Ramos v.

Heruela

G.R. No. 145330

October 14, 2005

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the Decision[2] dated 23 August 2000 and the Order dated 20 September
2000 of the Regional Trial Court (trial court) of Misamis Oriental, Branch 21, in Civil Case No. 98-060. The trial court
dismissed the plaintiffs action for recovery of ownership with damages.

The Antecedent Facts

The spouses Gomer and Leonor Ramos (spouses Ramos) own a parcel of land, consisting of 1,883 square meters, covered
by Transfer Certificate of Title (TCT) No. 16535 of the Register of Deeds of Cagayan de Oro City. On 18 February 1980, the
spouses Ramos made an agreement with the spouses Santiago and Minda Heruela (spouses Heruela)[3] covering 306
square meters of the land (land). According to the spouses Ramos, the agreement is a contract of conditional sale. The
spouses Heruela allege that the contract is a sale on installment basis.

On 27 January 1998, the spouses Ramos filed a complaint for Recovery of Ownership with Damages against the spouses
Heruela. The case was docketed as Civil Case No. 98-060. The spouses Ramos allege that out of
the P15,300[4] consideration for the sale of the land, the spouses Heruela paid only P4,000. The last installment that the
spouses Heruela paid was on 18 December 1981. The spouses Ramos assert that the spouses Heruelas unjust refusal to
pay the balance of the purchase price caused the cancellation of the Deed of Conditional Sale. In June 1982, the spouses
Ramos discovered that the spouses Heruela were already occupying a portion of the land. Cherry and Raymond Pallori
(spouses Pallori), daughter and son-in-law, respectively, of the spouses Heruela, erected another house on the land. The
spouses Heruela and the spouses Pallori refused to vacate the land despite demand by the spouses Ramos.

The spouses Heruela allege that the contract is a sale on installment basis. They paid P2,000 as down payment and made
the following installment payments:

31 March 1980 P200

2 May 1980 P400 (for April and May 1980)
20 June 1980 P200 (for June 1980)
8 October 1980 P500 (for July, August and part of
September 1980)
5 March 1981 P400 (for October and November
1980)
18 December 1981 P300 (for December 1980 and part of
January 1981)
The spouses Heruela further allege that the 306 square meters specified in the contract was reduced to 282 square
meters because upon subdivision of the land, 24 square meters became part of the road. The spouses Heruela claim that
in March 1982, they expressed their willingness to pay the balance of P11,300 but the spouses Ramos refused their offer.
 The Ruling of the Trial Court

In its Decision[5] dated 23 August 2000, the trial court ruled that the contract is a sale by installment. The trial court ruled
that the spouses Ramos failed to comply with Section 4 of Republic Act No. 6552 (RA 6552),[6] as follows:

SEC. 4. In case where less than two years of installments were paid, the seller shall give the buyer
a grace period of not less than sixty days from the date the installment became due. If the buyer fails to
pay the installments due at the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the
contract by a notarial act.

The dispositive portion of the Decision reads:

WHEREFORE, the complaint is hereby dismissed and plaintiff[s] are ordered to execute the corresponding
Deed of Sale in favor of defendants after the latter have paid the remaining balance of Eleven Thousand
and Three Hundred Pesos (P11,300.00).

Plaintiffs are further ordered to pay defendants the sum of P20,000.00, as Attorneys fees and P10,000.00
as litigation expenses.

SO ORDERED.[7]

In an Order[8] dated 20 September 2000, the trial court denied the spouses Ramos motion for reconsideration.

Hence, this petition.

The Issues

The spouses Ramos raise the following issues:

I. Whether RA 6552 is applicable to an absolute sale of land;

II. Whether Articles 1191 and 1592 of the Civil Code are applicable to the present case;

III. Whether the spouses Ramos have a right to cancel the sale;

IV. Whether the spouses Heruela have a right to damages.

The Ruling of the Court

The petition is partly meritorious.

The Agreement is a Contract to Sell

In its Decision, the trial court ruled on whether the contract made by the parties is a conditional sale or a sale on
installment. The spouses Ramos premise is that since the trial court ruled that the contract is a sale on installment, the
trial court also in effect declared that the sale is an absolute sale. The spouses Ramos allege that RA 6552 is not applicable
to an absolute sale.

Article 1458 of the Civil Code provides that a contract of sale may be absolute or conditional. A contract of sale is
absolute when title to the property passes to the vendee upon delivery of the thing sold. [10] A deed of sale is absolute
when there is no stipulation in the contract that title to the property remains with the seller until full payment of the
purchase price.[11] The sale is also absolute if there is no stipulation giving the vendor the right to cancel unilaterally the
contract the moment the vendee fails to pay within a fixed period.[12] In a conditional sale, as in a contract to sell,
ownership remains with the vendor and does not pass to the vendee until full payment of the purchase price. [13] The full
payment of the purchase price partakes of a suspensive condition, and non-fulfillment of the condition prevents the
obligation to sell from arising.[14]

In this case, the agreement of the parties is embodied in a one-page, handwritten document.[15] The document
does not contain the usual terms and conditions of a formal deed of sale. The original document, elevated to this Court as
part of the Records, is torn in part. Only the words LMENT BASIS is legible on the title. The names and addresses of the
parties and the identity of the property cannot be ascertained. The agreement only provides for the following terms of
the sale:

TERM[S] OF SALE:

PRICE PER SQM P50.00 X 306 SQM P 15,300.00

DOWN PAYMENT (TWO THOUSAND PESOS) 2,000.00

BALANCE PAYABLE AT MINIMUM OF P200.00 P 13,300.00

PER MONTH UNTIL FULLY PAID =======

In Manuel v. Rodriguez, et al.,[16] the Court ruled that to be a written contract, all the terms must be in writing, so
that a contract partly in writing and partly oral is in legal effect an oral contract. The Court reiterated the Manuel ruling
in Alfonso v. Court of Appeals:[17]

xxx In Manuel, only the price and the terms of payment were in writing, but the most important
matter in the controversy, the alleged transfer of title was never reduced to any written document.[] It
was held that the contract should not be considered as a written but an oral one; not a sale but a promise
to sell; and that the absence of a formal deed of conveyance was a strong indication that the parties did
not intend immediate transfer of title, but only a transfer after full payment of the price. Under these
circumstances, the Court ruled Article 1504 of the Civil Code of 1889 (Art. 1592 of the present Code) to
be inapplicable to the contract in controversy a contract to sell or promise to sell where title remains with
the vendor until fulfillment of a positive suspensive condition, such as full payment of the price x x [x].

The records show that the spouses Heruela did not immediately take actual, physical possession of the land.
According to the spouses Ramos, in March 1981, they allowed the niece of the spouses Heruela to occupy a portion of the
land. Indeed, the spouses Ramos alleged that they only discovered in June 1982 that the spouses Heruela were already
occupying the land. In their answer to the complaint, the spouses Heruela and the spouses Pallori alleged that their
occupation of the land is lawful because having made partial payments of the purchase price, they already considered
themselves owners of the land.[18] Clearly, there was no transfer of title to the spouses Heruela. The spouses Ramos
retained their ownership of the land. This only shows that the parties did not intend the transfer of ownership until full
payment of the purchase price.

RA 6552 is the Applicable Law

The trial court did not err in applying RA 6552 to the present case.

Articles 1191[19] and 1592[20] of the Civil Code are applicable to contracts of sale. In contracts to sell, RA 6552 applies.
In Rillo v. Court of Appeals,[21] the Court declared:

xxx Known as the Maceda Law, R.A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the contract upon non-payment of an
 installment by the buyer, which is simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force. It also provides the right of the buyer on installments in case he defaults
in the payment of succeeding installments xxx.

Sections 3 and 4 of RA 6552 provide:

Sec. 3. In all transactions or contracts involving the sale or financing of real estate on installment
payments, including residential condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight hundred forty-four as amended
by Republic Act Numbered Sixty-three hundred eighty-nine, where the buyer has paid at least two years
of installments, the buyer is entitled to the following rights in case he defaults in the payment of
succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him, which is hereby fixed at the rate of one month grace
period for every one year of installment payments made: Provided, That this right
shall be exercised by the buyer only once in every five years of the life of the contract
and its extensions, if any.

(b) If the contract is cancelled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty per cent of the total
payments made and, after five years of installments, an additional five per cent
every year but not to exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the contract shall take place after
thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the
total number of installments made.

Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace
period of not less than sixty days from the date the installment became due. If the buyer fails to pay the
installments due at the expiration of the grace period, the seller may cancel the contract after thirty days
from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.

In this case, the spouses Heruela paid less than two years of installments. Thus, Section 4 of RA 6552 applies.
However, there was neither a notice of cancellation nor demand for rescission by notarial act to the spouses Heruela.
In Olympia Housing, Inc. v. Panasiatic Travel Corp.,[22] the Court ruled that the vendor could go to court to demand judicial
rescission in lieu of a notarial act of rescission. However, an action for reconveyance is not an action for rescission. The
Court explained in Olympia:

The action for reconveyance filed by petitioner was predicated on an assumption that its contract
to sell executed in favor of respondent buyer had been validly cancelled or rescinded. The records would
show that, indeed, no such cancellation took place at any time prior to the institution of the action for
reconveyance. xxx

xxx

xxx Not only is an action for reconveyance conceptually different from an action for rescission but that,
also, the effects that flow from an affirmative judgment in either case would be materially dissimilar in
various respects. The judicial resolution of a contract gives rise to mutual restitution which is not
 necessarily the situation that can arise in an action for reconveyance. Additionally, in an action for
rescission (also often termed as resolution), unlike in an action for reconveyance predicated on an
extrajudicial rescission (rescission by notarial act), the Court, instead of decreeing rescission, may
authorize for a just cause the fixing of a period.[23]

In the present case, there being no valid rescission of the contract to sell, the action for reconveyance is premature. Hence,
the spouses Heruela have not lost the statutory grace period within which to pay. The trial court should have fixed the
grace period to sixty days conformably with Section 4 of RA 6552.

The spouses Heruela are not entirely fault-free. They have been remiss in performing their obligation. The trial
court found that the spouses Heruela offered once to pay the balance of the purchase price. However, the spouses Heruela
did not consign the payment during the pendency of the case. In the meanwhile, the spouses Heruela enjoyed the use of
the land.

For the breach of obligation, the court, in its discretion, and applying Article 2209 of the Civil Code,[24] may award
interest at the rate of 6% per annum on the amount of damages.[25] The spouses Heruela have been enjoying the use of
the land since 1982. In 1995, they allowed their daughter and son-in-law, the spouses Pallori, to construct a house on the
land. Under the circumstances, the Court deems it proper to award interest at 6% per annum on the balance of the
purchase price.

The records do not show when the spouses Ramos made a demand from the spouses Heruela for payment of the
balance of the purchase price. The complaint only alleged that the spouses Heruelas unjust refusal to pay in full the
purchase price xxx has caused the Deed of Conditional Sale to be rescinded, revoked and annulled.[26] The complaint did
not specify when the spouses Ramos made the demand for payment. For purposes of computing the legal interest, the
reckoning period should be the filing on 27 January 1998 of the complaint for reconveyance, which the spouses Ramos
erroneously considered an action for rescission of the contract.

The Court notes the reduction of the land area from 306 square meters to 282 square meters. Upon subdivision
of the land, 24 square meters became part of the road. However, Santiago Heruela expressed his willingness to pay for
the 306 square meters agreed upon despite the reduction of the land area.[27] Thus, there is no dispute on the amount of
the purchase price even with the reduction of the land area.

On the Award of Attorneys Fees and Litigation Expenses

The trial court ordered the spouses Ramos to pay the spouses Heruela and the spouses Pallori the amount of P20,000 as
attorneys fees and P10,000 as litigation expenses. Article 2208[28] of the Civil Code provides that subject to certain
exceptions, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered in the absence of
stipulation. None of the enumerated exceptions applies to this case. Further, the policy of the law is to put no premium
on the right to litigate.[29] Hence, the award of attorneys fees and litigation expenses should be deleted.

WHEREFORE, we AFFIRM the Decision dated 23 August 2000 of the Regional Trial Court of Misamis Oriental,
Branch 21, dismissing the complaint for Recovery of Ownership with Damages, with the following MODIFICATION:

1. The spouses Heruela shall pay the spouses Ramos P11,300 as balance of the purchase price plus interest at
6% per annum from 27 January 1998. The spouses Heruela shall pay within 60 days from finality of this
Decision;

2. Upon payment, the spouses Ramos shall execute a deed of absolute sale of the land and deliver the
certificate of title in favor of the spouses Heruela;

3. In case of failure to thus pay within 60 days from finality of this Decision, the spouses Heruela and the
spouses Pallori shall immediately vacate the premises without need of further demand, and the down
payment and installment payments of P4,000 paid by the spouses Heruela shall constitute rental for the land;
 4. The award of P20,000 as attorneys fees and P10,000 as litigation expenses in favor of the spouses Heruela
and the spouses Pallori is deleted.

Heirs of Mancunara v. CA

G.R. No. 158646

June 23, 2005

DECISION
CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 53117
affirming the Decision[2] of the Regional Trial Court (RTC) of San Carlos City, Negros Occidental, which ordered the dismissal
of the petitioners complaint for recovery of possession and damages.
The Antecedents
Gertrudis Wuthrich and her six other siblings were the co-owners of a parcel of land identified as Lot No. 124 of the
San Carlos City, Negros Occidental Cadastre, with an area of 1,729 square meters and covered by Transfer Certificate of
Title (TCT) No. 1453-R (T-29937)-38.[3] Over time, Gertrudis and two other co-owners sold each of their one-seventh (1/7)
shares, or a total area of 741 square meters, to Jesus Mascuana. The latter then sold a portion of his 140-square-meter
undivided share of the property to Diosdado Sumilhig. Mascuana later sold an additional 160-square-meter portion to
Sumilhig on April 7, 1961. However, the parties agreed to revoke the said deed of sale and, in lieu thereof, executed a
Deed of Absolute Sale on August 12, 1961. In the said deed, Mascuana, as vendor, sold an undivided 469-square-meter
portion of the property for P4,690.00, with P3,690.00 as down payment, and under the following terms of payment:

That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as the
above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and necessary to
the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.[4]

