and as attorneys fees, plus costs.
SO ORDERED.[17]
The spouses Rosario appealed the decision to the CA and ascribed the following errors to the
trial court:
I. THE LOWER COURT ERRED IN NOT HOLDING AND DECLARING THAT
THE PLAINTIFF-APPELLEE WAS IN FACT THE ASSIGNEE OR ONE
SUBROGATED TO THE RIGHTS AND OBLIGATIONS OF THE SELLER OF
THE MOTOR VEHICLE, CARMERCHANTS, INC.;
II. THE LOWER COURT ERRED IN ADJUDGING THE DEFENDANTS-
APPELLANTS LIABLE FOR THE UNPAID BALANCE UNDER THE CHATTEL
MORTGAGE AS WELL AS FOR DAMAGES, INTEREST AND ATTORNEYS
FEES.[18]
The spouses Rosario averred that, based on the evidence on record, CarMerchants, Inc. had
assigned to PCI Leasing its right to collect the balance of the purchase price of the motor vehicle;
hence, it was subrogated to the rights of CarMerchants, Inc., subject to the limitations and burdens
provided for by law. The spouses Rosario maintained that, by securing a writ of replevin from the
RTC, PCI Leasing had opted to foreclose the chattel mortgage under Article 1484 of the New Civil
Code; thus, it was barred from suing for the unpaid balance of the purchase price of the vehicle.
On June 30, 1999, the CA rendered judgment dismissing the appeal, declaring that the
spouses Rosario failed to prove their claim that PCI Leasing had agreed to be subrogated to the right of
CarMerchants, Inc. to collect the unpaid balance of the purchase price of the motor vehicle. The
appellate court also ruled that even if Article 1484 of the New Civil Code were to be applied, the
chattel mortgage had not been foreclosed; hence, PCI Leasing was not precluded from collecting the
balance of the appellants account. It held that the remedy of the unpaid seller under Article 1484 of the
New Civil Code is alternative and not cumulative.[19]
The spouses Rosario, now the petitioners, filed the instant petition, raising the following as
errors committed by the CA:
(1) FOR NOT HOLDING THAT THE RESPONDENT WAS IN FACT AN
ASSIGNEE AND SUBROGATED TO THE RIGHTS AND THE LIMITATIONS
THEREOF OF CARMERCHANTS, INC., AS SELLER OF THE MOTOR
VEHICLE BY INSTALLMENT;
(2) FOR NOT APPLYING THE PROVISIONS OF ART. 1484 OF THE
CIVIL CODE AND THE DECISIONS OF THE SUPREME COURT RELEVANT
THERETO IN RESOLVING THE APPEAL BEFORE IT;
(3) FOR AFFIRMING THE DECISION OF THE TRIAL COURT
SENTENCING THE PETITIONERS TO PAY THE UNPAID INSTALLMENTS
UNDER THE PROMISSORY NOTE AS WELL AS DAMAGES, INTERESTS
AND EXCESSIVE ATTORNEYS FEES DESPITE RESPONDENTS
REPOSSESSION OF THE MOTOR VEHICLE.
The petitioners arguments are basically a rehash of what they submitted in their appeal before
the appellate court. They aver that since respondent PCI Leasing was an assignee of CarMerchants,
Inc., it was proscribed from collecting from them the balance of the purchase price of the vehicle after
having taken possession of the chattel for purposes of foreclosure. They maintain that the respondent is
not entitled to damages and attorneys fees.
The petition is partially granted.
The Court notes that the principal issues raised by the petitioners are factual: (1) whether the
respondent, based on the evidence on record, is the assignee of the petitioners account with
CarMerchants, Inc. (as the vendor of the motor vehicle), and (2) whether the respondent is entitled to
attorneys fees of 22.10% of the total amount due from the petitioners. It is settled that in a petition for
review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be
raised.[20] This rule, however, is not without exceptions. Factual issues may be resolved by this Court in
cases where (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture;
(2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment
is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the CA went beyond
the issues of the case and its findings are contrary to the admissions of both appellant and appellees;
(7) the findings of fact of the CA are contrary to those of the trial court; (8) said findings of fact are
conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the respondents; and (10)
the findings of fact of the CA are premised on the supposed absence of evidence and contradicted by
the evidence on record.[21] Upon careful review of the records, the Court finds that the RTC and the CA
misappreciated the evidence on record and as such, the ruling in this case needs to be modified.
On the first issue, there is no factual basis for the petitioners claim that CarMerchants, Inc.
had assigned its rights to collect the balance of the purchase price to the respondent. The fact of the
matter is that the petitioners admitted in their petition at bench that they were declared in default and
failed to prove such claim. The evidence on record clearly shows that the petitioners secured a loan
from the respondent to pay the P190,000.00 balance to CarMerchants, Inc., and even executed a
promissory note evidencing their loan in favor of the respondent. The petitioners forthwith executed a
chattel mortgage in favor of the respondent over the vehicle as security for the payment of their loan
and the interests thereon.
It bears stressing that, under Article 1625 of the New Civil Code, an assignment of credit,
right or action must appear in a public document to bind third persons. There is no evidence on record
to prove that Car Merchants, Inc. executed such a deed, assigning its right to collect the balance of the
purchase price of the vehicle from the petitioners; hence, Article 1484 of the New Civil Code does not
apply in this case.
Even a cursory reading of the respondents complaint in the RTC will readily show that the
respondent did not allege that it was the assignee of CarMerchants, Inc. insofar as the right to collect
the balance of the purchase price of the vehicle from the petitioners was concerned. Neither did the
respondent adduce any evidence that it was such assignee. The respondent sued the petitioners for sum
of money with prayer for a writ of replevin based on the promissory note and the chattel mortgage
executed by the petitioners in its favor.
Even assuming that the respondent is the assignee of CarMerchants, Inc. and that Article 1484
of the New Civil Code is applicable, it is not proscribed from suing the petitioners for their unpaid
balance. The fact of the matter is that the respondent did not foreclose the chattel mortgage, but opted
to sue the petitioners for the balance of their account under the promissory note, with a plea for a writ
of replevin. By securing a writ of replevin, the respondent did not thereby foreclose the chattel
mortgage. As correctly ruled by the CA:
We rule: if there has been no foreclosure of the chattel mortgage or a
foreclosure sale, then the prohibition against further collection of the balance of the
price does not apply. Where the remedy is not foreclosure of the chattel mortgage,
but specific performance of the obligation to do payment, then the levy on the
property is indeed not a foreclosure of the mortgage but is instead a levy on
execution (Tanjanlangit, et al. v. Southern Motors, Inc., L-10789, May 28, 1957;
Southern Motors v. Moscoso, 2 SCRA 168).
A creditor is not obliged to foreclose a chattel mortgage even if there is one;
precisely the law says that any of the remedies may be exercised by the seller. He
may still sue for fulfillment or for cancellation of the obligation, if he does not want
to foreclose (Bachrach Motor Co. v. Millan, 61 Phil. 409). As a matter of fact, he
may avail himself of remedy no. 1 (specific performance) and may still ask that a
real estate mortgage be executed to secure the payment of the obligation, in which
case, and in the event of foreclosure, there can still be recovery of the deficiency
(Manila Trading v. Jalandoni [CA]O.G., August 31, 1941, p. 1698).
In the case before Us, that there was foreclosure of the chattel mortgage has
not been established; as a matter of fact, this is not obvious either in the evidence
having been presented to the court. What is only apparent was the execution of the
promissory note and the chattel mortgage.[22]
Anent the award of 22.10% of the total amount due as attorneys fees, this Court finds the
same to be without basis. The trial court awarded the
same without stating the reason therefor.[23] Moreover, as gleaned from the Statement of
Account[24] issued by the respondent, the P338,786.03 sought to be collected from the petitioners
already includes the legal expenses and attorneys fees of the respondent. Thus, the award of attorneys
fees should be deleted.
IN LIGHT OF ALL THE FOREGOING, the petition is hereby PARTIALLY GRANTED.
The Decision of the Court of Appeals in CA-G.R. SP No. 56081 is AFFIRMED WITH
MODIFICATION, in that the award of 22.10% of the total amount due for and as attorneys fees
is DELETED. No costs.
SO ORDERED.
 G.R.No. L-72306 January 24, 1989

DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P. FORNILDA OLILI, LEOCADIA P.

FORNILDA LABAYEN and ANGELA P. FORNILDA GUTIERREZ, petitioners,
vs.
THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL REGION, PASIG, JOAQUIN C.
ANTONIA Deputy Sheriff, RTC, 4JR Tanay, Rizal and ATTY. SERGIO
AMONOY, respondents.

RESOLUTION

MELENCIO-HERRERA, J.:

On 5 October 1988, this Court rendered a Decision, the dispositive portion of which reads:

WHEREFORE, certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985,
granting a Writ of Possession, as well as its orders, dated 25 April 1986 and 16 May 1986,
directing and authorizing respondent Sheriff to demolish the houses of petitioners Angela
and Leocadia Fornilda are hereby set aside, and the Temporary Restraining Order heretofore
issued, is made permanent. The six (6) parcels of land herein controverted are hereby
ordered returned to petitioner unless some of them have been conveyed to innocent third
persons.

With respect to petitioners' prayer for disbarment by reason of malpractice of Respondent

Amonoy embodied in their pleading entitled "Mahigpit na Musiyun para Papanagutin
Kaugnay ng Paglalapastangan" and "Masasamang Gawain (Mal-Practices)" and
"Paninindigan (Memorandum)" both filed on 16 June 1988, Respondent Sergio 1. Amonoy is
hereby required, within fifteen (15) days from notice hereof, to submit an answer thereto.
After receipt of the same, a new docket number will be assigned to the case.

Costs against respondent, Sergio I. Amonoy. (pp. 497-498, Rollo)

The case for disbarment is dealt with in a separate Resolution of even date in AC No. 3277.

On 25 October 1988 respondent Amonoy filed his Motion for Reconsideration, followed by his
"Supplemental Arguments in Support of Motion for Reconsideration" dated 8 November 1988. In
essence, he advances the following points:

1) The transaction involved herein being a mortgage, Article 1491[51 of the Civil Code does
not apply. Consequently, the mortgage contract executed in favor of respondent Amonoy is
valid;

2) Article 1491[5] does not apply to foreclosure sales in favor of judgment creditors;
SECOND DIVISION
 3) The instant petition is barred by res judicata;
4) The jurisdiction of the foreclosing court does not depend on the alleged invalidity of the
mortgage being foreclosed. Thus, the lower court had jurisdiction over the foreclosure case,
the alleged invalidity of the contract merely serving as a ground for the dismissal of the
petition due to lack of cause of action;
5) Under BP 129, only the Court of Appeals has original and exclusive jurisdiction over
actions for annulment of judgment.
We find the foregoing submissions without merit.
Respondent Amonoy avers that at the time of the execution of the mortgage on 20 January
1965, subject properties were no longer "properties in litigation" since the Project of Partition (as
signed by the intestate heirs) covering said properties was approved by the lower Court as early
as 12 January 1965.
This argument must fail for the reason that while the Project of Partition was approved on 12
January 1965, it was only on 6 August 1969, and after all charges against the estate had been
paid, that the estate was declared closed and terminated. In fact, by his own admission, he had
acted as counsel from 1959 until 1968 (Comment, p. 145, Rollo). Thus, at the time of the
execution of the mortgage contract, the Controverted Parcels were still in litigation and a
fiduciary relationship of lawyer and client, which Article 1491[5] precisely seeks to protect, still
existed between the parties. To state that mortgages are not included within the prohibition is to
open the door to an indirect circumvention of that statutory injunction, acquisition of the
property being merely postponed till eventual foreclosure.
Respondent asserts further that Article 1491[5] does not apply to judgment creditors of which,
he claims, he was one. Under ordinary circumstances, the argument of respondent could be
considered plausible. Unfortunately, however, as heretofore explained, the mortgage was
executed in violation of Article 1491[5] so that this Article has a direct bearing on this case and
respondent can not escape its provision. Having violated the same, he cannot be considered in
the general run of a judgment creditor.
Respondent likewise stresses that res judicata should apply herein since it was a little more than
four (4) years from the 22 July 1981 Decision of the Court of Appeals in the Annulment Case (CA-
G.R. No. 63214-R) when this Petition was filed. Consequently, he contends that this Petition
should be dismissed since it merely raises the same issues brought up and already resolved in
the earlier case.
The question of res judicata and jurisdiction of the lower Court over the subject matter of the
Foreclosure Case had been amply discussed in the Decision sought to be reconsidered, citing
the case of Municipality of Antipolo vs. Zapanta (133 SCRA 822 [1984]), and we find no need to
dwell on them again.
Neither of the cases cited by respondent to support his contention that the lower Court had
jurisdiction over the Foreclosure Case notwithstanding the invalidity of the mortgage contract,
viz., Florentino vs. Galera (5 SCRA 500 [1962] and Talosig vs. Vda. de Nieba (43 SCRA 472
[1972]), refers to a void subject matter over which the Courts involved could not acquire
jurisdiction.
Finally, respondent movant submits that only the Court of Appeals has original and exclusive
jurisdiction over actions for annulment of judgments of the lower Court under BP Blg. 129 so
that the Supreme Court should not take cognizance of the instant case. The focal issue raised
herein, however, i.e., whether or not the acquisition by respondent of the property in litigation is
valid or not, is a pure question of law. As such, this Court is vested with jurisdiction to take
cognizance of this case.
ACCORDINGLY, private respondent's Motion for Reconsideration is hereby DENIED and this denial
is FINAL.
SO ORDERED.
SECOND DIVISION
G.R. No. 91029 February 7, 1991
NORKIS DISTRIBUTORS, INC., petitioner,
vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.
GRIO-AQUINO, J.:
Subject of this petition for review is the decision of the Court of Appeals
(Seventeenth Division) in CA-G.R. No. 09149, affirming with modification the
judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI.
Himamaylan, Negros Occidental, in Civil Case No. 1272, which was private
respondent Alberto Nepales' action for specific performance of a contract of sale
with damages against petitioner Norkis Distributors, Inc.
The facts borne out by the record are as follows:
Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha
motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo
as its Branch Manager. On September 20, 1979, private respondent Alberto
Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike
motorcycle Model YL2DX with Engine No. L2-329401K Frame No. NL2-0329401,
Color Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was
payable by means of a Letter of Guaranty from the Development Bank of the
Philippines (DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo
agreed to accept. Hence, credit was extended to Nepales for the price of the
motorcycle payable by DBP upon release of his motorcycle loan. As security for
the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of
DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1)
showing that the contract of sale of the motorcycle had been perfected. Nepales
signed the sales invoice to signify his conformity with the terms of the sale. In the
meantime, however, the motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation
Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in
his name was issued by the Land Transportation Commission on November 6,
1979 (Exh. 2-b). The registration fees were paid by him, evidenced by an official
receipt, Exhibit 3.
On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales
who was allegedly the agent of Alberto Nepales but the latter denies it (p. 15,
t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales
presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP
offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The motorcycle
met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An
investigation conducted by the DBP revealed that the unit was being driven by a
certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a
total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and stored
inside Norkis' warehouse.
On March 20, 1980, DBP released the proceeds of private respondent's
motorcycle loan to Norkis in the total sum of P7,500. As the price of the
motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference
of P328 (p. 13, Rollo) and demanded the delivery of the motorcycle. When Norkis
could not deliver, he filed an action for specific performance with damages
against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth
(6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He
alleged that Norkis failed to deliver the motorcycle which he purchased, thereby
causing him damages.
Norkis answered that the motorcycle had already been delivered to private
respondent before the accident, hence, the risk of loss or damage had to be borne
by him as owner of the unit.
After trial on the merits, the lower court rendered a decision dated August 27,
1985 ruling in favor of private respondent (p. 28, Rollo.) thus:
WHEREFORE, judgment is rendered in favor of the plaintiff and against the
defendants. The defendants are ordered to pay solidarity to the plaintiff
the present value of the motorcycle which was totally destroyed, plus
interest equivalent to what the Kabankalan Sub-Branch of the
Development Bank of the Philippines will have to charge the plaintiff on
fits account, plus P50.00 per day from February 3, 1980 until full payment
of the said present value of the motorcycle, plus P1,000.00 as exemplary
damages, and costs of the litigation. In lieu of paying the present value of
the motorcycle, the defendants can deliver to the plaintiff a brand-new
motorcycle of the same brand, kind, and quality as the one which was
totally destroyed in their possession last February 3, 1980. (pp. 28-
29, Rollo.)
On appeal, the Court of appeals affirmed the appealed judgment on August 21,
1989, but deleted the award of damages "in the amount of Fifty (P50.00) Pesos a
day from February 3, 1980 until payment of the present value of the damaged
vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion for
reconsideration. Hence, this Petition for Review.
The principal issue in this case is who should bear the loss of the motorcycle. The
answer to this question would depend on whether there had already been a
transfer of ownership of the motorcycle to private respondent at the time it was
destroyed.
Norkis' theory is that:
. . . After the contract of sale has been perfected (Art. 1475) and even
before delivery, that is, even before the ownership is transferred to the
vendee, the risk of loss is shifted from the vendor to the vendee. Under
Art. 1262, the obligation of the vendor to deliver a determinate thing
becomes extinguished if the thing is lost by fortuitous event (Art. 1174),
that is, without the fault or fraud of the vendor and before he has incurred
in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or
destruction does not extinguish the obligation (Art. 1263). A thing is
determinate when it is particularly designated or physically segregated
from all others of the same class (Art. 1460). Thus, the vendor becomes
released from his obligation to deliver the determinate thing sold while the
vendee's obligation to pay the price subsists. If the vendee had paid the
price in advance the vendor may retain the same. The legal effect,
therefore, is that the vendee assumes the risk of loss by fortuitous event
(Art. 1262) after the perfection of the contract to the time of delivery. (Civil
Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)
Norkis concedes that there was no "actual" delivery of the vehicle. However, it
insists that there was constructive delivery of the unit upon: (1) the issuance of
the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent and the
affixing of his signature thereon; (2) the registration of the vehicle on November
6, 1979 with the Land Transportation Commission in private respondent's name
(Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment of
registration fees (p. 33, Rollo).
That argument is not well taken. As pointed out by the private respondent, the
issuance of a sales invoice does not prove transfer of ownership of the thing sold
to the buyer. An invoice is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered not a bill of sale (Am.
Jur. 2nd Ed., Vol. 67, p. 378).
In all forms of delivery, it is necessary that the act of delivery whether
constructive or actual, be coupled with the intention of delivering the thing. The
act, without the intention, is insufficient (De Leon, Comments and Cases on Sales,
1978 Ed., citing Manresa, p. 94).
When the motorcycle was registered by Norkis in the name of private respondent,
Norkis did not intend yet to transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of the DBP for the release of
the buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP,
reveals that the execution in its favor of a chattel mortgage over the purchased
vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not
accede to that arrangement, DBP would not approve private respondent's loan
application and, consequently, there would be no sale.
In other words, the critical factor in the different modes of effecting delivery,
which gives legal effect to the act, is the actual intention of the vendor to deliver,
and its acceptance by the vendee. Without that intention, there is no tradition
(Abuan vs. Garcia, 14 SCRA 759).
In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:
The Code imposes upon the vendor the obligation to deliver the thing sold.
The thing is considered to be delivered when it is "placed in the hands and
possession of the vendee." (Civil Code, Art. 1462). It is true that the same
article declares that the execution of a public instrument is equivalent to
the delivery of the thing which is the object of the contract, but, in order
that this symbolic delivery may produce the effect of tradition, it is
necessary that the vendor shall have had such control over the thing sold
that, at the moment of the sale, its material delivery could have been
made. It is not enough to confer upon the purchaser the ownership and
the right of possession. The thing sold must be placed in his control. When
there is no impediment whatever to prevent the thing sold passing into the
tenancy of the purchaser by the sole will of the vendor, symbolic delivery
through the execution of a public instrument is sufficient. But if
notwithstanding the execution of the instrument, the purchaser cannot
have the enjoyment and material tenancy of the thing and make use of it
himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction
yields to reality-the delivery has riot been effects .(Emphasis supplied.)
The Court of Appeals correctly ruled that the purpose of the execution of the sales
invoice dated September 20, 1979 (Exh. B) and the registration of the vehicle in
the name of plaintiff-appellee (private respondent) with the Land Registration
Commission (Exhibit C) was not to transfer to Nepales the ownership and
dominion over the motorcycle, but only to comply with the requirements of the
Development Bank of the Philippines for processing private respondent's
motorcycle loan. On March 20, 1980, before private respondent's loan was
released and before he even paid Norkis, the motorcycle had already figured in an
accident while driven by one Zacarias Payba. Payba was not shown by Norkis to
be a representative or relative of private respondent. The latter's supposed
relative, who allegedly took possession of the vehicle from Norkis did not explain
how Payba got hold of the vehicle on February 3, 1980. Norkis' claim that Julian
Nepales was acting as Alberto's agent when he allegedly took delivery of the
motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied
having authorized Julian Nepales to get the motorcycle from Norkis Distributors or
to enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n.,
February 6, 1985). This circumstances more than amply rebut the disputable
presumption of delivery upon which Norkis anchors its defense to Nepales' action
(pp. 33-34, Rollo).
Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable to this case, for there
was neither an actual nor constructive delivery of the thing sold, hence, the risk
of loss should be borne by the seller, Norkis, which was still the owner and
possessor of the motorcycle when it was wrecked. This is in accordance with the
well-known doctrine of res perit domino.
WHEREFORE, finding no reversible error in the decision of the Court of Appeals in
CA-G.R. No. 09149, we deny the petition for review and hereby affirm the
appealed decision, with costs against the petitioner.
SO ORDERED.
FIRST DIVISION
G.R. No. 147839 June 8, 2006
GAISANO CAGAYAN, INC. Petitioner,
vs.
INSURANCE COMPANY OF NORTH AMERICA, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari of the Decision 1 dated October 11,
2000 of the Court of Appeals (CA) in CA-G.R. CV No. 61848 which set aside the Decision
dated August 31, 1998 of the Regional Trial Court, Branch 138, Makati (RTC) in Civil Case
No. 92-322 and upheld the causes of action for damages of Insurance Company of North
America (respondent) against Gaisano Cagayan, Inc. (petitioner); and the CA Resolution
dated April 11, 2001 which denied petitioner's motion for reconsideration.
The factual background of the case is as follows:
Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991,
the Gaisano Superstore Complex in Cagayan de Oro City, owned by petitioner, was
consumed by fire. Included in the items lost or destroyed in the fire were stocks of ready-
made clothing materials sold and delivered by IMC and LSPI.
On February 4, 1992, respondent filed a complaint for damages against petitioner. It
alleges that IMC and LSPI filed with respondent their claims under their respective fire
insurance policies with book debt endorsements; that as of February 25, 1991, the unpaid
accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC
was P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of
IMC and LSPI and, by virtue thereof, respondent was subrogated to their rights against
petitioner; that respondent made several demands for payment upon petitioner but these
went unheeded.5
In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not
be held liable because the property covered by the insurance policies were destroyed due
to fortuities event or force majeure; that respondent's right of subrogation has no basis
inasmuch as there was no breach of contract committed by it since the loss was due to fire
which it could not prevent or foresee; that IMC and LSPI never communicated to it that
they insured their properties; that it never consented to paying the claim of the insured. 6

At the pre-trial conference the parties failed to arrive at an amicable settlement. 7 Thus,
Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss trial on the merits ensued.
(Phils.) Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi
Strauss & Co.. IMC and LSPI separately obtained from respondent fire insurance policies
On August 31, 1998, the RTC rendered its decision dismissing respondent's complaint. 8 It
with book debt endorsements. The insurance policies provide for coverage on "book debts
held that the fire was purely accidental; that the cause of the fire was not attributable to
in connection with ready-made clothing materials which have been sold or delivered to
the negligence of the petitioner; that it has not been established that petitioner is the
various customers and dealers of the Insured anywhere in the Philippines." 2 The policies
debtor of IMC and LSPI; that since the sales invoices state that "it is further agreed that
defined book debts as the "unpaid account still appearing in the Book of Account of the
merely for purpose of securing the payment of purchase price, the above-described
Insured 45 days after the time of the loss covered under this Policy." 3 The policies also
merchandise remains the property of the vendor until the purchase price is fully paid", IMC
provide for the following conditions:
and LSPI retained ownership of the delivered goods and must bear the loss.

1. Warranted that the Company shall not be liable for any unpaid account in
Dissatisfied, petitioner appealed to the CA. 9 On October 11, 2000, the CA rendered its
respect of the merchandise sold and delivered by the Insured which are
decision setting aside the decision of the RTC. The dispositive portion of the decision reads:
outstanding at the date of loss for a period in excess of six (6) months from the
date of the covering invoice or actual delivery of the merchandise whichever shall
first occur. WHEREFORE, in view of the foregoing, the appealed decision is REVERSED and SET ASIDE
and a new one is entered ordering defendant-appellee Gaisano Cagayan, Inc. to pay:
2. Warranted that the Insured shall submit to the Company within twelve (12) days
after the close of every calendar month all amount shown in their books of 1. the amount of P2,119,205.60 representing the amount paid by the plaintiff-
accounts as unpaid and thus become receivable item from their customers and appellant to the insured Inter Capitol Marketing Corporation, plus legal interest
dealers. x x x4 from the time of demand until fully paid;