On December 31, 1961, Mascuana and Jose G. Estabillo executed a Deed of Exchange and Absolute Sale of Real
Estate,[5] in which Estabillo deeded to Mascuana a portion of his property abutting that of Sumilhig on the southeast.
In the meantime, a survey was conducted for the co-owners of Lot No. 124 on July 9, 1962. The subdivision plan of
the said lot was approved by the Director of Lands on August 2, 1962. The portion of the property deeded to Sumilhig was
identified in the said plan as Lot No. 124-B.[6]
Meanwhile, Mascuana died intestate on April 20, 1965 and was survived by his heirs, Eva M. Ellisin, Renee Hewlett,
Carmen Vda. de Opea, Marilou Dy and Jose Ma. R. Mascuana.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property[7] on a portion of Lot No. 124-B with an area of
469 square meters and the improvements thereon, in favor of Corazon Layumas, the wife of Judge Rodolfo Layumas, for
the price of P11,000.00. The spouses Layumas then had the property subdivided into two lots: Lot No. 124-B-2 with an
area of 71 square meters under the name of Jesus Mascuana, and Lot No. 124-B-1, with an area of 469 square meters
under their names.[8] The spouses Layumas took possession of the property and caused the cutting of tall grasses thereon.
Upon the plea of a religious organization, they allowed a chapel to be constructed on a portion of the property.[9] In
January 1985, the spouses Layumas allowed Aquilino Barte to stay on a portion of the property to ward off
squatters.[10] Barte and his kin, Rostom Barte, then had their houses constructed on the property.
On October 1, 1985, the spouses Layumas received a Letter[11] from the counsel of Renee Tedrew, offering to buy
their share of the property for US$1,000.00. For her part, Corazon Layumas wrote Pepito Mascuana, offering to pay the
amount of P1,000.00, the balance of the purchase price of the property under the deed of absolute sale executed by
Mascuana and Sumilhig on August 12, 1961.[12] However, the addressee refused to receive the mail matter.[13]
 Unknown to the spouses Layumas, TCT No. 8986[14] was issued over Lot No. 124-B in the name of Jesus Mascuana on
March 17, 1986.
On November 17, 1986, the heirs of Mascuana filed a Complaint[15] for recovery of possession of Lot No. 124-B and
damages with a writ of preliminary injunction, alleging that they owned the subject lot by virtue of successional rights
from their deceased father. They averred that Barte surreptitiously entered the premises, fenced the area and constructed
a house thereon without their consent. Attached as annexes to the complaint were TCT No. 8986 and a
certification[16] from the Office of the City Treasurer, Land Tax Division, vouching that the property in question was owned
by the petitioners and that they had paid the taxes thereon until 1992.
In his answer to the complaint, Barte admitted having occupied a portion of Lot No. 124-B, but claimed that he
secured the permission of Rodolfo Layumas, the owner of the subject property. He added that he did not fence the
property, and that the petitioners did not use the same as a passageway in going to Broce Street from their house. Barte
raised the following special defenses: (a) the petitioners were estopped from asserting ownership over the lot in question
because they did not object when he occupied the said portion of the lot; (b) neither did the petitioners protest when a
church was built on the property, or when residential houses were constructed thereon; (c) the petitioners still asked
Barte and the other occupants whether they had notified Rodolfo Layumas of the constructions on the property; and (d)
the heirs of Mascuana, through the lawyer of Mrs. Renee M. Tedrew, even wrote a letter [17] to Rodolfo Layumas on
October 1, 1985, expressing her willingness to buy the subject property for US$1,000.00.
On April 8, 1991, the spouses Layumas filed a Motion for Leave to Intervene,[18] alleging therein that they had a legal
interest in Lot No. 124-B-1 as its buyers from Sumilhig, who in turn purchased the same from Mascuana. In their answer
in intervention,[19] the spouses Layumas alleged that they were the true owners of the subject property and that they had
wanted to pay the taxes thereon, but the Land Tax clerk refused to receive their payments on account that the petitioners
had already made such payment. The spouses Layumas further maintained that the petitioners had no cause of action
against Barte, as they had authorized him to occupy a portion of Lot No. 124-B-1. The spouses Layumas also averred that
the petitioners were estopped from denying their right of ownership and possession of the subject lot, as one of them
had even offered to repurchase a portion of Lot No. 124-B via letter. The said spouses interposed a counterclaim for
damages, claiming ownership over the property, and prayed, thus:

WHEREFORE, it is most respectfully prayed that this HONORABLE COURT render judgment in favor of the Intervenors and
the defendant Aquilino Barte, ordering:

1. That the complaint against Aquilino Barte be dismissed with costs against the plaintiff;
2. That the Intervenors spouses Judge Rodolfo S. Layumas and Corazon A. Layumas be declared as the legal and
true owners of Lot 124-B;
3. That the plaintiffs should deliver immediately to the Intervenors, TCT No. 8986 which is in their possession;
4. That the plaintiffs be made to pay to the Intervenors the sum of THIRTY THOUSAND (P30,000.00) PESOS moral
damages; TEN THOUSAND (P10,000.00) PESOS attorneys fees plus THREE HUNDRED (P300.00) PESOS as
appearance fee per hearing.

Intervenors pray for such other relief and remedies as may be deemed by this Honorable Court as just and equitable in
the premises.

At the trial, intervenor Rodolfo Layumas testified that he and his wife bought the subject property in 1968, and that
nobody objected to their possession of the land, including the petitioners. In 1970, a religious organization asked his
permission to construct a chapel on the disputed lot; he allowed the construction since the same would be used for
the fiesta. He further declared that part of the chapel still stood on the property. In 1985, a fire razed the towns public
market, thereby dislocating numerous people. Barte was one of the fire victims, who also happened to be a good friend
and political supporter of Rodolfo. Out of goodwill, Barte was allowed to occupy a portion of the said lot, along with some
other fire victims. Rodolfo clarified that the others were to stay there only on a temporary basis, but admitted that Bartes
children also stayed in the subject property.[20]
 Rodolfo Layumas further narrated that in 1987, Corazon wrote one of the petitioners-heirs, Pepito Mascuana,
requesting that the title of the lot be transferred in Sumilhigs name so that they could likewise arrange for the conveyance
of the title in their names. Pepito failed to claim the letter, and thereafter, filed a case of ejectment against Barte and
Rodolfo Layumas brother-in-law, Pepito Antonio. The case, the witness added, was dismissed as against the two parties.
Offered in evidence were the following: a Sworn Statement on the Current and Fair Market Value of the Real Property
issued in 1973 as required by Presidential Decree No. 76, and tax receipts.[21]
Rodolfo Layumas admitted on cross-examination that at the time they bought the property from Sumilhig, the title
was still in the possession of the Wuthrich family. He added that he filed an adverse claim before the Register of Deeds of
San Carlos City, Negros Occidental, on Lot No. 124-B in January 1986, or after the case had already been filed in court.
Lastly, the witness deposed that he did not fence the property after buying the same, but that his brother-in-law
constructed a coco-lumber yard thereon upon his authority.[22]
On January 30, 1996, the trial court rendered judgment in favor of Barte and the spouses Layumas. The fallo of the
decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of Intervenors-counterclaimants and defendant
and against plaintiffs-counterclaim defendants ordering as follows:

1. The dismissal of the plaintiffs complaint with costs against them;

2. The plaintiffs to jointly pay Intervenors-counterclaimants now RTC Judge Rodolfo S. Layumas and Corazon A.
Layumas:
(a) P10,000.00 for attorneys fees; and
(b) P30,000.00 as moral damages;
3. The plaintiffs, as counterclaim defendants, to comply with the above-stated obligation of their late father, Mr.
Jesus Mascuana, under the Deed of Absolute Sale, Exh. 3, pp. 92-93, Exp., thru plaintiff Mr. Jose Mascuana,
including the desegragation (sic) survey to desegregate the 469-square-meter portion of said Lot No. 124-B,
San Carlos Cadastre, this province, sold to the late Diosdado Sumilhig, if the same has not yet been done
despite what has been said herein earlier to said effect, and the execution of the Final Deed of Sale in their
capacity as the heirs and successors-in-interest of the late Mr. Jesus Mascuana, thru Mr. Jose Mascuana,
covering the 469-square-meter desegregated portion of said Lot No. 124-B, within sixty (60) days counted
from the finality of this Decision, in favor of the Intervenors-spouses, after which the said Intervenors-spouses
shall pay them, thru Mr. Jose Mascuana, the P1,000.00 balance due to them as successors-in-interest of the
late Mr. Jesus Mascuana;
4. In case plaintiffs fail to comply with what are herein ordered for them to do, the Clerk of Court V of this Court
to do all that they were to do as herein ordered in the text and dispositive portion hereof, at the expense of
Intervenors spouses to be later reimbursed by plaintiffs, including the desegragation (sic) survey of said 469-
square-meter portion of said Lot [No.] 124-B, San Carlos Cadastre, Negros Occidental, if the same has not yet
been done and the execution of the Final Deed of Sale on behalf of all the plaintiffs as heirs and successors-
in-interest of the late Mr. Jesus Mascuana covering the said desegregated portion of 469 square meters of
the aforesaid lot, in favor of Intervenors spouses, to the end that separate title therefor may be issued in
their names, after they shall have paid the P1,000.00 balance due plaintiffs under said Deed of Absolute Sale,
Exh. 3.

SO ORDERED.[23]

Forthwith, the petitioners appealed the case to the CA, raising the following issues of fact and law:
a. Whether or not the contract of alienation of Lot No. 124-B in favor of Diosdado Sumilhig in 1961 was a contract
to sell or a contract of sale;
b. Whether or not Diosdado Sumilhig had any right to sell Lot No. 124-B in favor of intervenor Corazon Layumas
in 1968.[24]
 On May 5, 2003, the CA affirmed the decision of the trial court. It ruled that the contract between the petitioners
father and Sumilhig was one of sale. Foremost, the CA explained, the contract was denominated as a Deed of Absolute
Sale. The stipulations in the contract likewise revealed the clear intention on the part of the vendor (Mascuana) to alienate
the property in favor of the vendee (Sumilhig). In three various documents, the late Mascuana even made declarations
that Sumilhig was already the owner of the disputed land. The CA added that the admission may be given in evidence
against Mascuana and his predecessors-in-interest under Section 26, Rule 130 of the Revised Rules on Evidence. As to the
argument that the contract between Mascuana and Sumilhig was not effective because it was subject to a suspensive
condition that did not occur, the CA ruled that the condition referred to by the petitioners refers only to the payment of
the balance of the purchase price and not to the effectivity of the contract.
As to the petitioners contention that even if the contract were one of sale, ownership cannot be transferred to
Sumilhig because Mascuana was not yet the owner of the lot at the time of the alleged sale, the appellate court ruled that
the registration of the land to be sold is not a prerequisite to a contract of sale.

The Present Petition

Aggrieved, the petitioners filed the instant petition for review on certiorari with this Court, where the following lone
legal issue was raised:

WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN FAVOR OF DIOSDADO SUMILHIG A CONTRACT TO
SELL OR CONTRACT OF SALE?[25]

We note that the original action of the petitioners against Aquilino Barte was one for recovery of possession of Lot
No. 124-B. With the intervention of the respondents Rodolfo and Corazon Layumas who claimed ownership over the
property, and the acquiescence of the parties, evidence was adduced to prove who, between the petitioners (as plaintiffs)
and the respondents (as defendants-intervenors) were the lawful owners of the subject property and entitled to its
possession.
The petitioners resolutely contend that the Deed of Absolute Sale dated August 12, 1961 between their father and
Sumilhig was a mere contract to sell because at the time of the said sale, the late Mascuana was not yet the registered
owner of Lot No. 124 or any of its portions. They assert that Sumilhig could not have acquired any rights over the lot due
to the fact that a person can only sell what he owns or is authorized to sell, and the buyer can acquire no more than what
the seller can transfer legally. Finally, the petitioners insist that the document in controversy was subject to a suspensive
condition, not a resolutory condition, which is a typical attribute of a contract of sale.
The petition is denied for lack of merit.
The issues raised by the petitioners in this case are factual, and under Rule 45 of the Rules of Court, only questions
of law may be raised in this Court, the reason being that this Court is not a trier of facts. It is not to re-examine the evidence
on record and to calibrate the same. Moreover, the findings and conclusions of the trial court as affirmed by the CA are
conclusive on the Court, absent of any evidence that the trial court, as well as the CA ignored, misinterpreted and
misconstrued facts and circumstances of substance which, if considered, would alter or reverse the outcome of the
case.[26]
We have reviewed the records and find no justification for a reversal or even a modification of the assailed decision
of the CA.
Even on the merits of the petition, the Court finds that the decision of the trial court as well as the ruling of the CA
are based on the evidence on record and the applicable law.
The petitioners reiterated their pose that the deed of absolute sale over the property executed by their father, Jesus
Mascuana, as vendor, and Diosdado Sumilhig as vendee, was a contract to sell and not a contract of sale. They assert that
on its face, the contract appears to be a contract to sell, because the payment of the P1,000.00 balance of the purchase
price was subject to a suspensive condition: the survey of the property, the segregation of the portion thereof subject of
the sale, and the completion of the documents necessary for the issuance of a Torrens title over the property to and in
the name of Sumilhig who was the vendee. The petitioners assert that Sumilhig never paid the aforesaid amount to the
vendor; hence, the obligation of the latter and his predecessors-in-interest (herein petitioners) to execute a final deed of
sale never arose. As such, they aver, title to the property remained reserved in the vendor and his heirs even after his
death. There was no need for the vendor to rescind the deed or collect the said amount of P1,000.00 under Article 1191
of the New Civil Code because such a remedy applies only to contracts of sale. The petitioners insist that Sumilhig never
acquired title over the property; he could not have transferred any title to the respondents. Sumilhig could not have
transferred that which he did not own.
The petitioners contention has no factual and legal bases.
The deed of absolute sale executed by Jesus Mascuana and Sumilhig, provides, thus:

That the VENDOR is the true and absolute owner of a parcel of land known as Lot No. 124 of the Cadastral Survey of San
Carlos, situated at Broce Street and is free from liens and encumbrances, and covered by O.C.T. No. T-299[3]7 (R-1453) of
Reg. of Deeds, Negros Occ.

That for and in consideration of the sum of FOUR THOUSAND SIX HUNDRED NINETY PESOS (P4,690.00), Philippine
Currency, to be paid by the VENDEE in the manner hereinafter stated, the VENDOR does hereby sell, transfer, cede and
convey, a portion of the above-described property containing an area of 469 square meters, the sketch of which can be
found at the back of this document and having a frontage at Broce Street of around 14 meters, and from the Broce Street
to the interior on its Southwest side with a length of 30.9 meters, with a length of 24.8 meters on its Northeast side where
it turned to the right with a length of 2.8 meters and continuing to Northwest with a length of 6.72 meters, the backyard
dimension is 17.5 meters to the Northwest, unto the VENDEE, his heirs and assigns, by way of Absolute Sale, upon the
receipt of the down payment of THREE THOUSAND SIX HUNDRED NINETY PESOS (P3,690.00), which is hereby
acknowledged by the VENDOR as received by him.

That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as soon as the
above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all papers pertinent and necessary to
the issuance of a separate Certificate of Title in the name of the VENDEE shall have been prepared.

The evidence on record shows that during the lifetime of vendor Jesus Mascuana, and even after his death, his heirs,
the petitioners herein, unequivocably declared that Diosdado Sumilhig was the owner of the property subject of this case,
and that the respondents acquired title over the property, having purchased the same via a deed of absolute sale from
Diosdado Sumilhig. Thus, on December 31, 1961, Jesus Mascuana and Jose Estabillo executed a Deed of Exchange and
Absolute Sale of Real Estate, in which both parties declared that they were co-owners of portions of Lot No. 124 abutted
by the property owned by Diosdado Sumilhig.[27]
In the subdivision plan of Lot No. 124, signed by Ricardo Quilop, Private Land Surveyor, following his survey of Lot
No. 124 on July 9, 1962 for and in behalf of Jesus Mascuana, et al., it appears that Lot No. 124-B with an area of 540 square
meters belonged to Diosdado Sumilhig,[28] which is abutted by Lot No. 124-C, owned by Jesus Mascuana.
On October 1, 1985, long after the death of Jesus Mascuana, one of his heirs, petitioner Renee Tedrew, through
counsel, wrote respondent Rodolfo Layumas offering to buy the property occupied by his overseer Aquilino Barte for
US$1,000.00:
ATTY. RODOLFO S. LAYUMAS
San Carlos City
Negros Occidental

Dear Atty. Layumas:

This has reference to the lot located at Broce Street, portions of which are presently occupied by Mr. Barte.

Mrs. Renee Tedrew (nee Agapuyan), who is now in the United States, would like to offer the amount of $1,000.00 to buy
your share of the said lot.
If you are amenable, kindly inform the undersigned for him to communicate [with] Mrs. Tedrew in California.

Very truly yours,

(Sgd.)
SAMUEL SM LEZAMA[29]
It was only after the respondents rejected the proposal of petitioner Renee Tedrew that the petitioners secured title
over the property on March 17, 1986 in the name of Jesus Mascuana (already deceased at the time), canceling TCT No.
967 issued on July 6, 1962 under the name of Jesus Mascuana, who appears to be a co-owner of Lot No. 124 with an
undivided two-seventh (2/7) portion thereof.[30]
While it is true that Jesus Mascuana executed the deed of absolute sale over the property on August 12, 1961 in favor
of Diosdado Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was issued in his name as one of
the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents nevertheless acquired ownership over the property.
The deed of sale executed by Jesus Mascuana in favor of Diosdado Sumilhig on August 12, 1961 was a perfected contract
of sale over the property. It is settled that a perfected contract of sale cannot be challenged on the ground of the non-
transfer of ownership of the property sold at that time of the perfection of the contract, since it is consummated upon
delivery of the property to the vendee. It is through tradition or delivery that the buyer acquires ownership of the property
sold. As provided in Article 1458 of the New Civil Code, when the sale is made through a public instrument, the execution
thereof is equivalent to the delivery of the thing which is the object of the contract, unless the contrary appears or can be
inferred. The record of the sale with the Register of Deeds and the issuance of the certificate of title in the name of the
buyer over the property merely bind third parties to the sale. As between the seller and the buyer, the transfer of
ownership takes effect upon the execution of a public instrument covering the real property.[31] Long before the
petitioners secured a Torrens title over the property, the respondents had been in actual possession of the property and
had designated Barte as their overseer.
Article 1458 of the New Civil Code provides:

By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale may be absolute or conditional.

Thus, there are three essential elements of sale, to wit:

a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.[32]
In this case, there was a meeting of the minds between the vendor and the vendee, when the vendor undertook to
deliver and transfer ownership over the property covered by the deed of absolute sale to the vendee for the price
of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down payment. The vendor undertook to have
the property sold, surveyed and segregated and a separate title therefor issued in the name of the vendee, upon which
the latter would be obliged to pay the balance of P1,000.00. There was no stipulation in the deed that the title to the
property remained with the vendor, or that the right to unilaterally resolve the contract upon the buyers failure to pay
within a fixed period was given to such vendor. Patently, the contract executed by the parties is a deed of sale and not a
contract to sell. As the Court ruled in a recent case:

In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a Deed of Conditional Sale, a sale
is still absolute where the contract is devoid of any proviso that title is reserved or the right to unilaterally rescind is
stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g. by the execution of a public document) of the property sold. Where the condition is imposed
upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code)

Thus, in one case, when the sellers declared in a Receipt of Down Payment that they received an amount as purchase
price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication
was that they sold their property. In Peoples Industrial and Commercial Corporation v. Court of Appeals, it was stated:

A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property
sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the
contract the moment the buyer fails to pay within a fixed period.

Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In
fact, the sale was consummated upon the delivery of the lot to respondent. Thus, Art. 1477 provides that the ownership
of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof.[33]

The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by the vendee as soon as the
property sold shall have been surveyed in the name of the vendee and all papers pertinent and necessary to the issuance
of a separate certificate of title in the name of the vendee shall have been prepared is not a condition which prevented
the efficacy of the contract of sale. It merely provides the manner by which the total purchase price of the property is to
be paid. The condition did not prevent the contract from being in full force and effect:

The stipulation that the payment of the full consideration based on a survey shall be due and payable in five (5) years from
the execution of a formal deed of sale is not a condition which affects the efficacy of the contract of sale. It merely provides
the manner by which the full consideration is to be computed and the time within which the same is to be paid. But it
does not affect in any manner the effectivity of the contract. [34]

In a contract to sell, ownership is retained by a seller and is not to be transferred to the vendee until full payment of
the price. Such payment is a positive suspensive condition, the failure of which is not a breach of contract but simply an
event that prevented the obligation from acquiring binding force.[35]
It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition which extinguishes
the transaction that, for a time, existed and discharges the obligation created under the transaction.[36] A seller cannot
unilaterally and extrajudicially rescind a contract of sale unless there is an express stipulation authorizing it. In such case,
the vendor may file an action for specific performance or judicial rescission.[37]
Article 1169 of the New Civil Code provides that in reciprocal obligations, neither party incurs in delay if the other
does not comply or is not ready to comply in a proper manner with what is incumbent upon him; from the moment one
of the parties fulfills his obligation, delay by the other begins. In this case, the vendor (Jesus Mascuana) failed to comply
with his obligation of segregating Lot No. 124-B and the issuance of a Torrens title over the property in favor of the vendee,
or the latters successors-in-interest, the respondents herein. Worse, petitioner Jose Mascuana was able to secure title
over the property under the name of his deceased father.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
Tumibay v. Lopez

G.R. No.171692

June 3, 2013

DECISION

DEL CASTILLO, J.:

In a contract to sell, the seller retains ownership of the property until the buyer has paid the price in full. A -buyer who
covertly usurps the seller's ownership of the property prior to the full payment of the price is in breach of the contract
and the seller is entitled to rescission because the breach is substantial and fundamental as it defeats the very object of
the parties in entering into the contract to sell.

The Petition for Review on Certiorari1 assails the May 19, 2005 Decision2 of the Court of Appeals (CA) in CA-G.R. CV No.
79029, which reversed the January 6, 2003 Decision3 of the Regional Trial Court (RTC) of Malaybalay City, Branch 9 in Civil
Case No. 2759-98, and the February 10, 2006 Resolution4 denying petitioner-spouses Delfin O. Tumibay and Aurora5 T.
Tumibay’s Motion for Reconsideration.6

Factual Antecedents

On March 23, 1998, petitioners filed a Complaint7 for declaration of nullity ab initio of sale, and recovery of ownership
and possession of land with the RTC of Malaybalay City. The case was raffled to Branch 9 and docketed as Civil Case No.
2759-98.

In their Complaint, petitioners alleged that they are the owners of a parcel of land located in Sumpong, Malaybalay,
Bukidnon covered by Transfer Certificate of Title (TCT) No. T-253348 (subject land) in the name of petitioner Aurora; that
they are natural born Filipino citizens but petitioner Delfin acquired American citizenship while his wife, petitioner Aurora,
remained a Filipino citizen; that petitioner Aurora is the sister of Reynalda Visitacion (Reynalda); 9that on July 23, 1997,
Reynalda sold the subject land to her daughter, Rowena Gay T. Visitacion Lopez (respondent Rowena), through a deed of
sale10 for an unconscionable amount of ₱95,000.00 although said property had a market value of more than
₱2,000,000.00; that the subject sale was done without the knowledge and consent of petitioners; and that, for these
fraudulent acts, respondents should be held liable for damages. Petitioners prayed that (1) the deed of sale dated July 23,
1997 be declared void ab initio, (2) the subject land be reconveyed to petitioners, and (3) respondents be ordered to pay
damages.

On May 19, 1998, respondents filed their Answer11 with counterclaim. Respondents averred that on December 12, 1990,
petitioners executed a special power of attorney (SPA)12 in favor of Reynalda granting the latter the power to offer for sale
the subject land; that sometime in 1994, respondent Rowena and petitioners agreed that the former would buy the
subject land for the price of ₱800,000.00 to be paid on installment; that on January 25, 1995, respondent Rowena paid in
cash to petitioners the sum of $1,000.00; that from 1995 to 1997, respondent Rowena paid the monthly installments
thereon as evidenced by money orders; that, in furtherance of the agreement, a deed of sale was executed and the
corresponding title was issued in favor of respondent Rowena; that the subject sale was done with the knowledge and
consent of the petitioners as evidenced by the receipt of payment by petitioners; and that petitioners should be held liable
for damages for filing the subject Complaint in bad faith. Respondents prayed that the Complaint be dismissed and that
petitioners be ordered to pay damages.

On May 25, 1998, petitioners filed an Answer to Counterclaim.13 Petitioners admitted the existence of the SPA but claimed
that Reynalda violated the terms thereof when she (Reynalda) sold the subject land without seeking the approval of
petitioners as to the selling price. Petitioners also claimed that the monthly payments from 1995 to 1997 were mere
deposits as requested by respondent Rowena so that she (Rowena) would not spend the same pending their agreement
as to the purchase price; and that Reynalda, acting with evident bad faith, executed the deed of sale in her favor but
placed it in the name of her daughter, respondent Rowena, which sale is null and void because an agent cannot purchase
for herself the property subject of the agency.

Ruling of the Regional Trial Court

On January 6, 2003, the RTC rendered a Decision in favor of petitioners, viz:

WHEREFORE, Decision is hereby rendered, as follows;

 (1) Ordering the petitioners, jointly and severally, to return the said amount of $12,000.00 at the present rate of
exchange less the expenses to be incurred for the transfer of the property in question under the name of the
petitioners;

(2) Ordering the Register of Deeds of Bukidnon to cancel TCT No. T-62674 in the name of the respondent Rowena
Gay T. Visitacion-Lopez and to issue a new TCT in the name of the petitioners;

(3) Ordering respondents, spouses Melvin and Rowena Gay Lopez, to execute a Deed of Reconveyance in favor of
the petitioners, or if said respondents should refuse to do so or are unable to do so, the Clerk of Court of the RTC
and ex-officio Provincial Sheriff to execute such Deed of Reconveyance;

(4) No x x x damages are awarded. The respective parties must bear their own expenses except that respondents,
jointly and severally, must pay the costs of this suit.

SO ORDERED.14

In ruling in favor of petitioners, the trial court held: (1) the SPA merely authorized Reynalda to offer for sale the subject
land for a price subject to the approval of the petitioners; (2) Reynalda violated the terms of the SPA when she sold the
subject land to her daughter, respondent Rowena, without first seeking the approval of petitioners as to the selling price
thereof; (3) the SPA does not sufficiently confer on Reynalda the authority to sell the subject land; (4) Reynalda, through
fraud and with bad faith, connived with her daughter, respondent Rowena, to sell the subject land to the latter; and, (5)
the sale contravenes Article 1491, paragraph 2, of the Civil Code which prohibits the agent from acquiring the property
subject of the agency unless the consent of the principal has been given. The trial court held that Reynalda, as agent, acted
outside the scope of her authority under the SPA. Thus, the sale is null and void and the subject land should be reconveyed
to petitioners. The trial court further ruled that petitioners are not entirely free from liability because they received from
respondent Rowena deposits totaling $12,000.00. Under the principle of unjust enrichment, petitioners should, thus, be
ordered to reimburse the same without interest.

Petitioners filed a partial motion for reconsideration15 praying for the award of attorney’s fees. In its January 14, 2003
Order16 denying the aforesaid motion, the trial court clarified that the reimbursement of $12,000.00 in favor of
respondents was without interest because there was also no award of rental income in favor of petitioners. Both parties
are deemed mutually compensated and must bear their own expenses.

From this Decision, respondents appealed to the CA.

Ruling of the Court of Appeals

On May 19, 2005, the CA rendered the assailed Decision reversing the judgment of the trial court, viz:

WHEREFORE, premises considered, the appealed Decision of the Court a quo is hereby REVERSED and SET ASIDE.
Accordingly, title to the subject property shall remain in the name of the Appellant ROWENA GAY VISITACION-LOPEZ. The
latter and her spouse MELVIN LOPEZ are directed to pay the balance of Four Hundred Eighty Eight Thousand Pesos
(₱488,000.00) to the petitioners effective within 30 days from receipt of this Decision and in case of delay, to pay the legal
rate of interests [sic] at 12% per annum until fully paid.

SO ORDERED.17

In reversing the trial court’s Decision, the appellate court ruled that: (1) the SPA sufficiently conferred on Reynalda the
authority to sell the subject land; (2) although there is no direct evidence of petitioners’ approval of the selling price of
the subject land, petitioner Aurora’s acts of receiving two money orders and several dollar checks from respondent
Rowena over the span of three years amount to the ratification of any defect in the authority of Reynalda under the SPA;
(3) petitioners are estopped from repudiating the sale after they had received the deposits totaling $12,000.00; (4) the
sale is not contrary to public policy because there is no rule or law which prohibits the sale of property subject of the
agency between the agent and his children unless it would be in fraud of creditors which is not the case here; (5)
petitioners impliedly ratified the subject SPA and contract of sale as well as its effects; and, (6) the selling price of
₱800,000.00 for the subject land is deemed reasonable based on the testimony of respondent Rowena as this was the
selling price agreed upon by her and petitioner Delfin. Considering that respondent Rowena proved that she remitted a
total of $12,000.00 to petitioners and pegging the exchange rate at that time at ₱26.00 per dollar, the appellate court
ruled that ₱312,000.00 of the ₱800,000.00 selling price was already received by petitioners. Thus, respondents are only
liable for the balance of ₱488,000.00.

Hence, this Petition.

Issues

Petitioners raise the following issues for our resolution:

I. Whether the CA erred in resolving the issue in the case at bar.

II. Whether under the SPA Reynalda had the power to sell the subject land.

III. Whether the actuations of petitioner Aurora in receiving money from respondent Rowena amounted to the
ratification of the breach in the exercise of the SPA.

IV. Whether the CA erred in not declaring the sale void on grounds of public policy.

V. Whether the CA erred in adopting the testimony of respondent Rowena as to the ₱800,000.00 selling price of
the subject land.18

Petitioners’ Arguments

Petitioners argue that the appellate court went beyond the issues of this case when it ruled that there was a contract of
sale between respondent Rowena and petitioner Aurora because the issues before the trial court were limited to the
validity of the deed of sale dated July 23, 1997 for being executed by Reynalda beyond the scope of her authority under
the SPA. Further, the existence of the alleged contract of sale was not proven because the parties failed to agree on the
purchase price as stated by petitioner Aurora in her testimony. The money, in cash and checks, given to petitioners from
1995 to 1997 were mere deposits until the parties could agree to the purchase price. Moreover, Reynalda acted beyond
the scope of her authority under the SPA because she was merely authorized to look for prospective buyers of the subject
land. Even assuming that she had the power to sell the subject land under the SPA, she did not secure the approval as to
the price from petitioners before executing the subject deed of sale, hence, the sale is null and void. Petitioners also
contend that there was no ratification of the subject sale through petitioners’ acceptance of the monthly checks from
respondent Rowena because the sale occurred subsequent to the receipt of the aforesaid checks. They further claim that
the sale was void because it was not only simulated but violates Article 1491 of the Civil Code which prohibits the agent
from acquiring the property subject of the agency. Here, Reynalda merely used her daughter, respondent Rowena, as a
dummy to acquire the subject land. Finally, petitioners question the determination by the appellate court that the fair
market value of the subject land is ₱800,000.00 for lack of any factual and legal basis.

Respondents’ Arguments

Respondents counter that the issue as to whether there was a perfected contract of sale between petitioners and
respondent Rowena is inextricably related to the issue of whether the deed of sale dated July 23, 1997 is valid, hence, the
appellate court properly ruled on the former. Furthermore, they reiterate the findings of the appellate court that the
receipt of monthly installments constitutes an implied ratification of any defect in the SPA and deed of sale dated July 23,
1997. They emphasize that petitioners received a total of $12,000.00 as consideration for the subject land.