xxxx
 2. the amount of P535,613.00 representing the amount paid by the plaintiff-
appellant to the insured Levi Strauss Phil., Inc., plus legal interest from the time of
demand until fully paid.
With costs against the defendant-appellee.
SO ORDERED.10
The CA held that the sales invoices are proofs of sale, being detailed statements of the
nature, quantity and cost of the thing sold; that loss of the goods in the fire must be borne
by petitioner since the proviso contained in the sales invoices is an exception under Article
1504 (1) of the Civil Code, to the general rule that if the thing is lost by a fortuitous event,
the risk is borne by the owner of the thing at the time the loss under the principle of res
perit domino; that petitioner's obligation to IMC and LSPI is not the delivery of the lost
goods but the payment of its unpaid account and as such the obligation to pay is not
extinguished, even if the fire is considered a fortuitous event; that by subrogation, the
insurer has the right to go against petitioner; that, being a fire insurance with book debt
endorsements, what was insured was the vendor's interest as a creditor. 11
Petitioner filed a motion for reconsideration 12 but it was denied by the CA in its Resolution
dated April 11, 2001.13
Hence, the present petition for review on certiorari anchored on the following Assignment
of Errors:
THE COURT OF APPEALS ERRED IN HOLDING THAT THE INSURANCE IN THE INSTANT CASE
WAS ONE OVER CREDIT.
THE COURT OF APPEALS ERRED IN HOLDING THAT ALL RISK OVER THE SUBJECT GOODS IN
THE INSTANT CASE HAD TRANSFERRED TO PETITIONER UPON DELIVERY THEREOF.
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS AUTOMATIC SUBROGATION
UNDER ART. 2207 OF THE CIVIL CODE IN FAVOR OF RESPONDENT. 14
Anent the first error, petitioner contends that the insurance in the present case cannot be
deemed to be over credit since an insurance "on credit" belies not only the nature of fire
insurance but the express terms of the policies; that it was not credit that was insured
since respondent paid on the occasion of the loss of the insured goods to fire and not
because of the non-payment by petitioner of any obligation; that, even if the insurance is
deemed as one over credit, there was no loss as the accounts were not yet due since no
prior demands were made by IMC and LSPI against petitioner for payment of the debt and
such demands came from respondent only after it had already paid IMC and LSPI under the
fire insurance policies.15
As to the second error, petitioner avers that despite delivery of the goods, petitioner-buyer
IMC and LSPI assumed the risk of loss when they secured fire insurance policies over the
goods.
Concerning the third ground, petitioner submits that there is no subrogation in favor of
respondent as no valid insurance could be maintained thereon by IMC and LSPI since all
risk had transferred to petitioner upon delivery of the goods; that petitioner was not privy
to the insurance contract or the payment between respondent and its insured nor was its
consent or approval ever secured; that this lack of privity forecloses any real interest on
the part of respondent in the obligation to pay, limiting its interest to keeping the insured
goods safe from fire.
For its part, respondent counters that while ownership over the ready- made clothing
materials was transferred upon delivery to petitioner, IMC and LSPI have insurable interest
over said goods as creditors who stand to suffer direct pecuniary loss from its destruction
by fire; that petitioner is liable for loss of the ready-made clothing materials since it failed
to overcome the presumption of liability under Article 1265 16 of the Civil Code; that the fire
was caused through petitioner's negligence in failing to provide stringent measures of
caution, care and maintenance on its property because electric wires do not usually short
circuit unless there are defects in their installation or when there is lack of proper
maintenance and supervision of the property; that petitioner is guilty of gross and evident
bad faith in refusing to pay respondent's valid claim and should be liable to respondent for
contracted lawyer's fees, litigation expenses and cost of suit. 17
As a general rule, in petitions for review, the jurisdiction of this Court in cases brought
before it from the CA is limited to reviewing questions of law which involves no
examination of the probative value of the evidence presented by the litigants or any of
them.18 The Supreme Court is not a trier of facts; it is not its function to analyze or weigh
evidence all over again.19 Accordingly, findings of fact of the appellate court are generally
conclusive on the Supreme Court.20
Nevertheless, jurisprudence has recognized several exceptions in which factual issues may
be resolved by this Court, such as: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6)
when in making its findings the CA went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings
are contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as
well as in the petitioner's main and reply briefs are not disputed by the respondent; (10)
when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the CA manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion. 21 Exceptions (4), (5), (7), and (11) apply to the present
petition.
At issue is the proper interpretation of the questioned insurance policy. Petitioner claims
that the CA erred in construing a fire insurance policy on book debts as one covering the
unpaid accounts of IMC and LSPI since such insurance applies to loss of the ready-made
clothing materials sold and delivered to petitioner.
The Court disagrees with petitioner's stand.
It is well-settled that when the words of a contract are plain and readily understood, there
is no room for construction.22 In this case, the questioned insurance policies provide
coverage for "book debts in connection with ready-made clothing materials which have
been sold or delivered to various customers and dealers of the Insured anywhere in the
Philippines."23 ; and defined book debts as the "unpaid account still appearing in the Book
of Account of the Insured 45 days after the time of the loss covered under this
Policy."24 Nowhere is it provided in the questioned insurance policies that the subject of the
insurance is the goods sold and delivered to the customers and dealers of the insured.
Indeed, when the terms of the agreement are clear and explicit that they do not justify an
attempt to read into it any alleged intention of the parties, the terms are to be understood
literally just as they appear on the face of the contract. 25 Thus, what were insured against
were the accounts of IMC and LSPI with petitioner which remained unpaid 45 days after the
loss through fire, and not the loss or destruction of the goods delivered.
Petitioner argues that IMC bears the risk of loss because it expressly reserved ownership of
the goods by stipulating in the sales invoices that "[i]t is further agreed that merely for
purpose of securing the payment of the purchase price the above described merchandise
remains the property of the vendor until the purchase price thereof is fully paid." 26
The Court is not persuaded.
The present case clearly falls under paragraph (1), Article 1504 of the Civil Code:
ART. 1504. Unless otherwise agreed, the goods remain at the seller's risk until the
ownership therein is transferred to the buyer, but when the ownership therein is
transferred to the buyer the goods are at the buyer's risk whether actual delivery has been
made or not, except that:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in
pursuance of the contract and the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations under the contract, the goods
are at the buyer's risk from the time of such delivery; (Emphasis supplied)
xxxx
Thus, when the seller retains ownership only to insure that the buyer will pay its debt, the
risk of loss is borne by the buyer. 27 Accordingly, petitioner bears the risk of loss of the
goods delivered.
IMC and LSPI did not lose complete interest over the goods. They have an insurable
interest until full payment of the value of the delivered goods. Unlike the civil law concept
of res perit domino, where ownership is the basis for consideration of who bears the risk of
loss, in property insurance, one's interest is not determined by concept of title, but
whether insured has substantial economic interest in the property. 28
Section 13 of our Insurance Code defines insurable interest as "every interest in property,
whether real or personal, or any relation thereto, or liability in respect thereof, of such
nature that a contemplated peril might directly damnify the insured." Parenthetically,
under Section 14 of the same Code, an insurable interest in property may consist in: (a) an
existing interest; (b) an inchoate interest founded on existing interest; or (c) an
expectancy, coupled with an existing interest in that out of which the expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a property interest
in, or a lien upon, or possession of, the subject matter of the insurance, and neither the
title nor a beneficial interest is requisite to the existence of such an interest, it is sufficient
that the insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured. 29 Anyone has an
insurable interest in property who derives a benefit from its existence or would suffer loss
from its destruction.30Indeed, a vendor or seller retains an insurable interest in the property
sold so long as he has any interest therein, in other words, so long as he would suffer by its
destruction, as where he has a vendor's lien. 31 In this case, the insurable interest of IMC
and LSPI pertain to the unpaid accounts appearing in their Books of Account 45 days after
the time of the loss covered by the policies.
The next question is: Is petitioner liable for the unpaid accounts?
Petitioner's argument that it is not liable because the fire is a fortuitous event under Article
117432 of the Civil Code is misplaced. As held earlier, petitioner bears the loss under Article
1504 (1) of the Civil Code.
Moreover, it must be stressed that the insurance in this case is not for loss of goods by fire
but for petitioner's accounts with IMC and LSPI that remained unpaid 45 days after the fire.
Accordingly, petitioner's obligation is for the payment of money. As correctly stated by the
CA, where the obligation consists in the payment of money, the failure of the debtor to
make the payment even by reason of a fortuitous event shall not relieve him of his
liability.33 The rationale for this is that the rule that an obligor should be held exempt from
liability when the loss occurs thru a fortuitous event only holds true when the obligation
consists in the delivery of a determinate thing and there is no stipulation holding him liable
even in case of fortuitous event. It does not apply when the obligation is pecuniary in
nature.34
Under Article 1263 of the Civil Code, "[i]n an obligation to deliver a generic thing, the loss
or destruction of anything of the same kind does not extinguish the obligation." If the
obligation is generic in the sense that the object thereof is designated merely by its class
or genus without any particular designation or physical segregation from all others of the
same class, the loss or destruction of anything of the same kind even without the debtor's
fault and before he has incurred in delay will not have the effect of extinguishing the
obligation.35This rule is based on the principle that the genus of a thing can never perish.
Genus nunquan perit.36 An obligation to pay money is generic; therefore, it is not excused
by fortuitous loss of any specific property of the debtor. 37
Thus, whether fire is a fortuitous event or petitioner was negligent are matters immaterial
to this case. What is relevant here is whether it has been established that petitioner has
outstanding accounts with IMC and LSPI.
With respect to IMC, the respondent has adequately established its claim. Exhibits "C" to
"C-22"38 show that petitioner has an outstanding account with IMC in the amount
of P2,119,205.00. Exhibit "E"39 is the check voucher evidencing payment to IMC. Exhibit
"F"40 is the subrogation receipt executed by IMC in favor of respondent upon receipt of the
insurance proceeds. All these documents have been properly identified, presented and
marked as exhibits in court. The subrogation receipt, by itself, is sufficient to establish not
only the relationship of respondent as insurer and IMC as the insured, but also the amount
paid to settle the insurance claim. The right of subrogation accrues simply upon payment
by the insurance company of the insurance claim. 41Respondent's action against petitioner
is squarely sanctioned by Article 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. x x x
Petitioner failed to refute respondent's evidence.
As to LSPI, respondent failed to present sufficient evidence to prove its cause of action. No
evidentiary weight can be given to Exhibit "F Levi Strauss", 42 a letter dated April 23, 1991
from petitioner's General Manager, Stephen S. Gaisano, Jr., since it is not an admission of
petitioner's unpaid account with LSPI. It only confirms the loss of Levi's products in the
amount of P535,613.00 in the fire that razed petitioner's building on February 25, 1991.
Moreover, there is no proof of full settlement of the insurance claim of LSPI; no subrogation
receipt was offered in evidence. Thus, there is no evidence that respondent has been
subrogated to any right which LSPI may have against petitioner. Failure to substantiate the
claim of subrogation is fatal to petitioner's case for recovery of the amount of P535,613.00.
WHEREFORE, the petition is partly GRANTED. The assailed Decision dated October 11, 2000 and
Resolution dated April 11, 2001 of the Court of Appeals in CA-G.R. CV No. 61848 are AFFIRMED with
the MODIFICATION that the order to pay the amount of P535,613.00 to respondent is DELETED for
lack of factual basis. No pronouncement as to costs.SO ORDERED.
EN BANC
G.R. No. L-21263 April 30, 1965
LAWYERS COOPERATIVE PUBLISHING COMPANY, plaintiff-appellee,
vs.
PERFECTO A. TABORA, defendant-appellant.
BAUTISTA ANGELO, J.:
On May 3, 1955, Perfecto A. Tabora bought from the Lawyers Cooperative Publishing
Company one complete set of American Jurisprudence consisting of 48 volumes with 1954
pocket parts, plus one set of American Jurisprudence, General Index, consisting of 4
volumes, for a total price of P1,675.50 which, in addition to the cost of freight of P6.90,
makes a total of P1,682.40. Tabora made a partial payment of P300.00, leaving a balance
of P1,382.40. The books were duly delivered and receipted for by Tabora on May 15, 1955
in his law office Ignacio Building, Naga City.
In the midnight of the same date, however, a big fire broke out in that locality which
destroyed and burned all the buildings standing on one whole block including at the law
office and library of Tabora As a result, the books bought from the company as above
stated, together with Tabora's important documents and papers, were burned during the
conflagration. This unfortunate event was immediately reported by Tabora to the company
in a letter he sent on May 20, 1955. On May 23, the company replied and as a token of
goodwill it sent to Tabora free of charge volumes 75, 76, 77 and 78 of the Philippine
Reports. As Tabora failed to pay he monthly installments agreed upon on the balance of
the purchase price notwithstanding the long time that had elapsed, the company
demanded payment of the installments due, and having failed, to pay the same, it
commenced the present action before the Court of First Instance of Manila for the recovery
of the balance of the obligation. Plaintiff also prayed that defendant be ordered to pay 25%
of the amount due as liquidated damages, and the cost of action.
Defendant, in his answer, pleaded force majeure as a defense. He alleged that the books
bought from the plaintiff were burned during the fire that broke out in Naga City on May
15, 1955, and since the loss was due to force majeure he cannot be held responsible for
the loss. He prayed that the complaint be dismissed and that he be awarded moral
damages in the amount of P15,000.00.
After due hearing, the court a quo rendered judgment for the plaintiff. It ordered the
defendant to pay the sum of P1,382.40, with legal interest thereon from the filing of the
complaint, plus a sum equivalent to 25% of the total amount due as liquidated damages,
and the cost of action.
Defendant took the case to the Court of Appeals, but the same is now before us by virtue
of a certification issued by that Court that the case involves only questions of law.
Appellant bought from appellee one set of American Jurisprudence, including one set of
general index, payable on installment plan. It was provided in the contract that "title to and
ownership of the books shall remain with the seller until the purchase price shall have
been fully paid. Loss or damage to the books after delivery to the buyer shall be borne by
the buyer." The total price of the books, including the cost of freight, amounts to
P1,682.40. Appellant only made a down payment of P300.00 thereby leaving a balance of
P1,382.40. This is now the import of the present action aside from liquidated damages.
Appellant now contends that since it was agreed that the title to and the ownership of the
books shall remain with the seller until the purchase price shall have been fully paid, and
the books were burned or destroyed immediately after the transaction, appellee should be
the one to bear the loss for, as a result, the loss is always borne by the owner. Moreover,
even assuming that the ownership of the books were transferred to the buyer after the
perfection of the contract the latter should not answer for the loss since the same occurred
through force majeure. Here, there is no evidence that appellant has contributed in any
way to the occurrence of the conflagration.1wph1.t
This contention cannot be sustained. While as a rule the loss of the object of the contract
of sale is borne by the owner or in case of force majeure the one under obligation to
deliver the object is exempt from liability, the application of that rule does not here obtain
because the law on the contract entered into on the matter argues against it. It is true that
in the contract entered into between the parties the seller agreed that the ownership of
the books shall remain with it until the purchase price shall have been fully paid, but such
stipulation cannot make the seller liable in case of loss not only because such was agreed
merely to secure the performance by the buyer of his obligation but in the very contract it
was expressly agreed that the "loss or damage to the books after delivery to the buyer
shall be borne by the buyer." Any such stipulation is sanctioned by Article 1504 of our Civil
Code, which in part provides:
(1) Where delivery of the goods has been made to the buyer or to a bailee for the
buyer, in pursuance of the contract and the ownership in the goods has been
retained by the seller merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the time of such delivery.
Neither can appellant find comfort in the claim that since the books were destroyed by fire
without any fault on his part he should be relieved from the resultant obligation under the
rule that an obligor should be held exempt from liability when the loss occurs thru a
fortuitous event. This is because this rule only holds true when the obligation consists in
the delivery of a determinate thing and there is no stipulation holding him liable even in
case of fortuitous event. Here these qualifications are not present. The obligation does not
refer to a determinate thing, but is pecuniary in nature, and the obligor bound himself to
assume the loss after the delivery of the goods to him. In other words, the obligor agreed
to assume any risk concerning the goods from the time of their delivery, which is an
exception to the rule provided for in Article 1262 of our Civil Code.
Appellant likewise contends that the court a quo erred in sentencing him to pay attorney's
fees. This is merely the result of a misapprehension for what the court a quo ordered
appellant to pay is not 25% of the amount due as attorney's fees, but as liquidated
damages, which is in line with an express stipulation of the contract. We believe, however,
that the appellant should not be made to pay any damages because his denial to pay the
balance of the account is not due to bad faith.
WHEREFORE, the decision appealed from is modified by eliminating that portion which
refers to liquidated damages. No costs.
FIRST DIVISION
G.R. No. L-64159 September 10, 1985
CIRCE S. DURAN and ANTERO S. GASPAR, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, ERLINDA B. MARCELO TIANGCO and
RESTITUTO TIANGCO, respondents.
RELOVA, J.:
The respondent then Court of Appeals rendered judgment, modifying the decision
of the then Court of First Instance of Rizal, which reads as follows:
(1) the complaint of the plaintiffs (herein petitioners) is hereby
DISMISSED;
(2) the defendants-appellants spouses Erlinda B. Marcelo Tiangco
and Restituto Tiangco (herein private respondents) are hereby
declared the lawful owners of the two (2) parcels of land and all the
improvements thereon including the 12-door apartment thereon
described in the complaint, in the counterclaim, in the cross-claim,
and in the Sheriff's Certificate of Sale;
(3) the plaintiffs-appellants and the defendant-appellee Fe S. Duran
are hereby ordered to deliver to (the Tiangcos) the two parcels of
land and all the improvements thereon including the 12-door
apartment thereon, subject matter of the complaint, counterclaim,
and cross-claim, and in the Sheriff's Certificate of Sale;
(4) the plaintiffs-appellants and the defendant-appellee Fe S. Duran
are hereby ordered to pay solidarily to the Tiangcos the sum of Two
Thousand Four Hundred Pesos (P2,400) a month from May 16, 1972
until delivery of possession of the properties in question to said
Tiangco spouses, representing rentals collected by plaintiffs-
appellants and defendant- appellee Fe S. Duran;
(5) the plaintiffs-appellants and defendant-appellee Fe S. Duran are
hereby ordered to pay solidarily to the spouses Tiangco the sum of
Twenty Thousand Pesos (P20,000) as damages for attorney's fees,
and the sum of Twenty-Five Thousand Pesos (P25,000) for moral
damages, and the costs. (pp. 149-150, Rollo)
The antecedent facts showed that petitioner Circe S. Duran owned two (2) parcels
of land (Lots 5 and 6, Block A, Psd 32780) covered by Transfer Certificate of Title
No. 1647 of the Register of Deeds of Caloocan City which she had purchased from
the Moja Estate. She left the Philippines in June 1954 and returned in May 1966.
On May 13, 1963, a Deed of Sale of the two lots mentioned above was made in
favor of Circe's mother, Fe S. Duran who, on December 3, 1965, mortgaged the
same property to private respondent Erlinda B. Marcelo-Tiangco. When petitioner
Circe S. Duran came to know about the mortgage made by her mother, she wrote
the Register of Deeds of Caloocan City informing the latter that she had not given
her mother any authority to sell or mortgage any of her properties in the
Philippines. Failing to get an answer from the registrar, she returned to the
Philippines. Meanwhile, when her mother, Fe S. Duran, failed to redeem the
mortgage properties, foreclosure proceedings were initiated by private
respondent Erlinda B. Marcelo Tiangco and, ultimately, the sale by the sheriff and
the issuance of Certificate of Sale in favor of the latter.
Petitioner Circe S. Duran claims that the Deed of Sale in favor of her mother Fe S.
Duran is a forgery, saying that at the time of its execution in 1963 she was in the
United States. On the other hand, the adverse party alleges that the signatures of
Circe S. Duran in the said Deed are genuine and, consequently, the mortgage
made by Fe S. Duran in favor of private respondent is valid.
With respect to the issue as to whether the signature of petitioner Circe S. Duran
in the Deed of Sale is a forgery or not, respondent appellate court held the same
to be genuine because there is the presumption of regularity in the case of a
public document and "the fact that Circe has not been able to satisfactorily prove
that she was in the United States at the time the deed was executed in 1963. Her
return in 1966 does not prove she was not here also in 1963, and that she did not
leave shortly after 1963. She should have presented her old passport, not her
new one. But even if the signatures were a forgery, and the sale would be
regarded as void, still it is Our opinion that the Deed of Mortgage is VALID, with
respect to the mortgagees, the defendants-appellants. While it is true that under
Art. 2085 of the Civil Code, it is essential that the mortgagor be the absolute
owner of the property mortgaged, and while as between the daughter and the
mother, it was the daughter who still owned the lots, STILL insofar as innocent
third persons are concerned the owner was already the mother (Fe S. Duran)
inasmuch as she had already become the registered owner (Transfer Certificates
of Title Nos. 2418 and 2419). The mortgagee had the right to rely upon what
appeared in the certificate of title, and did not have to inquire further. If the rule
were otherwise, the efficacy and conclusiveness of Torrens Certificate of Titles
would be futile and nugatory. Thus the rule is simple: the fraudulent and forged
document of sale may become the root of a valid title if the certificate has already
been transferred from the name of the true owner to the name indicated by the
forger (See De la Cruz v. Fable, 35 Phil. 144; Blondeau et al. v. Nano et al., 61 Phil.
625; Fule et al. v. Legare et al., 7 SCRA 351; see also Sec. 55 of Act No. 496, the
Land Registration Act). The fact that at the time of the foreclosure sale
proceedings (1970-72) the mortgagees may have already known of the plaintiffs'
claim is immaterial. What is important is that at the time the mortgage was
executed, the mortgagees in good faith actually believed Fe S. Duran to be the
owner, as evidenced by the registration of the property in the name of said Fe S.
Duran (pp. 146-147, Rollo)."
In elevating the judgment of the respondent appellate court to Us for review,
petitioners discussed questions of law which, in effect and substance, raised only
one issue and that is whether private respondent Erlinda B. Marcelo-Tiangco was
a buyer in good faith and for value.
Guided by previous decisions of this Court, good faith consists in the possessor's
belief that the person from whom he received the thing was the owner of the
same and could convey his title (Arriola vs. Gomez dela Serna, 14 Phil. 627). Good
faith, while it is always to be presumed in the absence of proof to the contrary,
requires a well-founded belief that the person from whom title was received was
himself the owner of the land, with the right to convey it (Santiago vs. Cruz, 19
Phil. 148). There is good faith where there is an honest intention to abstain from
taking any unconscientious advantage from another (Fule vs. Legare, 7 SCRA
351). Otherwise stated, good faith is the opposite of fraud and it refers to the
state of mind which is manifested by the acts of the individual concerned. In the
case at bar, private respondents, in good faith relied on the certificate of title in
the name of Fe S. Duran and as aptly stated by respondent appellate court
"[e]ven on the supposition that the sale was void, the general rule that the direct
result of a previous illegal contract cannot be valid (on the theory that the spring
cannot rise higher than its source) cannot apply here for We are confronted with
the functionings of the Torrens System of Registration. The doctrine to follow is
simple enough: a fraudulent or forged document of sale may become the ROOT of
a valid title if the certificate of title has already been transferred from the name of
the true owner to the name of the forger or the name indicated by the forger." (p.
147, Rollo)
certificate to determine the condition of the property. Stated differently, an
innocent purchaser for value relying on a torrens title issued is protected. A
mortgagee has the right to rely on what appears in the certificate of title and, in
the absence of anything to excite suspicion, he is under no obligation to look
beyond the certificate and investigate the title of the mortgagor appearing on the
face of said certificate.
Likewise, We take note of the finding and observation of respondent appellate
court in that petitioners were guilty of estoppel by laches "in not bringing the
case to court within a reasonable period. Antero Gaspar, husband of Circe, was in
the Philippines in 1964 to construct the apartment on the disputed lots. This was
testified to by Circe herself (tsn., p. 41, Nov. 27, 1973). In the process of
construction, specifically in the matter of obtaining a building permit, he could
have discovered that the deed of sale sought to be set aside had been executed
on May 13, 1963 (the building permit needed an application by the apparent
owner of the land, namely, Circe's mother, Fe S. Duran). And then again both
plaintiffs could have intervened in the foreclosure suit but they did not. They kept
silent until almost the last moment when they finally decided, shortly before the
sheriff's sale, to file a third-party claim. Clearly, the plaintiffs can be faulted for
their estoppel by laches." (p. 148, Rollo)
IN VIEW OF THE FOREGOING, We find the petition without merit and hereby
AFFIRMED in toto the decision of respondent appellate court promulgated on
August 12, 1981. SO ORDERED.

Thus, where innocent third persons relying on the correctness of the certificate of
title issued, acquire rights over the property, the court cannot disregard such
rights and order the total cancellation of the certificate for that would impair
public confidence in the certificate of title; otherwise everyone dealing with
property registered under the torrens system would have to inquire in every
instance as to whether the title had been regularly or irregularly issued by the
court. Indeed, this is contrary to the evident purpose of the law. Every person
dealing with registered land may safely rely on the correctness of the certificate
of title issued therefor and the law will in no way oblige him to go behind the
 The next day, Ireneo went to the house of Marella and they agreed to the price of
P14,700 on the understanding that it will be paid after the car has been registered
in the latters name.
A deed of sale was executed and the registration was changed to the name of
Marella. Ireneo went to Marella to get the payment and deliver the car who
informed him that he is P2,000 short of the money and that they need to go to his
sister to get it. Ireneo, together with De Dios and an unidentified man went to a
house.

Once inside, De Dios asked Ireneo to wait in the sale. After waiting in vain, he
went down and discovered that the car was gone.

Marella was able to sell the car to plaintiff-appellant Jose Aznar and while
attending to registration, the car was seized by Phil. Constabulary due to the
report of the incident.

ISSUE:

Between the two parties, who has the better right?

AZNAR v. YAPDIANGCO- Stolen Goods HELD:

True owner has a better right than a buyer in good faith to possession of a stolen Teodoro Santos has the better right. Marella did not have any title to the property
good. under litigation because the same was never delivered to him. He may have the
contract but he never acquired valid title. Although the keys to the car may have
been given to the unidentified companion, it may be done only because that
companion took them to the place where the sister of Marella was supposed to
live. The car was evidently stolen and that the buyer did not acquire any valid
FACTS:
title thereto.