Our Ruling
The Petition is meritorious.

As a general rule, we do not disturb the factual findings of the appellate court. However, this case falls under one of the
recognized exceptions thereto because the factual findings of the trial court and appellate court are conflicting.19Our
review of the records leads us to conclude that the following are the relevant factual antecedents of this case.

Petitioners were the owners of the subject land covered by TCT No. T-25334 in the name of petitioner Aurora. On
December 12, 1990, petitioners, as principals and sellers, executed an SPA in favor of Reynalda, as agent, to, among others,
offer for sale the subject land provided that the purchase price thereof should be approved by the former. Sometime in
1994, petitioners and respondent Rowena agreed to enter into an oral contract to sell over the subject land for the price
of ₱800,000.00 to be paid in 10 years through monthly installments.

On January 25, 1995, respondent Rowena paid the first monthly installment of $1,000.00 to petitioner Aurora which was
followed by 22 intermittent monthly installments of $500.00 spanning almost three years. Sometime in 1997, after having
paid a total of $10,000.00, respondent Rowena called her mother, Reynalda, claiming that she had already bought the
subject land from petitioners. Using the aforesaid SPA, Reynalda then transferred the title to the subject land in
respondent Rowena’s name through a deed of sale dated July 23, 1997 without the knowledge and consent of petitioners.
In the aforesaid deed, Reynalda appeared and signed as attorney-in-fact of petitioner Aurora, as seller, while respondent
Rowena appeared as buyer. After which, a new title, i.e., TCT No. 62674,20 to thesubject land was issued in the name of
respondent Rowena.

We explain these factual findings and the consequences thereof below.

Petitioners and respondent

Rowena entered into a contract to sell over the subject land.

Petitioners deny that they agreed to sell the subject land to respondent Rowena for the price of ₱800,000.00 payable in
10 years through monthly installments. They claim that the payments received from respondent Rowena were for
safekeeping purposes only pending the final agreement as to the purchase price of the subject land.

We are inclined to give credence to the claim of the respondents for the following reasons.

First, the payment of monthly installments was duly established by the evidence on record consisting of money
orders21 and checks22 payable to petitioner Aurora. Petitioners do not deny that they received 23 monthly installments
over the span of almost three years. As of November 30, 1997 (i.e., the date of the last monthly installment), the payments
already totaled $12,000.00, to wit:

Date Amount Paid

(in dollars)
January 25, 1995 1,000.0023
February 21, 1995 500.00
March 27, 1995 500.00
April 25, 1995 500.00
June 1, 1995 500.00
June 30, 1995 500.00
July 31, 1995 500.00
May 29, 1996 500.00
 June 30, 1996 500.00
July 31, 1996 500.00
August 31, 1996 500.00
September 30, 1996 500.00
October 29, 1996 500.00
December 31, 1996 500.00
January 31, 1997 500.00
February 28, 1997 500.00
March 31, 1997 500.00
May 31, 1997 500.00
July 19, 1997 500.00
August 31, 1997 500.00
September 30, 1997 500.00
October 31, 1997 500.00
November 30, 1997 500.00
Total 12,000.00

Second, in her testimony, petitioner Aurora claimed that the $1,000.00 in cash that she received from respondent Rowena
on January 25, 1995 was a mere deposit until the purchase price of the subject land would have been finally agreed upon
by both parties.24 However, petitioner Aurora failed to explain why, after receiving this initial sum of $1,000.00, she
thereafter accepted from respondent Rowena 22 intermittent monthly installments in the amount of $500.00. No attempt
was made on the part of petitioners to return these amounts and it is fair to assume that petitioners benefited therefrom.

Third, it strains credulity that respondent Rowena would make such monthly installments for a substantial amount of
money and for a long period of time had there been no agreement between the parties as to the purchase price of the
subject land.

We are, thus, inclined to rule that there was, indeed, a contractual agreement between the parties for the purchase of
the subject land and that this agreement partook of an oral contract to sell for the sum of ₱800,000.00. A contract to sell
has been defined as "a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price."25 In a
contract to sell, "ownership is retained by the seller and is not to pass until the full payment of the price x x x." 26 It is
"commonly entered into so as to protect the seller against a buyer who intends to buy the property in installments by
withholding ownership over the property until the buyer effects full payment therefor."27

In the case at bar, while there was no written agreement evincing the intention of the parties to enter into a contract to
sell, its existence and partial execution were sufficiently established by, and may be reasonably inferred from the
actuations of the parties, to wit: (1) the title to the subject land was not immediately transferred, through a formal deed
of conveyance, in the name of respondent Rowena prior to or at the time of the first payment of $1,000.00 by respondent
Rowena to petitioner Aurora on January 25, 1995;28 (2) after this initial payment, petitioners received 22 intermittent
monthly installments from respondent Rowena in the sum of $500.00; and, (3) in her testimony, respondent Rowena
admitted that she had the title to the subject land transferred in her name only later on or on July 23, 1997, through a
deed of sale, because she believed that she had substantially paid the purchase price thereof,29 and that she was entitled
thereto as a form of security for the installments she had already paid.30

Respondent Rowena was in breach of the contract to sell.

Although we rule that there was a contract to sell over the subject land between petitioners and respondent Rowena, we
find that respondent Rowena was in breach thereof because, at the time the aforesaid deed of sale was executed on July
23, 1997, the full price of the subject land was yet to be paid. In arriving at this conclusion, we take judicial notice31 of the
prevailing exchange rates at the time, as published by the Bangko Sentral ng Pilipinas,32 and multiply the same with the
monthly installments respondent Rowena paid to petitioners, as supported by the evidence on record, to wit:

Amount Paid Exchange Rate

Date Peso Equivalent
(in dollars) (peso per dollar)
January 25, 1995 1,000.00 24.7700 24,770.00
February 21, 1995 500.00 25.1140 12,557.00
March 27, 1995 500.00 25.9670 12,983.50
April 25, 1995 500.00 26.0270 13,013.50
June 1, 1995 500.00 25.8040 12,902.00
June 30, 1995 500.00 25.5750 12,787.50
July 31, 1995 500.00 25.5850 12,792.50
May 29, 1996 500.00 26.1880 13,094.00
June 30, 1996 500.00 26.203033 13,101.50
July 31, 1996 500.00 26.2280 13,114.00
August 31, 1996 500.00 26.202034 13,101.00
September 30, 1996 500.00 26.2570 13,128.50
October 29, 1996 500.00 26.2830 13,141.50
December 31, 1996 500.00 26.288035 13,144.00
January 31, 1997 500.00 26.3440 13,172.00
February 28, 1997 500.00 26.3330 13,166.50
March 31, 1997 500.00 26.3670 13,183.50
May 31, 1997 500.00 26.374036 13,187.00
July 19, 1997 500.00 28.574037 14,287.00
Total 260,626.50

Thus, as of July 19, 1997 or prior to the execution of the deed of sale dated July 23, 1997, the total amount of monthly
installments paid by respondent Rowena to petitioners was only ₱260,626.50 or 32.58%38 of the ₱800,000.00 purchase
price. That the full price was yet to be paid at the time of the subject transfer of title was admitted by respondent Rowena
on cross-examination, viz:

ATTY. OKIT:
Q - Let us make this clear. You now admit that x x x you agreed to buy the lot at eight hundred thousand, to which the
Plaintiff x x x agreed. Now based on the dollar rate, your total payment did not reach x x x eight hundred thousand pesos?
Is that correct? [sic]

A - Yes.

Q - Since notwithstanding the fact this eight hundred thousand which you have agreed is not fully paid why did your
mother finalize the deed of sale?

A - My mother is equipped with the SPA to transfer the lot to me only for security purposes but actually there is no full
payment.39 (Emphasis supplied)

Respondent Rowena tried to justify the premature transfer of title by stating that she had substantially paid the full
amount of the purchase price and that this was necessary as a security for the installments she had already paid. However,
her own evidence clearly showed that she had, by that time, paid only 32.58% thereof. Neither can we accept her
justification that the premature transfer of title was necessary as a security for the installments she had already paid
absent proof that petitioners agreed to this new arrangement. Verily, she failed to prove that petitioners agreed to amend
or novate the contract to sell in order to allow her to acquire title over the subject land even if she had not paid the price
in full.

Significantly, the evidence on record indicates that the premature transfer of title in the name of respondent Rowena was
done without the knowledge and consent of petitioners. In particular, respondent Rowena’s narration of the events
leading to the transfer of title showed that she and her mother, Reynalda, never sought the consent of petitioners prior
to said transfer of title, viz:

COURT:

Q- Why is this check (in the amount of $1,000.00) in your possession now?

A- This is the check I paid to her (referring to petitioner Aurora) which is in cash. [sic]

ATTY. BARROSO:

Q - Now did you continue x x x paying the $500.00 dollar to him (referring to petitioner Delfin)?

A - Yes.

xxxx

Q - Now having stated substantially paid, what did you do with the land subject of this case? [sic]

A - I called my mother who has equipped with SPA to my Uncle that I have already bought the land. [sic]

Q - And you called your mother?

A - Yes.

xxxx

Q - Then what transpired next?

A - After two years my mother called me if how much I have paid the land and being equipped with SPA, so she transferred
the land to me. [sic]40 (Emphases supplied)

Respondent Rowena’s reliance on the SPA as the authority or consent to effect the premature transfer of title in her name
is plainly misplaced. The terms of the SPA are clear. It merely authorized Reynalda to sell the subject land at a price
approved by petitioners. The SPA could not have amended or novated the contract to sell to allow respondent Rowena to
acquire the title over the subject land despite non-payment of the price in full for the reason that the SPA was executed
four years prior to the contract to sell. In fine, the tenor of her testimony indicates that respondent Rowena made a
unilateral determination that she had substantially paid the purchase price and that she is entitled to the transfer of title
as a form of security for the installments she had already paid, reasons, we previously noted, as unjustified.

The contract to sell is rescissible.

Article 1191 of the Civil Code provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him.

The injured party may choose between fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission even after he has chosen fulfillment, if the latter should become impossible.

The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. x x x

As a general rule, "rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches
as are substantial and fundamental as to defeat the object of the parties in making the agreement."41

In the case at bar, we find that respondent Rowena’s act of transferring the title to the subject land in her name, without
the knowledge and consent of petitioners and despite non-payment of the full price thereof, constitutes a substantial and
fundamental breach of the contract to sell. As previously noted, the main object or purpose of a seller in entering into a
contract to sell is to protect himself against a buyer who intends to buy the property in installments by withholding
ownership over the property until the buyer effects full payment therefor.42 As a result, the seller’s obligation to convey
and the buyer’s right toconveyance of the property arise only upon full payment of the price. Thus, a buyer who willfully
contravenes this fundamental object or purpose of the contract, by covertly transferring the ownership of the property in
his name at a time when the full purchase price has yet to be paid, commits a substantial and fundamental breach which
entitles the seller to rescission of the contract.43

Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should continue with the contract to sell
even after the discovery of the aforesaid breach committed by respondent Rowena, as buyer, considering that these acts
betrayed in no small measure the trust reposed by petitioners in her and her mother, Reynalda. Put simply, respondent
Rowena took advantage of the SPA, in the name of her mother and executed four years prior to the contract to sell, to
effect the transfer of title to the subject land in her (Rowena’s) name without the knowledge and consent of petitioners
and despite non-payment of the full price.

We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.

Petitioners are entitled to moral damages and attorney’s fees while respondent Rowena is entitled to the reimbursement
of the monthly installments with legal interest.

Article 1170 of the Civil Code provides:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in
any manner contravene the tenor thereof, are liable for damages.
Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade the normal fulfillment of existing
obligations" and is, thus, incompatible with good faith.44 In the case at bar, we find that respondent Rowena was guilty of
fraud in the performance of her obligation under the subject contract to sell because (1) she knew that she had not yet
paid the full price (having paid only 32.58% thereof) when she had the title to the subject land transferred to her name,
and (2) she orchestrated the aforesaid transfer of title without the knowledge and consent of petitioners. Her own
testimony and documentary evidence established this fact. Where fraud and bad faith have been established, the award
of moral damages is proper.45 Further, under Article 2208(2)46 of the Civil Code, the award of attorney’s fees is proper
where the plaintiff is compelled to litigate with third persons or incur expenses to protect his interest because of the
defendant’s act or omission. Here, respondent Rowena’s aforesaid acts caused petitioners to incur expenses in litigating
their just claims. We, thus, find respondent Rowena liable for moral damages and attorney’s fees which we fix at
₱100,000.00 and ₱50,000.00, respectively.47

Anent the monthly installments respondent Rowena paid to petitioners, our review of the records leads us to conclude
that respondent Rowena is entitled to the reimbursement of the same with legal interest. Although respondent Rowena
was clearly unjustified in prematurely and covertly transferring the title to the subject land in her name, we deplore
petitioners’ lack of candor in prosecuting their claims before the trial court and intent to evade recognition of the monthly
installments that they received from respondent Rowena. The records indicate that, in their Complaint, petitioners made
no mention of the fact that they had entered into a contract to sell with respondent Rowena and that they had received
23 monthly installments from the latter. The Complaint merely alleged that the subject sale was done without the
knowledge and consent of petitioners. It was only later on, when respondent Rowena presented the proof of payment of
the monthly installments in her Answer to the Complaint, that this was brought to light to which petitioners readily
admitted. Further, no evidence was presented to prove that respondent Rowena occupied the subject land or benefited
from the use thereof upon commencement of the contract to sell which would have justified the setting off of rental
income against the monthly installments paid by respondent Rowena to petitioners.

In view of the foregoing, the sums paid by respondent Rowena as monthly installments to petitioners should, thus, be
returned to her with legal interest. The total amount to be reimbursed by petitioners to respondent Rowena is computed
as follows:

Amount Paid Exchange Rate

Date Peso Equivalent
(in dollars) (peso per dollar)
January 25, 1995 1,000.00 24.7700 24,770.00
February 21, 1995 500.00 25.1140 12,557.00
March 27, 1995 500.00 25.9670 12,983.50
April 25, 1995 500.00 26.0270 13,013.50
June 1, 1995 500.00 25.8040 12,902.00
June 30, 1995 500.00 25.5750 12,787.50
July 31, 1995 500.00 25.5850 12,792.50
May 29, 1996 500.00 26.1880 13,094.00
June 30, 1996 500.00 26.2030 13,101.50
July 31, 1996 500.00 26.2280 13,114.00
August 31, 1996 500.00 26.2020 13,101.00
September 30, 1996 500.00 26.2570 13,128.50
October 29, 1996 500.00 26.2830 13,141.50
December 31, 1996 500.00 26.2880 13,144.00
 January 31, 1997 500.00 26.3440 13,172.00
February 28, 1997 500.00 26.3330 13,166.50
March 31, 1997 500.00 26.3670 13,183.50
May 31, 1997 500.00 26.3740 13,187.00
July 19, 1997 500.00 28.5740 14,287.00
August 31, 1997 500.00 30.1650 15,082.50
September 30, 1997 500.00 33.8730 16,936.50
October 31, 1997 500.00 34.9380 17,469.00
November 30, 1997 500.00 34.6550 17,327.50
Total 327,442.00

Since this amount is neither a loan nor forbearance of money, we set the interest rate at 6% per annum computed from
the time of the filing of the Answer48 to the Complaint on May 19, 199849 until finality of judgement and thereafter at 12%
per annum until fully paid in accordance with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.50 Petitioners
are, thus, ordered to pay respondent Rowena the sum of ₱327,442.00 with an interest of 6% per annum computed from
May 19, 1998 until finality of judgment and thereafter of 12% per annum until fully paid.

The sale of the subject land, effected through the deed of sale dated July 23, 1997, is void.

Having ruled that respondent Rowena was in substantial breach of the contract to sell because she had the title to the
subject land transferred in her name without the knowledge and consent of petitioners and despite lack of full payment
of the purchase price, we now rule on the validity of the deed of sale dated July 23, 1997 which was used to effect the
aforesaid transfer of ownership.

It will be recalled that on December 12, 1990, petitioners, as principals and sellers, executed an SPA in favor of Reynalda,
as agent. The SPA stated in part:

That we spouses, AURORA TUMIBAY and DELFIN TUMIBAY, of legal age and presently residing at 36 Armstrong Drive,
Clark, New Jersey, 07066 name, constitute and appoint REYNALDA VISITACION, widow, of legal age and residing at Don
Carlos, Bukidnon, Philippines, to be our true and lawful Attorney-in-fact, for us and in our name, place and stead and for
our use and benefit to do and perform the following acts and deed:

To administer our real property located in the Province of Bikidnon, Town of Malaybalay, Barrio of Bantaunon, Towns of
Maramag, Paradise, Maramag and Barrio of Kiburiao, Town of Quezon.

To offer for sale said properties, the selling price of which will be subject to our approval.

xxxx

To sign all papers and documents on our behalf in a contract of sale x x x.51.

As can be seen, the SPA gave Reynalda the power and duty to, among others, (1) offer for sale the subject land to
prospective buyers, (2) seek the approval of petitioners as to the selling price thereof, and (3) sign the contract of sale on
behalf of petitioners upon locating a buyer willing and able to purchase the subject land at the price approved by
petitioners. Although the SPA was executed four years prior to the contract to sell, there would have been no obstacle to
its use by Reynalda had the ensuing sale been consummated according to its terms. However, as previously discussed,
when Reynalda, as attorney-in-fact of petitioner Aurora, signed the subject deed of sale dated July 23, 1997, the agreed
price of ₱800,000.00 (which may be treated as the approved price) was not yet fully paid because respondent Rowena at
the time had paid only ₱260,262.50.52 Reynalda, therefore, acted beyond the scope of her authority because she signed
the subject deed of sale, on behalf of petitioners, at a price of ₱95,000.00 which was not approved by the latter. For her
part, respondent Rowena cannot deny that she was aware of the limits of Reynalda’s power under the SPA because she
(Rowena) was the one who testified that the agreed price for the subject land was ₱800,000.00.

Article 1898 of the Civil Code provides:

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does
not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers
granted by the principal. In this case, however, the agent is liable if he undertook to secure the principal’s ratification.

It should be noted that, under Article 1898 of the Civil Code, the principal’s ratification of the acts of the agent, done
beyond the scope of the latter’s authority, may cure the defect in the contract entered into between the agent and a third
person. This seems to be the line of reasoning adopted by the appellate court in upholding the validity of the subject sale.
The appellate court conceded that there was no evidence that respondents sought the approval of petitioners for the
subject sale but it, nonetheless, ruled that whatever defect attended the sale of the subject land should be deemed
impliedly ratified by petitioners’ acceptance of the monthly installments paid by respondent Rowena. Though not clearly
stated in its Decision, the appellate court seemed to rely on the four monthly installments (i.e., August 31, September 30,
October 31, and November 30, 1997) respondent Rowena paid to petitioners which the latter presumably received and
accepted even after the execution of the deed of sale dated July 23, 1997.

We disagree.

That petitioners continued to receive four monthly installments even after the premature titling of the subject land in the
name of respondent Rowena, through the deed of sale dated July 23, 1997, did not, by itself, establish that petitioners
ratified such sale. On the contrary, the fact that petitioners continued to receive the aforesaid monthly installments
tended to establish that they had yet to discover the covert transfer of title in the name of respondent Rowena. As stated
earlier, the evidence on record established that the subject sale was done without petitioners’ knowledge and consent
which would explain why receipt or acceptance by petitioners of the aforementioned four monthly installments still
occurred. Further, it runs contrary to common human experience and reason that petitioners, as sellers, would forego the
reservation or retention of the ownership over the subject land, which was intended to guarantee the full payment of the
price under the contract to sell, especially so in this case where respondent Rowena, as buyer, had paid only 32.58% of
the purchase price. In a contract to sell, it would be unusual for the seller to consent to the transfer of ownership of the
property to the buyer prior to the full payment of the purchase price because the reservation of the ownership in the
seller is precisely intended to protect the seller from the buyer. We, therefore, find that petitioners’ claim that they did
not ratify the subject sale, which was done without their knowledge and consent, and that the subsequent discovery of
the aforesaid fraudulent sale led them to promptly file this case with the courts to be more credible and in accord with
the evidence on record. To rule otherwise would be to reward respondent Rowena for the fraud that she committed on
petitioners.

Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond the scope of her authority under the SPA when
she executed the deed of sale dated July 23, 1997 in favor of respondent Rowena, as buyer, without the knowledge and
consent of petitioners, and conveyed the subject land to respondent Rowena at a price not approved by petitioners, as
principals and sellers, (2) respondent Rowena was aware of the limits of the authority of Reynalda under the SPA, and (3)
petitioners did not ratify, impliedly or expressly, the acts of Reynalda. Under Article 1898 of the Civil Code, the sale is void
and petitioners are, thus, entitled to the reconveyance of the subject land.

WHEREFORE, the Petition is GRANTED. The May 19, 2005 Decision and February 10, 2006 Resolution of the Court of
Appeals in CA-G.R. CV No. 79029 are ANNULLED and SET ASIDE. The January 6, 2003 Decision of the Regional Trial Court
of Malaybalay City, Branch 9 in Civil Case No. 2759-98 is REINSTATED and MODIFIED to read as follows:
 1. The deed of sale dated July 23, 1997 over the subject land, covered by TCT No. T-62674, between petitioner
Aurora, represented by Reynalda as her attorney-in-fact, and respondent Rowena is declared void.

2. The contract to sell over the subject land, covered by TCT No. T-25334, between petitioners, as sellers, and
respondent Rowena, as buyer, is declared rescinded.1âwphi1

3. The Register of Deeds of Malaybalay City is ordered to cancel TCT No. T-62674 in the name of respondent
Rowena and to reinstate TCT No. T-25334 in the name of petitioner Aurora.

4. Respondent Rowena is ordered to pay petitioners the sum of ₱100,000.00 as moral damages and ₱50,000.00
as attorney’s fees.

5. Petitioners are ordered to pay respondent Rowena the sum of ₱327,442.00 with legal interest of 6% per annum
from May 19, 1998 until finality of this Decision. In case petitioners fail to pay the amount due upon finality of this
Decision, they shall pay legal interest thereon at the rate of 12% per annum until fully paid.

Manuel Uy and Sons, Inc. v. Valbueco, Inc.

G.R. No. 179594

September 11, 2013

DECISION

PERALTA, J.:

This is a petition for review on certiorari1 of the Court of Appeals’ Decision2 dated December 11, 2006 in CA-G.R. CV No.
85877, and its Resolution dated September 4, 2007, denying petitioner’s motion for reconsideration.

The Court of Appeals reversed and set aside the Decision3 of the Regional Trial Court (RTC) of Manila, Branch 1, dismissing
the Complaint for specific performance and damages. The Court of Appeals reinstated the Complaint and directed
petitioner to execute deeds of absolute sale in favor of respondent after payment of the purchase price of the subject
lots.

The facts, as stated by the Court of Appeals, are as follows:

Petitioner Manuel Uy & Sons, Inc. is the registered owner of parcels of land located in Teresa, Rizal covered by Transfer
Certificate of Title(TCT) No. 59534, covering an area of about 6,119 square meters; TCT No.59445, covering an area of
about 6,838 square meters; TCT No. 59446,covering an area of about 12,389 square meters; and TCT No. 59444,covering
an area of about 32,047 square meters.

On November 29, 1973, two Conditional Deeds of Sale were executed by petitioner, as vendor, in favor of respondent
Valbueco, Incorporated, as vendee. The first Conditional Deed of Sale4 covered TCT Nos. 59534, 59445 and 59446, and
contained the following terms and conditions:

That for and in consideration of the sum of ONE HUNDREDSIXTY-FOUR THOUSAND SEVEN HUNDRED FORTY-
NINE(Php164,749.00) PESOS, Philippine currency, the VENDOR hereby agrees to SELL, CEDE, TRANSFER and CONVEY unto
the VENDEE xx x the aforementioned properties, payable under the following terms and conditions:

1. The sum of FORTY-ONE THOUSAND ONE HUNDREDEIGHTY-SEVEN and 25/100 (Php 41,187.25) PESOS shall be
paid upon signing of this conditional deed of sale; and
 2. The balance of ONE HUNDRED TWENTY-THREETHOUSAND FIVE HUNDRED SIXTY-ONE and 75/100
(Php123,561.75) PESOS shall be paid within a period of one (1) year from November 15, 1973, with interest of
12% per annum based on the balance, in the mode and manner specified below:

a) January 4, 1974 – ₱16,474.90 plus interest

b) On or before May 15, 1974 – ₱53,543.43 plus interest

c) On or before November 15, 1974 – ₱53,543.32 plus interest

3. That the vendee shall be given a grace period of thirty (30)days from the due date of any installment with
corresponding interest to be added, but should the VENDEE fail to make such payment within the grace period
this contract shall be deemed rescinded and without force and effect after notice in writing by VENDOR to
VENDEE.

4. That the VENDOR agrees to have the existing Mortgages on the properties subject of this sale released on or
before May 20, 1974.

5. That the VENDOR agrees to have the above-described properties freed and cleared of all lessees, tenants,
adverse occupants or squatters within 100 days from the execution of this conditional deed of sale. In case of
failure by the VENDOR to comply with the undertaking provided in this paragraph and the VENDEE shall find it
necessary to file a case or cases in court to eject the said lessees, tenants, occupants and/or squatters from the
land, subject of this sale, the VENDOR agrees to answer and pay for all the expenses incurred and to be incurred
in connection with said cases until the same are fully and finally terminated.

6. That the VENDOR and the VENDEE agree that during the existence of this Contract and without previous
expressed written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in any way
encumber unto another person or party any right, interest or equity that they may have in and to said parcels of
land. x x x x

8. That it is understood that ownership of the properties herein conveyed shall not pass to the VENDEE until after
payment of the full purchase price; provided, however, that the VENDOR shall allow the annotation of this
Conditional Deed of Sale at the back of the titles of the above-described parcels of land in the corresponding
Registry of Deeds x xx.

9. That upon full payment of the total purchase price, a Deed of Absolute Sale shall be executed in favor of the
VENDEE and the VENDOR agrees to pay the documentary stamps and the science stamp tax of the Deed of Sale;
while the VENDEE agrees to pay the registration and other expenses for the issuance of a new title.

10. That it is mutually agreed that in case of litigation, the venue of the case shall be in the courts of Manila, having
competent jurisdiction, any other venue being expressly waived.5

On the other hand, the second Conditional Deed of Sale6 covering Lot No. 59444 provides, thus:

1. The sum of FIFTY-TWO THOUSAND SEVENTY-SIXAND 37/100 (Php 52,076.37) PESOS, shall be paid upon signing
of this conditional deed of sale; and

2. The balance of ONE HUNDRED FIFTY-SIXTHOUSAND TWO HUNDRED TWENTY-NINE and 13/100
(Php156,229.13) PESOS shall be paid within a period of one (1) year from November 15, 1973, with interest of
12% per annum based on the balance, in the mode and manner specified below:

a) January 4, 1974 – ₱20,830.55 plus interest

 b) On or before May 15, 1974 – ₱67,699.29 plus interest

c) On or before November 15, 1974, ₱67,699.29 plus interest

3. That the VENDEE shall be given a grace period of thirty (30) days from the due date of any installment with
corresponding interest to be added, but should the VENDEE fail to make such payment within the grace period,
this contract shall be deemed rescinded and without force and effect after notice in writing by VENDOR to
VENDEE.

4. That the VENDOR agrees and acknowledges that any and all payments to be made by the VENDEE by reason of
this presents unless hereafter advised by VENDOR to the contrary, shall be made in favor of and to the Philippine
Trust Company by way of liquidation and payment of the existing mortgage on the property subject of this sale.

5. That after each payment adverted to above the VENDOR shall issue the corresponding receipt for the amount
paid by the VENDOR to the Philippine Trust Company.

6. That the VENDOR agrees to have the above-described property freed and cleared of all lessees, tenants, adverse
occupants or squatters within 100 days from the execution of this conditional deed of sale. In case of failure by
the VENDOR to comply with this undertaking provided in this paragraph and the VENDEE shall find it necessary to
file a case or cases in court to eject the said lessees, tenants, occupants and/or squatters from the land, subject
of this sale, the VENDOR agrees to answer and pay for all the expenses incurred and to be incurred in connection
with said cases until the same are fully and finally terminated.

7. That the VENDOR and the VENDEE agree that during the existence of this Contract and without previous
expressed written permission from the other, they shall not sell, cede, assign, transfer or mortgage, or in any way
encumber unto another person or party any right, interest or equity that they may have in and to said parcel of
land.

xxxx

9. That it is understood that ownership of the property herein conveyed shall not pass to the VENDEE until after
payment of the full purchase price, provided, however, that the VENDOR shall allow the annotation of the
Conditional Deed of Sale at the back of the Title of the above-described parcel of land in the corresponding
Registry of Deeds; x xx.

10. That upon full payment of the total purchase price, a Deed of Absolute Sale shall be executed in favor of the
VENDEE and the VENDOR agrees to pay the documentary stamps and the science stamp tax of the Deed of Sale;
while the VENDEE agrees to pay the registration and other expenses for the issuance of a new title.

11. That it is mutually agreed that in case of litigation, the venue of the case shall be in the courts of Manila, having
competent jurisdiction, any other venue being expressly waived.7

Respondent was able to pay petitioner the amount of ₱275,055.558 as partial payment for the two properties
corresponding to the initial payments and the first installments of the said properties.

At the same time, petitioner complied with its obligation under the conditional deeds of sale, as follows: (1) the mortgage
for TCT No. 59446 was released on May 18, 1984, while the mortgages for TCT Nos. 59445and 59534 were released on
July 19, 1974; (2) the unlawful occupants of the lots covered by TCT Nos. 59444, 59534, 59445 and 59446 surrendered
their possession and use of the said lots in consideration of the amount of ₱6,000.00 in a document9 dated November 19,
1973, and they agreed to demolish their shanties on or before December 7, 1973; and (3) the mortgage with Philippine
Trust Company covering TCT No. 59444 was discharged10 in 1984.
However, respondent suspended further payment as it was not satisfied with the manner petitioner complied with its
obligations under the conditional deeds of sale. Consequently, on March 17, 1978, petitioner sent respondent a
letter 11 informing respondent of its intention to rescind the conditional deeds of sale and attaching therewith the original
copy of the respective notarial rescission.