Teodoro Santos advertised the sale of his FORD FAIRLANE 500 in a newspaper. On
L. De Dios went to the house of Teodoro and talked to his son Ireneo Santos and
said that his uncle Vicente Marella is interested in buying the said car.
FACTS:
Theodoro Santos advertised in the newspapers the sale of his Ford Fairlane 500.
After the advertisement, a certain de Dios, claiming to be the nephew of Marella,
went to the residence of Santos and expressing his uncles intent to purchase the
car. Since Santos wasn't around, it was Irineo who talked with de Dios. On being
informed, Santos advised his son to see
Marella, which the son did. Marella expressed his intention to purchase the car. A
deed of sale was prepared and Irineo was instructed by his father not to part with
the deed and the car without receiving the purchase price from Marella. When
irineo and de Dios arrived at the residence of Marella, the latter averred that his
money was short and had to borrow from his sister. He then instructed de Dios
and Irineo to go the supposed house of the sister to obtain the money with an
unidentified person. He also asked Irineo to leave the deed to have his lawyer see
it. Relying on the good faith of Marella, Irineo did as requested. Upon arriving at
the house of Marellas supposed to be sister, de Dios and the unidentified person
then disappeared together with the car. This prompted Santos to report the
incident to the authorities. Thereafter, Marella was able to sell the land to Aznar.
And while in possession of the car, police authorities confiscated the same. This
prompted Aznar to file an action for replevin.
HELD:
Marella never had title to the car as the car wasn't ever delivered to him. While
there was a deed of sale in his favor, he was only able to obtain possession of the
car since he stole it from Santos. The applicable law is Article 559. The rule is to
the effect that if the owner has lost a thing, or if he has been unlawfully deprived
of it, he has a right to recover it, not only from its finder, thief or robber, but also
from third persons who may have acquired it in good faith from such finder, thief
or robber. The said article establishes 2 exceptions to the general rule of
irrevindicabiltyto wit, the owner has lost the thing or has been unlawfully
deprived thereof. In these cases, the possessor cannot retain the thing as against
the owner who may recover it without paying any indemnity, except when the
possessor acquired it in a public sale. Furthermore, the common law principle that
where one of two innocent persons must suffer a fraud perpetrated by another,
the law imposes the loss upon the party who, by his misplaced confidence, has
enable the fraud to be committed, cannot be applied in this case, which is
covered by an express provision of law.
FIRST DIVISION
G.R. No. 83432 May 20, 1991
RADIOWEALTH FINANCE COMPANY, petitioner,
vs.
MANUELITO S. PALILEO, respondent.
GANCAYCO, J.:
If the same piece of land was sold to two different purchasers, to whom shall
ownership belong? Article 1544 of the Civil Code provides that in case of double
sale of an immovable property, ownership shall be transferred: (1) to the person
acquiring it who in good faith first recorded it in the Registry of Property; (2) in
default thereof, to the person who in good faith was first in possession; and (3) in
default thereof, to the person who presents the oldest title, provided there is good
faith. There is no ambiguity regarding the application of the law with respect to
lands registered under the Torrens System. Section 51 of Presidential Decree No.
1529 (amending Section 50 of Act No. 496 clearly provides that the act of
registration is the operative act to convey or affect registered lands insofar as
third persons are concerned. Thus, a person dealing with registered land is not
required to go behind the register to determine the condition of the property. He
is only charged with notice of the burdens on the property which are noted on the
face of the register or certificate of title. 1 Following this principle, this Court has
time and again held that a purchaser in good faith of registered land (covered by
a Torrens Title) acquires a good title as against all the transferees thereof whose
right is not recorded in the registry of deeds at the time of the sale. 2
The question that has to be resolved in the instant petition is whether or not the
rule provided in Article 1544 of the Civil Code as discussed above, is applicable to
a parcel of unregistered land purchased at a judicial sale. To be more specific, this
Court is asked to determine who, as between two buyers of unregistered land, is
the rightful ownerthe first buyer in a prior sale that was unrecorded, or the
second buyer who purchased the land in an execution sale whose transfer was
registered in the Register of Deeds.
The facts as found by the Court of Appeals are as follows:
On April 13, 1970, defendant spouses Enrique Castro and Herminia R.
Castro sold to plaintiff-appellee Manuelito Palileo (private respondent
herein), a parcel of unregistered coconut land situated in Candiis,
Mansayaw, Mainit, Surigao del Norte. The sale is evidenced by a notarized
Deed of Absolute Sale (Exh. "E"). The deed was not registered in the
Registry of Property for unregistered lands in the province of Surigao del
Norte. Since the execution of the deed of sale, appellee Manuelito Palileo
who was then employed at Lianga Surigao del Sur, exercised acts of
ownership over the land through his mother Rafaela Palileo, as
administratrix or overseer. Appellee has continuously paid the real estate
taxes on said land from 1971 until the present (Exhs. "C" to "C-7",
inclusive).
On November 29, 1976, a judgment was rendered against defendant
Enrique T. Castro, in Civil Case No. 0103145 by the then Court of First
Instance of Manila, Branch XIX, to pay herein defendant-appellant
Radiowealth Finance Company (petitioner herein), the sum of P22,350.35
with interest thereon at the rate of 16% per annum from November 2,
1975 until fully paid, and the further sum of P2,235.03 as attorney's fees,
and to pay the costs. Upon the finality of the judgment, a writ of execution
was issued. Pursuant to said writ, defendant provincial Sheriff Marietta E.
Eviota, through defendant Deputy Provincial Sheriff Leopoldo Risma, levied
upon and finally sold at public auction the subject land that defendant
Enrique Castro had sold to appellee Manuelito Palileo on April 13,1970. A
certificate of sale was executed by the Provincial Sheriff in favor of
defendant- appellant Radiowealth Finance Company, being the only bidder.
After the period of redemption has (sic) expired, a deed of final sale was
also executed by the same Provincial Sheriff. Both the certificate of sale
and the deed of final sale were registered with the Registry of Deeds. 3
Learning of what happened to the land, private respondent Manuelito Palileo filed
an action for quieting of title over the same. After a trial on the merits, the court a
quo rendered a decision in his favor. On appeal, the decision of the trial court was
affirmed. Hence, this petition for review on certiorari.
In its petition, Radiowealth Finance Company presents the following errors:
1. THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE DEED OF
ABSOLUTE SALE (EXHIBIT B) ALLEGEDLY EXECUTED BY ENRIQUE CASTRO
IN FAVOR OF APPELLEE MANUELITO PALILEO, WAS SIMULATED OR
FICTITIOUS.
2. THE COURT OF APPEALS ERRED IN NOT FINDING APPELLEE MANUELITO
PALILEO AS ADMINISTRATOR ONLY OF THE DISPUTED PROPERTY; AND
3. THE COURT OF APPEALS ERRED IN NOT FINDING DEFENDANT-
APPELLANT RADIOWEALTH FINANCE COMPANY OWNER OF THE DISPUTED
PROPERTY BY REASON OF THE CERTIFICATE OF SALE AND THE DEED OF
FINAL SALE WHICH WERE ALL REGISTERED IN THE REGISTER OF DEEDS,
HENCE, SUPERIOR TO THAT OF THE DEED OF SALE IN POSSESSION OF
MANUELITO PALILEO, FOR BEING NOT REGISTERED. 4
As regards the first and second assigned errors, suffice it to state that findings of
fact of the Court of Appeals are conclusive on this Court and will not be disturbed
unless there is grave abuse of discretion. The finding of the Court of Appeals that
the property in question was already sold to private respondent by its previous
owner before the execution sale is evidenced by a deed of sale. Said deed of sale
is notarized and is presumed authentic. There is no substantive proof to support
petitioner's allegation that the document is fictitious or simulated. With this in
mind, We see no reason to reject the conclusion of the Court of Appeals that
private respondent was not a mere administrator of the property. That he
exercised acts of ownership through his mother also remains undisputed.
Going now to the third assigned error which deals with the main issue presented
in the instant petition, We observe that the Court of Appeals resolved the same in
favor of private respondent due to the following reason; what the Provincial
Sheriff levied upon and sold to petitioner is a parcel of land that does not belong
to Enrique Castro, the judgment debtor, hence the execution is contrary to the
directive contained in the writ of execution which commanded that the lands and
buildings belonging to Enrique Castro be sold to satisfy the execution. 5
There is no doubt that had the property in question been a registered land, this
case would have been decided in favor of petitioner since it was petitioner that
had its claim first recorded in the Registry of Deeds. For, as already mentioned
earlier, it is the act of registration that operates to convey and affect registered
land. Therefore, a bona fide purchaser of a registered land at an execution sale
acquires a good title as against a prior transferee, if such transfer was
unrecorded.
However, it must be stressed that this case deals with a parcel of unregistered
land and a different set of rules applies. We affirm the decision of the Court of
Appeals.
Under Act No. 3344, registration of instruments affecting unregistered lands is
"without prejudice to a third party with a better right". The aforequoted phrase
has been held by this Court to mean that the mere registration of a sale in one's
favor does not give him any right over the land if the vendor was not anymore the
owner of the land having previously sold the same to somebody else even if the
earlier sale was unrecorded.
The case of Carumba vs. Court of Appeals 6 is a case in point. It was held therein
that Article 1544 of the Civil Code has no application to land not registered under
Act No. 496. Like in the case at bar, Carumba dealt with a double sale of the same
unregistered land. The first sale was made by the original owners and was
unrecorded while the second was an execution sale that resulted from a
complaint for a sum of money filed against the said original owners. Applying
Section 35, Rule 39 of the Revised Rules of Court, 7 this Court held that Article
1544 of the Civil Code cannot be invoked to benefit the purchaser at the
execution sale though the latter was a buyer in good faith and even if this second
sale was registered. It was explained that this is because the purchaser of
unregistered land at a sheriffs execution sale only steps into the shoes of the
judgment debtor, and merely acquires the latter's interest in the property sold as
of the time the property was levied upon.
Applying this principle, the Court of Appeals correctly held that the execution sale
of the unregistered land in favor of petitioner is of no effect because the land no
longer belonged to the judgment debtor as of the time of the said execution sale.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-
G.R. CV No. 10788 is hereby AFFIRMED. No costs.
SO ORDERED.
FACTS:
Spouses Castro sold a parcel of unregistered coconut land in Surigao del Norte to Manuelito
Palileo. The sale is evidenced by a notarized deed of sale and Palileo exercised acts of
ownership through his mother and also paid real estate taxes.
Meanwhile, a judgment over a civil case was rendered agains Enriqur Castro ordering him to
pay 22K to Radiowealth Finance Co.
Pursuant to this, the provincial sheriff levied upon and sold in public auction the subject land
that was previously sold to Palileo. A certificate of sale was issued in favor of Radiowealth
being the lone bidder and after the expiration of the period of redemption, a deed of final sale
was also executed in their favor and both deeds was registered to the Registry of Deeds.
ISSUE:
WON the sale in public auction is valid.
HELD:
Had Art.1544 been applied, the judgment should be rendered in favor of Radiowealth being
the one who registered the land first. But since the subject land is an unregistered land, a
different rule should apply.
Under Act.3344 mere registration of a sale in one's favor does not give him any right over the
land if the vendor was not anymore the owner of the land having previously sold the same to
somebody else even if the earlier sale was unrecorded.
Article 1544 of the Civil Code has no application to land not registered under the torrens
system. It was explained that this is because the purchaser of unregistered land at a sheriffs
execution sale only steps into the shoes of the judgment debtor, and merely acquires the
latter's interest in the property sold as of the time the property was levied upon. As such, the
execution sale of the unregistered land in favor of petitioner is of no effect because the land
no longer belonged to the judgment debtor as of the time of the said execution sale.
SECOND DIVISION
G.R. No. 77423 March 13, 1989
SPOUSES DIOSDADO NUGUID AND MARIQUETA VENEGAS, petitioners,
vs.
COURT OF APPEALS, AMORITA GUEVARRA, TERESITA GUEVARRA,
NARCISO GUEVARRA, MARCIANA DELA ROSA, BERNABE
BUENAVENTURA, AND JULIETA BUENAVENTURA, respondents.
SARMIENTO, J.:
This petition seeks the reversal of the decision of the Court of Appeals
declaring the private respondents owners of one-half portion of the property
subject of this case.
The petitioners were the defendants in a suit commenced by the private
respondents before the Court of First Instance (now Regional Trial Court) of
Bataan. 1 The antecedent facts may be summarized as follows:
The deceased spouses Victorino and Crisanta dela Rosa were the registered
owners of a parcel of land with an area of 231 square meters, situated in
Orani Bataan, and covered by original Certificate of Title No. 3778. On or
about May 4, 1931, Victorino dela Rosa (widowed by then) sold one-half of the
said property to Juliana Salazar for P 95.00. This sale, though evidenced by a
document, 2 was not registered. Immediately after the sale, Juliana Salazar constructed a house on the
lot she purchased.
On March 10, 1964, petitioner spouses (defendants below) caused the
registration of a document entitled "Kasulatan ng Partihan at Bilihan"'
(hereinafter referred to as Exhibit "D"), 3 dated June 6, 1961. In this document, Marciana dela
Rosa (who is among the private respondents), Victoria Buenaventura, Ernesto Buenaventura, Virgilio
Buenaventura, and Felicisimo Buenaventura-all heirs of Victorino and Crisanta dela Rosa- sold to the
petitioners the entire area of the property abovementioned for the sum of P 300.00. Subsequently, OCT No.
3778 was cancelled by the Register of Deeds of Bataan, and Transfer Certificate of Title No. T-12782 was
issued in the names of the petitioners.
The private respondents claim that Exhibit "D" is a forged deed in that: 1) the
signature of Marciana dela Rosa appearing therein is a forgery; 2) it is not true
that, as stated in the deed, Luisa dela Rosa (sister of Marciana), at the time of
her death, was a widow; 3) none of the heirs-signatories to the deed received
any consideration for the supposed sale; and 4) Luisa dela Rosa is survived
not only by four, but by five children (the fifth child, respondent Julieta
Buenaventura, was not mentioned in the deed).
The private respondents allegedly discovered the forged deed as well as the
certificate of title in the name of the petitioners much later, that is, on
February 28, 1978, when respondents Amorita Guevarra and Teresita
Guevarra thought of having the title of their grandmother Juliana Salazar,
registered.
On the other hand, the petitioners assert that sometime in the latter part of
1960, the land subject of this case was offered to them for sale by Nicolas
dela Rosa, uncle of respondent Marciana dela Rosa and grandfather of the
other heirs-signatories to Exhibit "D". Apparently, Nicolas dela Rosa claimed
that he had already purchased the shares of the heirs over the subject
property as evidenced by a private document entitled "Kasunduan"
(hereinafter referred to as Exhibit "6") dated August 31, 1955; as a matter of
fact, he had in his possession the original certificate of title covering the
property in the name of the deceased Victorino and Crisanta dela Rosa. He
promised, however, that he would arrange for a direct sale to be made by the
heirs in favor of the petitioners. Consequently, Exhibit "D" as mentioned
earlier, was executed. The petitioners stress that even before they decided to
buy the subject property, they made an ocular inspection thereof and
questioned the occupants therein to verify its real ownership. They
underscore the fact that the persons whom they found occupying the
property did not at all assert adverse ownership over the same.
The trial court rendered judgment dismissing the complaint filed by the
private respondents, but on appeal, this was reversed by the Court of
Appeals. 4 To quote the dispositive portion of the appellate court's decision:
WHEREFORE, finding the decision of the lower court to be with
reversible error the decision dated May 1, 1982 is hereby
ordered REVERSED and a new one entered declaring plaintiffs to
be owners of 115.5 square meters of Lot 678. Defendants are
hereby ordered to execute a deed of reconveyance in favor of
plaintiffs over the said area within thirty (30) days from the
finality of this decision, otherwise, the Register of Deeds will be
ordered to execute one in favor of the plaintiffs. With costs
against the defendants plus attorney's fees in the amount of P
500.00.
SO ORDERED. 5
From the foregoing, this petition for review was filed.
We find merit in the petition.
From the start, the respondent court erred in treating the private respondents
as though they all belong to one group of heirs whose right is derived from
one ancestor, when actually, the private respondents should be categorized
into two groups.
To one group belong the respondents Amorita, Teresita and Narcism, all
surnamed Guevarra. As children of Pedro Guevarra and Pascuala Tolentino,
and grandchildren of Juliana Salazar, they claim to have succeeded to the
ownership over the onehalf portion of land which was sold to Juliana Salazar.
The remaining private respondents, Marciana dela Rosa, Bernabe
Buenaventura, and Julieta Buenaventura, make up the second group of heirs
who claim to have derived, by succession, their ownership over the other half
of the subject property from their predecessors-in-interest, the original
registrants, Victorino and Crisanta dela Rosa.
Analyzing the case before us in this manner, we can immediately discern
another error in the decision of the respondent court, which is that said court,
with absolutely no basis, sweepingly adjudged all of the respondents co-
owners of one-half of the subject property. Clearly, it was a glaring error for
the Court of Appeals to have so ruled because as a matter of fact, the
respondent heirs of Victorino dela Rosa were claiming a half of the entire
property which is separate and distinct from the other half claimed by the
respondents Guevarras. 6
Surprisingly, none of the private respondents appealed the above decision of
the Court of Appeals. Consequently, they are deemed to have accepted the
said erroneous decision declaring them, collectively, owners of one-half of the
subject property. In effect, only this portion of the Property is being presently
disputed by the contending parties. As regards the other onehalf portion, it is
now settled (by virtue of the private respondents' acceptance of the Court of
Appeals decision) that the same is the property of the petitioners.
Insofar as the respondent heirs of Victorino dela Rosa are concerned,
undoubtedly they are not entitled to any portion of the disputed property.
Respondent Marciana dela Rosa is bound by her signature appearing on
Exhibit "D". This public document evidencing the sale of the subject property
to the petitioners was executed with all the legal formalities of a public
document, to wit:
The "Kasulatan ng Partihan at Bilihan" (Exhibit D, Exhibit 1) was
duly witnessed by Ricardo L. Santos and Pablo R. Buenaventura,
proven to be relatives both of Marciana dela Rosa and the
Buenaventuras who were then at the municipal building of Orani
Bataan, when the '"Kasulatan ng Partihan at Bilihan" was
notarized by Fernando J. Rivera, Justice of the peace of Orani
Bataan, in his capacity as ex officio notary public. It should be
noted that all the parties were from Orani Bataan, and the
notary public, who notarized the document, was the justice of
the peace of Orani Bataan, acting in his capacity as ex
officio notary public. 7
Indeed, the legal presumption of the regularity of the above notarized
contract was not rebutted successfully. The courts below were one in
concluding that the alleged forgery of respondent Marciana dela Rosa's
signature was not proven. Likewise, the private respondents' allegation of
absence of consideration of the contract was not substantiated. Under Art.
1354 of the Civil Code, it is presumed that consideration exists and is lawful,
unless the debtor proves the contrary. 8
Noteworthy is the fact that of the five heirs who signed Exhibit "D", only one, the respondent Marciana dela
Rosa, impugned its genuineness and due execution, as well as the authenticity of her signature thereon; and
she alone joined the other respondents in this suit.
In the case of the respondents Bernabe Buenaventura and Julieta
Buenaventura, the trial court correctly declared that:
... With his signature appearing in the "Kasulatan" 9 (Exhibit 6) and
his affirmation that his wife, Luisa dela Rosa, who was a sister of Marciana dela Rosa and
also a daughter of Victorino dela Rosa and Crisanta dela Cruz, had sold her share of Lot
No. 678 to Nicolas dela Rosa, plaintiff Bernabe Buenaventura could no longer be heard to
complain. And if, plaintiff Julieta Buenaventura were prejudiced, her logical recourse would
be to go after her own kin. 10
Since no evidence was introduced on the point, the trial court surmised that
respondent Julieta Buenaventura was probably a minor at the time of signing
of Exhibits "D" and "6".
It must be noted that although respondent Bernabe Buenaventura disowned
his signature on Exhibit "6", there was no effort on his part to prove such
claim. Forgery cannot be presumed. It must be proved. 11
At any rate, the question of whether or not the abovementioned signatures
were forged would become irrelevant if, on the other hand, the petitioners are
able to establish that they acquired the subject property in good faith. For,
indeed, an innocent purchaser for value is protected such that when land has
already passed into the hands of an innocent purchaser for value,
reconveyance of the same can no longer be made.12
On the other hand, the claimed ownership of the respondent heirs of Pedro
and Pascuala Guevarra over the property is anchored on the prior sale thereof
to their grandmother, Juliana Salazar. The situation, in effect, is that
contemplated by Article 1544 of the Civil Code, 13 a double sale. Parenthetically,
although the second sale (to the petitioners herein) was made by the heirs of the deceased Victorino dela
Rosa, the said heirs are deemed the judicial continuation of the personality of the decedent. 14 Essentially,
therefore, the first and second sales were made by the same person, as envisioned under Article 1544 of the
Civil Code, quoted earlier (footnote No. 13). The disputed property being immovable property, the ownership
should belong to the vendee who in good faith first recorded it in the Registry of Property, pursuant to the
same article.
It is an established fact that the first sale to Juliana Salazar was not registered
while the sale to the petitioners was registered. However, it is contended by
the respondents Guevarras that they have a better right as against the
petitioners because the element of good faith was lacking as regards the
latter.
Whether or not there was good faith in the purchase of the land and in the
subsequent registration of title acquired in the Registry of Property is,
therefore, the central issue in this case.
We agree with the trial court's finding that the petitioners are purchasers in
good faith.
The Original Certificate of Title No. 3778 covering the entire property was
clean and free from any annotation of an encumbrance, 15 and there was nothing
whatsoever to indicate on its face any vice or infirmity in the title of the registered owners-the spouses
Victorino and Crisanta dela Rosa. Thus, the petitioners could not have known of the prior sale to Juliana
Salazar as, precisely, it was not registered. The general rule is that if the property sold is registered land, the
purchaser in good faith has a right to rely on the certificate of title and is under no duty to go behind it to
look for flaws.16 This' notwithstanding, the petitioners did not rely solely upon the certificate of title. They
personally inspected the subject property. Undeniably, they found the same to be occupied by two houses,
one belonging to a certain Doray dela Rosa and the other to spouses Pedro Guevarra and Pascuala Tolentino,
parents of the respondents Guevarras. Upon being informed of the petitioners' desire to purchase the land,
Doray dela Rosa apparently offered to sell her house, which offer was accepted by the petitioners. As regards
the spouses Guevarra, we find no reason to disturb the trial court's finding that they themselves requested
that they be allowed to refrain on the property until such time that the petitioners would need the entire
premises; and in lieu of rentals to the petitioners, they offered to continue paying the real estate taxes for
one-half of the property as this was their arrangement with the previous owners-to which request the
petitioners acceded.17 Evidently, neither Doray dela Rosa nor the spouses Guevarra professed ownership
over the portions of land they were occupying; on the contrary, by their actuations they expressly
acknowledged that they were not the real owners of the said property. The spouses Guevarra, in particular,
made no mention of the prior unregistered sale to their predecessor-in-interest, Juliana Salazar. Thus, when
the petitioners registered the sale in their favor with the Register of Deeds, they did so without any
knowledge about the prior sale in favor of Juliana Salazar. The petitioners, therefore, had acted in good faith.
The basis for the Court of Appeals' conclusion that petitioners were buyers in
bad faith is, to say the least, ambiguous. Said court appears to have relied on
the singular circumstance that the petitioners are, like the respondents, from
Orani Bataan, and as such, according to the court, they should have
personally known that the private respondents were the persons in actual
possession and not Doray dela Rosa and Pedro Guevarra. The respondent
court's premise, therefore, is that the private respondents were the actual
occupants of the property.
There is, however, nothing in the record to sustain the validity of the above
premise. At the time of the purchase, the petitioners dealt with Pedro
Guevarra and Pascuala Tolentino, the latter being the actual occupants. The
respondents Guevarras children of the said Pedro and Pascuala Guevarra,
came into the picture only after their parents died. As for the respondent heirs
of Victorino dela Rosa, their being in actual possession of any portion of the
property was, likewise, simply presumed or taken for granted by the Court of
Appeals.
The private respondents can not honestly claim that they became aware of
the petitioners' title only in 1978. Ever since the petitioners bought the
property in 1961, they have occupied the same openly, publicly, and
continuously in the concept of owners, even building their house thereon. For
seventeen years they were in peaceful possession, with the respondents
Guevarras occupying less than one-half of the same property. If the
petitioners are mere usurpers, why did the private respondents complain only
now? Moreover, they have not bothered to explain in what capacity are the
petitioners occupying the land, if not as legal owners. Consequently, we are
more inclined to accept the petitioners' explanation that the private
respondents have initiated this suit because of their (the petitioners') refusal
to sell to the respondents Guevarras that portion of the land which the latter
are occupying, coupled with the petitioners' demand for the said private
respondents to vacate the same.
Anent the other issues raised in the petition, these do not need further
discussion, being merely subordinate to the main issue of good faith.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is FIRST DIVISION
SET ASIDE, and that of the Court of First Instance (now Regional Trial Court) of
G.R. No. 144320
Bataan, Branch I is hereby REINSTATED.
NATIVIDAD ARIAGA VDA. DE GURREA,
CARLOS GURREA, JULIETA GURREA,
Costs against the private respondents. TERESA GURREA-RODRIGUEZ, RICARDO
GURREA, Jr., MA. VICTORIA GURREA-
SO ORDERED. CANDEL, and RAMONA GURREA-
MONTINOLA,
Petitioners,
Present:

PANGANIBAN, C.J., Chairperson,

YNARES-SANTIAGO,
- versus - AUSTRIA-MARTINEZ,
CALLEJO, and
CHICO-NAZARIO, JJ.

Promulgated:

ENRIQUE SUPLICO, April 26, 2006

Respondent.

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

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals (CA) dated February 24, 2000 in
CA-G.R. CV No. 56210, which affirmed in toto the Decision[2] dated July 5, 1996 of
the Regional Trial Court (RTC) of Pasig City, Branch 268, in Civil Case No. 47543;
and the CA Resolution[3] dated August 7, 2000 which denied petitioners motion for
reconsideration.
The present petition arose from a complaint for annulment of title with prayer for
preliminary injunction filed with the Court of First Instance (CFI) of Rizal, docketed
as Civil Case No. 47543, by Rosalina Gurrea (plaintiff) in her capacity as attorney-
in-fact of the heirs of Ricardo Gurrea (Ricardo), namely: Natividad, Carlos, Juliet
and Ricardo, Jr., all surnamed Gurrea, and Teresa Gurrea Colemenares. [4] The
complaint was filed against Atty. Enrique Suplico (defendant), Gen. Gaudencio
Tobias, in his capacity as General Manager of the National Housing Authority, and
Joseph Estrada, in his capacity as Municipal Mayor of San Juan, Rizal.[5]

The CA adopted the facts of the case as summarized by the RTC, to wit:
The lot in question situated at 245 Marne Street, San Juan,
Metro Manila was originally owned by one of herein plaintiffs
Attorney-in-Fact, Rosalina Gurrea, as evidence (sic) by TCT No.
49767 (Exhibit A). That sometime in 1958, Rosalina Gurrea
transferred the ownership of said lot to Adelina Gurrea, whose
ownership was evidenced by TCT No. 58253 (Exhibit
B). That Adelina Gurrea continued to be the owner of the lot until
her death. Thereafter, Special Proceedings No. 7185 was instituted
to have the will she executed during her lifetime probated and to
settle her estate. Under the said will, the San Juan lot was
bequeathed to Pilar and Luis Gurrea, while 700,000 pesetas, of the
lot in Baguio City and a one-hectare piece of land in Pontevedra,
Negros Occidental were given to Ricardo Gurrea.
Ricardo Gurrea, represented by and through his counsel
Atty. Enrique Suplico (the defendant), filed an Opposition in Special
Proc. No. 7185. In consideration of said representation, Ricardo
Gurrea agreed to pay Atty. Suplico a contingent fee of twenty (20%)
of whatever is due me, either real or personal property (Exhibit
5). During the pendency of the proceedings and upon the oral
instructions of Ricardo Gurrea, Atty. Suplico negotiated with the
other heirs of Adelina Gurrea regarding the transfer of the piso
(apartment building) in Spain to Ricardo Gurreas daughter, Juliet
Gurrea de Melendres. Ricardo Gurrea further instructed Atty.
Suplico not to enter into any settlement with the heirs unless the
piso is transferred to his daughter. Finally, the transfer of the piso
worth P64,000.00 was executed and the heirs arrived at an
amicable settlement regarding the estate of Adelina Gurrea. Hence,
Ricardo Gurrea withdrew his Opposition and the heirs then drew up
a project of partition which was eventually approved by the probate
court. Pursuant to the project of partition, the following properties
were adjudicated to Ricardo Gurrea: (1) the whole of the Baguio lot
(with assessed value of P26,350.00); (2) the whole of the San
Juan lot (with assessed value of P9,630.00); and (3) a parcel of land
in Pontevedra, Negros Occidental (with assessed value of
P300.00). (Exhibit R for plaintiff and exhibit 19 for defendant).
As payment of his attorneys fees, Ricardo Gurrea offered
the San Juan lot to Atty. Suplico who was initially hesitant to accept
the same as the property is occupied by squatters.However, in
order not to antagonize his client, Atty. Suplico agreed to Ricardo
Gurreas proposal with the further understanding that he will receive
an additional commission of 5% if he sells
the Baguio property. Thereafter, the deed of Transfer of Rights and
Interest was drafted. The said deed was presented to Ricardo
Gurrea for his signature. That before signing the same, the contents
of the deed were first explained to Ricardo Gurrea by Atty. Suplico
and Atty. Manuel Pama, the notary public. On August 20, 1975, the
deed was finally signed by Ricardo Gurrea at the office of Atty.
Pama, in the presence of the latter, Atty. Suplico, Victor Tupas and
another person, the last two acting as witnesses. Later, on October
7, 1980, Atty. Suplico registered the deed and obtained a title/TCT
to the San Juan property under his name. Ricardo Gurrea died
on October 22, 1980. After his death, his heirs instituted Special
Pro. No. 2722 for the settlement of Ricardo Gurreas estate. In the
said proceedings, Atty. Suplico filed several claims for unpaid
attorneys fees (no claim was filed relative to Special Proc. No.
7185); however, all were dismissed with finality (Exhibits I and
J). Also in the same case, the estates administrator, Carlos Gurrea,
filed an Inventory of Properties left by the decedent, which did not
initially include the property subject of this case. The said lot was
included only subsequently in the Amended Inventory (Exhibit G). [6]
On July 11, 1985, the RTC issued an Order dismissing the complaint on the
ground that it does not state a cause of action because the plaintiff is not the real
party-in-interest.[7] The complaint-in-intervention was likewise dismissed. Plaintiff
filed an appeal with the CA questioning the July 11, 1985 Order of the RTC.[8] The
case was docketed as CA-G.R. CV No. 14790.
Thereafter, defendant filed a Motion for Issuance of Writ of Execution
Pending Appeal.[9] In its Order dated May 20, 1986, the RTC granted defendants
motion.[10]Plaintiff then filed a petition for certiorari, prohibition and mandamus
with the CA seeking to annul the trial courts Order of May 20, 1986. The case was
docketed as CA-G.R. SP No. 09394.
Subsequently, CA-G.R. CV No. 14790 and CA-G.R. SP No. 09394 were
consolidated.
On November 21, 1989, the CA promulgated its Decision in the
consolidated cases, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered, as follows:
(1) REVERSING the order appealed from in CA-G.R. CV No.
14790 and GRANTING the appellant Rosalina Gurrea a period of
 sixty (60) days from finality of this decision within which to implead
in Civil Case No. 47543 the real parties-in-interest; after compliance
herewith by the appellant, the trial court shall proceed to hear and
decide the case accordingly; and
(2) GRANTING the petition for certiorari and prohibition in CA-G.R. SP
No. 09394, hereby ANNULLING and SETTING ASIDE the respondent Courts order
dated May 20, 1986, granting the respondent Enrique Suplicos motion for execution
pending appeal (Annex C, petition), and the writ issued pursuant thereto (Annex D,
petition).
Costs against the appellee and respondent Enrique Suplico in both cases.
SO ORDERED.[11]
Accordingly, an Amended Complaint was filed in the RTC impleading the
heirs of Ricardo as additional plaintiffs, to wit: Natividad Ariaga Vda. de Gurrea,
Carlos Gurrea, Julieta Gurrea, Teresa Gurrea-Rodriguez, Ricardo Gurrea, Jr., Ma.
Victoria Gurrea Candel and Ramona Gurrea-Montinola.[12] Thereafter, trial ensued.
In the course of the trial, Gen. Gaudencio Tobias of the NHA and then
Mayor Joseph Estrada of San Juan, were dropped as defendants upon motion of
plaintiffs and without the objection of defendant.
After trial, the RTC rendered judgment the dispositive portion of which
reads:
WHEREFORE, taking all the foregoing into consideration, the Court finds
that the preponderance of evidence is in favor of the defendant and against the
plaintiffs, hence, orders the DISMISSAL of the above entitled case. No
pronouncement as to damages, costs and attorneys fees.
SO ORDERED.[13]
Plaintiffs and defendant appealed the case to the CA.
Plaintiffs-appellants contended that the RTC erred: in upholding the validity
of the supposed contract of attorneys fees between Ricardo and defendant-
appellant which provided for the payment of attorneys fees in the form of real
property because such an agreement is prohibited by Article 1491 of the Civil
Code; in limiting its evaluation of the transfer of rights and interests in defendant-
appelants favor only on the basis of whether the deed evidencing said transfer of
rights and interests was forged, without regard to the facts and circumstances
surrounding its execution; in not finding that defendant-appellant has been fully
paid for all the services he had rendered for Ricardo; in not declaring the payment
of the subject lot as attorneys fees to be unconscionable based on the guidelines
for determining attorneys fees.
On the other hand, defendant-appellant asserted that the RTC erred in
refusing to dismiss the complaint for lack of cause of action; and in refusing to
award counterclaim in his favor.
On February 24, 2000, the CA rendered its Decision affirming, in toto, the
judgment of the RTC. The CA maintained the lower courts ruling that the plaintiffs-
appellants failed to present clear and convincing evidence that defendant-
appellant defrauded and exerted undue influence on Ricardo in the latters
execution of the deed of Transfer of Rights and Interest and in consequently
transferring his ownership of the San Juan lot in his (defendant-appellants) favor;
and that based on the evidence, the San Juan lot may be considered as
reasonable attorneys fees for defendant-appellant.
However, the CA did not discuss the issue of whether the contract of
attorneys fees between the late Ricardo and defendant-appellant and the
consequent transfer of rights and interest in favor of the latter is invalid for being
violative of Article 1491 of the Civil Code.
Plaintiffs-appellants (hereinafter petitioners), with the exception of
plaintiff-appellant Rosalina Gurrea, who died on June 2, 1999, filed a Motion for
Reconsideration, but the CA denied the same in a Resolution issued on August 7,
2000.
Hence, the present petition raising the following issues:
1. WHETHER OR NOT, ASSUMING WITHOUT ADMITTING, THAT
THE TRANSFER OF RIGHTS AND INTERESTS (EXHIBIT E; 1) WAS
DULY EXECUTED BY RICARDO GURREA, THE SAME VIOLATES
 ARTICLE 1491 OF THE NEW CIVIL CODE AND, THEREFORE, NULL
AND VOID.
2. WHETHER OR NOT THE SUPPOSED CONTRACT FOR
ATTORNEYS FEES IN THE FORM OF THE MANIFESTATION
DATED JUNE 24, 1972 (EXHIBIT 5) PROVIDING FOR THE
PAYMENT OF ATTORNEYS FEES OUT OF THE PROPERTIES IN
LITIGATION, IS VALID;
3. WHETHER OR NOT, ASSUMING THAT THE MANIFESTATION
AND TRANSFER OF RIGHTS AND INTERESTS ARE VALID, AND
FURTHER ASSUMING THAT RESPONDENT-ATTORNEY HAS NOT
YET BEEN PAID HIS ATTORNEYS FEES IN SPECIAL PROCEEDINGS
NO. 7185, THE PAYMENT OF SAID FEES BY WAY OF THE WHOLE
PROPERTY SUBJECT MATTER OF THE INSTANT CASE IS
UNCONSCIONABLE OR UNREASONABLE CONSIDERING THE
GUIDELINES FOR FIXING ATTORNEYS FEES;
4. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE
CANCELLATION OF RESPONDENT ATTORNEYS TITLE OVER THE
SUBJECT PROPERTY AND THE RECONVEYANCE THEREOF TO THE
HEREIN PETITIONERS OR TO THE ESTATE OF THE LATE RICARDO
GURREA.
5. WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE
DAMAGES CLAIMED IN THE ACTION SUBSTANTIATED BY THEIR
EVIDENCE.[14]
As to the first issue, petitioners argue on the premise that, under the law,
estate proceedings shall be deemed closed and terminated when the court
declares it to be so and only after delivery of the remaining estate to the heirs
entitled to receive the same. Petitioners contend that no evidence was presented
to show that the probate court issued an order declaring Special Proceedings No.
7185 closed and terminated. In addition, when the Transfer of Rights and Interest
in favor of respondent was notarized on August 20, 1975, the title over the
subject lot was still in the name of Adelina Gurrea and that said title was
transferred only in the name of Ricardo on October 7, 1980. On these bases,
petitioners conclude that at the time the Transfer of Rights and Interest was
notarized, there is no dispute that the subject property still formed part of the
estate of Adelina Gurrea and was, therefore, still the subject of litigation. Hence,
the transfer of rights and interest over the subject property in favor of Atty.
Suplico (respondent) is null and void.
Anent the second issue, petitioners contend that the Manifestation dated
June 24, 1972 executed by Ricardo providing for the payment in favor of
respondent of a contingent fee of twenty percent (20%) of whatever is due to
Ricardo, either real or personal property is invalid because based on
jurisprudence, attorneys fees, based on a contingent fee contract, may be paid
only out of a certain percentage of the value of the real property in litigation; and
that the real property itself may not be given as payment of attorneys fees.
As to the third issue, petitioners assert that even assuming that the above-
mentioned Manifestation and Transfer of Rights and Interest are valid and that
respondent had not yet been paid his attorneys fees, the subject property is an
unreasonable and unconscionable payment for the actual services that
respondent had rendered for Ricardo, taking into consideration the guidelines for
fixing attorneys fees.
Petitioners did not elaborate on the fourth issue while, in the fifth issue,
they submitted to the discretion of the Court their entitlement to damages and
attorneys fees, as claimed before the trial court.
On his part, respondent contends that the issue as to whether Special
Proceedings No. 7185 was already closed and terminated at the time of execution
of the deed of Transfer of Rights and Interest, involves the determination of
factual matters and appreciation of pieces of evidence which cannot be raised in
a petition for review on certiorari before this Court. Even assuming that
petitioners may properly raise a factual issue in the present petition, respondent
submits that there is sufficient evidentiary basis for the trial courts conclusion
that the Transfer of Rights and Interest was executed and entered into after the
termination of Special Proceedings No. 7185. Respondent also contends that
based on jurisprudence, the Court has upheld the validity of contingency fee
contracts providing for the payment of attorneys fees out of a portion or part of
the property subject of litigation; that the subject property is just, reasonable and
equitable payment for the services he rendered for the late Ricardo, consisting of
the signing of the Project of Partition, filing of an Opposition during the estate
proceedings, and negotiating with the other heirs which resulted in Ricardos
recovery of three parcels of land.

The Court finds the petition meritorious.
It is a fundamental rule that the Supreme Courts jurisdiction in a petition
for review on certiorari as a mode of appeal under Rule 45 of the Rules of Court,
as amended, such as the one at bar, is limited to reviewing only errors of law, not
of fact.[15] The rationale of this rule is founded on the fact that the Court is not a
trier of facts and does not normally undertake the re-examination of the evidence
presented by the contending parties during the trial of the case considering that
the findings of facts of the CA are conclusive and binding on the Court. [16]
However, there are recognized exceptions to this rule, to wit:
(1) when the findings are grounded entirely on speculation,
surmises or conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of facts are conflicting; (6) when in
making its findings the CA went beyond the issues of the case, or
its findings are contrary to the admissions of both the appellant
and the appellee; (7) when the findings are contrary to the trial
court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; (10) when the findings of
fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; and (11) when the CA
manifestly overlooked certain relevant facts not disputed by the
parties, which, if properly considered, could justify a different
conclusion.[17]
The Court finds the present case falling under the second exception for reasons
discussed hereunder.
At the outset, it should be stressed that the question as to whether the
deed of Transfer of Rights and Interest was forged was resolved by the CA when it
affirmed the ruling of the RTC that herein petitioners failed to present clear,
convincing and satisfactory evidence that respondent defrauded Ricardo. The CA
also ruled that there is no evidence on record to show that the signature of the
late Ricardo on the questioned deed is simulated or false. This matter is not
assailed in the present petition.
However, despite having been specifically assigned as an error by
petitioners in their appellants brief filed with the CA, the appellate court failed to
rule on the question of whether the subject Transfer of Rights and Interest was
executed even before the estate proceedings were closed and terminated.
Anent the first issue, it is necessary to resolve whether the subject
property was still the object of litigation at the time the deed of Transfer of Rights
and Interest in favor of respondent was executed; and if so, whether the same
should be considered null and void for being violative of the provisions of Article
1491 of the Civil Code.
Article 1491(5) of the Civil Code provides:
1491. The following persons cannot acquire by purchase,
even at a public or judicial auction, either in person or through the
mediation of another:
(5) Justices, judges, prosecuting attorneys, clerks of superior
and inferior courts, and other officers and employees connected
with the administration of justice, the property and rights in
litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this
prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and
rights which may be the object of any litigation in which
they may take part by virtue of their profession.

(emphasis supplied)
In its Decision, the RTC made the following disquisition:
[A]ccording to the evidence for the defendant, a Motion for
Termination of Proceeding and Discharge of the Executor and Bond
dated June 20, 1975 was filed in the case, alleging in paragraphs 3
and 5 thereof, that the executor Angel E. Ordoez has already turned
over to the respective heirs and devisees all their respective shares
in accordance with the Project of Partition duly approved by the
Court. Thereafter, more than one month from the filing thereof, the
Transfer of Rights and Interest was executed on August 20,
1975. Hence, at the time of the execution of the questioned
document, it may be concluded that Special Proceedings
No. 7185 had been terminated. The property in San Juan is no
longer the subject of a litigation and may be alienated by the client
to his lawyer as payment of attorneys fees rendered. (emphasis
supplied)
It is clear from the above-quoted ruling of the trial court that its sole basis in
concluding that Special Proceedings No. 7185 had been terminated and that the
subject property is no longer the object of litigation at the time the deed of
Transfer of Rights and Interest was executed on August 20, 1975 is the allegation
of the executor, Angel E. Ordoez, in his Motion [18] for Termination of Proceeding
and Discharge of the Executor and Bond dated June 20, 1975, that he had already
turned over to the respective heirs and devisees all their respective shares in
accordance with the project of partition duly approved by the probate court.
The Court finds the trial courts inference to be without sufficient basis.
How can the trial court conclude that Special Proceedings No. 7185 had been
terminated and the subject property no longer the object of litigation when no
evidence was presented to show that when the Transfer of Rights and Interest
was executed, the probate court had already issued an order declaring the estate
proceedings closed and terminated? A thing is said to be in litigation not only if
there is some contest or litigation over it in court, but also from the moment that
it becomes subject to the judicial action of the judge. [19] In the present case, there
is no proof to show that at the time the deed of Transfer of Rights and Interest
was executed, the probate court had issued an order granting the Motion for
Termination of Proceeding and Discharge of the Executor and Bond. Since the
judge has yet to act on the above-mentioned motion, it follows that the subject
property which is the subject matter of the deed of Transfer of Rights and Interest,
is still the object of litigation, that is Special Proceedings No. 7185.
Furthermore, we agree with the petitioners undisputed contention that
when the deed of Transfer of Rights and Interest was executed, the title over the
subject lot was still in the name of Adelina Gurrea and that it was only on October
7, 1980 that the title was transferred in the name of Ricardo. The rule is that as
long as the order for the distribution of the estate has not been complied with, the
probate proceedings cannot be deemed closed and terminated. [20] The probate
court loses jurisdiction of an estate under administration only after the payment
of all the debts and the remaining estate delivered to the heirs entitled to receive
the same.[21] In the present case, while the subject lot was assigned as Ricardos
share in the project of partition executed by the heirs of Adelina Gurrea, the title
over the subject lot was still in the name of the latter and was not yet conveyed
to Ricardo when the Transfer of Rights and Interest was executed. As correctly
cited by petitioners, the Court held in Lucero v. Baaga[22] that:
[t]he term delivery or tradition has two aspects: (1) the de
jure delivery or the execution of deeds of conveyance and (2) the
delivery of the material possession (Florendo vs. Foz, 20 Phil. 388,
393). The usual practice is that, if the land to be delivered is in the
name of the decedent, the administrator executes a deed,
conveying the land to the distributee. That deed, together with the
project of partition, the order approving it, the letters of
administration and the certification as to the payment of the
estate, inheritance and realty taxes, is registered in the
corresponding Registry of Deeds. Title would then be issued to the
distributee. Thereafter, the administrator or executor places him in
material possession of the land if the same is in the custody of the
former.[23]
It follows that, since at the time of execution of the deed of Transfer of Rights and
Interest, the subject property still formed part of the estate of Adelina, and there
being no evidence to show that material possession of the property was given to
Ricardo, the probate proceedings concerning Adelinas estate cannot be deemed
to have been closed and terminated and the subject property still the object of
litigation.
Having been established that the subject property was still the object of
litigation at the time the subject deed of Transfer of Rights and Interest was
executed, the assignment of rights and interest over the subject property in favor
of respondent is null and void for being violative of the provisions of Article 1491
of the Civil Code which expressly prohibits lawyers from acquiring property or
rights which may be the object of any litigation in which they may take part by
virtue of their profession.
Article 1409 of the same Code provides, among others, that contracts
which are expressly prohibited or declared void by law are considered inexistent
and void from the beginning.
Anent the second issue, the Court has already held that the said property
is still the object of litigation at the time the subject Manifestation and Transfer of
Rights and Interest were executed and, thus, may not be acquired by respondent
pursuant to the provisions of Article 1491 of the Civil Code.
Considering that the subject Transfer of Rights and Interest is null and
void, the Court no longer finds it necessary to resolve the third issue.
As to the fourth issue, it follows that respondents title over the subject
property should be cancelled and the property reconveyed to the estate of
Ricardo, the same to be distributed to the latters heirs. This is without prejudice,
however, to respondents right to claim his attorneys fees from the estate of
Ricardo, it being undisputed that he rendered legal services for the latter.
Anent the last issue, the Court is not persuaded by petitioners prayer for
the grant of attorneys fees in an amount as the Court may determine. The
general rule is that attorneys fees cannot be recovered as part of damages
because no premium should be placed on the right to litigate. [24] Article 2208 of
the Civil Code provides that in the absence of stipulation, attorneys fees and
expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendants act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against
the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiffs plainly valid, just and demandable
claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers
and skilled workers;
(8) In actions for indemnity under workmens compensation and
employers liability laws;
(9) In a separate civil action to recover civil liability arising from a
crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that
attorneys fees and expenses of litigation should be recovered.
The Court finds that the present case does not fall under any of the enumerated
exceptions. It is settled that even if a claimant is compelled to litigate with third
persons or to incur expenses to protect its rights, still attorneys fees may not be
awarded where no sufficient showing of bad faith could be reflected in a partys
persistence in a case other than an erroneous conviction of the righteousness of
his cause.[25] In the present case, even granting that petitioners were compelled
to litigate and incur expenses to protect their interests, attorneys fees may not be
awarded in their favor because there is no sufficient showing that respondent
acted in gross and evident bad faith in refusing to satisfy their claim, in view of
his erroneous belief and judgment that he has lawfully acquired the subject
property.
As to petitioners entitlement to other forms of damages, while the complaint filed
by herein petitioners with the trial court contains a general prayer for the grant of
other reliefs, the rule is that evidence should be taken of the damages claimed
and the court should determine who are the persons entitled to such indemnity.
[26]
The power of the courts to grant damages and attorneys fees demands
factual, legal and equitable justification; its basis cannot be left to speculation or
conjecture.[27] In the present case, no allegation, much less, evidence was
presented by petitioners to prove that they are entitled to damages.
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals in CA-G.R. No. CV No. 56210 together with the Decision dated July 5,
1996 of the Regional Trial Court of Pasig City, Branch 268 in Civil Case No. 47543
are REVERSED and SET ASIDE. A new judgment is rendered canceling Transfer
Certificate of Title No. 24474 in the name of respondent Enrique P. Suplico and
reinstating Transfer Certificate of Title No. 24473 in the name of Ricardo Gurrea.
No pronouncement as to costs.
SO ORDERED.
SECOND DIVISION
G.R. No. 73913 January 31, 1989
JERRY T. MOLES, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and MARIANO M.
DIOLOSA, respondents.
REGALADO, J.:
This petition for review on certiorari assails the decision of the then
Intermediate Appellate Court 1 dismissing the complaint filed by herein
petitioner against the herein private respondent in the former Court of First
Instance of Negros Occidental in Civil Case No. 13821 thereof. 2
The factual backdrop of this controversy, as culled from the records, 3 shows
that on May 17, 1978, petitioner Jerry T. Moles commenced a suit against private
respondent Mariano M. Diolosa in the aforesaid trial court, Branch IV in Bacolod
City, for rescission of contract with damages. Private respondent moved to
dismiss on the ground of improper venue, invoking therefor Sales Invoice No.
075A executed between petitioner and private respondent on April 23, 1977
which provides that all judicial actions arising from this contract shall be instituted
in the City of Iloilo. 4 This was opposed by petitioner who averred that there is no
formal document evidencing the sale which is substantially verbal in character. In
an order dated June 23, 1978, the trial court denied the motion to dismiss, holding
that the question of venue could not be resolved at said stage of the case. The
subsequent motion for reconsideration was likewise denied.
Consequently, private respondent, invoking the aforesaid venue stipulation,
preceeded to this Court on a petition for prohibition with preliminary
injunction in G.R. No. 49078, questioning the validity of the order denying his
aforesaid two motions and seeking to enjoin the trial court from further
proceeding with the case. This petition was dismissed for lack of merit in a
resolution of the Court, dated February 7, 1979, and which became final on
March 15, 1979. Thereafter, private respondent filed his answer and
proceeded to trial.
The aforecited records establish that sometime in 1977, petitioner needed a
linotype printing machine for his printing business, The LM Press at Bacolod
City, and applied for an industrial loan with the Development Bank of the
Philippines. (hereinafter, DBP) for the purchase thereof. An agent of Smith,
Bell and Co. who is a friend of petitioner introduced the latter to private
respondent, owner of the Diolosa Publishing House in Iloilo City, who had two
available machines. Thereafter, petitioner went to Iloilo City to inspect the two
machines offered for sale and was informed that the same were secondhand
but functional.
On his second visit to the Diolosa Publishing House, petitioner together with
Rogelio Yusay, a letter press machine operator, decided to buy the linotype
machine, Model 14. The transaction was basically verbal in nature but to
facilitate the loan application with the DBP, a pro forma invoice, dated April
23, 1977 and reflecting the amount of P50,000.00 as the consideration of the
sale, was signed by petitioner with an addendum that payment had not yet
been made but that he promised to pay the full amount upon the release of
his loan from the aforementioned bank on or before the end of the
month. 5 Although the agreed selling price was only P40,000.00, the amount on
the invoice was increased by P10,000.00, said increase being intended for the
purchase of new matrices for said machine.
Sometime between April and May, 1977, the machine was delivered to
petitioner's publishing house at Tangub, Bacolod City where it was installed by
one Crispino Escurido, an employee of respondent Diolosa. Another employee
of the Diolosa Publishing House, Tomas Plondaya, stayed at petitioners house
for almost a month to train the latter's cousin in operating the machine. 6
Under date of August 29, 1977, private respondent issued a certification
wherein he warranted that the machine sold was in A-1 condition, together
with other express warranties. 7
Prior to the release of the loan, a representative from the DBP, Bacolod,
supposedly inspected the machine but he merely looked at it to see that it
was there . 8 The inspector's recommendation was favorable and, thereafter,
petitioner's loan of P50,000.00 was granted and released. However, before
payment was made to private respondent, petitioner required the former, in a
letter dated September 30, 1977, to accomplish the following, with the
explanations indicated by him:
1.) Crossed check for P15,407.10 representing.
a) P 10,000.00-Overprice in the machine:
b) P203.00-Freight and handling of the machine;
c) P203.00-Share in the electric repair; and
d) P5,000.00- Insurance that Crispin will come back and repair
the linotype machine at seller's account as provided in the
contract; after Crispin has put everything in order when he goes
home on Sunday he will return the check of P15,000.00.
2) Official receipt in the amount of P 50,000.00 as full payment
of the linotype machine.
These were immediately complied with by private respondent and on the
same day, September 30,1977, he received the DBP check for P50,000.00. 9
It is to be noted that the aforesaid official receipt No. 0451, dated September
30, 1977 and prepared and signed by private respondent, expressly states
that he received from the petitioner the DBP check for P50,000.00 issued in
our favor in full payment of one (1) Unit Model 14 Linotype Machine as
per Pro forma Invoice dated April 23, 1977. 10
On November 29, 1977, petitioner wrote private respondent that the machine
was not functioning properly as it needed a new distributor bar. In the same
letter, petitioner unburdened himself of his grievances and sentiments in this
wise.
We bought this machine in good faith because we trusted you
very much being our elder brother in printing and publishing
business. We did not hire anybody to look over the machine,
much more ask for a rebate in your price of P40,000.00 and
believed what your trusted two men, Tomas and Crispin, said
 although they were hiding the real and actual condition of the
machine for your business protection.
Until last week, we found out the worst ever to happen to us. We
have been cheated because the expert of the Linotype machine
from Manila says, that the most he will buy your machine is at
P5,000.00 only. ... 11
Private respondent made no reply to said letter, so petitioner engaged the
services of other technicians. Later, after several telephone calls regarding
the defects in the machine, private respondent sent two technicians to make
the necessary repairs but they failed to put the machine in running condition.
In fact, since then petitioner was never able to use the machine. 12
On February 18, 1978, not having received from private respondent the action
requested in his preceding letter as herein before stated, petitioner again
wrote private respondent, this time with the warning that he would be forced
to seek legal remedies to protect his interest. 13
Obviously in response to the foregoing letter, private respondent decided to
purchase a new distributor bar and, on March 16, 1978, private respondent
delivered this spare part to petitioner through one Pedro Candido. However,
when thereafter petitioner asked private respondent to pay for the price of
the distributor bar, the latter asked petitioner to share the cost with him.
Petitioner thus finally decided to indorse the matter to his lawyer.
An expert witness for the petitioner, one Gil Legaspina, declared that he
inspected the linotype machine involved in this case at the instance of
petitioner. In his inspection thereof, he found the following defects: (1) the
vertical automatic stop lever in the casting division was worn out; (2) the
justification lever had a slight breach (balana in the dialect); (3) the
distributor bar was worn out; (4) the partition at the entrance channel had a
tear; (5) there was no "pie stacker" tube entrance; and (6) the slouch arm
lever in the driving division was worn out.
It turned out that the said linotype machine was the same machine that
witness Legaspina had previously inspected for Sy Brothers, a firm which also
wanted to buy a linotype machine for their printing establishment. Having
found defects in said machine, the witness informed Sy Brother about his
findings, hence the purchase was aborted. In his opinion, major repairs were
needed to put the machine back in good running condition. 14
After trial, the court a quo rendered a decision the dispositive portion of which
reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is
hereby rendered as follows:
(1) Decreeing the rescission of the contract of sale involving one
linotype machine No. 14 between the defendant as seller and
the plaintiff as buyer;
(2) Ordering the plaintiff to return to the defendant at the
latter's place of business in Iloilo City the linotype machine
aforementioned together with all accessories that originally
were delivered to the plaintiff;
(3) Ordering the defendant to return to the plaintiff the sum of
Forty Thousand Pesos (P40,000.00) representing the price of the
linotype machine, plus interest at the legal rate counted from
May 17, 1978 when this action was instituted, until fully paid;
(4) Ordering the defendant to indemnify the plaintiff the sum of
Four Thousand Five Hundred Pesos (P4,500.00) representing
unearned income or actual damages;
(5) Ordering the defendant to pay the plaintiff the sum of One
Thousand Pesos (Pl,000.00) for attorney's fees.
Costs against the defendant. 15
From this decision, private respondent appealed to the Intermediate Appellate
Court which reversed the judgment of the lower court and dismissed
petitioner's complaint, hence the present petition.
We find merit in petitioner's cause.
On the matter of venue, private respondent relies on the aforementioned
Sales Invoice No. 076A which allegedly requires that the proper venue should
be Iloilo City and not Bacolod City. We agree with petitioner that said
document is not the contract evidencing the sale of the linotype machine, it
being merely a preliminary memorandum of a proposal to buy one linotype
machine, using for such purpose a printed form used for printing job orders in
private respondent's printing business. As hereinbefore explained, this issue
on venue was brought to Us by private respondent in a special civil action for
prohibition with preliminary injunction in G.R. No. 49078. After considering the
allegations contained, the issues raised and the arguments adduced in said
petition, as well as the comments thereto, the Court dismissed the petition for
lack of merit. Respondent court erred in reopening the same issue on appeal,
with a contrary ruling.
Furthermore, it was error for the respondent court, after adopting the factual
findings of the lower court, to reverse the latter's holding that the sales
invoice is merely a pro forma memorandum. The records do not show that
this finding is grounded entirely on speculation, surmises or conjectures as to
warrant a reversal thereof. 16 In fact, as hereinbefore stated, private respondent
expressly admitted in his official receipt No. 0451, dated September 30, 1977,
that the said sales invoice was merely a pro forma invoice. Consequently, the
printed provisions therein, especially since the printed form used was for
purposes of other types of transactions, could not have been intended by the
parties to govern their transaction on the printing machine. It is obvious that a
venue stipulation, in order to bind the parties, must have been intelligently and
deliberately intended by them to exclude their case from the reglementary rules
on venue. Yet, even such intended variance may not necessarily be given judicial
approval, as, for instance, where there are no restrictive or qualifying words in the
agreement indicating that venue cannot be laid in any place other than that
agreed upon by the parties, 17 and in contracts of adhesion. 18
Now, when an article is sold as a secondhand item, a question arises as to
whether there is an implied warranty of its quality or fitness. It is generally
held that in the sale of a designated and specific article sold as secondhand,
there is no implied warranty as to its quality or fitness for the purpose
intended, at least where it is subject to inspection at the time of the sale. On
the other hand, there is also authority to the effect that in a sale of a
secondhand articles there may be, under some circumstances, an implied
warranty of fitness for the ordinary purpose of the article sold or for the
particular purpose of the buyer. 19
In a line of decisions rendered by the United States Supreme Court, it had
theretofore been held that there is no implied warranty as to the condition,
adaptation, fitness, or suitability for the purpose for which made, or the
quality, of an article sold as and for a secondhand article. 20
Thus, in finding for private respondent, the respondent court cited the ruling
in Sison vs. Ago, et al. 21 to the effect that unless goods are sold as to raise an
implied warranty, as a general rule there is no implied warranty in the sale of
secondhand articles. 22
Said general rule, however, is not without exceptions. Article 1562 of our Civil
Code, which was taken from the Uniform Sales Act, provides:
Art. 1562. In a sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known
to the seller the particular purpose for which the goods are
acquired, and it appears that the buyer relies on the seller's skill
or judgment (whether he be the grower or manufacturer or not),
there is an implied warranty that the goods shall be reasonably
fit for such purpose;
xxx
In Drumar Mining Co. vs. Morris Ravine Mining Co., 23 the District Court of
Appeals, 3rd District, California, in applying a similar provision of law, ruled:
'There is nothing in the Uniform Sales Act declaring there is no
implied warranty in the sale of secondhand goods. Section 1735
of the Civil Code declares there is no implied warranty or
condition as to the quality or fitness for any particular purpose,
of goods supplied under a contract to sell or a sale, except (this
general statement is followed by an enumeration of several
exceptions). It would seem that the legislature intended this
 section to apply to all sales of goods, whether new or
secondhand. In subdivision 1 of this section, this language is
used: where the buyer ... makes known to the seller the
particular purpose for which the goods are required, and it
appears that the buyer relies on the seller's skill or judgment ...
there is an implied warranty that the goods shall be reasonably
fit for such purpose.'
Furthermore, and of a more determinative role in this case, a perusal of past
American decisions 24 likewise reveals a uniform pattern of rulings to the effect
that an express warranty can be made by and also be binding on the seller even
in the sale of a secondhand article.
In the aforecited case of Markman vs. Hallbeck, while holding that there was
an express warranty in the sale of a secondhand engine, the court said that it
was not error to refuse an instruction that upon the sale of secondhand goods
no warranty was implied, since secondhand goods might be sold under such
circumstances as to raise an implied warranty.
To repeat, in the case before Us, a certification to the effect that the linotype
machine bought by petitioner was in A-1 condition was issued by private
respondent in favor of the former. This cannot but be considered as an
express warranty. However, it is private respondent's submission, that the
same is not binding on him, not being a part of the contract of sale between
them. This contention is bereft of substance.
It must be remembered that the certification was a condition sine qua non for
the release of petitioner's loan which was to be used as payment for the
purchase price of the machine. Private respondent failed to refute this
material fact. Neither does he explain why he made that express warranty on
the condition of the machine if he had not intended to be bound by it. In fact,
the respondent court, in declaring that petitioner should have availed of the
remedy of requiring repairs as provided for in said certification, thereby
considered the same as part and parcel of the verbal contract between the
parties.
On the basis of the foregoing circumstances, the inescapable conclusion is
that private respondent is indeed bound by the express warranty he executed
in favor of herein petitioner.
We disagree with respondent court that private respondents express warranty
as to the A-1 condition of the machine was merely dealer's talk. Private
respondent was not a dealer of printing or linotype machines to whom could
be ascribed the supposed resort to the usual exaggerations of trade in said
items. His certification as to the condition of the machine was not made to
induce petitioner to purchase it but to confirm in writing for purposes of the
financing aspect of the transaction his representations thereon. Ordinarily,
what does not appear on the face of the written instrument should be
regarded as dealer's or trader's talk; 25 conversely, what is specifically
represented as true in said document, as in the instant case, cannot be
considered as mere dealer's talk.
On the question as to whether the hidden defects in the machine is sufficient
to warrant a rescission of the contract between the parties, we have to
consider the rule on redhibitory defects contemplated in Article 1561 of the
Civil Code. A redhibitory defect must be an imperfection or defect of such
nature as to engender a certain degree of importance. An imperfection or
defect of little consequence does not come within the category of being
redhibitory. 26
As already narrated, an expert witness for the petitioner categorically
established that the machine required major repairs before it could be used.
This, plus the fact that petitioner never made appropriate use of the machine
from the time of purchase until an action was filed, attest to the major defects
in said machine, by reason of which the rescission of the contract of sale is
sought. The factual finding, therefore, of the trial court that the machine is
not reasonably fit for the particular purpose for which it was intended must be
upheld, there being ample evidence to sustain the same.
At a belated stage of this appeal, private respondent came up for the first
time with the contention that the action for rescission is barred by
prescription. While it is true that Article 1571 of the Civil Code provides for a
prescriptive period of six months for a redhibitory action a cursory reading of
the ten preceding articles to which it refers will reveal that said rule may be
applied only in case of implied warranties. The present case involves one with
and express warranty. Consequently, the general rule on rescission of
contract, which is four years 27 shall apply. Considering that the original case for
rescission was filed only one year after the delivery of the subject machine, the
same is well within the prescriptive period. This is aside from the doctrinal rule
that the defense of prescription is waived and cannot be considered on appeal if
not raised in the trial court, 28 and this case does not have the features for an
exception to said rule.

WHEREFORE, the judgment of dismissal of the respondent court is hereby

REVERSED and SET ASIDE, and the decision of the court a quo is hereby
REINSTATED.

SO ORDERED.