On November 28, 1994, respondent filed a Complaint12 for specific performance and damages against petitioner with the
RTC of Antipolo City. However, on January 15, 1996, the case was dismissed without prejudice 13 for lack of interest, as
respondent's counsel failed to attend the pre-trial conference.

Five years later, or on March 16, 2001, respondent again filed with the RTC of Manila, Branch 1 (trial court) a
Complaint14 for specific performance and damages, seeking to compel petitioner to accept the balance of the purchase
price for the two conditional deeds of sale and to execute the corresponding deeds of absolute sale. Respondent
contended that its non-payment of the installments was due to the following reasons:(1) Petitioner refused to receive the
balance of the purchase price as the properties were mortgaged and had to be redeemed first before a deed of absolute
sale could be executed; (2) Petitioner assured that the existing mortgages on the properties would be discharged on or
before May 20,1974, or that petitioner did not inform it (respondent) that the mortgages on the properties were already
released; and (3) Petitioner failed to fully eject the unlawful occupants in the area.

In its Answer,15 petitioner argued that the case should be dismissed, as it was barred by prior judgment. Moreover,
petitioner contended that it could not be compelled to execute any deed of absolute sale, because respondent failed to
pay in full the purchase price of the subject lots. Petitioner claimed that it gave respondent a notice of notarial rescission
of both conditional deeds of sale that would take effect 30 days from receipt thereof. The notice of notarial rescission was
allegedly received by respondent on March 17,1978. Petitioner asserted that since respondent failed to pay the full
purchase price of the subject lots, both conditional deeds of sale were rescinded as of April 16, 1978; hence, respondent
had no cause of action against it.

In its Reply,16 respondent denied that it received the alleged notice of notarial rescission. Respondent also denied that the
alleged recipient (one Wenna Laurenciana)17 of the letter dated March 17, 1978, which was attached to the notice of
notarial rescission, was its employee. Respondent stated that assuming arguendo that the notice was sent to it, the
address (6th Floor, SGC Bldg., Salcedo Street, Legaspi Village, Makati, Metro Manila) was not the given address of
respondent. Respondent contended that its address on the conditional deeds of sale and the receipts issued by it and
petitioner showed that its principal business address was the 7th Floor, Bank of P.I. Bldg, Ayala Avenue, Makati, Rizal.

On August 1, 2005, the trial court rendered a Decision,18 dismissing the complaint, as petitioner had exercised its right to
rescind the contracts. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the complaint is DISMISSED for lack of merit.

Claims and counterclaims for damages are also dismissed.19

The trial court stated that the issues before it were: (1) Did petitioner unlawfully evade its obligation to execute the final
deed of sale and to eject the squatters/occupants on the properties; (2) Is the case barred by prior judgment; and (3) Does
respondent have a cause of action against petitioner.

The trial court said that both conditional deeds of sale clearly provided that "ownership x x x shall not pass to the VENDEE
until after full payment of the purchase price." Respondent admitted that it has not yet fully paid the purchase price. The
trial court held that the conditions in the conditional deeds of sale being suspensive, that is, its fulfillment gives rise to the
obligation, the reasons for the inability of respondent to fulfill its own obligations is material, in order that the obligation
of petitioner to execute the final deeds of absolute sale will arise. The trial court stated that the evidence showed that
petitioner had exercised its right to rescind the contract by a written notice dated March 17, 1978 and notarial acts both
dated March15, 1978. The trial court noted that respondent denied having received the notice and disclaimed knowing
the recipient, Wenna Laurenciana. However, on cross-examination, respondent's witness, Gaudencio Juan, who used to
be respondent's Personnel Manager and Forester at the same time, admitted knowing Laurenciana because she was the
secretary of Mr. Valeriano Bueno, respondent's president at that time, although Laurenciana was not employed by
respondent, but she was employed by Mahogany Products Corporation, presumably one of the 14 other companies being
controlled by Mr. Bueno.20

The trial court held that the conditional deeds of sale were executed on November 29, 1973 and were already covered by
Republic Act (R.A.) No. 6552, otherwise known as the Realty Installment Buyer Act. Under Section 4 of the law, if the buyer
fails to pay the installments due at the expiration of the grace period, which is not less than 60 days from the date the
installment became due, the seller may cancel the contract after 30 days from receipt of the buyer of the notice of
cancellation or the demand for rescission of the contracts by notarial act. The trial court found no lawful ground to grant
the relief prayed for and dismissed the complaint for lack of merit.

Respondent appealed the decision of the trial court to the Court of Appeals, and made these assignments of error: (1) the
trial court erred in holding that petitioner did not unlawfully evade executing a final deed of sale, since respondent's failure
to fulfill its own obligation is material; (2) the trial court erred in holding that it is unbelievable and a self-contradiction
that respondent was informed of the mortgage only when it was paying the balance of the properties; and (3) the trial
court erred in holding that as early as November 19, 1973, petitioner had already taken necessary steps to evict the
squatters/occupants through the intercession of the agrarian reform officer.

On December 11, 2006, the Court of Appeals rendered a Decision, reversing and setting aside the Decision of the trial
court. It reinstated the complaint of respondent, and directed petitioner to execute deeds of absolute sale in favor of
respondent after payment of the balance of the purchase price of the subject lots. The dispositive portion of the Decision
reads:

WHEREFORE, premises considered, the August 1, 2005Decision of the Regional Trial Court of Manila, Branch 1, in Civil
Case No. 01-100411, is hereby REVERSED and SET ASIDE.

A new one is hereby entered: REINSTATING the complaint and defendant-appellee MANUEL UY & SONS INC. is hereby
DIRECTED, pursuant to Sec. 4, R. A. No. 6552, otherwise known as the Maceda Law, to EXECUTE and DELIVER:

(1) Deeds of Absolute Sale in favor of VALBUECO, INC.; and

(2) Transfer Certificates of Title pertaining to Nos. 59534, 59445,59446 and 59444, in the name of plaintiff-
appellant VALBUECO, INC., after VALBUECO pays MANUEL UY & SONS, without additional interest, within thirty
days from finality of this judgment, the balance of the contract price.

If MANUEL UY & SONS refuses to deliver the Deeds of Absolute Sale and the co-owner's copy of the TCTs, the Register of
Deeds of Antipolo, Rizal is hereby DIRECTED to CANCEL the latest TCTs issued derived from TCT Nos. 59534, 59445, 59446
and 59444, and to

ISSUE new TCTS in the name of VALBUECO.

Only if VALBUECO fails in the payment directed above, then defendant-appellee MANUEL UY & SONS INC. has the
opportunity to serve a valid notice of notarial rescission.

SO ORDERED.21

The Court of Appeals held that the two conditional deeds of sale in this case are contracts to sell. It stated that the law
applicable to the said contracts to sell on installments is R.A. No. 6552, specifically Section 4thereof, as respondent paid
less than two years in installments. It held that upon repeated defaults in payment by respondent, petitioner had the right
to cancel the said contracts, but subject to the proper receipt of respondent of the notice of cancellation or the demand
for the rescission of the contracts by notarial act.
However, the Court of Appeals found that petitioner sent the notice of notarial rescission to the wrong address. The
business address of respondent, as used in all its transactions with petitioner, was the 7th Floor, Bank of the Philippine
Islands Building, Ayala Avenue, Makati City, but the notice of notarial rescission was sent to the wrong address at the 6th
Floor, SGC Building, Salcedo Street, Legaspi Village, Makati, Metro Manila. Petitioner served the notice to the address of
Mahogany Products Corporation. It was established that the person who received the notice, one Wenna Laurenciana,
was an employee of Mahogany Products Corporation and not an employee of respondent or Mr. Valeriano Bueno, the
alleged president of Mahogany Products Corporation and respondent company.22 The appellate court stated that this
cannot be construed as to have been contructively received by respondent as the two corporations are two separate
entities with a distinct personality independent from each other. Thus, the Court of Appeals held that the notarial
rescission was in validly served. It stated that it is a general rule that when service of notice is an issue, the person alleging
that the notice was served must prove the fact of service by a preponderance of evidence. In this case, the Court of Appeals
held that there was no evidence that the notice of cancellation by notarial act was actually received by respondent. Thus,
for petitioner's failure to cancel the contract in accordance with the procedure provided by law, the Court of Appeals held
that the contracts to sell on installment were valid and subsisting, and respondent has the right to offer to pay for the
balance of the purchase price before actual cancellation.

Petitioner's motion for reconsideration was denied for lack of merit by the Court of Appeals in a Resolution 23 dated
September 4, 2007.

Petitioner filed this petition raising the following issues:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED INREVERSING THE RTC DECISION AND REINSTATING
THECOMPLAINT WHEN ON ITS FACE IT HAS LONG BEENPRESCRIBED, AS IT WAS FILED AFTER 27 YEARS AND HAS
NOJURISDICTION (SIC).

II

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED ANDGRAVELY ABUSED ITS DISCRETION IN
COMPELLINGPETITIONER TO EXECUTE A FINAL DEED OF ABSOLUTE SALE EVEN IF RESPONDENT JUDICIALLY ADMITTED ITS
NON-PAYMENT OF THE BALANCE OF THE DEEDS OF CONDITIONALSALE DUE SINCE 1974.

III

THE HONORABLE COURT OF APPEALS GRAVELY ERRED INGRANTING THE RELIEFS PRAYED BY RESPONDENT IN
ITSCOMPLAINT FOR SPECIFIC PERFORMANCE WHEN IT WASRESPONDENT WHO BREACHED THE CONTRACT.

IV

THE HONORABLE COURT OF APPEALS COMMITTED GRAVEINJUSTICE WHEN IT PENALIZED PETITIONER FOR EXERCISINGITS
LEGAL RIGHT AND DID NOT COMMIT AN ACTIONABLEWRONG WHILE IT HEFTILY REWARDED RESPONDENT,
WHOBREACHED THE CONTRACT, AND ORDERED TO PAY WITHOUTINTEREST PHP 97,998.95, WHICH IS DUE SINCE 1974
UNDER THECONTRACT, FOR FOUR (4) PARCELS OF LAND (57,393 SQUAREMETERS), NOW WORTH HUNDRED MILLIONS.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED INANNULING THE NOTARIAL RESCISSION WHEN THE COMPLAINT
IS ONLY FOR SPECIFIC PERFORMANCE AND WAS NOT AN ISSUE RAISED IN THE PLEADINGS OR DURING THETRIAL.24

The main issue is whether respondent is entitled to the relief granted by the Court of Appeals. Petitioner contends that
the Court of Appeals erred in directing it to execute deeds of absolute sale over the subject lots even if respondent
admitted non-payment of the balance of the purchase price.
As found by the Court of Appeals, the two conditional deeds of sale entered into by the parties are contracts to sell, as
they both contained a stipulation that ownership of the properties shall not pass to the vendee until after full payment of
the purchase price. In a conditional sale, as in a contract to sell, ownership remains with the vendor and does not pass to
the vendee until full payment of the purchase price.25 The full payment of the purchase price partakes of a suspensive
condition, and non-fulfillment of the condition prevents the obligation to sell from arising.26To differentiate, a deed of sale
is absolute when there is no stipulation in the contract that title to the property remains with the seller until full payment
of the purchase price.

Ramos v. Heruela27 held that Articles 1191 and 1592 of the Civil Code28 are applicable to contracts of sale, while R.A. No.
6552 applies to contracts to sell.

The Court of Appeals correctly held that R.A. No. 6552, otherwise known as the Realty Installment Buyer Act, applies to
the subject contracts to sell. R.A. No. 6552 recognizes in conditional sales of all kinds of real estate (industrial, commercial,
residential) the right of the seller to cancel the contract upon non-payment of an installment by the buyer, which is simply
an event that prevents the obligation of the vendor to convey title from acquiring binding force.29

It also provides the right of the buyer on installments in case he defaults in the payment of succeeding installments30 as
follows:

Section 3. In all transactions or contracts involving the sale or financing of real estate on installment payments, including
residential condominium apartments but excluding industrial lots, commercial buildings and sales to tenants under
Republic Act Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three hundred
eighty-nine, where the buyer has paid at least two years of installments, the buyer is entitled to the following rights in
case he defaults in the payment of succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total grace period earned by him
which is hereby fixed at the rate of one month grace period for every one year of installment payments made:
Provided, That this right shall be exercised by the buyer only once in every five years of the life of the contract and
its extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender value of the payments on the
property equivalent to fifty per cent of the total payments made, and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt by the buyer of the notice of cancellation
or the demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value
to the buyer.

Down payments, deposits or options on the contract shall be included in the computation of the total number of
installment payments made. chanrobles a law library

Sec. 4. In case where less than two years of installments were paid, the seller shall give the buyer a grace period of not
less than sixty days from the date the installment became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel the contract after
thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial
act.31

In this case, respondent has paid less than two years of installments; therefore, Section 4 of R.A. No. 6552 applies.

The Court of Appeals held that even if respondent defaulted in its full payment of the purchase price of the subject lots,
the conditional deeds of sale remain valid and subsisting, because there was no valid notice of notarial rescission to
respondent, as the notice was sent to the wrong address, that is, to Mahogany Products Corporation, and it was received
by a person employed by Mahogany Products Corporation and not the respondent. The Court of Appeals stated that the
allegation that Mahogany Products Corporation and respondent have the same President, one Valeriano Bueno, is
irrelevant and has not been actually proven or borne by evidence. The appellate court held that there was insufficient
proof that respondent actually received the notice of notarial rescission of the conditional deeds of sale; hence, the
unilateral rescission of the conditional deeds of sale cannot be given credence.

However, upon review of the records of this case, the Court finds that respondent had been served a notice of the notarial
rescission of the conditional deeds of sale when it was furnished with the petitioner's Answer, dated February 16, 1995,
to its first Complaint filed on November 28, 1994with the RTC of Antipolo City, which case was docketed as Civil Case
No.94-3426, but the complaint was later dismissed without prejudice on January15, 1996.32

It appears that after respondent filed its first Complaint for specific performance and damages with the RTC of Antipolo
City on November 28,1994, petitioner filed an Answer and attached thereto a copy of the written notice dated March 17,
1978 and copies of the notarial acts of rescission dated March 15, 1978, and that respondent received a copy of the said
Answer with the attached notices of notarial rescission. However, to reiterate, the first Complaint was dismissed without
prejudice.

Five years after the dismissal of the first Complaint, respondent again filed this case for specific performance and damages,
this time, with the RTC of Manila. Petitioner filed an Answer, and alleged, among others, that the case was barred by prior
judgment, since respondent filed a complaint on November 28, 1994 before the RTC of Antipolo City, Branch 73, against
it (petitioner) involving the same issues and that the case, docketed as Civil Case No. 94-3426, was dismissed on January
15, 1996 for lack of interest. Respondent filed a Reply33 dated July 18, 2001, asserting that petitioner prayed for the
dismissal of the first case filed on November 28, 1994 (Civil Case No. 94-3426) on the ground of improper venue as the
parties agreed in the deeds of conditional sale that in case of litigation, the venue shall be in the courts of Manila. To prove
its assertion, respondent attached to its Reply a copy of petitioner’s Answer to the first Complaint in Civil Case No. 94-
3426, which Answer included the written notice dated March 17, 1978 and two notarial acts of rescission, both dated
March 15, 1978, of the two conditional deeds of sale. Hence, respondent is deemed to have had notice of the notarial
rescission of the two conditional deeds of sale when it received petitioner’s Answer to its first complaint filed with the
RTC of Antipolo, since petitioner’s Answer included notices of notarial rescission of the two conditional deeds of sale. The
first complaint was filed six years earlier before this complaint was filed. As stated earlier, the first complaint was dismissed
without prejudice, because respondent’s counsel failed to appear at the pre-trial. Since respondent already received
notices of the notarial rescission of the conditional deeds of sale, together with petitioner’s Answer to the first Complaint
five years before it filed this case, it can no longer deny having received notices of the notarial rescission in this case, as
respondent admitted the same when it attached the notices of notarial rescission to its Reply in this case. Consequently,
respondent is not entitled to the relief granted by the Court of Appeals.