FACTS:
Jerry Moles(petitioner) bought from Mariano Diolosa owner of Diolosa Publishing
House a linotype printing machine(secondhand machine). Moles promised Diolosa
that will pay the full amount after the loan from DBP worth P50,000.00 will be
released. Private respondent on return issued a certification wherein he warrated
that the machine was in A-1 condition, together with other express warranties.
After the release of the of the money from DBP, Petitioner required the
Respondent to accomplish some of the requirements. On which the dependant
complied the requirements on the same day.
On November 29, 1977, petitioner wrote private respondent that the machine was
not functioning properly. The petitioner found out that the said machine was not
in good condition as experts advised and it was worth lesser than the purchase
price. After several telephone calls regarding the defects in the machine, private
respondent sent two technicians to make necessary repairs but they failed to put
the machine in running condition and since then the petitioner wan unable to use
the machine anymore.
ISSUE/S:
1. Whether there is an implied warranty of its quality or fitness.
2. Whether the hidden defects in the machine is sufficient to warrant a
rescission of the contract between the parties.
HELD:
1. It is generally held that in the sale of a designated and specific article sold as
secondhand, there is no implied warranty as to its quality or fitness for the
purpose intended, at least where it is subject to inspection at the time of the sale.
On the other hand, there is also authority to the effect that in a sale of
secondhand articles there may be, under some circumstances, an implied
warranty of fitness for the ordinary purpose of the article sold or for the particular
purpose of the buyer.
Said general rule, however, is not without exceptions. Article 1562 of our Civil
Code, which was taken from the Uniform Sales Act, provides:
"Art. 1562. In a sale of goods, there is an implied warranty or condition as to the
quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the buyer
relies on the seller's skill or judgment (whether he be the grower or manufacturer
or not), there is an implied warranty that the goods shall be reasonably fit for
such purpose;"
2. We have to consider the rule on redhibitory defects contemplated in Article
1561 of the Civil Code. A redhibitory defect must be an imperfection or defect of
such nature as to engender a certain degree of importance. An imperfection or
defect of little consequence does not come within the category of being
redhibitory.
As already narrated, an expert witness for the petitioner categorically established
that the machine required major repairs before it could be used. This, plus the
fact that petitioner never made appropriate use of the machine from the time of
purchase until an action was filed, attest to the major defects in said machine, by
reason of which the rescission of the contract of sale is sought. The factual
finding, therefore, of the trial court that the machine is not reasonably fit for the
particular purpose for which it was intended must be upheld, there being ample
evidence to sustain the same.
At a belated stage of this appeal, private respondent came up for the first time
with the contention that the action for rescission is barred by prescription. While
it is true that Article 1571 of the Civil Code provides for a prescriptive period of six
months for a redhibitory action, a cursory reading of the ten preceding articles to
which it refers will reveal that said rule may be applied only in case of implied
warranties. The present case involves one with an express warranty.
Consequently, the general rule on rescission of contract, which is four years shall
apply. Considering that the original case for rescission was filed only one year
after the delivery of the subject machine, the same is well within the prescriptive
period. This is aside from the doctrinal rule that the defense of prescription is
waived and cannot be considered on appeal if not raised in the trial court, and
this case does not have the features for an exception to said rule.

SECOND DIVISION

G.R. No. 96271 June 26, 1992

NATIVIDAD VILLOSTAS, petitioner,

vs.
THE HON. COURT OF APPEALS, SECOND DIVISION, THE HON. SALVADOR S.
TENSUAN as Presiding Judge of RTC, Makati, Branch 146 and ELECTROLUX
MARKETING, INCORPORATED, respondents.
PARAS, J.:
This is a petition for review on certiorari seeking the annulment of the resolution 1 of the
respondent Court of Appeals, dated November 16, 1990, in CA-G.R. Sp. No. 23178 denying
the petitioner's appeal which in effect affirms the decision 2 of the Regional Trial Court in
Civil Case No. 90-1420 sustaining the decision 3 of the Metropolitan Trial Court, Branch 64,
Makati, Metro Manila, dated November 15, 1989 ordering herein petitioner to pay private
respondent, among others, the amount of P14,540.00.
The established facts of the case are as follows:
Desiring to have safe drinking water at home, herein petitioner Villostas and her husband
decided to buy a water purifier. At about this time, private respondent's Electrolux sales
agents were making door to door selling of its products in the subdivision where petitioner
has her residence. Because private respondent's sales agents had assured petitioner of the
very special features of their brand of water purifier, petitioner Villostas placed an order for
one (1) unit of said water purifier. On September 13, 1986, an Electrolux Aqua Guard water
purifier was delivered and installed at petitioner's residence (Rollo, p. 38; 49).
Consequently, petitioner signed the Sales Order (Annex "B", p. 31) and the Contract of Sale
with Reservation of Title (Annex "A", p. 31) in October 1986 (Rollo, p. 38, 22). A warranty
certificate, Exhibit "l", was issued by private respondent which provides that:
ELECTROLUX MARKETING, INCORPORATED WARRANTS THIS QUALITY
ELECTROLUX PRODUCT TO PERFORM EFFICIENTLY FOR ONE FULL YEAR
FROM DATE OF ORIGINAL PURCHASE. (Rollo, p. 49)
The purchase of said unit was on installment basis under which petitioner would pay the
amount of P16,190.00 in 20 monthly installments of P635.00 a month.
After two (2) weeks, petitioner verbally complained for the first time about the impurities,
dirtiness and bad odor coming out of the unit (Rollo, p. 22). On October 21, 1986, private
respondent Electrolux sent its service technician to examine and test the water purifier.
The water which came out was dirty so the unit was shut off automatically (Ibid.).The
technician changed the filter of the unit on said date without charge with an instruction
that the filter should be changed every 6 months otherwise the unit will not last long as
the water in the area was dirty (Ibid.).
After the filter was replaced, petitioner paid the amount of Pl,650.00 on November 18,
1986 which included the first amortization of P700.00 (Ibid.).
Petitioner complained for the second and third time when dirty water still came out of the
water purifier after the replacement of the filter. It was on the third complaint of petitioner
Villostas when the service technician gave advise that the filter should be changed every
six (6) months costing about P300.00 which was considered to be uneconomical by the
former (Rollo, pp. 22-23).
On December 9, 1986, petitioner sent a letter to the private respondent's branch manager
stating therein her complaint that the actual performance of the carbon filter was only for
a month instead of the private respondent's claim that the replacement of such filter will
be only once every six (6) months. The petitioner, citing the above incident as
uneconomical, decided to return the unit and demand a refund for the amount paid (Rollo,
p. 76), Electrolux's branch manager offered to change the water purifier with another
brand of any of its appliance of the unit in her favor. Petitioner did not accept it as she was
disappointed with the original unit which did not perform as warranted. Consequently,
petitioner did not pay any more the subsequent installments in the amount of P14,540.00
exclusive of interests (Rollo, p. 23, 120).
What transpired next was an exchange of demand letter and reply between petitioner and
private respondent.
Ultimately, respondent Electrolux Marketing, Inc. filed a complaint against petitioner
Villostas with the MTC of Makati for the recovery of the sum of P14,540.00 representing the
unpaid balance of the purchase price of one (1) Electrolux Water Purifier plus interest
thereon at the rate of 42% per annum in accordance with the Sales Contract with
Reservation of Title (Rollo, pp. 28-30).
In her amended answer, petitioner Villostas asserted that by reason of private
respondent's breach of warranty she was availing of the remedy of rescission of the
contract of sale and offered to return the water purifier to the seller as in fact, it was
already being offered for return as early as December 9, 1986, aside from claiming for the
refund of her payments. Petitioner prayed that the contract of sale be declared rescinded
and the payments refunded to her together with the full grant of the claims asserted in her
counterclaims (Rollo, pp. 35-36).
After trial on the merits. the MTC of Makati rendered its decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered ordering the defendant to pay
plaintiff as follows:
 1) the amount of P14,540.00 representing the unpaid outstanding balance
of the aforesaid unit, plus interest thereon at the rate of P42% per
annum until fully paid;
2) the amount of P1,000.00 as attorney's fees and
3) dismissing the counterclaim of defendant.
SO ORDERED. (Rollo, pp. 38-44)
The petitioner, thereafter, filed a notice of appeal from the judgment of said lower court.
The Regional Trial Court of Makati rendered its judgment affirming the disputed decision
(Rollo, pp. 21-24).
A motion for reconsideration having been denied, petitioner elevated the case to the Court
of Appeals and was given an inextendible period of 15 days to file a petition for review.
Anticipating that she would fail to comply with the deadline, herein petitioner filed a
second extension to file a petition for review which, however, was denied.
Herein, petitioner comes to this Court via petition for review on certiorari.
Petitioner assigns the following errors:
I
WHETHER OR NOT THE PETITION MADE BY THE PETITIONER TO THE
SUPREME COURT IS PROPER AND RIPE FOR JUDICIAL REVIEW.
II
WHETHER OR NOT PETITIONER IS ENTITLED TO RESCIND THE CONTRACT IN
VIOLATION OF THE WARRANTY FOR HIDDEN DEFECT OF THE ARTICLE
DELIVERED BY THE RESPONDENT.
III
WHETHER OR NOT PETITIONER IS BOUND TO PAY RESPONDENT HER
REMAINING BALANCE OF P14,540.00 PLUS INTEREST THEREON PURSUANT
TO THE CONTRACT OF SALE.
IV
WHETHER OR NOT PETITIONER IS LIABLE TO PAY RESPONDENT
ATTORNEY'S FEES PURSUANT TO THE CONTRACT PLUS COSTS OF SUIT.
The main issue in the instant case is whether or not the petitioner is entitled to rescind the
contract on the basis of a violation of the warranty of the article delivered by the
respondent.
Petitioner contends that the Regional Trial Court erred when it ruled that its claim for
rescission had prescribed inasmuch as she had formally notified the seller within a
reasonable time, that is, 2 months and 26 days, from the delivery of water purifier on
September 13, 1986 of her election to rescind.
Private respondent counters that the petitioner is not entitled to rescission vis-a-vis alleged
violation of the warranty for hidden defects for the reason that rescission of contract
sought by petitioner was beyond the jurisdictional competence of the trial court. It adds
that petitioner could no longer avail of rescission because said legal recourse was time
barred judging from delivery of the water purifier on September 13, 1986 pursuant to Art.
1571 of the New Civil Code.
The petition is impressed with merit.
Anent the jurisdictional competence of the Metropolitan Trial Court to order rescission of
contract, suffice it to say that the action was initiated by herein private respondent
Electrolux when it filed a complaint for collection of a sum of money worth P14,540.00,
against petitioner Villostas. Said amount is indubitably within the jurisdiction of the
Metropolitan Trial Court since it does not exceed P20,000.00 exclusive of interest and costs
but inclusive of damages of whatever (Maceda v. CA, G.R. No. 83545, 176 SCRA 440
[1989]). Moreover, the jurisdiction of the court over the subject matter is determined by
the allegations of the complaint irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein (Caparros v. CA, G.R. No. 56803,
170 SCRA 758 [1989]). When the petitioner, therefore, raised rescission of contract in her
answer, the court is not divested of its jurisdiction over the case on account of defenses
raised by the answer. The court is then merely authorized to receive evidence thereon
(Dela Cruz v. Bautista, G.R. No. 39692, 186 SCRA 517, [1990]). Clearly, the jurisdiction of
the court cannot be made to depend upon the defenses set up in the answer or upon the
motion to dismiss. Otherwise, the question of jurisdiction would depend almost entirely
upon the defendant (Caparros v. CA, supra.).
As regards the contention that the action for rescission is barred by prescription under Art.
1571 of the Civil Code, the same is bereft of merit. It must be pointed out that at the time
the Electrolux Aqua Guard water purifier was delivered and installed at petitioner Villostas'
residence a Warranty Certificate was issued by private respondent Electrolux which reads:
 ELECTROLUX MARKETING, INCORPORATED WARRANTS THIS QUALITY G.R. No. 158370 August 17, 2006
ELECTROLUX PRODUCT TO PERFORM EFFICIENTLY FOR ONE FULL YEAR SPOUSES MICHAEL UY & BONITA UY, Petitioners,
FROM DATE OF ORIGINAL PURCHASE. - versus -

The foregoing is clearly an express warranty regarding the efficiency of the water purifier. EDUARDO ARIZA, ERLINDA A.
On this regard the court said that while it is true that Article 1571 of the Civil Code ABDON, BENJAMIN ARIZA,
provides for a prescriptive period of six months for a redhibitory action, a cursory reading TERESITA A. SIMPORIOS,
of the ten preceding articles to which it refers will reveal that said rule may be applied only
HEIRS OF MARIANO ARIZA, JR.,
namely: JUANITA L. ARIZA,
in case of implied warranties. The present case involves one with an express warranty.
DENNIS L. ARIZA, ROLDAN L.
Consequently, the general rule on rescission of contract, which is four years (Article 1389,
ARIZA, & JOVANNI L. ARIZA; and
Civil Coded) shall apply (Moles v. IAC, G.R. No. 73913, 169 SCRA 777 [1989]). Inasmuch as
the Heirs of FAUSTO ARIZA, namely:
the instant case involves an express warranty, the filing of petitioner's amended answer on JESUSA ARIZA, THELMA SOLLANO,
September 30, 1988 is well within the four-year prescriptive period for rescission of ARTURO ARIZA, ELDINA CONOS,
contract from September 13, 1986, which was the delivery date of the unit. VILMA SABERON, & REBECCA
PADULLO, Respondents.
PREMISES CONSIDERED, the decision appealed from is REVERSED and SET ASIDE and the x--------------------------------------------------x
complaint of private respondent is DISMISSED. The sale of the water purifier is hereby
RESCINDED. DECISION

PUNO, J.:
SO ORDERED.
The facts:
On October 8, 1996, spouses Michael and Bonita Uy, petitioners, purchased 200 square meters of the parcel
of land designated as Lot No. 3229-C-2-F, covered by Transfer Certificate of Title (TCT) No. T-20007, from
respondents. The contract stipulated that petitioners had the right of choice to designate which portion of Lot
No. 3229-C-2-F would be the subject of the sale.[1]
Petitioners exercised their right to choose within two to three months from the sale, informing respondents
that they have selected and in fact occupied around 200 square meters of a portion of land. [2]
On August 4, 1997, petitioners purchased another 200 square meters of the same Lot No. 3229-C-2-F, with
the same option to choose which portion. They selected and occupied an adjoining portion to the lot in their
first sale.[3]
It appears that the parcels of land petitioners had chosen and occupied were already titled in the
names of the Delgados, namely, Carlos, Allan and Antonio, Jr. Although originally part of Lot No. 3229-C-
2-F, the two parcels of land were part of some 3,500 square meters that were purportedly sold by the
respondents to the Delgados on July 31, 1985. This deed of sale to the Delgados was annotated on TCT No.
T-20007 (covering Lot No. 3229-C-2-F) on June 10, 1993, and a new title for the covered area was issued
on April 21, 1994, which was likewise annotated on TCT No. T-20007 on the same date. [4] Thus, at the time
of the first sale by the respondents to petitioners, the two parcels of land had been cancelled from Lot No.
3229-C-2-F (covered by TCT No. T-20007), and were already part of Lot No. 3229-C-2-F-1 (covered by
TCT No. T-39106). [5]
Petitioners were sued for unlawful detainer by the Delgados. In September 1998, petitioners
entered into a compromise agreement with the Delgados and surrendered possession of the subject parcels of
land. Petitioners compromised the case without giving notice to respondents. [6]
Thereafter, petitioners demanded from respondents that they be allowed to choose again from Lot No. 3229-
C-2-F. When respondents refused, petitioners filed, on March 12, 1999, a case for specific performance with
delivery of possession of real property and damages. [7] Petitioners anchored their claim for specific
SECOND DIVISION
performance on the averment that they could not exercise [their] right to choose the portion bought from the
parcel of land afore-described because the portion pointed out by the [petitioners] were already sold and
claimed by third persons[8]
Respondents filed their answer and by way of special and affirmative defenses alleged that they had already
complied with their obligation to deliver, as petitioners had already chosen and been in possession of the
parcels of land they chose.[9] Respondents also faulted petitioners for losing possession of the parcels of land
by entering into a compromise agreement with the Delgados on two grounds: first, because respondents
have allegedly initiated the necessary legal steps to defend their possessory rights to the disputed land by
filing a case for the declaration of nullity of the title of the Delgados, and second, because petitioners failed
to interpose a third-party complaint to implead respondents in the unlawful detainer case. [10]
The trial court denied respondents motion to dismiss based on their Special and Affirmative Defenses as
well as their motion for reconsideration. [11] They went to the Court of Appeals on an action for certiorari and
prohibition contending that the trial court committed grave abuse of discretion in holding that:
1. petitioners had a cause of action for specific performance against respondents;
2. petitioners erroneously selected the parcels of land by some unfortunate turn of
events so that the portions selected were not owned by respondents but the Delgados;
and
3. the parcels of land were owned by the Delgados, a conclusion that was premature
considering that the case for the declaration of nullity of the Delgados title covering
the parcels was pending before the trial court.
The Court of Appeals reversed and set aside the orders of the trial court. It held that petitioners had
no cause of action to file a case of specific performance against respondents. [12] It ruled that the proper
remedy of the petitioners is an action for enforcement of warranty against eviction.
Petitioners now come before this Court on a petition for review on the following issues:
(1) whether the complaint filed in the RTC by petitioners fails to state a cause of action for
specific performance with delivery of possession of real property and damages
against respondents; and
(2) whether the RTCs denial of the motion to dismiss on lack of cause of action was the
proper subject of certiorari before the Court of Appeals.
We deny the petition.
We quote with approval the following ruling of the appellate court, viz:
At the outset, it could already be seen that indeed, [petitioners] have no cause of
action against [respondents]. The case for specific performance which was filed by
[petitioners] against [respondents] is not the proper remedy in this case. Rather, said
action was purely an afterthought on the part of [petitioners] when they were eventually
evicted from the lots they bought from [respondents].
The facts of the case are very clear. [Petitioners] bought from [respondents] a
200 square meter lot which was part of a bigger parcel of land covered by TCT No. 20007
registered in the names of [respondents], and which [petitioners] immediately took
possession of. After a year, [petitioners] again bought from [respondents] and took
possession of the adjacent lot also measuring 200 square meters. Since the sale,
[petitioners] had been in peaceful possession of the lots until they were evicted from the
same by third persons claiming to be the owners of the said lots. Thus, if [petitioners]
have a cause of action against [respondents], it would be one for the enforcement of
warranty against eviction and not one for specific performance.
The core of [petitioners] argument to support their action for specific
performance was that [respondents] failed to deliver to them the lots subject matter of the
sale, since what was delivered were not owned by [respondents] but by third
persons. They likewise maintain that they were not able to exercise their choice on which
lot to occupy as agreed upon by them. We do not find these arguments tenable. The truth
of the matter is that [respondents] were able to deliver the said parcels of land to
[petitioners]. It could not be said that [petitioners were] deprived of their choice on which
parcel of land they were to buy and occupy. The fact that they even decided to buy the lot
adjacent to the first lot they bought would clearly indicate that the said lots were their
choice. Moreover, [petitioners] had been enjoying possession of the same until an
unlawful detainer case was filed against them by third persons. After having enjoyed the
property for sometime, [petitioners] cannot now come before the court claiming that
[respondents] failed to deliver the property subject of the sale.
There is no denying also that these lots were originally part of a bigger parcel of
land owned by [respondents] and covered by TCT No. 20007. That third persons armed
with a certificate of title in their favor suddenly surfaced claiming to be the owners of the
subject lots does not automatically render the delivery made by [respondents] to
[petitioners] ineffectual. Stated otherwise, although third persons later on claimed
ownership over the property, it does not mean that [respondents] failed to deliver the lots
subject matter of the sale. It is also worth mentioning that the claim of these third persons
to the subject lots is being disputed by [respondents] as in fact, they filed an action for the
declaration of nullity of the title of Allan, Carlos and Antonio Delgado over the subject
lots and which up to now is still pending before the Court of Appeals. This action on the
part of [respondents] would show that they do not recognize the right of these third
persons to the subject lots and that [respondents] still maintain that they are the lawful
owners of the same.
What is before Us is a clear case of eviction. Thus, the action for specific
performance filed by [petitioners] against [respondents] must necessarily fail. If at all,
[petitioners] may file an action for the enforcement of warranty in case of eviction which
every vendor of a parcel of land is enjoined by law to guarantee as provided under Article
1548 of the New Civil Code:
Art. 1548. Eviction shall take place whenever by a final
judgment based on a right prior to the sale or an act imputable to the
vendor, the vendee is deprived of the whole or part of the thing
purchased.
The vendor shall answer for the eviction even though
nothing has been said in the contract on the subject.
The contracting parties, however, may increase, diminish or
suppress this legal obligation of the vendor.
But even if [petitioners] would file an action for the enforcement of warranty in
case of eviction against [respondents], We are afraid that the same will not prosper. The
records of the case reveal that the unlawful detainer case filed by third persons against
[petitioners], which led to the ouster of the latter from the subject lots, was decided by
compromise agreement without impleading [respondents] as third-party defendants. It
should be stressed that in order for the case to prosper, it is a precondition that the seller
must have been summoned in the suit for the eviction of the buyer. This rule is provided
under the provisions of Articles 1558 and 1559 of the New Civil Code, to wit:
 Art. 1558. The vendor shall not be obliged to make good
the proper warranty, unless he is summoned in the suit for eviction at
the instance of the vendee.
SECOND DIVISION
Art. 1559. The defendant vendee shall ask, within the time
fixed in the Rules of Court for answering the complaint, that the
vendor be made a co-defendant. G.R. No. 141480 November 29, 2006
Applying the above-quoted provisions of law, the Supreme Court enumerated
the requisites in the enforcement of a vendors liability for eviction, in the case of Maria
CARLOS B. DE GUZMAN, Petitioner,
Luisa De Leon Escaler and Ernesto Escaler v. Court of Appeals, et al., [G.R. No. L-
42636. August 1, 1985.], to wit: vs.
In order that a vendors liability for eviction may be enforced, TOYOTA CUBAO, INC., Respondent.
the following requisites must concur a) there must be a final judgment;
b) the purchaser has been deprived of the whole or part of the thing
DECISION
sold; c) said deprivation was by virtue of a right prior to the sale made
by the vendor; and d) the vendor has been summoned and made co-
defendant in the suit for eviction at the instance of the vendee. In the AZCUNA, J.:
case at bar, the fourth requisite that of being summoned in the suit for
eviction (Case No. 4252) at the instance of the vendee is not present.
This is a petition for review on certiorari under Rule 45 of the Rules of Court
We need only add that petitioners could have filed a third-party complaint against the respondents seeking to annul the Order,1 dated September 9, 1999, of the Regional Trial Court
when they were sued for eviction by the of Quezon City (the RTC), Branch 105, which dismissed the complaint for damages
Delgados under Rule 6, Section 11.[13] In Firestone Tire and Rubber Co. of the Philippines v. filed by petitioner Carlos B. De Guzman against respondent Toyota Cubao, Inc.
Tempongko,[14] we explained the function of a third-party complaint, viz:

The third-party complaint, is x x x a procedural device whereby a third party
who is neither a party nor privy to the act or deed complained of by the plaintiff, may be
brought into the case with leave of court, by the defendant, who acts as third-party plaintiff
to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiffs claim. The third-party complaint
is actually independent of and separate and distinct from the plaintiffs complaint. Were it
not for this provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the third-party. But the
Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his
separate cause of action in respect of plaintiffs claim against a third party in the original
and principal case with the object of avoiding circuitry of action and unnecessary
proliferation of lawsuits and of disposing expeditiously in one litigation the entire subject
matter arising from one particular set of facts. Prior leave of Court is necessary, so that
where the allowance of a third-party complaint would delay the resolution of the original
case, such as when the third-party defendant cannot be located or where matters
extraneous to the issue of possession would unnecessarily clutter a case of forcible entry,
or the effect would be to introduce a new and separate controversy into the action, the
salutary object of the rule would not be defeated, and the court should in such cases
require the defendant to institute a separate action. x x x.
On November 27, 1997, petitioner purchased from respondent a brand new white
Toyota Hi-Lux 2.4 SS double cab motor vehicle, 1996 model, in the amount
of P508,000. Petitioner made a down payment of P152,400, leaving a balance
of P355,600 which was payable in 36 months with 54% interest. The vehicle was
delivered to petitioner two days later. On October 18, 1998, petitioner demanded
the replacement of the engine of the vehicle because it developed a crack after
traversing Marcos Highway during a heavy rain. Petitioner asserted that
respondent should replace the engine with a new one based on an implied
warranty. Respondent countered that the alleged damage on the engine was not
covered by a warranty.
On April 20, 1999, petitioner filed a complaint for damages 2 against respondent
with the RTC. Respondent moved to dismiss the case on the ground that under
Article 1571 of the Civil Code, the petitioners cause of action had prescribed as
the case was filed more than six months from the date the vehicle was sold
and/or delivered.