Under R.A. No. 6552, the right of the buyer to refund accrues only when he has paid at least two years of installments.34 In
this case, respondent has paid less than two years of installments; hence, it is not entitled to a refund.35

Moreover, petitioner raises the issue of improper venue and lack of jurisdiction of the RTC of Manila over the case. It
contends that the complaint involved real properties in Antipolo City and cancellation of titles; hence, it was improperly
filed in the RTC of Manila.

Petitioner's contention lacks merit, as petitioner and respondent stipulated in both Conditional Deeds of Sale that they
mutually agreed that in case of litigation, the case shall be filed in the courts of Manila.36

Further, petitioner contends that the action has prescribed. Petitioner points out that the cause of action is based on a
written contract; hence, the complaint should have been brought within 10 years from the time the right of action accrues
under Article 1144 of the Civil Code. Petitioner argues that it is evident on the face of the complaint and the two contracts
of conditional sale that the cause of action accrued in 1974; yet, the complaint for specific performance was filed after 27
years. Petitioner asserts that the action has prescribed.

The contention is meritorious.

Section 1, Rule 9 of the 1997 Rules of Civil Procedure provides:

Section 1. Defense and objections not pleaded. - Defenses and objections not pleaded whether in a motion to dismiss or
in the answer are deemed waived. However, when it appears from the pleadings that the court has no jurisdiction over
the subject matter, that there is another action pending between the same parties for the same cause, or that the action
is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim.37

In Gicano v. Gegato,38 the Court held:

x x x (T)rial 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. Mc Quaid,
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 basis of a motion to dismiss (Sec. 1,f, Rule 16, Rules
of Court), or an answer which sets up such ground as an affirmative defense (Sec. 5, Rule16), or even if the ground is
alleged after judgment on the merits, as in a motion for reconsideration (Ferrer v. Ericta, 84 SCRA 705); or even if the
defense has not been asserted at all, as where no statement thereof is found in the pleadings (Garcia v. Mathis, 100 SCRA
250;PNB v. Pacific Commission House, 27 SCRA 766; Chua Lamco v.Dioso, et al., 97 Phil. 821);

or where a defendant has been declared in default (PNB v. Perez, 16 SCRA 270). 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 plaintiff's complaint, or otherwise established by the evidence.39

Moreover, Dino v. Court of Appeals40 held:

Even if the defense of prescription was raised for the first time on appeal in respondent's Supplemental Motion for
Reconsideration of the appellate court's decision, this does not militate against the due process right of the petitioners.
On appeal, there was no new issue of fact that arose in connection with the question of prescription, thus it cannot be
said that petitioners were not given the opportunity to present evidence in the trial court to meet a factual issue. Equally
important, petitioners had the opportunity to oppose the defense of prescription in their Opposition to the Supplemental
Motion for Reconsideration filed in the appellate court and in their Petition for Review in this Court.41

In this case, petitioner raised the defense of prescription for the first time before this Court, and respondent had the
opportunity to oppose the defense of prescription in its Comment to the petition. Hence, the Court can resolve the issue
of prescription as both parties were afforded the opportunity to ventilate their respective positions on the matter. The
Complaint shows that the Conditional Deeds of Sale were executed on November 29, 1973, and payments were due on
both Conditional Deeds of Sale on November 15, 1974. Article 114442 of the Civil Code provides that actions based upon
a written contract must be brought within ten years from the time the right of action accrues. Non-fulfillment of the
obligation to pay on the last due date, that is, on November 15, 1974, would give rise to an action by the vendor, which
date of reckoning may also apply to any action by the vendee to determine his right under R.A. No. 6552. The vendee,
respondent herein, filed this case on March 16, 2001, which is clearly beyond the 10-year prescriptive period; hence, the
action has prescribed.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals, dated December 11, 2006, in CA-G.R. CV No.
85877 and its Resolution dated September 4, 2007 are REVERSED and SET ASIDE. The Decision of the Regional Trial Court
of Manila, Branch I, dated August 1, 2005 in Civil Case No. 01-100411, dismissing the case for lack of merit, is REINSTATED.

Diego v. Diego

G.R. No. 179965

February 20, 2013

DECISION
DEL CASTILLO, J.:

It is settled jurisprudence, to the point of being elementary, that an agreement which stipulates that the seller shall
execute a deed of sale only upon or after tl1ll payment of the purchase price is a contract to sell, not a contract of sale.
In Reyes v. Tuparan, 1 this Court declared in categorical terms that "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price, the contract is only a contract to sell.
The aforecited stipulation shows that the vendors reserved title to the subject property until full payment of the
purchase price."

In this case, it is not disputed as in tact both parties agreed that the deed of sale shall only be executed upon payment of
the remaining balance of the purchase price. Thus, pursuant to the above stated jurisprudence, we similarly declare that
the transaction entered into by the parties is a contract to sell.

Before us is a Petition for Review on Certiorari2 questioning the June 29, 2007 Decision3 and the October 3, 2007
Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 86512, which affirmed the April 19, 2005 Decision5 of the
Regional Trial Court (RTC), Branch 40, of Dagupan City in Civil Case No. 99-02971-D.

Factual Antecedents

In 1993, petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, respondent herein, entered into an oral contract to
sell covering Nicolas’s share, fixed at ₱500,000.00, as co-owner of the family’s Diego Building situated in Dagupan City.
Rodolfo made a downpayment of ₱250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of ₱250,000.00. However, Rodolfo failed to pay the remaining balance.

Meanwhile, the building was leased out to third parties, but Nicolas’s share in the rents were not remitted to him by
herein respondent Eduardo, another brother of Nicolas and designated administrator of the Diego Building. Instead,
Eduardo gave Nicolas’s monthly share in the rents to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and
Eduardo failed to render an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.

Thus, on May 17, 1999, Nicolas filed a Complaint6 against Rodolfo and Eduardo before the RTC of Dagupan City and
docketed as Civil Case No. 99-02971-D. Nicolas prayed that Eduardo be ordered to render an accounting of all the
transactions over the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the rents; and
that Eduardo and Rodolfo be held solidarily liable for attorney’s fees and litigation expenses.

Rodolfo and Eduardo filed their Answer with Counterclaim7 for damages and attorney’s fees. They argued that Nicolas
had no more claim in the rents in the Diego Building since he had already sold his share to Rodolfo. Rodolfo admitted
having remitted only ₱250,000.00 to Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas
only after the latter shall have executed a deed of absolute sale.

Ruling of the Regional Trial Court

After trial on the merits, or on April 19, 2005, the trial court rendered its Decision8 dismissing Civil Case No. 99-02971-D
for lack of merit and ordering Nicolas to execute a deed of absolute sale in favor of Rodolfo upon payment by the latter
of the ₱250,000.00 balance of the agreed purchase price. It made the following interesting pronouncement:

It is undisputed that plaintiff (Nicolas) is one of the co-owners of the Diego Building, x x x. As a co-owner, he is entitled to
[his] share in the rentals of the said building. However, plaintiff [had] already sold his share to defendant Rodolfo Diego in
the amount of ₱500,000.00 and in fact, [had] already received a partial payment in the purchase price in the amount of
₱250,000.00. Defendant Eduardo Diego testified that as per agreement, verbal, of the plaintiff and defendant Rodolfo
Diego, the remaining balance of ₱250,000.00 will be paid upon the execution of the Deed of Absolute Sale. It was in the
year 1997 when plaintiff was being required by defendant Eduardo Diego to sign the Deed of Absolute Sale. Clearly,
defendant Rodolfo Diego was not yet in default as the plaintiff claims which cause [sic] him to refuse to sign [sic] document.
The contract of sale was already perfected as early as the year 1993 when plaintiff received the partial payment, hence,
he cannot unilaterally revoke or rescind the same. From then on, plaintiff has, therefore, ceased to be a co-owner of the
building and is no longer entitled to the fruits of the Diego Building.

Equity and fairness dictate that defendant [sic] has to execute the necessary document regarding the sale of his share to
defendant Rodolfo Diego. Correspondingly, defendant Rodolfo Diego has to perform his obligation as per their verbal
agreement by paying the remaining balance of ₱250,000.00.9

To summarize, the trial court ruled that as early as 1993, Nicolas was no longer entitled to the fruits of his aliquot share in
the Diego Building because he had "ceased to be a co-owner" thereof. The trial court held that when Nicolas received the
₱250,000.00 downpayment, a "contract of sale" was perfected. Consequently, Nicolas is obligated to convey such share
to Rodolfo, without right of rescission. Finally, the trial court held that the ₱250,000.00 balance from Rodolfo will only be
due and demandable when Nicolas executes an absolute deed of sale.

Ruling of the Court of Appeals

Nicolas appealed to the CA which sustained the trial court’s Decision in toto. The CA held that since there was a perfected
contract of sale between Nicolas and Rodolfo, the latter may compel the former to execute the proper sale document.
Besides, Nicolas’s insistence that he has since rescinded their agreement in 1997 proved the existence of a perfected sale.
It added that Nicolas could not validly rescind the contract because: "1) Rodolfo ha[d] already made a partial payment; 2)
Nicolas ha[d] already partially performed his part regarding the contract; and 3) Rodolfo opposes the rescission."10

The CA then proceeded to rule that since no period was stipulated within which Rodolfo shall deliver the balance of the
purchase price, it was incumbent upon Nicolas to have filed a civil case to fix the same. But because he failed to do so,
Rodolfo cannot be considered to be in delay or default.

Finally, the CA made another interesting pronouncement, that by virtue of the agreement Nicolas entered into with
Rodolfo, he had already transferred his ownership over the subject property and as a consequence, Rodolfo is legally
entitled to collect the fruits thereof in the form of rentals. Nicolas’ remaining right is to demand payment of the balance
of the purchase price, provided that he first executes a deed of absolute sale in favor of Rodolfo.

Nicolas moved for reconsideration but the same was denied by the CA in its Resolution dated October 3, 2007.

Hence, this Petition.

Issues

The Petition raises the following errors that must be rectified:

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE
BETWEEN PETITIONER NICOLAS DIEGO AND RESPONDENT RODOLFO DIEGO OVER NICOLAS’S SHARE OF THE BUILDING
BECAUSE THE SUSPENSIVE CONDITION HAS NOT YET BEEN FULFILLED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE CONTRACT OF SALE BETWEEN PETITIONER AND
RESPONDENT RODOLFO DIEGO REMAINS LEGALLY BINDING AND IS NOT RESCINDED GIVING MISPLACED RELIANCE ON
PETITIONER NICOLAS’ STATEMENT THAT THE SALE HAS NOT YET BEEN REVOKED.

III
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONER NICOLAS DIEGO ACTED LEGALLY AND
CORRECTLY WHEN HE UNILATERALLY RESCINDED AND REVOKED HIS AGREEMENT OF SALE WITH RESPONDENT RODOLFO
DIEGO CONSIDERING RODOLFO’S MATERIAL, SUBSTANTIAL BREACH OF THE CONTRACT.

IV

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS NO MORE RIGHTS OVER HIS SHARE IN
THE BUILDING, DESPITE THE FACT THAT THERE WAS AS YET NO PERFECTED CONTRACT OF SALE BETWEEN PETITIONER
NICOLAS DIEGO AND RODOLFO DIEGO AND THERE WAS YET NO TRANSFER OF OWNERSHIP OF PETITIONER’S SHARE TO
RODOLFO DUE TO THE NON-FULFILLMENT BY RODOLFO OF THE SUSPENSIVE CONDITION UNDER THE CONTRACT.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT RODOLFO HAS UNJUSTLY ENRICHED
HIMSELF AT THE EXPENSE OF PETITIONER BECAUSE DESPITE NOT HAVING PAID THE BALANCE OF THE PURCHASE PRICE
OF THE SALE, THAT RODOLFO HAS NOT YET ACQUIRED OWNERSHIP OVER THE SHARE OF PETITIONER NICOLAS, HE HAS
ALREADY BEEN APPROPRIATING FOR HIMSELF AND FOR HIS PERSONAL BENEFIT THE SHARE OF THE INCOME OF THE
BUILDING AND THE PORTION OF THE BUILDING ITSELF WHICH WAS DUE TO AND OWNED BY PETITIONER NICOLAS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN NOT AWARDING ACTUAL DAMAGES, ATTORNEY’S FEES AND LITIGATION
EXPENSES TO THE PETITIONER DESPITE THE FACT THAT PETITIONER’S RIGHTS HAD BEEN WANTONLY VIOLATED BY THE
RESPONDENTS.11

Petitioner’s Arguments

In his Petition, the Supplement12 thereon, and Reply,13 Nicolas argues that, contrary to what the CA found, there was no
perfected contract of sale even though Rodolfo had partially paid the price; that in the absence of the third element in a
sale contract – the price – there could be no perfected sale; that failing to pay the required price in full, Nicolas had the
right to rescind the agreement as an unpaid seller.

Nicolas likewise takes exception to the CA finding that Rodolfo was not in default or delay in the payment of the agreed
balance for his (Nicolas’s) failure to file a case to fix the period within which payment of the balance should be made. He
believes that Rodolfo’s failure to pay within a reasonable time was a substantial and material breach of the agreement
which gave him the right to unilaterally and extrajudicially rescind the agreement and be discharged of his obligations as
seller; and that his repeated written demands upon Rodolfo to pay the balance granted him such rights.

Nicolas further claims that based on his agreement with Rodolfo, there was to be no transfer of title over his share in the
building until Rodolfo has effected full payment of the purchase price, thus, giving no right to the latter to collect his share
in the rentals.

Finally, Nicolas bewails the CA’s failure to award damages, attorney’s fees and litigation expenses for what he believes is
a case of unjust enrichment at his expense.

Respondents’ Arguments

Apart from echoing the RTC and CA pronouncements, respondents accuse the petitioner of "cheating" them, claiming that
after the latter received the ₱250,000.00 downpayment, he "vanished like thin air and hibernated in the USA, he being an
American citizen,"14 only to come back claiming that the said amount was a mere loan.

They add that the Petition is a mere rehash and reiteration of the petitioner’s arguments below, which are deemed to
have been sufficiently passed upon and debunked by the appellate court.
Our Ruling

The Court finds merit in the Petition.

The contract entered into by Nicolas and Rodolfo was a contract to sell.

a) The stipulation to execute a deed of sale upon full payment of the purchase price is a unique and distinguishing
characteristic of a contract to sell. It also shows that the vendor reserved title to the property until full payment.

There is no dispute that in 1993, Rodolfo agreed to buy Nicolas’s share in the Diego Building for the price of ₱500,000.00.
There is also no dispute that of the total purchase price, Rodolfo paid, and Nicolas received, ₱250,000.00. Significantly, it
is also not disputed that the parties agreed that the remaining amount of ₱250,000.00 would be paid after Nicolas shall
have executed a deed of sale.