If petitioners filed the third-party complaint against the respondents, they could have sought from
In an Order dated September 9, 1999, the RTC granted respondents motion and
the respondents x x x contribution, indemnity, subrogation or any other relief in respect of the claim of the
Delgados. The phrase any other relief includes a claim of a vendee for warranty against the vendor.[15] dismissed the complaint, thus:
IN VIEW WHEREOF, the petition is denied. No cost. SO ORDERED.
For the Courts consideration are: (1) defendants Motion to Dismiss; (2) plaintiffs
Opposition thereto; (3) defendants Reply; and (4) plaintiffs Rejoinder.
The Court agrees with the plaintiffs counsel that the subject pick-up is a
consumer product because it is used for personal, family or agricultural purposes,
contrary to defendant counsels claim that it is not because it is a non-
consumable item.
Since no warranty card or agreement was attached to the complaint, the contract
of sale of the subject pick-up carried an implied warranty that it was free from any
hidden faults or defects, or any charge or encumbrance not declared or known to
the buyer. The prescriptive period thereof is six (6) months under the Civil Code
(Art. 1571).
Under RA No. 7394, the provisions of the Civil Code on conditions and warranties
shall govern all contracts of sale with condition and warranties (Art. 67). The
duration of the implied warranty (not accompanied by an express warranty) shall
endure not less than sixty days nor more than one (1) year following the sale of
new consumer products (Art. 68, par. [e]). The two (2) year prescriptive period
under Art. 169 cannot prevail over Art. 68 because the latter is the specific
provision on the matter.
The Court has noted that the prescriptive period for implied and express
warranties cannot be the same. In the Civil Code, a redhibitory action for violation
of an implied warranty against hidden defects prescribes in six (6) months, while
if it based on an express warranty[,] the action prescribes in four (4) years. Under
RA No. 7394, the implied warranty cannot be more than one (1) year; however,
the implied warranty can only be of equal duration to that an express warranty
when the implied warranty of merchantability accompanies an express warranty
(Art. 68, par. [e]). Therefore, the prescriptive period of two years under Art. 169
does not cover an implied warranty, which is not accompanied by an express
warranty. It is applicable to cases where there is an express warranty in the sale
of the consumer product.
Relative to plaintiffs argument that the claim for moral and exemplary damages
and attorneys fees is based on quasi-delict or breach of contract, such are merely
ancillary to the main cause of action which is based on warranty against hidden
defects. Without the latter, the former cannot stand alone.
Based on the record, the subject vehicle was purchased on 27 November 1997
and delivered on 29 November 1997. This case was filed only on 20 April 1999 or
almost nineteen (19) months from [the] sale and/or delivery. Applying Art. 1571 of
Civil Code, the action is barred by prescription because the complaint was filed
more than six (6) months after the sale and/or delivery of the vehicle. In addition,
the duration of the implied warranty of not more than one (1) year under Art. 68,
par (e) of RA No. 7394 has already elapsed.
Accordingly, defendants Motion is granted and the plaintiffs Complaint is ordered
dismissed.
SO ORDERED3
On December 21, 1999, the RTC denied petitioners motion for reconsideration, as
follows:
Submitted for resolution are: (1) plaintiffs Motion for Reconsideration; (2)
defendants Opposition; and (3) plaintiffs Reply.
Although plaintiffs motion was filed beyond the ten-day period, the Court is
convinced that it was not for the purpose of delay; hence, it cannot be considered
as a mere scrap of paper.
After a thorough study, the Court resolves that while reference to Art. 68, par. (e)
of RA No. 7394 may have been misplaced, yet the subject sale carried an implied
warranty whose prescriptive period is six (6) months under Art. 1571 of the Civil
Code.
Accordingly, plaintiffs Motion for Reconsideration is DENIED. SO ORDERED. 4
Petitioner thereupon filed a petition for review on certiorari with this Court.
The petition should be denied.
First, on procedural grounds, the petition should forthwith be denied for violation
of the hierarchy of courts. Petitioner states that the present petition is an "appeal
by certiorari on pure questions of law, from the final Order of Branch 105 of the
Regional Trial Court of Quezon City in Civil Case No. Q-99-37381 under Rule 45
of the Rules of Court." Upon receipt of the Order of the RTC, dated September 9,
1999, on September 21, 1999, petitioner filed a motion for reconsideration on
September 28, 1999. On December 21, 1999, the RTC denied petitioners motion.
When petitioner received a copy of the said order on January 18, 2000, he had
fifteen (15) days from receipt within which to appeal to the Court of Appeals by
filing a notice of appeal under Section 2(a) of Rule 41, from an order of the RTC
issued in the exercise of its original jurisdiction. The RTCs order dated September
9, 1999 and its subsequent order dated December 21, 1999 partake of the nature
of a final disposition of the case. Hence, the appropriate remedy petitioner should
have taken was to file a notice of appeal from the RTC to the Court of Appeals, not
a petition for review on certiorari directly with this Court.
Although petitioner intended his petition, filed on February 2, 2000, to be one
filed under Rule 45 and he filed it well within the 15-day reglementary period
counted from January 18, 2000, the same was in effect a petition
for certiorari under Rule 65, and is therefore dismissible for violation of the
hierarchy of courts under Section 4 thereof. Petitioner failed to show that special
and important reasons or exceptional and compelling circumstances exist to
justify a direct filing of the petition with this Court instead of first taking an appeal
to the Court of Appeals.5Likewise, petitioner cannot find refuge in the argument
that he was raising pure questions of law. The sole matter petitioner assails in this
action is the RTCs order of dismissal of his complaint for damages on the ground
of prescription which was tantamount to an adjudication on the merits. Again,
petitioner should have resorted to the remedy of appealing the case to the Court
of Appeals by filing a notice of appeal with the RTC.
Second, even if the Court were to disregard the procedural infirmity, the petition
should be denied for lack of merit.
In his complaint, petitioner alleged and prayed, thus:
2. Last 27 November 1997, the plaintiff purchased from the defendant a
brand new Toyota Hilux 2.4 motor vehicle with [E]ngine [N]o. 2-L-9514743.
It was delivered to the plaintiff on 29 November 1997. Copies of the
Vehicle Sales Invoice and Vehicle Delivery Note issued by the defendant
are hereto attached as Annexes "A" and "B," respectively.
3. Last 18 October 1998, after only 12,000 kilometers of use, the vehicles
engine cracked. Although it was previously driven through a heavy rain, it
didnt pass through flooded streets high enough to stop sturdy and
resistant vehicles. Besides, vehicles of this class are advertised as being
capable of being driven on flooded areas or rugged terrain.
4. As plaintiff knows no reason why the vehicles engine would crack just
like that, the same could only be due to the fact that said engine and/or
the vehicle itself was defective even from the time it was bought.
5. Brought to the attention, defendant refused to answer for this defect
saying it is not covered by the vehicles warranty. It refused to replace the
vehicle as plaintiff demanded (or at least its engine, or even repair the
damage).
6. As a result of defendants actions, plaintiff suffered mental anxiety and
sleepless nights for which he demands an award of P200,000.00 moral
damages.
7. By way of example for the public good, plaintiff should also be awarded
exemplary damages in the amount of P200,000.00.
8. Forced to litigate to enforce his rights, plaintiff incurred, and shall
further incur, litigation-related expenses (including those for his counsels
fees) in the total estimated sum of P100,000.
WHEREFORE, it is respectfully prayed that judgment be rendered ordering
defendant:
a. to replace the subject vehicle with a brand new one or at least to
replace its engine all at defendants cost;
b. pay the plaintiff:
i. P200,000 moral damages;
ii. P200,000 exemplary damages;
iii. P200,000 attorneys fees and litigation expenses; and
iv. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for. 6
Petitioner contends that the dismissal on the ground of prescription was
erroneous because the applicable provision is Article 169 of Republic Act No. 7394
(otherwise known as "The Consumer Act of the Philippines" which was approved
on April 13, 1992), and not Article 1571 of the Civil Code. Petitioner specifies that
in his complaint, he neither asked for a rescission of the contract of sale nor did
he pray for a proportionate reduction of the purchase price. What petitioner
claims is the enforcement of the contract, that is, that respondent should replace
either the vehicle or its engine with a new one. In this regard, petitioner cites
Article 169 of Republic Act No. 7394 as the applicable provision, so as to make his
suit come within the purview of the two-year prescriptive period. Tangentially,
petitioner also justifies that his cause of action has not yet prescribed because
this present suit, which was an action based on quasi-delict, prescribes in four
years.
On the other hand, respondent maintains that petitioners cause of action was
already barred by the statute of limitations under Article 1571 of the Civil Code
for having been filed more than six months from the time the vehicle was
purchased and/or delivered. Respondent reiterates that Article 169 of Republic Act
No. 7394 does not apply.
Petitioners argument is erroneous. Article 1495 of the Civil Code states that in a
contract of sale, the vendor is bound to transfer the ownership of and to deliver
the thing that is the object of sale. Corollarily, the pertinent provisions of the Code
set forth the available remedies of a buyer against the seller on the basis of a
warranty against hidden defects:
Art. 1561. The vendor shall be responsible for warranty against the hidden
defects which the thing sold may have, should they render it unfit for the use for
which it is intended, or should they diminish its fitness for such use to such an
extent that, had the vendee been aware thereof, he would not have acquired it or
would have given a lower price for it; but said vendor shall not be answerable for
patent defects or those which may be visible, or for those which are not visible if
the vendee is an expert who, by reason of this trade or profession, should have
known them. (Emphasis supplied)
Art. 1566. The vendor is responsible to the vendee for any hidden faults or
defects in the thing sold, even though he was not aware thereof.
This provision shall not apply if the contrary has been stipulated and the vendor
was not aware of the hidden faults or defects in the thing sold.
Art. 1571. Actions arising from the provisions of the preceding ten articles shall be
barred after six months from the delivery of the thing sold.
(Emphasis supplied)
Under Article 1599 of the Civil Code, once an express warranty is breached, the
buyer can accept or keep the goods and maintain an action against the seller for
damages. In the absence of an existing express warranty on the part of the
respondent, as in this case, the allegations in petitioners complaint for damages
were clearly anchored on the enforcement of an implied warranty against hidden
defects, i.e., that the engine of the vehicle which respondent had sold to him was
not defective. By filing this case, petitioner wants to hold respondent responsible
for breach of implied warranty for having sold a vehicle with defective engine.
Such being the case, petitioner should have exercised this right within six months
from the delivery of the thing sold.7 Since petitioner filed the complaint on April
20, 1999, or more than nineteen months counted from November 29, 1997 (the
date of the delivery of the motor vehicle), his cause of action had become time-
barred.
Petitioner contends that the subject motor vehicle comes within the context of
Republic Act No. 7394. Thus, petitioner relies on Article 68 (f) (2) in relation to
Article 169 of Republic Act No. 7394. Article 4 (q) of the said law defines
"consumer products and services" as goods, services and credits, debts or
obligations which are primarily for personal, family, household or agricultural
purposes, which shall include, but not limited to, food, drugs, cosmetics, and
devices. The following provisions of Republic Act No. 7394 state:
Art. 67. Applicable Law on Warranties. The provisions of the Civil Code on
conditions and warranties shall govern all contracts of sale with conditions and
warranties.
Art. 68. Additional Provisions on Warranties. In addition to the Civil Code
provisions on sale with warranties, the following provisions shall govern the sale
of consumer products with warranty:
e) Duration of warranty. The seller and the consumer may stipulate the period
within which the express warranty shall be enforceable. If the implied warranty on
merchantability accompanies an express warranty, both will be of equal
duration.1wphi1
Any other implied warranty shall endure not less than sixty (60) days nor more
than one (1) year following the sale of new consumer products.

f) Breach of warranties xxx

xxx
2) In case of breach of implied warranty, the consumer may retain in the goods
and recover damages, or reject the goods, cancel the contract and recover from
the seller so much of the purchase price as has been paid, including damages.
(Emphasis supplied.)
A complaint must contain a concise statement of the ultimate facts constituting
the plaintiffs cause of action. To determine whether a cause of action is stated,
the test is as follows: admitting arguendo the truth of the facts alleged, can the
court render a valid judgment in accordance with the prayer? If the answer is no,
the complaint does not state a cause of action and should be dismissed forthwith.
If yes, then it does and must be given due course.

Consequently, even if the complaint is made to fall under the Republic Act No. The Case
7394, the same should still be dismissed since the prescriptive period for implied
warranty thereunder, which is one year, had likewise lapsed.

WHEREFORE, the petition is DENIED for being in violation of the hierarchy of Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing
courts, and in any event, for lack of merit. No costs. the June 5, 2002 Decision[2] and the August 8, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 61229. The dispositive portion of the challenged
SO ORDERED. Decision reads as follows:

THIRD DIVISION

G.R. No. 154554 November 9, 2005 WHEREFORE, the instant appeal is GRANTED. The Order dated May 27, 1998 of
the Regional Trial Court of Legazpi City, Branch 9, is hereby REVERSED and the
GOODYEAR PHILIPPINES, INC., Petitioner, case is remanded to the court a quo for the appropriate further proceedings.[4]

- versus - Sandoval-Gutierrez*

ANTHONY SY and JOSE L. LEE, Respondents. The assailed Resolution denied petitioners Motion for Reconsideration.

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

The Antecedents

DECISION

The CA narrated the antecedents of the case as follows:

PANGANIBAN, J.:
The subject of this case involves a motor vehicle, particularly described as:
MAKE: 1984 Isuzu JCR 6-Wheeler
PLATE NUMBER: PEL 685
MOTOR NO.: 6BD1-371305
SERIAL NO.: JCR500BOF-21184
The vehicle was originally owned by Goodyear Philippines, Inc. ([Goodyear]) which
it purchased from Industrial and Transport Equipment, Inc. in 1983. It had since
been in the service of [Goodyear] until April 30, 1986 when it was hijacked. This
hijacking was reported to the Philippine National Police (PNP) which issued out an
alert alarm on the said vehicle as a stolen one. It was later on recovered also in
1986.
The vehicle was used by [Goodyear] until 1996, when it sold it to Anthony Sy on
September 12, 1996.
Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But the latter on December
4, 1997, filed an action for rescission of contract with damages against Sy[,]
because he could not register the vehicle in his name due to the certification from
the PNP Regional Traffic Management Office in Legazpi City that it was a stolen
vehicle and the alarm covering the same was not lifted. Instead, the PNP in
Legazpi City impounded the vehicle and charged Lee criminally.
Upon being informed by Sy of the denial of the registration of the vehicle in Lees
name, [Goodyear] requested on July 10, 1997 the PNP to lift the stolen vehicle
alarm status. This notwithstanding, [Goodyear] was impleaded as third-party
defendant in the third-party complaint filed by Sy on January 9, 1998.
A motion to dismiss was filed by [Goodyear] on March 24, 1998 on the twin
grounds that the third-party complaint failed to state a cause of action and even if
it did, such cause of action was already extinguished. An opposition thereto was
interposed by Sy on April 17, 1998.
The Regional Trial Court [(RTC)] resolved to dismiss the third-party complaint on
the basis of the first proffered ground in its challenged Order dated May 27, 1998.
It ratiocinated:
A perusal of the third party complaint does not expressly show any act or
omission committed by the third party defendant which violates a right of the
third party complainant. The third party complaint failed to show that the vehicle
in question belongs to a person other than the third party defendant at the time
the said motor vehicle was sold by the third party defendant to the third party
plaintiff. On the contrary[,] the third party defendant has not denied having sold
to the third party plaintiff the said motor vehicle which had been in its possession
as owner from 1986 to 1996. The fact that the said motor vehicle was included by
the PNP in its alert status as stolen vehicle[,] resulted only following the report by
the third party defendant that it was hijacked in 1986. But when the said motor
vehicle was recovered, the third party defendant informed the PNP about the said
recovery and requested the lifting of the alert status on it as stolen vehicle.
If the PNP has not removed the said vehicle from its alert status as a stolen
vehicle, [then] that does not make [Goodyear] not the owner thereof. Hence,
[Goodyear], the third party defendant, is not guilty of any breach resulting from
any flaw in the title over the said vehicle. This is confirmed by the allegation of
the third party plaintiff as answering defendant in paragraph 6 of its Answer with
Counterclaim and Affirmative Defenses dated January 9, 1998, hereunder quoted
as follows:
6. Defendant specifically denies the allegations contained in paragraph 9 of
[p]laintiffs complaint, the truth of the matter is that [d]efendant help[ed] plaintiff
in removing the impediments in the registration and transfer of ownership and
that defendant ha[d] no knowledge of any flaw [in] the title of Goodyear Hence, this Petition.[6]
Philippines, Inc.

The Issues
Under Rules 16, a motion to dismiss may be made on any of the following
grounds:

Petitioner raises the following issues for the Courts consideration:

g) That the pleading asserting the claim states no cause of action.

I.

WHEREFORE, for failure of the third party complaint to state a cause of action, the Whether or not the Court of Appeals erred in reversing and setting aside the decision of the Regional
Trial Court, dismissing the complaint against petitioner for lack of a cause of action.
same is hereby ordered DISMISSED.[5]

II.

Whether or not the Court of Appeals erred in failing to find that petitioner did not breach any warranty
Ruling of the Court of Appeals in the absence of proof that at the time it sold the subject vehicle to Sy, petitioner was not the owner
thereof.

In granting the appeal, the CA reasoned that the Third-Party Complaint had stated
III.
a cause of action. First, petitioner did not make good its warranty in the Deed of
Sale: to convey the vehicle to Respondent Anthony Sy free from all liens,
Whether or not the Court of Appeals erred in failing to find that the cause of action, if ever it existed,
encumbrances and legal impediments. The reported hijacking of the vehicle was was already extinguished.[7]
a legal impediment that prevented its subsequent sale.

The foregoing issues actually point to one main question: did the Third-Party
Second, Respondent Sy had a right to protect and a warranty to enforce, while Complaint state a cause of action against petitioner?
petitioner had the corresponding obligation to honor that warranty. The latter
caused the impairment of that right, though, when the vehicle it had sold to him
was refused registration, because of the non-lifting of the alert status issued at its
instance. That petitioner had to execute all documents necessary to confer a
perfect title to him before he could seek recourse to the courts was deemed a The Courts Ruling
ludicrous condition precedent, because it could easily refuse to fulfill that
condition in order to obviate the filing of a case against it.
The Petition has merit.

3) an act or omission of the defendant that violates such right.[13]

Main Issue: In determining whether an initiatory pleading states a cause of action, the test is
as follows: admitting the truth of the facts alleged, can the court render a valid
Whether a Cause of Action judgment in accordance with the prayer?[14] To be taken into account are only
the material allegations in the complaint; extraneous facts and circumstances or
Was Stated in the Third-Party Complaint other matters aliunde are not considered.[15] The court may consider -- in
addition to the complaint -- the appended annexes or documents, other pleadings
of the plaintiff, or admissions in the records.[16]

A cause of action is a formal statement of the operative facts that give rise to a
remedial right.[8] The question of whether the complaint states a cause of action
is determined by its averments regarding the acts committed by the defendant. No Cause of Action
[9] Thus, it must contain a concise statement of the ultimate or essential facts
constituting the plaintiffs cause of action.[10] Failure to make a Against Petitioner

sufficient allegation of a cause of action in the complaint warrants its dismissal.

[11]
In the present case, the third element is missing. The Third-Party Complaint filed
by Sy is inadequate, because it did not allege any act or omission that petitioner
had committed in violation of his right to the subject vehicle. The Complaint
Elements of a capitalized merely on the fact that the vehicle -- according to the records of the
PNP, which was a stranger to the case -- was a stolen vehicle. The pleading did
Cause of Action not contain sufficient notice of the cause of action[17] against petitioner.

A cause of action, which is an act or omission by which a party violates the right Without even going into the veracity of its material allegations, the Complaint is
of another,[12] has these elements: insufficient on its face.[18] No connection was laid out between the owners sale of
the vehicle and its impounding by the PNP. That the police did not lift the alert
status did not make petitioner less of an owner.

1) the legal right of the plaintiff;

The Deed of Sale between petitioner and Respondent Sy was attached as Annex
A[19] to the Third-Party Complaint filed by the latter against the former. The Deed
stated that petitioner was the absolute owner of the subject vehicle. No contrary
2) the correlative obligation of the defendant to respect that legal right; and assertion was made in the Complaint. Hence, the trial court correctly observed
that the Complaint had failed to show that, at the time of its sale to Respondent
Sy, the vehicle belonged to a person other than petitioner.[20]
To reiterate, the Third-Party Complaint absolutely failed to state an act or
omission of petitioner that had proximately caused injury or prejudice to Sy.
Indeed, based on that pleading alone, the latters claim for relief against petitioner
does not appear to exist.
Warranties Passed On
By the Vendor to the Vendee
In a contract of sale, the vendor is bound to transfer the ownership of and to
deliver the thing that is the object of the sale.[21] Moreover, the implied
warranties are as follows: first, the vendor has a right to sell the thing at the time
that its ownership is to pass to the vendee, as a result of which the latter shall
from then on have and enjoy the legal and peaceful possession of the thing;[22]
and, second, the thing shall be free from any charge or encumbrance not
declared or known to the vendee.[23]
Upon the execution of the Deed of Sale, petitioner did transfer ownership of and
deliver the vehicle to Respondent Sy.[24] No other owner or possessor of the
vehicle had been alleged, and the ownership and possession rights of petitioner
over it had never been contested. The Deed of Sale executed on September 12,
1996 showed that petitioner was the absolute owner. Therefore, at the time that
ownership passed to Sy, petitioner alone had the right to sell the vehicle.
In the same manner, when he sold the same truck to Jose L. Lee,[25] Respondent
Sy was exercising his right as absolute owner. Unfortunately, though, from the
time Respondent Lee attempted to register the truck in his name, he could not
have or enjoy the legal and peaceful possession of the vehicle, because it had
been impounded by the PNP, which also opposed its registration.
The impoundment of the vehicle and the failure to register it were clearly acts
that were not deliberately caused by petitioner, but that resulted solely from the
failure of the PNP to lift the latters own alarm over the vehicle. Pursuant to
Republic Act 6975,[26] these matters were purely administrative and
governmental in nature. Petitioner had no authority, much less power, over the
PNP. Hence, the former did not breach its obligation as a vendor to Respondent
Sy; neither did it violate his right for which he could maintain an action for the
recovery of damages. Without this crucial allegation of a breach or violation, no
cause of action exists.[27]
A warranty is an affirmation of fact or any promise made by a vendor in relation to
the thing sold. As such, a warranty has a natural tendency to induce the vendee --
relying on that affirmation or promise -- to purchase the thing.[28] The vendor
impliedly warrants that that which is being sold is free from any charge or
encumbrance not declared or known to the vendee. The decisive test is whether
the vendor assumes to assert a fact of which the vendee is ignorant.[29]
No Lien or Breach
of Warranty
In the present case, petitioner did not breach the implied warranty against hidden
encumbrances. The subject vehicle that had earlier been stolen by a third party
was subsequently recovered by the authorities and restored to petitioner, its
rightful owner. Whether Sy had knowledge of the loss and subsequent recovery,
the fact remained that the vehicle continued to be owned by petitioner, free from
any charge or encumbrance whatsoever.
A lien is a legal right or interest that a creditor has in anothers property, lasting
usually until a debt or duty that it secures is satisfied.[30] An encumbrance is a
claim or liability that is attached to property or some other right and that may
lessen its value, such as a lien or mortgage.[31] A legal impediment is a legal
hindrance or obstruction.[32]
The Third-Party Complaint did not allege that petitioner had a creditor with a legal
right to or interest in the subject vehicle. There was no indication either of any
debt that was secured by the vehicle. In fact, there was not even any claim,
liability or some other right attached to the vehicle that would lessen its value. Its
impoundment, as well as the refusal of its registration, was not the hindrance or
obstruction in the contemplation of law that the vendor warranted against.
Neither of those instances arose from any liability or obligation that could be
satisfied by a legal claim or charge on, or property right to -- other than an
ownership interest in -- the subject vehicle.[33]
No Notice of Any
Breach of Warranty
Gratia argumenti that there was a breach of the implied warranty against hidden
encumbrances, notice of the breach was not given to petitioner within a
reasonable time. Article 1586 of the Civil Code requires that notice be given after
the breach, of which Sy ought to have known. In his Third-Party Complaint against
petitioner, there was no allegation at all that respondent had given petitioner the
requisite notice.[34]
More important, an action for damages for a breach of implied warranties must be
brought within six months from the delivery of the thing sold.[35] The vehicle was
understood to have been delivered to Sy when it was placed in his control or
possession.[36] Upon execution of the Deed of Sale on September 12, 1996,
control and possession of the vehicle was transferred to respondent. That the
vehicle had been delivered is bolstered by the fact that no contrary allegation was
raised in the Third-Party Complaint. Whether the period should be reckoned from
the actual or from the constructive delivery through a public instrument, more
than six months had lapsed before the filing of the Third-Party Complaint.
Finally, the argument that there was a breach of the implied warranty against
eviction does not hold water, for there was never any final judgment based on
either a right prior to the sale; or an act that could be imputed[37] to petitioner
and deprive Sy of ownership or possession of the vehicle purchased.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Decision and
Resolution are REVERSED. The May 27, 1998 Order of the Regional Trial Court is
REINSTATED. No costs.
SO ORDERED.
EN BANC
G.R. No. L-19196 November 29, 1968
ANGEL VILLARICA and NIEVES PALMA GIL DE VILLARICA, petitioners,
vs.
THE COURT OF APPEALS, JULIANA MONTEVERDE, GAUDENCIO CONSUNJI
and JOVITO S. FRANCISCO, respondents.
CAPISTRANO, J.:
On May 19, 1951, the spouses Angel Villarica and Nieves Palma Gil de Villarica
sold to the spouses Gaudencio Consunji and Juliana Monteverde a lot containing
an area of 1,174 sq. meters, situated in the poblacion of the City of Davao, for the
price of P35,000. The instrument of absolute sale dated May 19, 1951 (Exh. "B"),
in the form of a deed poll, drafted by Counselor Juan B. Espolong who had been
appointed by the Villaricas as their agent to sell the lot, was acknowledged on
May 25, 1951, before the same Juan B. Espolong who was also a Notary Public.
The public instrument of absolute sale and the vendors' TCT No. 2786 were
delivered to the vendees. On the same day, May 25, 1951, the spouses Consunji
executed another public instrument, Exh. "D", whereby they granted the spouses
Villarica an option to buy the same property within the period of one year for the
price of P37,750. In July, same year, the spouses Consunji registered the absolute
deed of sale, Exh. "B", in consequence of which TCT No. 2786 in the names of the
spouses Villarica was cancelled and a new TCT No. 3147 was issued in the names
of the spouses Consunji. In February, 1953, the spouses Consunji sold the lot to
Jovito S. Francisco for the price of P47,000 by means of a public instrument of sale
Exh. "4". This public instrument of sale was registered in view of which TCT No.
3147 in the names of the spouse Consunji was cancelled and a new TCT in the
name of Jovito S. Francisco was issued.
On April 14, 1953, the spouses Villarica brought an action in the Court of First
Instance of Davao against the spouses Consunji and Jovito S. Francisco for the
reformation of the instrument of absolute sale, Exh. "B", into an equitable
mortgage as a security for a usurious loan of P28,000 alleging that such was the
real intention of the parties. Defendants answered that the deed of absolute sale
expressed the real intention of the parties and they also alleged a counterclaim
for sums of money borrowed by the plaintiffs from the Consunjis which were then
due and demandable. After trial, the Court of First Instance of Davao rendered its
decision holding that the instrument of absolute sale, Exh. "B", was really
intended as an equitable mortgage. Judgment was accordingly rendered
reforming the deed of absolute sale into an equitable mortgage. Judgment was
likewise rendered in favor of defendant Consunjis on their counterclaim for sums
of money. Judgment was also rendered in favor of defendant Francisco as
purchaser in good faith. Both parties appealed to the Court of Appeals.
On September 15, 1961, the Court of Appeals rendered its decision finding that
the public instrument of absolute sale, Exh. "B", expressed the true intention of
the parties and that the defendants-appellants' (Consunjis) counterclaim for sums
of money was substantiated by the evidence. Accordingly the Court of Appeals
rendered judgment as follows:
WHEREFORE, the judgment appealed from is reversed and the complaint is
dismissed as to the defendant spouses, and the plaintiffs are ordered to
pay to them their remaining indebtedness of fifteen thousand (P15,000.00)
pesos with interest at 5% from July 7, 1951. That part of the judgment
dismissing the complaint as to Jovito S. Francisco is hereby affirmed, with
the modification that the attorney's fees in the sum of P2,350.00 awarded
to him is eliminated. The present case is not one of those enumerated in
Article 2208 of the New Civil Code where attorney's fees may be
recovered. Costs against the plaintiffs-appellants.
On December 6, 1961, the spouses Villarica, plaintiffs-appellants in the Court of
Appeals, petitioned the Supreme Court for certiorari or review of the decision
rendered by the Court of Appeals. The petition was given due course and the
decision of the Court of Appeals is now before us for review on questions of law.
Petitioners contend that the Court of Appeals erred in finding that the public
instrument of absolute sale, Exh. "B", expressed the true intention of the parties,
arguing that under Article 1604 in relation to Articles 1602 and 1603 of the Civil
Code, the instrument of absolute sale, Exh. "B", should be presumed as an
equitable mortgage on the grounds that (1) the price of P35,000 was unusually
inadequate; (2) the vendors remained in possession of the property sold; (3) the
period of one year for repurchase granted in the instrument Exh. "D" was
extended for one month; and (4) the vendors pay the taxes on the land sold. The
contention is unmeritorious in view of the following considerations:
(1) The price of P35,000 was not even inadequate. The land sold was assessed for
tax purposes at P8,870 effective 1950. It was purchased by the spouses Villarica
from the Philippine Alien Property Custodian in October, 1950, for the price of
P20,000. The Villaricas borrowed P7,400 from a Chinese named Domingo Lua Chin
Lam and, with this borrowed money, made part payment of the price to the
Philippine Alien Property Custodian. Then they mortgaged the land to the
Philippine Alien Property Custodian as security for the P10,000 unpaid balance of
the purchase price. One year later, on May 19, 1951, they sold the land by means
of the instrument of absolute sale Exh. "B" to the Consunjis for the price of
P35,000, thus making a profit of P15,000 in one year without having invested
their own money in buying the land. On February 21, 1953, the Consunjis sold the
land to Jovito S. Francisco for the price of P47,000, thus making profit of P12,000.
The price of P70,000 found by the trial court to be the market price of the land at
the time of the trial in 1956 was not the market price in 1951 when the Villaricas
sold the lot to the Consunjis. Hence, it is evident that the price of P35,000 stated
in the instrument of absolute sale Exh. "B" was the market price of the lot in
1951.
(2) The vendors did not remain in possession of the land sold as lessees or
otherwise. On their request in order to help them in the expenses of their children
in Manila, the vendors were merely allowed by the vendees to collect the monthly
rents of P300 for five months up to October, 1951, on the understanding that the
amounts so collected would be charged against them. But thereafter the vendees
were the ones who collected the monthly rents from the tenants. It follows that
the vendors did not remain in possession of the land as lessees or otherwise.
(3) In Exh. "D" the Consunjis as new owners of the lot granted the Villaricas an
option to buy the property within the period of one year from May 25, 1951 for
the price of P37,750. Said option to buy is different and distinct from the right of
repurchase which must be reserved by the vendor, by stipulation to that effect, in
the contract of sale. This is clear from Article 1601 of the Civil Code, which PREMISES CONSIDERED, the judgment of the Court of Appeals is hereby affirmed,
provides: with costs against petitioners also in this instance.

Conventional redemption shall take place when the vendor reserves the
right to repurchase the thing sold, with the obligation to comply with the
provisions of article 1616 and other stipulation which may have been
agreed upon.

The right of repurchase is not a right granted the vendor by the vendee in a
subsequent instrument, but is a right reserved by the vendor in the same
instrument of sale as one of the stipulations of the contract. Once the instrument
of absolute sale is executed, the vendor can no longer reserve the right to
repurchase, and any right thereafter granted the vendor by the vendee in a
separate instrument cannot be a right of repurchase but some other right like the
option to buy in the instant case. Hence, Exhibits "B" and "D" cannot be
considered as evidencing a contract of sale with pacto de retro. Since Exh. "D" did
not evidence a right to repurchase but an option to buy, the extension of the
period of one year for the exercise of the option by one month does not fall under
No. 3, of Article 1602 of the Civil Code, which provides that:

When upon or after the expiration of the right to repurchase another

instrument extending the period of redemption or granting a new period is
executed.

(4) The taxes paid by the vendors were back taxes up to the time of the sale on
May 19, 1951. The vendors had the obligation to pay the back taxes because they
sold the land free of all liens and encumbrances. The taxes due after the sale
were paid by the vendees.

The petitioners admit that they cannot now question the finding of the Court of
Appeals that they fully received the price of P35,000 mentioned in the instrument
of absolute sale Exh. "B". In addition, we noted that the petitioners acknowledged
in writing (Exh. "4"-Consunji-Monteverde), dated May 28, 1951, having received
full payment of said price of P35,000. In view hereof and of the foregoing
considerations, petitioners' contention that Exhibits "B" and "D" were used as a
device to cover a usurious loan, has absolutely no merit.

The findings of the Court of Appeals on the amounts due from the spouses
Villarica to the spouses Consunji as loans, evidenced by promissory notes, after
deducting partial payments made thereon being factual, cannot be reviewed.
SECOND DIVISION

G.R. No. L-65425 November 5, 1987

IRENEO LEAL, JOSE LEAL, CATALINA LEAL, BERNABELA LEAL, VICENTE LEAL
EUIOGIA LEAL PATERNO RAMOS, MACARIO DEL ROSARIO, MARGARITA
ALBERTO, VICTORIA TORRES, JUSTINA MANUEL, JULIAN MANUEL, MELANIA
SANTOS, CLEMENTE SAMARIO, MARIKINA VALLEY, INC., MIGUELA MENDOZA,
and REGISTER OF DEEDS OF RIZAL, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT (4th Civil Cases
Division), and VICENTE SANTIAGO (Substituted by SALUD M.
SANTIAGO), respondents.

SARMIENTO, J.:

In its resolution dated September 27, 1983, the respondent Intermediate Appellate
Court, 1 speaking through Justice Porfirio V, Sison, ordered, in part, the petitioners to
accept the sum of P5,600.00 from the private respondent as repurchase price of the
lots described in the "Compraventa" and, thereafter, to execute a Deed of Repurchase
to effect transfer over ownership over the same properties to the private respondent.

This ruling was a complete reversal of the earlier decision, 2 dated June 28, 1.978,
penned by Justice Paras, of the Court of Appeals, in the same case, affirming the trial
court's dismissal of the private respondent's complaint.

The petitioners, feeling aggrieved and astonished by the complete turnaround of the
respondent court, come to Us with this petition for review by certiorari.

The antecedent facts are undisputed.

This case brings us back almost half a century ago, on March 21, 1941, when a
document entitled "Compraventa," written entirely in the Spanish language, involving
three parcels of land, was executed by the private respondent's predecessors-in-
interest, Vicente Santiago and his brother, Luis Santiago, in favor of Cirilio Leal the
deceased father of some of the petitioners, Pursuant to this "Compraventa," the title
over the three parcels of land in the name of the vendors was cancelled and a new
one was issued in the name of Cirilo Leal who immediately took possession and
exercised ownership over the said lands. When Cirilo died on December 10, 1959, the
subject lands were inherited by his six children, who are among the petitioners, and
who caused the consolidation and subdivision of the properties among themselves.
Between the years 1960 and 1965, the properties were either mortgaged or leased by
the petitioners-children of Cirilo Leal to their co-petitioners.
Sometime before the agricultural year 1966-1967, Vicente Santiago approached the
petitioners and offered re- repurchase the subject properties. Petitioners, however,
refused the offer. Consequently, Vicente Santiago instituted a complaint for specific
performance before the then Court of First Instance of Quezon City on August 2, 1967.
All the trial, the court a quo rendered its decision,-dismissing the complaint on the
ground that the same was still premature considering that there was, as yet, no sale
nor any alienation equivalent to a sale. Not satisfied with this decision, the private
respondent appealed to the Court of Appeals and the latter, acting through the Fourth
Division and with Justice Edgardo Paras as ponente affirmed the decision of the
court a quo.
The petitioners seasonably filed a motion to amend the dispositive portion of the
decision so as to include an order for the cancellation of the annotations at the back
of the Transfer certificates of Title issued in their favor. The private respondent,-on the
other hand, filed a-timely motion for reconsideration of the above decision and an
opposition to petitioners' motion to amend. These incidents were not resolved until
then Court of Appeals was abolished and in lieu of which the Intermideate Appellate
Court was established In view of the said reorganization, case was reassigned to the
Fourth Civil in this cases Division.
Resolving the abovestated motion for reconsideration, the respondent court, in a
resolution penned by Justice Sison and promulgated on September 27, 1983, ruled, as
follows:
WHEREFORE, Our decision of June 28, 1978 is hereby reversed and set aside and
another one is rendered ordering: (1) defendants-appellees surnamed Leal to
accept the sum of P5,600.00 from plaintiff-appellant (substituted by Salud M.
Santiago) as repurchase price of the lots described in the "Compraventa" of
March 21, 1941, and thereafter to execute a deed of repurchase sufficient in law
to transfer ownership of the properties to appellant Salud M. Santiago, the same
to be done within five (5) days from payment; (2) ordering the same defendants
Leals and defendant Clemente Samario to indemnify appellant in the sum of
P3,087.50 as rental for the year 1967-1968 and the same amount every year
thereafter; (3) ordering an the defendants jointly and severally to pay the sum of
Pl,500.00 as attorney's fees and other expenses of litigation; and (4) ordering
defendant Register of Deeds of Rizal to cancel Transfer Certificate of Title No.
42535 in the names of Vicente Santiago and Luis Santiago upon presentation of
the deed of sale herein ordered to be executed by the appellees in favor of Salud
M. Santiago and to issue thereof another Transfer Certificate of Title in the name
alone of Salud M. Santiago. No costs here and in the courts (sic) below. SO
ORDERED.
Verily, the well-spring whence the present controversy arose is the abovementioned
"Compraventa," more particularly paragraph (b) thereof, to wit:
xxx xxx xxx
(b) En caso de venta, no podran vender a otros dichos tres lotes de terreno
sino al aqui vendedor Vicente Santiago, o los herederos o sucesores de este
por el niismo precio de CINCO MIL SEISCIENTOS PESOS (P5,600.00) siempre y
cuando estos ultimos pueden hacer la compra. 3xxx xxx xxx
which is now the subject of varying and conflicting interpretations.
xxx xxx xxx It is admitted by both parties that the phrase "they shall not sell to others
these three lots but only to the seller Vicente Santiago or to his heirs or successors" is
an express prohibition against the sale of the lots described in the "Compraventa" to
third persons or strangers to the contract. However, while private respondent
naturally lauds the resolution of Justice Sison, which sustains the validity of this
prohibition, the petitioners, on the other hand, endorse the decision penned by Justice
Paras, which states, in part:
xxx xxx xxx Finally, there is grave doubt re the validity of the ostensible resolutory
condition here, namely, the prohibition to sell the lots to persons other than the
vendor (appellant); uncertainly, a prohibition to alienate should not exceed at most a
period of twenty years, otherwise there would be subversion of public policy, which
naturally frowns on unwarranted restrictions on the right of ownership. xxx xxx xxx
We agree with the Paras ponencia.
Contracts are generally binding between the parties, their assigns and heirs; however,
under Art. 1255 of the Civil Code of Spain, which is applicable in this instance, pacts,
clauses, and conditions which are contrary to public order are null and void, thus,
without any binding effect.
Parenthetically, the equivalent provision in the Civil Code of the Philippines is that of
Art. 1306, which states: "That contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy. Public order
signifies the public weal public policy. 5 Essentially, therefore, public order and
public policy mean one and the same thing. Public policy is simply the English
equivalent of "order publico" in Art. 1255 of the Civil Code of Spain. 6
One such condition which is contrary to public policy is the present prohibition to self
to third parties, because the same virtually amounts to a perpetual restriction to the
right of ownership, specifically the owner's right to freely dispose of his properties.
This, we hold that any such prohibition, indefinite and stated as to time, so much so
that it shall continue to be applicable even beyond the lifetime of the original parties
to the contract, is, without doubt, a nullity. In the light of this pronouncement, we
grant the petitioners' prayer for the cancellation of the annotations of this prohibition
at the back of their Transfer Certificates 'Title.
It will be noted, moreover, that the petitioners have never sold, or even attempted to
sell, the properties subject of the "Compraventa. "
We now come to what we believe is the very issue in this case which is, whether or
not under the aforequoted paragraph (b) of the "Compraventa" a right of repurchase
in favor of the private respondent exist.
The ruling of the Fourth Division (Justice Paras) is that the said stipulation does not
grant a right to repurchase. Contrarily, the resolution of the Fourth Civil Cases Division
(Justice P. V. Sison) interpreted the same provision as granting the right to repurchase
subject to a condition precedent.
Thus, the assailed Resolution, reversing the earlier decision of the same respondent
court, ruled
xxx xxx xxx The all-importartant phrase "en caso de venta," must of necessity refer to
the sale of the properties either by Cirilo or his heirs to the Santiago brothers
themselves or to their heirs, including appellants Vicente Santiago including
appellants Vicente Santiago and Salud M Santiago, for the same sum of P5,600.00,
"siempre y cuando estos ultimos pueden hacer la compra" (when the latter shall be
able to buy it).
xxx xxx xxx... We repeat, The words envision the situation contemplated by the
contracting parties themselves, the resale of the lots to their owners, and NOT to a
sale of the lots to third parties or strangers to the contracts. ... xxx xxx xxx
The law provides that for conventional redemption to take place, the vendor should
reserve, in no uncertain terms, the right to repurchase the thing sold. 8 Thus, the right
to redeem must be expressly stipulated in the contract of sale in order that it may
have legal existence.
In the case before us, we cannot and any express or implied grant of a right to
repurchase, nor can we infer, from any word or words in the questioned paragraph,
the existence of any such right. The interpretation in the resolution (Justice Sison) is
rather strained. The phrase "in case case" of should be construed to mean "should the
buyers wish to sell which is the plain and simple import of the words, and not "the
buyers should sell," which is clearly a contorted construction of the same phrase. The
resort to Article 1373 of the Civil Code of the Philippines is erroneous. The subject
phrase is patent and unambiguous, hence, it must not be given another interpretation
But even assuming that such a right of repurchase is granted under the
"Compraventa," the petitioner correctly asserts that the same has already prescribed.
Under Art. 1508 of the Civil Code of Spain (Art,. 1606 of the Civil Code of the
Philippines), the right to redeem or repurchase, in the absence of an express
agreement as to time, shall last four years from the date of the contract. In this case
then, the right to repurchase, if it was at four guaranteed under in the "Compraventa,"
should have been exercise within four years from March 21, 1941 (indubitably the
date of execution of the contract), or at the latest in 1945.
In the respondent court's resolution, it is further ruled that the right to repurchase was
given birth by the condition precedent provided for in the phrase "siempre y cuando
estos ultimos pueden hacer la compra" (when the buyer has money to buy). In other
words, it is the respondent court's contention that the right may be exercised only
when the buyer has money to buy. If this were so, the second paragraph of Article
1508 would apply there is agreement as to the time, although it is indefinite,
therefore, the right should be exercised within ten years, because the law does not
favor suspended ownership. Since the alleged right to repurchase was attempted to
be exercised by Vicente Santiago only in 1966, or 25 years from the date of the
contract, the said right has undoubtedly expired.
WHEREFORE, in view of the foregoing, the Resolution dated September 27, 1983, of
the respondent court is SET ASIDE and the Decision promulgated on June 28, 1978 is
hereby REINSTATED. The annotations of the prohibition to sell at the back of TCT Nos.
138837, 138838, 138839, 138840, 138841, and 138842 are hereby ordered
CANCELLED. Costs against the private respondent.
SO ORDERED.
SECOND DIVISION
G.R. No. 83664 November 13, 1989
RENATO S. SANTOS, petitioner,
vs.
THE HONORABLE COURT OF APPEALS AND THE SPOUSES CESAR A.
FERRERA AND REYNALDA PEDRONIA AND RUFINO NAZARETH AND
DOMINGO NAZARETH, respondents.
PARAS, J.:
Once again, this Court is tasked with determining whether the contract entered
into by the parties constitutes an absolute sale or merely an equitable mortgage
in this present appeal by certiorari under Rule 45 of the Rules of Court. Petitioners
seek the reversal of the decision of the public respondent Court of Appeals which
affirmed in toto the decision of the trial court declaring the Deed of Absolute Sale
as null and void and finding the contract to be in truth an equitable mortgage.
The antecedent facts of the case, as found by the trial court, are as follows:
1. Defendants Ferrera and Pedronia were the registered owners of the
property in question containing an area of 2,221.86 square meters. The
property had been planted to rice for sometime by defendants Nazareths
under a tenancy agreement with Romana Aniana Vda. de Ferrera,
predecessor-in-interest of defendant Ferrera.
2. On February 1, 1971 defendants Ferrera and Pedronia executed a deed
of sale over the said property in favor of spouses Apolonia and Ruflno
Santos (Exh. "A") for the sum of P22,000,00. Upon the issuance of a new
title (TCT No. 313883) in the name of vendees (Exh. "F") the amount of
P16,000.00 was delivered to defendant Ferrera. Simultaneous with the
execution of the deed of sale (Exh. "A"), an -instrument entitled Promise to
Sell dated February 1, 1971 was executed by the spouses Santos in favor
of defendants Ferrera, whereby the former promised to sell back the land
in question to the latter for P22,00.00 within a period of six months from
February 1, 1971 (Exh. "4").
3. Defendants Ferrera failed to exercise the right to repurchase the
property. On July 30, 1971 spouses Santos executed a deed of absolute
sale covering the property in question in favor of their daughter
Felicitacion for P30,000.00 on August 14, 1971 (Exh. "5"). On the same
date, Felicitacion and Gregorio Santos executed a promise to sell the
property in favor of the Ferreras for P30,000.00 within six months.
4. Notwithstanding, the sale of the property to the Santoses, spouses
Ferrera continued in possession of the property thru their tenants, the
Nazareths. The Santoses informed the Nazareths that they are the new
owners of the property in question and required the latter to pay the rent
for the property in question to them but the Nazareths refused to
recognize them as the owner of the property and continued to deliver the
harvest shares to the Ferreras. (Records, p. 223) (pp. 4-5, Decision; pp. 86-
87, Rollo)
As a consequence, on August 17, 1977, or nearly seven (7) years after, plaintiffs,
through their attorney-in-fact, Renato Santos, filed an action for breach of
warranty and damages against the defendants based on the alleged Deed of
Absolute Sale. The defendants argue that they never intended to sell their land
for such an inadequate price; that they were in dire need of money so they
obtained the loan of P22,000.00; that to secure payment of the loan, defendants
were required to execute a Deed of Absolute Sale over the property in dispute,
with the agreement that the deed of sale will merely serve as collateral; that they
remain in possession of the land; and that the transfer certificate of title in favor
of Apolonia Santos is null and void, the real contract between the parties being
one of equitable mortgage only.
The trial court dismissed the complaint, declaring the transaction as an equitable
mortgage. We quote:
 Insofar as the price of the property in the deed of sale is concerned. there is
evidence that the same is unusually inadequate. The original deed of sale
(Exh. "A") provides that the property in question was sold for P22,000.00,
although only P16,000.00 thereof was actually. received by defendant
Ferreras. On the other hand, there is evidence that the land in question would
command a price of P50.00 to P100.00 per square meters, or from
P100,000.00 to P200,000.00 for the entire parcel at the time of the
transaction in 1971, considering the location thereof at Caniogan, Pasig, Metro
Manila, which is within the poblacion or town proper of Pasig.
In the second place, the vendor (defendants Ferreras) have remained in
possession of the property up to the present. This is admitted by plaintiff who
would only want defendants to recognize her as the new owner and to pay the
accrued and accruing rentals to her. Defendants Ferreras, however, insist that
they are the owner and not mere lessees of the land in question.
In the third place, there is evidence also that after the expiration of the six-
month period given to the defendants to repurchase the property a new deed
of sale was executed by the transferee in favor of defendants giving the latter
another six months to repurchase the land in question (see Exh. "6").
Finally, except for the execution of the deed of sale in question (Exh. "A"), it
may be clearly inferred from the circumstances that the intention of the
parties is that the transaction in question was to secure the payment of the
amount of P16,000. 00 originally extended to and received by the defendants
Ferreras by way of loan. These are clearly indicative of the fact that the
transaction in question was in reality an equitable mortgage. (Records, pp.
224-225). (pp. 5-6, Decision, pp. 87-88, Rollo)
The aforequoted decision was brought on appeal to the Court of Appeals. Finding
the conclusions of the trial court to be supported by evidence, the respondent
appellate court affirmed in toto the questioned decision.
A motion for reconsideration having been denied, plaintiff, now petitioner, filed
the instant appeal by certiorari. After the required pleadings were submitted by
the respective parties, this Court resolved to give due course to the petition.
The crucial issue presented before Us for review is whether the transaction
between the parties constitutes an absolute sale or only an equitable mortgage.
The instant case calls for an interpretation of the contract between the
contending parties. Thus, Article 1370 of the New Civil Code provides;
If the terms of contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipula petitions shall control.
If the words appear to be contrary to the evident intention of the parties, the
latter shall prevail over the former.
Article 1371 of the same code further states:
In order to judge the intention of the contracting parties their contemporaneous
and subsequent acts shall be principally considered.
ln the case at bar, the terms of the transaction in question do not plainly and
distinctly indicate the intention of the contracting parties. Since such intention
cannot be discerned from the Deed of Absolute Sale executed by the parties, their
contemporaneous and subsequent act shall be taken into consideration to be able
to determine their true intention.
It is an undisputed fact that respondent spouses were "in dire need of money" to
settle certain obligations when they entered into the subject transaction with the
petitioners. They entered into a loan agreement but were however made to
execute a Deed of Absolute Sale for the amount of P22,000.00. Simultaneous with
the execution of the said document., petitioners executed a separate document,
which is the Promise to Sell for the same amount of money. From the time the
Deed of Absolute Sale was executed up to the time the action was instituted in
court, respondent spouses continued to remain in actual physical possession of
the land in dispute, through their tenants Nazareths) who were also made
respondents. The existence of this tenancy relationship between the respondents
was also admitted by the petitioner.
From the foregoing contemporaneous and subsequent acts of the parties, the trial
court found that the contract in issue could not be deemed to be an absolute sale.
We agree with the trial court's findings. The acts of the parties indicate the
presence of an equitable mortgage. Equitable mortgage has been defined as one
in which although lacking in some formality, form or words or other requisites
demanded by a statute nevertheless reveals the intention of the parties to charge
a real property as security for a debt, and contains nothing impossible or contrary
to law" (41 Corpus Juris 303). The applicable law, as found in the New Civil Code,
provides:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in
any of the following cases:
(1) When the price of a sale with right to purchase is unusually inadeque;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other cases where it may be fairly inferred that the real intention
of the parties is that the transaction shall secure the payment of a debt or
the performance of any other obligation.
Equally important is Article 1604 of the same Code, which reads:
Art. 1604. The provisions of article 1602 shall also apply to contract
purporting to be an absolute sale.
Firstly, it was found that the lot in question is located within the town proper of
Pasig, Metro Manila, behind the elementary school of Caniogan, Pasig, Metro
Manila. Petitioner himself admitted the fact that the subject lot is within the town
proper of Pasig, Being so, it could thus easily command a much higher price than
P22,000.00, considering further that the same measures about 2,221.86 square
meters, more or less. The conclusion that the price of the lot is grossly inadequate
is well-taken. We are not inclined to disturb the factual findings of the trial court
which are supported by evidence. The case of Labasan v. Lacuesta, 86 SCRA 16,
quoted the Lord Chancellor, in Vernon v. Bethell (2 Eden, 113), which states:
"Necessitous men are not, truly speaking, free men; but to answer a present
emergency, will submit to any term that the crafty may impose upon them."
Secondly, it was clearly established that the private respondents, through their
tenant, remained in physical possession of the land subject matter of the dispute,
and enjoyed the fruits thereof despite the execution of the Deed of Absolute Sale.
This fact was not disputed by the petitioner. Again, this indicates the existence of
a contract of loan with the land given as security.
Thirdly, the respondent court noted that there had always been an extension of
the period to repurchase arising from the fact that there were two (2) sets of deed
of sale and with a period given to the vendor to repurchase, as seen from the two
(2) sets of Promise to Sell. Such fact even maintains the theory than an absolute
sale was never intended. Contrary to the allegation of the petitioner, the promise
to sell simultaneously executed by the vendee is in truth the right of repurchase
granted the vendor, and is within the contemplation of Art. 1602, No. 3 of the
New Civil Code. In support of his claim, petitioner cited the case of Villarica vs.
Court of Appeals, et al., L-19196, Nov. 29, 1988, which ruled that if a seller has
been granted an "option to buy" only (and not a right to repurchase) within a
certain period, the sale is absolute, and cannot be considered as an equitable
mortgage, even if there is an extension of the period within which to exercise the
option. The cited case is inapplicable to the present one. It is worthy to note that
the deed of sale in the Villarica case was executed on May 19, 1951 and the
option to buy on May 25, 1951. In the present case, however, the promise to sell
was executed on the same day that the deed of sale was executed. In like
manner, the price of the sale in the cited case was considered to be sufficiently
adequate, whereas in the instant case it is unusually inadequate. Petitioner also
cited the case of I156 SCRA 586, which decreed that "if there are no
circumstances that may reasonably be accepted as generating some honest
doubts as to the parties' intention, the proviso is inapplicable. The reason is quite
obvious. If the rule were otherwise, it would be within the power of every vendor a
retro to set at naught a pacto de retro, or resurrect an expired right of repurchase,
by simply instituting an action to reform the contract known to him to be in truth
a sale with pacto de retro into an equitable mortgage. ... The rule would thus
be made a tool to spawn, protect and even reward fraud and bad faith, a situation
surely never contemplated or intended by law." We find no resemblance between
the cited case and the instant one. The Felicen case involves only one deed of
sale wherein the right to repurchase is already incorporated therein. The contract
could not be considered a loan, as its terms were so plain and preclude a
construction of some other kind of agreement but one of a sale with pacto de
retro. On the other hand, the circumstances attendant in the instant case are
obviously different. The right to repurchase (or the Promise to Sell) was embodied
in a separate document which was executed on the same date as the deed of
sale.

After a careful evaluation of the above-stated circumstances, We find the present

case to exhibit several of the familiar badges of a concealed mortgage
enumerated by the New Civil Code. According to the pertinent law, presence
of any of the circumstances enumerated would be sufficient enough to declare
the transaction of absolute sale as one impressed with an equitable mortgage. In
the instant case, there is even more than one (1) circumstance indicating an
equitable mortgage. Hence, the claim of the petitioner that the decision of the
trial court is not based on the supporting evidentiary facts and jurisprudence on
the matter is devoid of merit,

WHEREFORE, finding no reversible error in the decision of the Court of Appeals,

the petition for review is DENIED for lack of merit.

SO ORDERED.
 This is an appeal by the petitioners from the decision of the Court of Appeals,
holding that the deed of sale between respondent Irinea Inacala and one Arcadio
Mendoza should be given the effect of a mere pacto de retro sale and that, in
accordance with the third paragraph of Article 1606 of the Civil Code of the
Philippines, said respondent should be permitted to exercise the right of
repurchase.

Respondent Inacala was the registered owner of a parcel of land located in barrio
Valdefuente, Cabanatuan, Nueva Ecija. On July 1, 1941, through the intervention
of Claro Pacis, she executed a deed of sale (Exhibit B) covering a 15-hectare lot in
favor of Arcadio Mendoza for P420.00. The latter thereupon executed a private
instrument (Exhibit C) granting said respondent the option to repurchase the lot
for the same consideration within the period of one year from the date of the sale.
Mendoza afterwards sold the property to the spouses Eugenio and Margarita
Ramos to whom a transfer certificate of title was issued. The petitioners herein,
all surnamed Adorable, in turn bought the land from the Ramos spouses, and the
corresponding transfer certificate of title No. 19736 was issued.

Since the first sale in 1941, Inacala, who had not redeemed the land from
Mendoza, never relinquished the possession thereof. It was only in 1951, during
the opening of the Pampanga River Irrigation Project, when the petitioners
attempted to take physical possession through one Geronimo Fajardo, who leased
it from them, that said petitioners were apprised for the first time of Inacala's
claim over the lot.

There can be no question about the correctness of the correctness of the Court of
Appeals that the transaction at bar is a pacto de retro sale. Exhibit "C" is
conclusive on the point. But, as contended by the petitioners, the Court of
Appeals erred in applying the third paragraph of Article 1606 of the new Civil
EN BANC Code. In our opinion, this provision refers to cases involving a transaction where
one of the parties contests or denies that the true agreement is one of sale with
G.R. No. L-10183 April 28, 1958 right of repurchase. In the case now before us, the sale (Exhibit B) is expressly
with right to repurchase in virtue of Exhibit "C" granting respondent Inacala the
RAQUEL ADORABLE, ET AL., petitioners, right to redeem within one year. As this stipulated period has expired without said
vs. respondent having redeemed the land in question, the original purchaser, Arcadio
IRINEA INACALA, ET AL., respondents. Mendoza, had irrevocably acquired ownership over the property in accordance
with Article 1509 of the old Civil Code which was in force at the time of the
PARAS, C.J.: transaction in dispute. (Angao vs. Clavano, 17 Phil., 152; Rafols vs. Rafols, 22
Phil., 236; Gonzales vs. Javellana, 49 Phil., 1; Racca vs. Viloria, 26 Phil., 120.)
It therefore becomes unnecessary to discuss petitioners' other contention that the
Court of Appeals erred in holding that the petitioners were not purchasers in good
faith.

In view of the foregoing, the decision appealed from is hereby reversed, and the
petitioners declared owners, of the land in controversy. So ordered without
pronouncement as to costs.

EN BANC
G.R. No. 9785 September 24, 1915
ISABELA BANDONG and JUAN FERRER, Plaintiffs-Appellants, vs. ALEJANDRA
AUSTRIA, Defendant-Appellee.
CARSON, J.:
On the 29th of April, 1905, the plaintiffs in this action sold to Antonio Ventenilla,
since deceased, a parcel of land for the sum of P350, expressly reserving a right
to repurchase under and in accordance with the terms of the deed of sale.
The written contract contained the following stipulation:
Tambien hacemos constar que una de las promesas que tenemos a D. Antonio
que recompraremos este terreno en el mismo precio sin acordance uno y otro del
interes del dinero ni del producto del terreno, pero en el mes de marzo de
cualquier ao, si recompramos. (We also set forth that one of the promises we
have made to Don Antonio is that we will repurchase this land at the same price;
neither of us make any stipulation as to interest on the money or the products of
the land, but in the month of March of any year, if we repurchase.)
The vendors offered to repurchase in the month of March, 1913, but this offer was
declined on the ground that the right to repurchase had prescribed: a contention
which is renewed by the defendant in this action, who is the widow of original
vendee, deriving title through him.
The court below was of opinion that the right to repurchase expired at the end of
four years from the date of the contract, relying in support of this ruling on the
provisions of article 1508 of the Civil Code, which are as follows:
The right mentioned in the preceding article (right to repurchase), in the absence
of an express agreement, shall last four years counted from the date of the
contract.
In case of stipulation, the period of redemption shall not exceed ten years.
We are of opinion, however, that the above cited provision in the written contract
was an express agreement between the parties by the terms of which the
vendors were given the right to repurchase in the month of March of any year,
after the date of the contract (1905), which they might elect for that purpose. In
the event that they should assert that right in the month of March of any year
after the date of the contract, it could not be said that there was no express
agreement between the parties authorizing them so to do. Manifestly, therefore,
the statutory limitation upon the right of repurchase to a period of four years is
not applicable to the contract under consideration, that limitation being
applicable only to cases wherein there is no express agreement touching the date
of redemption.
The parties having expressly agreed that the vendors should have the right to
repurchase in the month of March of any year after the date of the contract, the
only statutory limitation placed upon them in the exercise of that right is the
limitation found in the second paragraph of article 1508 of the Civil Code cited
above, which limits the power of the vendor, even by express agreement, to
reserve a right to repurchase for a longer period than ten years. We conclude,
therefore, that the provisions of the contract of sale, whereby the parties
undertook by express agreement to secure to the vendors a right to repurchase in
the month of March of any year after the date of the contract, were valid and
binding upon the parties for a period of ten years from the date of the contract
but wholly without force and effect thereafter.
It is admitted that the vendors offered to repurchase the land in question in the
month of March, 1913, less than eight years from the date of the contract. This
they had a perfect right to do, and the judgment of the trial court which denies
their right to enforce the terms of their contract on the ground that the period of
redemption had expired by statutory limitation cannot, therefore, be sustained.
The judgment entered in the court below should be and is hereby reversed,
without special condemnation of costs in this instance, and the record will be
returned to the court below, where the judgment will be entered in accordance
herewith. So ordered.

SECOND DIVISION
G.R. No. L-28161 August 13, 1986
EUFEMIA ELPA DE BAYQUEN and ESTEFANIA BAYON VDA. DE ELPA, plaintiffs-
appellants,
vs.
EULALIO BALAORO, defendant-appellee.
PARAS, J.:
This is an appeal from the decision of the then Court of First Instance of Abra in Civil Case
No. 444 dismissing the complaint of plaintiffs-appellants against defendant-appellee.
The records show that on January 16, 1954, appellants sold the land under question to the
appellee, reserving their right to repurchase the said land within four (4) years. The
plaintiffs-appellants failed to repurchase the land within the four-year period. They now
assert their right to repurchase the subject property after more than thirteen (13) years.
(p. 40, Record.)
At the trial court, the parties agreed on the following stipulation of facts:
At this pre-trial parties are all present assisted by their respective counsel and after a
short conference, as the plaintiffs cannot agree on the settlement proposed by the
defendant, they now come to stipulate:
1. That the land described in paragraph 2 of the complaint was the subject of a Deed
of Sale with right to repurchase dated January 16, 1954, duplicate copy of which is
marked as Exh. A, and that the same property described in the Tax Declaration No.
1150 in the name of Eulalio Balaoro also marked as Exh. B;
2. That plaintiffs failed to repurchase the property within the stipulated period in the
contract Exh. A up to this day;
3. That the defendant failed to file in court consolidation proceedings of the property
in accordance with the provisions of the Civil Code;
4. That parties renounce their respective claims for damages and submit to the court
the question of law whether the plaintiffs still have the right to redeem the said
property described in Exh.A; and
5. That parties submit the case for decision on the basis of these stipulations upon the
firing of their respective memoranda within 10 days from today. (p. 2, Rec.)
On the basis of the aforequoted stipulation of facts and other pleadings submitted by both
parties, the trial court ruled that the vendors-appellants have lost their right to repurchase
the land under controversy and that by operation of law, ownership of such land had
become consolidated in the vendee-appellee.
The plaintiffs-appellants appealed the decision of the trial court, alleging several errors,
which defendant-appellee disputed together with the corresponding evaluation thereof.
Appellants contend that the trial court erred in holding that there is no dispute between
the parties regarding the nature of the purported "deed of sale with right to repurchase"
and that actually the transaction is a mortgage. Defendant-appellee refutes this by putting
up the claim that the fact that the contract is in truth a deed of sale with right to
repurchase has been admitted by appellants and the same has been stipulated upon by
the parties.
We agree with the trial court's finding that the contract is not an equitable mortgage but a
deed of sale with right to repurchase. Said court thus elucidated:
The deed of conveyance states the purchase price as P2,000.00 for a parcel of land, partly
riceland and partly pasture land, with an assessed value of P440.00. Based on the size,
productivity and accessibility, the price of P2,000.00 for said parcel is adequate.
The vendee admittedly took immediate possession after the execution of the contract; no
extension of the period of redemption, at or after its expiration, was made. The vendee did
not retain any part of the purchase price. The sum of Two Hundred Fifty Pesos (P250.00)
claimed by vendors-plaintiffs to be delivered to them is not part of the purchase price
retained by the vendee, but merely the excess of the value of the yearly crops over the
purchase price resulting from the computation of the plaintiffs. The vendee has declared
the property under his name and paid the corresponding real estate taxes, and there is no
circumstance by which the Court could fairly infer that the transaction was intended by the
parties to secure the payment of a debt or loan. There is no doubt as to the true nature of
the transaction and it was, the Court finds, a contract of sale with right to purchase.
Besides, not one of the instances enumerated in Article 1602 of the Civil Code (re
presumption that the contract is one of equitable mortgage) exists in this case.
Appellants also insist that the trial court erred in holding that the ownership over the
property in question consolidated by operation of law in the defendant-appellee
immediately after plaintiffs-appellants failed to repurchase the property within four years.
Significantly, We long ago resolved this matter in the early case of Rosario vs. Rosario, L-
13018, Dec. 29, 1960 (110 Phil. 394) where we thus enunciated:
Where the contract between the parties is admitted and which has been stipulated by the
parties to be a deed of sale with right to repurchase, there should be no issue or dispute
about the effects thereof that once there is failure to redeem within the stipulated period,
ownership thereof becomes vested or consolidated by operation of law on the vendee. Any
other interpretation would be violative of the sanctity of the contract between the parties.
Besides, the needed judicial hearing contemplated by Art. 1607 of the Civil Code
refers not to the consolidation itself, but to the registration of the consolidation.(See
Rosario vs. Rosario, L-3018, Dec. 29, 1960; see also Dakandan vs. Julio, L-19101, Feb. 29,
1964.)
We find no necessity to discuss the other assigned errors because they are mere corollaries
of the rest.
WHEREFORE, the decision of the court a quo is hereby AFFIRMED, with costs against
appellants. SO ORDERED.
G.R. No. 107439 July 20, 1995
MICHAEL T. UY, petitioner,
vs.
HON. COURT OF APPEALS, REGIONAL TRIAL COURT OF VALENZUELA, BRANCH
CLXXII and ROSA SAULER, respondents.
VITUG, J.:
The controversy (in the instant petition for review on certiorari) concerns a parcel of
land, with an area of 4,167 square meters, located along Pio Valenzuela St., Barrio
Pugad Baboy, Valenzuela, Metro Manila. The property, also known as Lot No. 1551-C-
1-J of Subdivision Plan (LRC) Psd-167118, used to be covered by Transfer Certificate of
Title numbered T-170692 of the land records of Bulacan and then, after the town of
Valenzuela, Bulacan, had become a part of Metro Manila, renumbered (T-170692)
9968 of the land records of Caloocan City, in the name of the spouses Miriam Reyes
and Numeriano Catador.
The Catador spouses offered to sell to private respondent Rosa Sauler the whole
parcel of land for P80.00 per square meter. The latter agreed and, on
07 July 1977, she paid the spouses an initial amount of P45,000.00. In the receipt
signed by Numeriano Catador, the spouses promised to execute a deed of sale "upon
full payment of the balance" of the purchase price. 1
On 18 October 1978, the Catador spouses hypothecated the property to the State
Investment House, Inc. ("SIHI"), to "accommodate" their niece, Angelina Cadieva-
Lacson, who had secured a loan of P250,000.00 from SIHI. The mortgage was
registered with the Registry of Deeds in Bulacan and annotated on the transfer
certificate of title of the property. Upon learning of the mortgage, private respondent
met with the Catador spouses in order to "renegotiate" their standing agreement. It
would appear that private respondent gave up a claim to get the entire property and
agreed to instead retain, with the conformity of the Catador spouses, an area within
the lot as the "katumbas" or as equivalent of the downpayment of
P45,000.00. 2 Private respondent opted for the 555-square-meter area which she was
then occupying and on which she had theretofore made improvements. Her request
for a survey and subdivision of the property, as well as a separate title, could not,
however, be granted by the Catador spouses since the certificate of title over the
whole lot was by then already handed over to SIHI.
Angelina Cadieva-Lacson, the niece of the Catador spouses, defaulted on her loan;
whereupon, SIHI foreclosed on the security. At the extrajudicial foreclosure sale, SIHI
came out to be the highest bidder at P309,515.15. The certificate of sale issued by
the Provincial Sheriff of Bulacan was registered in the Registry of Deeds and
annotated at the back of the certificate of title on 17 March 1980.
One year thereafter, or on 17 March 1981 (the expiry date of the one-year redemption
period under Act No. 3135), SIHI received a letter from private respondent asserting
her ownership over the 555 square meters of the foreclosed land. The letter was
followed, on 13 August 1981, by another communication sent this time by private
respondent's son, William Ang, who offered to buy from SIHI one-half of the property
for P225,000.00. SIHI did not respond to both letters. In the meantime, or on 21 April
1981, SIHI consolidated ownership over the property. On 19 October 1981, TCT No.
(170692) 9968 was canceled and replaced by TCT No. 48467 in SIHl's name. 3
Two years later, petitioner Michael T. Uy bought the property from SIHI. The deed of
sale presented for registration before the land registration authority 4 showed that
petitioner obtained the property for P60,000.00 on 13 December 1983 (although
another deed of sale, also dated 13 December 1983, indicated an additional purchase
price of P300,000.00 5). TCT No. 48467 in SIHI's name was cancelled and TCT No.
108486 was issued to petitioner on 29 March 1984. 6
Alleging title over the portion of the property sold to her, private respondent filed, on
11 July 1985, with the Regional Trial Court in Valenzuela, Metro Manila, a complaint for
legal redemption with damages against Michael T. Uy and SIHI. Docketed Civil Case
No. 2263-V-85, the complaint stated that private respondent, being a part owner of
the lot, was entitled to a right of redemption when SIHI sold its part of the property to
petitioner Michael Uy, evidently invoking Article 1620, in relation to Article 1623, of
the Civil Code.
In his answer, petitioner averred, among other things, that he was unaware of any
contract between private respondent and the Catador spouses and that, if there
indeed was such a transaction, he could not be bound by it for not being registered in
the Registry of Deeds. In any event, petitioner added, private respondent failed to
exercise her right of redemption within the reglementary
30-day period from the time she acquired knowledge of the foreclosure sale.
SIHI filed a separate answer asseverating, mainly, that private respondent could not
profess ignorance of the extrajudicial foreclosure sale because it was published in a
newspaper of general circulation for three consecutive weeks, and that she should
thereby be barred by estoppel from claiming any right of redemption.
During the proceedings, private respondent consigned in court the sum of P60,000.00.
Petitioner refused to receive the tender. After several renewals of the deposit, on 05
January 1988, private respondent ultimately withdrew the amount.
On 30 May 1989, the trial court 7 rendered its decision (in Civil Case No. 2263-V-85)
thusly:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against the
defendants:
1. Ordering the defendant Michael T. Uy to convey via legal redemption and in favor of
plaintiff, Lot No. 1551-C-1-J of subdivision plan (LRC) Psd-167118, covered by T.C.T.
No. 108486, Book T.539 of the land records of Caloocan City for a consideration of
SIXTY THOUSAND PESOS (P60,000.00) Philippine Currency;
2. Ordering both defendants, jointly and severally, to pay the plaintiff for damages for
their failed expansion program in the amount of P100,000.00;
3. Ordering both defendants, jointly and severally, to pay plaintiff moral damages of
P30,000.00; exemplary damages of P10,000.00; litigation expenses of P10,000.00;
attorney's fees of P50,000.00 plus P500.00 for each day of actual appearance of
counsel for the plaintiff; and to pay the costs of suit.
SO ORDERED. 8
A motion for the reconsideration of the decision was denied by the court. Both herein
petitioner and SIHI then elevated the case to the Court of Appeals.
On 05 June 1992, the Court of Appeals rendered judgment 9 affirming the decision of
the court a quo except for the award of damages which was deleted. The attorney's
fees were reduced.
The appellate court found the verbal agreement of sale between private respondent
and the Catador spouses, to have "long been executed and consummated, even
before the mortgage was constituted." It noted that the private respondent promptly
took possession of the 555-square-meter area, filled up the area with "tambak,"
fenced it and caused to be repaired the house thereon, thus rendering the agreement
beyond the ambit of the Statute of Frauds [Article 1403 (2) (e) of the Civil Code] that
requires for enforceability a written evidence of an agreement for the sale of real
property. Besides, it held, the receipt issued by the Catadors (Exhibit F) served "as a
ratification of the verbal transaction between the parties."
Being the "owner" of the 555-square-meter portion of the lot, private respondent, the
appellate court concluded, was entitled to redeem the entire property "within thirty
days from notice in writing by the prospective vendor, or by the vendor." 10 Finding
that when SIHI foreclosed the mortgage on 28 February 1980, it never sent any notice
of sale to private respondent, the Court of Appeals said that since she learned from
petitioner's counsel of the foreclosure sale only on 22 June 1985 and then lost no time
in notifying petitioner of her intention to buy the 555-square-meter portion, private
respondent should be deemed to have timely exercised the right of redemption.
The Court of Appeals ruled that petitioner was not an innocent purchaser for value. It
said that petitioner was "fully aware" of private respondent's possession of the land
since he was staying in a land adjacent to the property in question, not to mention the
fact that, on one occasion, Numeriano Catador informed petitioner himself of private
respondent's interest in the latter's portion of land.
His motion for reconsideration of the appellate court's decision having been
denied, 11 petitioner has interposed the instant petition 12 with the following assigned
errors:
I mortgage, private respondent gave up her interest to acquire the whole property and
RESPONDENT COURT ERRED IN CONCLUDING THAT THE ORAL CONTRACT OF SALE
BETWEEN PRIVATE RESPONDENT AND THE CATADORS COVERING THE MIDDLE
PORTION (555 SQ. M.) OF THE SUBJECT PROPERTY GAVE PRIVATE RESPONDENT
SUPERIOR RIGHTS OVER THAT MIDDLE PORTION, AS AGAINST THE PRIOR REGISTERED
RIGHTS OF SIHI AND PETITIONER OVER THE ENTIRE SUBJECT PROPERTY (4,167 SQ. M.)
INCLUDING THE MIDDLE PORTION THEREOF.
A. RESPONDENT COURT'S FINDING THAT THE ORAL CONTRACT OF SALE BETWEEN
PRIVATE RESPONDENT AND THE CATADORS HAD LONG BEEN EXECUTED OR
CONSUMMATED EVEN BEFORE THE MORTGAGE WAS CONSTITUTED IS PATENTLY
ERRONEOUS.
B. RESPONDENT COURT FAILED TO CONSIDER THAT THE ORAL CONTRACT OF SALE OF
THE 555 SQ. M. MIDDLE PORTION OF THE SUBJECT PROPERTY WAS SUBORDINATE TO
THE REGISTERED RIGHTS OF SIHI, THE INNOCENT MORTGAGEE OVER THE ENTIRE
SUBJECT PROPERTY (4,167 SQ. M.) INCLUDING THE MIDDLE PORTION THEREOF.
C. SIHI'S SUBSEQUENT SALE OF THE SUBJECT PROPERTY TO PETITIONER
TRANSFERRED TO THE LATTER ALL THE RIGHTS AND INTEREST ACQUIRED BY THE
FORMER AS PURCHASER AT THE FORECLOSURE SALE.
D. RESPONDENT COURT FAILED TO CONSIDER THAT THE ALLEGED ENFORCEABILITY
OF THE ORAL CONTRACT OF SALE AS BETWEEN THE PARTIES TO IT DID NOT GIVE
PRIVATE RESPONDENT BETTER RIGHTS OVER THE MIDDLE PORTION OF SUBJECT
PROPERTY THAN SIHI AND PETITIONER.
II
ASSUMING ARGUENDO THAT PRIVATE RESPONDENT ACQUIRED OWNERSHIP OVER THE
MIDDLE PORTION OF SUBJECT PROPERTY, RESPONDENT COURT ERRED IN HOLDING
THAT SHE WAS ENTITLED TO LEGAL REDEMPTION OF THE ENTIRE SUBJECT PROPERTY.
There is partial merit in the petition.
The original agreement entered into by private respondent and the Catador spouses
covered the whole property. Initially, an amount of P45,000.00 was paid to, and
receipted for by, the spouses who then undertook to execute the formal deed of
conveyance upon full payment of the purchase price. Private respondent thereupon
took possession of a portion of the property. In the meantime, the Catador spouses
executed a mortgage deed over the property in favor of SIHI. Upon learning of the
settled for the confirmatory purchase of the 555-square-meter portion which she was
then actually occupying. In her complaint in Civil Case No. 2263-V-85, private
respondent so attested thusly:
. . . (she) sought a re-negotiation of her transaction with her sellers and both sellers
and herein plaintiff agreed that the down payment of P45,000.00 was considered as
full payment for an equivalent smaller area within Lot 1551-C-1-J and thereupon
sellers allowed plaintiff to choose the site consisting of 555 sqm., more or less,
and plaintiff immediately occupied the same in the concept of owner, peaceful,
open, public and adverse and said occupancy in 1977, continued up to the
present, and she introduced improvements thereon; (Emphasis supplied.) 13
The facts that would indicate private respondent's rightful title to a specific portion of
the foreclosed asset, i.e., her being in possession of the 555-square-meter area, her
repairing and improving the house standing thereon, her enclosing the premises with
concrete fence and a steel gate, 14 installing drainage (pipes), as well as filling up the
site with earth ("tambak") and her constructing a bodega for the raw materials and
supplies 15 of her "Kastiron Foundry & Machine Shop" business, 16 verily, are the
circumstances that negate, rather than bolster, her claim for legal redemption over
the entire property on the basis of Article 1620, 17 in relation to Article 1623, 18 of the
Civil Code. The exercise of a right of legal redemption thereunder presupposes the
existence of a co-ownership at the time the conveyance is made by a co-owner and
when it is demanded by the other co-owner or co-owners. There is co-ownership when
"the ownership of an undivided thing or right belongs to different persons." 19
In De la Cruz v. Cruz, 20 where the northern half of a piece of registered land had been
sold by a couple to a person who, after the other half was subsequently sold by the
couple to another, sought to exercise the right of legal redemption, the Court,
speaking through Mr. Justice Jose B.L. Reyes, ruled:
. . . Tested against the concept of co-ownership, as authoritatively expressed by the
commentators, appellant is not a co-owner of the registered parcel of land, taken as a
unit or subject of co-ownership, since he and the spouses do not "have a spiritual part
of a thing which is not physically divided" (3 Sanchez Roman 162), nor is each of
them an "owner of the whole, and over the whole he exercises the right of dominion,
but he is at the same time the owner of a portion which is truly abstract . . ." (3
Manresa 405). The portions of appellant-plaintiff and of the defendant spouses are
concretely determined and identifiable, for to the former belongs the northern half,
and to the latter belongs the remaining southern half, of the land. That their
respective portions are not technically described, or that said portions are still
embraced in one and the same certificate of title, does not make said portions less
determinable or identifiable, or distinguishable, one from the other, nor that dominion
over each portion less exclusive, in their respective owners. Hence, no right of
redemption among co-owners exists.
At no time in the case at bench has co-ownership over the entire lot ever existed
between private respondent and SIHI or, later, its successor Michael Uy. Not being a
co-owner of Lot No. 1551-C-1-J, private respondent's plea to have her right of
redemption upheld by us cannot be sustained.
For his part, petitioner may not successfully pretend to be an innocent purchaser for
value of the disputed lot so as to warrant his sole ownership over the entire property
and thereby preclude private respondent from asserting her prior purchase of the 555-
square-meter portion thereof. The Court of Appeals, the factual findings of which we
cannot ignore, said:
We are not convinced that appellant Michael Uy can be considered innocent
purchaser for value. To be sure, appellant Uy was fully aware of appellee's possession
of the portion of lot in question (Tsn., December 13, 1988, p. 9). Why not, when
subject property is adjacent to the land occupied by appellant Uy and his parents? Not
only that; as testified to by William Ang Tee, son of appellee, he and Numeriano
Catador met with appellant Uy and the latter's father, Dionisio, and in that meeting,
Numeriano Catador informed Dionisio Uy that the appellee bought a 555-square-
meter portion of Lot 1551-C-1-J (Tsn., June 25, 1987, p. 6); a testimonial evidence
appearing to be unrebutted. Therefore, appellant UY cannot be categorized a
purchaser in good faith because he had knowledge of the prior sale to appellee of the
555 square meters under controversy. 21
Neither can SIHI, petitioner's predecessor-in-interest, claim to be an innocent
mortgagee. In Sunshine Finance and Investment Corporation v. IAC, 22 the Court, after
reciting the general rule that a mortgagee "is under no obligation to look beyond the
certificate and investigate the title of the mortgagor appearing on the face of the
certificate," has thenceforth elaborated:
Nevertheless, we have to deviate from the general rule because of the failure of the
petitioner in this case to take the necessary precautions to ascertain if there was any
flaw in the title of the Nolascos and to examine the condition of the property they
sought to mortgage. The petitioner is an investment and financing corporation. We
presume it is experienced in its business. Ascertainment of the status and condition of
properties offered to it as security for the loans it extends must be a standard and
indispensable part of its operations. Surely, it cannot simply rely on an examination of
a Torrens certificate to determine what the subject property looks like as its condition
is not apparent in the document. The land might be in a depressed area. There might
be squatters on it. It might be easily inundated. It might be an interior lot, without
convenient access. These and other similar factors determine the value of the
property and so should be of practical concern to the petitioner.
Curiously, the petitioner merely relied on the certificate of title to persuade it that the
security offered was acceptable. It would have been so simple for it to send one of its
trained investigators to make an ocular inspection of the land which, after all, was not
in some remote or forbidding wilderness."
And in Crisostomo v. Court of Appeals, 23
we have reiterated:
It is a well-settled rule that a purchaser or mortgagee 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 or
mortgagor. 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 the vendor's or mortgagor's
title, will not make him an innocent purchaser or mortgagee for value, if it afterwards
develops that the title was in fact defective, and it appears that he had such notice of
the defects as would have led to its discovery had he acted with the measure of
precaution which may be required of a prudent man in a like situation.
WHEREFORE, the decision appealed from, as well as that of the trial court in Civil Case
No. 2263-V-85, is SET ASIDE. Instead, a new one is RENDERED (a) upholding the right
of petitioner over the lot covered by Transfer Certificate of Title No. 108486 excluding,
however, the 555-square meter area bought by private respondent which ownership is
similarly hereby DECLARED to be that of the latter and (b) denying the demand for
legal redemption by private respondent. No special pronouncement on costs.
SO ORDERED.
FIRST DIVISION
[G.R. No. 109972. April 29, 1996]
ZOSIMA VERDAD, petitioner, vs. THE HON. COURT OF APPEALS, SOCORRO C.
ROSALES, AURORA ROSALES, NAPOLEON ROSALES, ANTONIO ROSALES,
FLORENDA ROSALES, ELENA ROSALES AND VIRGINIA
ROSALES, respondents.
SYLLABUS
1. CIVIL LAW; SUCCESSION; RIGHT TO REDEEM PROPERTY AS LEGAL HEIR OF HUSBAND, PART OF
WHOSE ESTATE IS A SHARE IN HIS MOTHERS INHERITANCE. - The thrust of the petition before us is the
alleged incapacity of private respondent Socorro C. Rosales to redeem the property, she being merely the
spouse of David Rosales, a son of Macaria, and not being a co-heir herself in the intestate estate of
Macaria. Socorros right to the property is not because she rightfully can claim heirship in Macarias estate but
that she is a legal heir of her husband, David Rosales, part of whose estate is a share in his mothers
inheritance. David Rosales, incontrovertibly, survived his mothers death. When Macaria died her estate passed
on to her surviving children, among them David Rosales, who thereupon became co-owners of the
property. When David Rosales himself later died, his own estate, which included his undivided interest over the
property inherited from Macaria, passed on to his widow Socorro and her co-heirs pursuant to the law on
succession. Socorro and herein private respondents, along with the co-heirs of David Rosales, thereupon
became co-owners of the property that originally descended from Macaria.
2. ID.; ID.; RIGHT OF REDEMPTION; WRITTEN NOTICE OF SALE, MANDATORY. - When their interest in the
property was sold by the Burdeos heirs to petitioner, a right of redemption arose in favor of private
respondents. This right of redemption was timely exercised by private respondents. Concededly, no written
notice of the sale was given by the Burdeos heirs (vendors) to the co-owners required under Article 1623 of the
Civil Code. The thirty-day period of redemption had yet to commence when private respondent Rosales sought
to exercise the right of redemption on 31 March 1987, a day after she discovered the sale from the Office of
the City Treasurer of Butuan City, or when the case was initiated, on 16 October 1987, before the trial
court. The written notice of sale is mandatory. This Court has long established the rule that notwithstanding
actual knowledge of a co-owner, the latter is still entitled to a written notice from the selling co-owner in order to
remove all uncertainties about the sale, its terms and conditions, as well as its efficacy and status.
DECISION
VITUG, J.:
The petitioner, Zosima Verdad, is the purchaser of a 248-square meter residential lot
(identified to be Lot No. 529, Ts-65 of the Butuan Cadastre, located along Magallanes Street,
now Marcos M. Calo St., Butuan City). Private respondent, Socorro Cordero Vda. de
Rosales, seeks to exercise a right of legal redemption over the subject property and traces
her title to the late Macaria Atega, her mother-in-law, who died intestate on 08 March 1956.
 During her lifetime, Macaria contracted two marriages: the first with Angel Burdeos and
the second, following the latters death, with Canuto Rosales. At the time of her own death,
Macaria was survived by her son Ramon A. Burdeos and her grandchild (by her daughter
Felicidad A. Burdeos) Estela Lozada of the first marriage and her children of the second
marriage, namely, David Rosales, Justo Rosales, Romulo Rosales, and Aurora Rosales.
Socorro Rosales is the widow of David Rosales who himself, some time after Macarias
death, died intestate without an issue.
In an instrument, dated 14 June 1982, the heirs of Ramon Burdeos, namely, his widow
Manuela Legaspi Burdeos and children Felicidad and Ramon, Jr., sold to petitioner Zosima
Verdad (their interest on) the disputed lot supposedly for the price of P55,460.00. In a duly
notarized deed of sale, dated 14 November 1982, it would appear, however, that the lot was
sold for only P23,000.00. Petitioner explained that the second deed was intended merely to
save on the tax on capital gains.
Socorro discovered the sale on 30 March 1987 while she was at the City Treasurers
Office. On 31 March 1987, she sought the intervention of the Lupong Tagapayapa of
Barangay 9, Princess Urduja, for the redemption of the property. She tendered the sum of
P23,000.00 to Zosima. The latter refused to accept the amount for being much less than the
lots current value of P80,000.00. No settlement having been reached before the Lupong
Tagapayapa, private respondents, on 16 October 1987, initiated against petitioner an action
for Legal Redemption with Preliminary Injunction before the Regional Trial Court of Butuan
City.
On 29 June 1990, following the reception of evidence, the trial court handed down its
decision holding, in fine, that private respondents right to redeem the property had already
lapsed.
An appeal to the Court of Appeals was interposed by private respondents. the appellate
court, in its decision of 22 April 1993, reversed the court a quo; thus:
WHEREFORE, premises considered, the judgment appealed from is hereby REVERSED, and a new
one is accordingly entered declaring plaintiff-appellant, Socorro C. Rosales, entitled to redeem the
inheritance rights (Art. 1088, NCC) or pro indiviso share (Art. 1620, NCC) of the Heirs of Ramon
Burdeos, Sr. in Lot 529, Ts-65 of the Butuan Cadastre, within the remaining ELEVEN (11) DAYS
from finality hereon, unless written notice of the sale and its terms are received in the interim, under
the same terms and conditions appearing under Exhibit J and after returning the purchase price of
P23,000.00 within the foregoing period. No cost.[1]
In her recourse to this Court, petitioner assigned the following errors: That
The Honorable Court of Appeals erred in declaring Socorro C. Rosales is entitled to redeem the
inheritance rights (Article 1088, NCC) or pro-indiviso share (Article 1620, NCC) of the heirs of
Ramon Burdeos, Sr. in Lot 529, Ts-65 of the Butuan Cadastre, for being contrary to law and evidence.
The Honorable Court of Appeals erred in ignoring the peculiar circumstance, in that, the respondents
actual knowledge, as a factor in the delay constitutes laches.
The Honorable Court of Appeals erred in concluding that Socorro C. Rosales, in effect, timely
exercised the right of legal redemption when referral to Barangay by respondent signifies bonafide
intention to redeem and; that, redemption is properly made even if there is no offer of redemption in
legal tender.
The Honorable Court of Appeals erred in ruling that the running of the statutory redemption period is
stayed upon commencement of Barangay proceedings.[2]
Still, the thrust of the petition before us is the alleged incapacity of private respondent
Socorro C. Rosales to redeem the property, she being merely the spouse of David Rosales, a
son of Macaria, and not being a co-heir herself in the intestate estate of Macaria.
We rule that Socorro can. It is true that Socorro, a daughter-in-law (or, for that matter, a
mere relative by affinity), is not an intestate heir of her parents-in-law; [3] however, Socorro s
right to the property is not because she rightfully can claim heirship in Macarias estate but
that she is a legal heir of her husband, David Rosales, part of whose estate is a share in his
mothers inheritance.
David Rosales, incontrovertibly, survived his mothers death. When Macaria died on 08
March 1956 her estate passed on to her surviving children, among them David Rosales, who
thereupon became co-owners of the property. When David Rosales himself later died, his
own estate, which included his undivided interest over the property inherited from Macaria,
passed on to his widow Socorro and her co-heirs pursuant to the law on succession.
ART. 995. In the absence of legitimate descendants and ascendants, and illegitimate children and their
descendants, whether legitimate or illegitimate, the surviving spouse shall inherit the entire estate,
without prejudice to the rights of brothers and sisters, nephews and nieces, should there be any, under
Article 1001.
xxx xxx xxx
ART. 1001. Should brothers and sisters or their children survive with the widow or widower, the latter
shall be entitled to one-half of the inheritance and the brothers and sisters or their children to the other
half.[4]
Socorro and herein private respondents, along with the co-heirs of David Rosales,
thereupon became co-owners of the property that originally descended from Macaria.
When their interest in the property was sold by the Burdeos heirs to petitioner, a right of
redemption arose in favor of private respondents; thus:
ART. 1619. Legal redemption is the right to be subrogated, upon the same terms and conditions
stipulated in the contract, in the place of one who acquires a thing by purchase or dation in payment, or
by any other transaction whereby ownership is transmitted by onerous title.
ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the
other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly
excessive, the redemptioner shall pay only a reasonable one.
We hold that the right of redemption was timely exercised by private respondents.
Concededly, no written notice of the sale was given by the Burdeos heirs (vendors) to the co-
owners[5]required under Article 1623 of the Civil Code
ART. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The
deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the
vendor that he has given written notice thereof to all possible redemptioners.
Hence, the thirty-day period of redemption had yet to commence when private
respondent Rosales sought to exercise the right of redemption on 31 March 1987, a day after
she discovered the sale from the Office of the City Treasurer of Butuan City, or when the case
was initiated, on 16 October 1987, before the trial court.
The written notice of sale is mandatory. This Court has long established the rule that
notwithstanding actual knowledge of a co-owner, the latter is still entitled to a written notice
from the selling co-owner in order to remove all uncertainties about the sale, its terms and
conditions, as well as its efficacy and status.[6]
Even in Alonzo vs. Intermediate Appellate Court,[7] relied upon by petitioner in contending
that actual knowledge should be an equivalent to a written notice of sale, the Court made it
clear that it was not reversing the prevailing jurisprudence; said the Court:
We realize that in arriving at our conclusion today, we are deviating from the strict letter of the law,
which the respondent court understandably applied pursuant to existing jurisprudence. The said court
acted properly as it had no competence to reverse the doctrines laid down by this Court in the above-
cited cases. In fact, and this should be clearly stressed, we ourselves are not abandoning the De
Conejero and Buttle doctrines. What we are doing simply is adopting an exception to the general rule,
in view of the peculiar circumstances of this case.[8]
In Alonzo, the right of legal redemption was invoked several years, notjust days or
months, after the consummation of the contracts of sale. The complaint for legal redemption
itself was there filed more than thirteen years after the sales were concluded.
Relative to the question posed by petitioner on private respondents tender of payment, it
is enough that we quote, with approval, the appellate court; viz:
In contrast, records clearly show that an amount was offered, as required in Sempio vs. Del Rosario, 44
Phil. 1 and Daza vs. Tomacruz, 58 Phil. 414, by the redemptioner-appellant during the barangay
conciliation proceedings (Answer, par. 8) but was flatly rejected by the appellee, not on the ground that
it was not the purchase price (though it appeared on the face of the deed of sale, Exh. J-1), nor that it
was offered as partial payment thereof, but rather that it was unconscionable based upon its present
value. (Answer, par. 8).[9]
All given, we find no error in the appellate courts finding that private respondents are
entitled to the redemption of the subject property.
WHEREFORE, the petition is DENIED and the assailed decision of the Court of Appeals
is AFFIRMED. Costs against petitioner.
SO ORDERED.