This stipulation, i.e., to execute a deed of absolute sale upon full payment of the purchase price, is a unique and
distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this Court ruled that a stipulation in the
contract, "[w]here the vendor promises to execute a deed of absolute sale upon the completion by the vendee of the
payment of the price," indicates that the parties entered into a contract to sell. According to this Court, this particular
provision is tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court ruled that the
agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved title to
the subject property until full payment of the purchase price."16

In Tan v. Benolirao,17 this Court, speaking through Justice Brion, ruled that the parties entered into a contract to sell as
revealed by the following stipulation:

d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and
deliver to the BUYER the appropriate Deed of Absolute Sale;18

The Court further held that "[j]urisprudence has established that where the seller promises to execute a deed of
absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell."19

b) The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of the parties show that they
agreed on a contract to sell, not of sale. The absence of a formal deed of conveyance is indicative of a contract to sell.

In San Lorenzo Development Corporation v. Court of Appeals,20 the facts show that spouses Miguel and Pacita Lu (Lu) sold
a certain parcel of land to Pablo Babasanta (Pablo). After several payments, Pablo wrote Lu demanding "the execution of
a final deed of sale in his favor so that he could effect full payment of the purchase price."21 To prove his allegation that
there was a perfected contract of sale between him and Lu, Pablo presented a receipt signed by Lu acknowledging receipt
of ₱50,000.00 as partial payment.22

However, when the case reached this Court, it was ruled that the transaction entered into by Pablo and Lu was only
a contract to sell, not a contract of sale. The Court held thus:

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (₱50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that
the seller reserves the ownership of the property until full payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly refused
to do so. In effect, Babasanta himself recognized that ownership of the property would not be transferred to him until
such time as he shall have effected full payment of the price. Moreover, had the sellers intended to transfer title, they
could have easily executed the document of sale in its required form simultaneously with their acceptance of the partial
payment, but they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected
contract to sell.23

In the instant case, records show that Nicolas signed a mere receipt24 acknowledging partial payment of ₱250,000.00 from
Rodolfo. It states:

July 8, 1993

Received the amount of [₱250,000.00] for 1 share of Diego Building as partial payment for Nicolas Diego.

(signed)
Nicolas Diego25

As we ruled in San Lorenzo Development Corporation v. Court of Appeals,26 the parties could have executed a document
of sale upon receipt of the partial payment but they did not. This is thus an indication that Nicolas did not intend to
immediately transfer title over his share but only upon full payment of the purchase price. Having thus reserved title over
the property, the contract entered into by Nicolas is a contract to sell. In addition, Eduardo admitted that he and Rodolfo
repeatedly asked Nicolas to sign the deed of sale27 but the latter refused because he was not yet paid the full amount. As
we have ruled in San Lorenzo Development Corporation v. Court of Appeals,28the fact that Eduardo and Rodolfo asked
Nicolas to execute a deed of sale is a clear recognition on their part that the ownership over the property still remains
with Nicolas. In fine, the totality of the parties’ acts convinces us that Nicolas never intended to transfer the ownership
over his share in the Diego Building until the full payment of the purchase price. Without doubt, the transaction agreed
upon by the parties was a contract to sell, not of sale.

In Chua v. Court of Appeals,29 the parties reached an impasse when the seller wanted to be first paid the consideration
before a new transfer certificate of title (TCT) is issued in the name of the buyer. Contrarily, the buyer wanted to secure a
new TCT in his name before paying the full amount. Their agreement was embodied in a receipt containing the following
terms: "(1) the balance of ₱10,215,000.00 is payable on or before 15 July 1989; (2) the capital gains tax is for the account
of x x x; and (3) if [the buyer] fails to pay the balance x x x the [seller] has the right to forfeit the earnest money x x x."30 The
case eventually reached this Court. In resolving the impasse, the Court, speaking through Justice Carpio, held that "[a]
perusal of the Receipt shows that the true agreement between the parties was a contract to sell."31 The Court noted that
"the agreement x x x was embodied in a receipt rather than in a deed of sale, ownership not having passed between
them."32 The Court thus concluded that "[t]he absence of a formal deed of conveyance is a strong indication that the
parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase
price."33 Thus, the "true agreement between the parties was a contract to sell."34

In the instant case, the parties were similarly embroiled in an impasse. The parties’ agreement was likewise embodied
only in a receipt. Also, Nicolas did not want to sign the deed of sale unless he is fully paid. On the other hand, Rodolfo did
not want to pay unless a deed of sale is duly executed in his favor. We thus say, pursuant to our ruling in Chua v. Court of
Appeals35 that the agreement between Nicolas and Rodolfo is a contract to sell.

This Court cannot subscribe to the appellate court’s view that Nicolas should first execute a deed of absolute sale in favor
of Rodolfo, before the latter can be compelled to pay the balance of the price. This is patently ridiculous, and goes against
every rule in the book. This pronouncement virtually places the prospective seller in a contract to sell at the mercy of the
prospective buyer, and sustaining this point of view would place all contracts to sell in jeopardy of being rendered
ineffective by the act of the prospective buyers, who naturally would demand that the deeds of absolute sale be first
executed before they pay the balance of the price. Surely, no prospective seller would accommodate.

In fine, "the need to execute a deed of absolute sale upon completion of payment of the price generally indicates that
it is a contract to sell, as it implies the reservation of title in the vendor until the vendee has completed the payment of
the price."36 In addition, "[a] stipulation reserving ownership in the vendor until full payment of the price is x x x typical in
a contract to sell."37 Thus, contrary to the pronouncements of the trial and appellate courts, the parties to this case only
entered into a contract to sell; as such title cannot legally pass to Rodolfo until he makes full payment of the agreed
purchase price.

c) Nicolas did not surrender or deliver title or possession to Rodolfo.

Moreover, there could not even be a surrender or delivery of title or possession to the prospective buyer Rodolfo. This
was made clear by the nature of the agreement, by Nicolas’s repeated demands for the return of all rents unlawfully and
unjustly remitted to Rodolfo by Eduardo, and by Rodolfo and Eduardo’s repeated demands for Nicolas to execute a deed
of sale which, as we said before, is a recognition on their part that ownership over the subject property still remains with
Nicolas.

Significantly, when Eduardo testified, he claimed to be knowledgeable about the terms and conditions of the transaction
between Nicolas and Rodolfo. However, aside from stating that out of the total consideration of ₱500,000.00, the amount
of ₱250,000.00 had already been paid while the remaining ₱250,000.00 would be paid after the execution of the Deed of
Sale, he never testified that there was a stipulation as regards delivery of title or possession.38

It is also quite understandable why Nicolas belatedly demanded the payment of the rentals. Records show that the
structural integrity of the Diego Building was severely compromised when an earthquake struck Dagupan City in 1990.39 In
order to rehabilitate the building, the co-owners obtained a loan from a bank.40 Starting May 1994, the property was
leased to third parties and the rentals received were used to pay off the loan.41 It was only in 1996, or after payment of
the loan that the co-owners started receiving their share in the rentals.42 During this time, Nicolas was in the USA but
immediately upon his return, he demanded for the payment of his share in the rentals which Eduardo remitted to Rodolfo.
Failing which, he filed the instant Complaint. To us, this bolsters our findings that Nicolas did not intend to immediately
transfer title over the property.

It must be stressed that it is anathema in a contract to sell that the prospective seller should deliver title to the property
to the prospective buyer pending the latter’s payment of the price in full. It certainly is absurd to assume that in the
absence of stipulation, a buyer under a contract to sell is granted ownership of the property even when he has not paid
the seller in full. If this were the case, then prospective sellers in a contract to sell would in all likelihood not be paid the
balance of the price.

This ponente has had occasion to rule that "[a] contract to sell is one where the prospective seller reserves the transfer of
title to the prospective buyer until the happening of an event, such as full payment of the purchase price. What the seller
obliges himself to do is to sell the subject property only when the entire amount of the purchase price has already been
delivered to him. ‘In other words, the full payment of the purchase price partakes of a suspensive condition, the
nonfulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective
seller without further remedies by the prospective buyer.’ It does not, by itself, transfer ownership to the buyer."43

The contract to sell is terminated or cancelled.

Having established that the transaction was a contract to sell, what happens now to the parties’ agreement?

The remedy of rescission is not available in contracts to sell.44 As explained in Spouses Santos v. Court of Appeals:45

In view of our finding in the present case that the agreement between the parties is a contract to sell, it follows that the
appellate court erred when it decreed that a judicial rescission of said agreement was necessary. This is because there
was no rescission to speak of in the first place. As we earlier pointed out, in a contract to sell, title remains with the vendor
and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the
purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or
serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This
is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory
condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and
cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains
the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor
should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it.
When the petitioners in the instant case repossessed the disputed house and lot for failure of private respondents to pay
the purchase price in full, they were merely enforcing the contract and not rescinding it. As petitioners correctly point out,
the Court of Appeals erred when it ruled that petitioners should have judicially rescinded the contract pursuant to Articles
1592 and 1191 of the Civil Code. Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It
does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to
sales of immovable property. Neither provision is applicable in the present case.46

Similarly, we held in Chua v. Court of Appeals47 that "Article 1592 of the Civil Code permits the buyer to 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 notarial act. However, Article 1592 does not apply to a contract to sell where the seller reserves the ownership until
full payment of the price,"48 as in this case.1âwphi1

Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the purchase price, the contract to sell
was deemed terminated or cancelled.49 As we have held in Chua v. Court of Appeals,50 "[s]ince the agreement x x x is a
mere contract to sell, the full payment of the purchase price partakes of a suspensive condition. The non-fulfillment of
the condition prevents the obligation to sell from arising and ownership is retained by the seller without further
remedies by the buyer." Similarly, we held in Reyes v. Tuparan51 that "petitioner’s obligation to sell the subject properties
becomes demandable only upon the happening of the positive suspensive condition, which is the respondent’s full
payment of the purchase price. Without respondent’s full payment, there can be no breach of contract to speak of
because petitioner has no obligation yet to turn over the title. Respondent’s failure to pay in full the purchase price in
full is not the breach of contract contemplated under Article 1191 of the New Civil Code but rather just an event that
prevents the petitioner from being bound to convey title to respondent." Otherwise stated, Rodolfo has no right to compel
Nicolas to transfer ownership to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no
obligation to transfer his ownership over his share in the Diego Building to Rodolfo.52

Thus, it was erroneous for the CA to rule that Nicolas should have filed a case to fix the period for Rodolfo’s payment of
the balance of the purchase price. It was not Nicolas’s obligation to compel Rodolfo to pay the balance; it was Rodolfo’s
duty to remit it.

It would appear that after Nicolas refused to sign the deed as there was yet no full payment, Rodolfo and Eduardo hired
the services of the Daroya Accounting Office "for the purpose of estimating the amount to which [Nicolas] still owes
[Rodolfo] as a consequence of the unconsummated verbal agreement regarding the former’s share in the co-ownership
of [Diego Building] in favor of the latter."53 According to the accountant’s report, after Nicolas revoked his agreement with
Rodolfo due to non-payment, the downpayment of ₱250,000.00 was considered a loan of Nicolas from Rodolfo. 54 The
accountant opined that the ₱250,000.00 should earn interest at 18%.55 Nicolas however objected as regards the
imposition of interest as it was not previously agreed upon. Notably, the contents of the accountant’s report were not
disputed or rebutted by the respondents. In fact, it was stated therein that "[a]ll the bases and assumptions made
particularly in the fixing of the applicable rate of interest have been discussed with [Eduardo]."56

We find it irrelevant and immaterial that Nicolas described the termination or cancellation of his agreement with Rodolfo
as one of rescission. Being a layman, he is understandably not adept in legal terms and their implications. Besides, this
Court should not be held captive or bound by the conclusion reached by the parties. The proper characterization of an
action should be based on what the law says it to be, not by what a party believed it to be. "A contract is what the law
defines it to be x x x and not what the contracting parties call it."57

On the other hand, the respondents’ additional submission – that Nicolas cheated them by "vanishing and hibernating" in
the USA after receiving Rodolfo’s ₱250,000.00 downpayment, only to come back later and claim that the amount he
received was a mere loan – cannot be believed. How the respondents could have been cheated or disadvantaged by
Nicolas’s leaving is beyond comprehension. If there was anybody who benefited from Nicolas’s perceived "hibernation",
it was the respondents, for they certainly had free rein over Nicolas’s interest in the Diego Building. Rodolfo put off
payment of the balance of the price, yet, with the aid of Eduardo, collected and appropriated for himself the rents which
belonged to Nicolas.

Eduardo is solidarily liable with Rodolfo as regards the share of Nicolas in the rents.

For his complicity, bad faith and abuse of authority as the Diego Building administrator, Eduardo must be held solidarily
liable with Rodolfo for all that Nicolas should be entitled to from 1993 up to the present, or in respect of actual damages
suffered in relation to his interest in the Diego Building. Eduardo was the primary cause of Nicolas’s loss, being directly
responsible for making and causing the wrongful payments to Rodolfo, who received them under obligation to return
them to Nicolas, the true recipient.1âwphi1 As such, Eduardo should be principally responsible to Nicolas as well. Suffice
it to state that every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith; and every person who, contrary to law, wilfully or negligently
causes damage to another, shall indemnify the latter for the same.58

Attorney’s fees and other costs.

"Although attorney’s fees are not allowed in the absence of stipulation, the court can award the same when the
defendant’s act or omission has compelled the plaintiff to incur expenses to protect his interest or where the defendant
acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim." 59 In the
instant case, it is beyond cavil that petitioner was constrained to file the instant case to protect his interest because of
respondents’ unreasonable and unjustified refusal to render an accounting and to remit to the petitioner his rightful share
in rents and fruits in the Diego Building. Thus, we deem it proper to award to petitioner attorney’s fees in the amount of
₱50,000.00,60 as well as litigation expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 for each court
appearance by his lawyer or lawyers, as prayed for.

WHEREFORE, premises considered, the Petition is GRANTED. The June 29, 2007 Decision and October 3, 2007 Resolution
of the Court of Appeals in CA-G.R. CV No. 86512, and the April 19, 2005 Decision of the Dagupan City Regional Trial Court,
Branch 40 in Civil Case No. 99-02971-D, are hereby ANNULLED and SET ASIDE.

The Court further decrees the following:

1. The oral contract to sell between petitioner Nicolas P. Diego and respondent Rodolfo P. Diego
is DECLARED terminated/cancelled;

2. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to surrender possession and control, as the
case may be, of Nicolas P. Diego’s share in the Diego Building. Respondents are further commanded to return or
surrender to the petitioner the documents of title, receipts, papers, contracts, and all other documents in any
form or manner pertaining to the latter’s share in the building, which are deemed to be in their unauthorized and
illegal possession;

3. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED to immediately render an accounting of all
the transactions, from the period beginning 1993 up to the present, pertaining to Nicolas P. Diego’s share in the
Diego Building, and thereafter commanded to jointly and severally remit to the petitioner all rents, monies,
payments and benefits of whatever kind or nature pertaining thereto, which are hereby deemed received by them
during the said period, and made to them or are due, demandable and forthcoming during the said period and
from the date of this Decision, with legal interest from the filing of the Complaint;

4. Respondents Rodolfo P. Diego and Eduardo P. Diego are ORDERED, immediately and without further delay upon
receipt of this Decision, to solidarily pay the petitioner attorney’s fees in the amount of ₱50,000.00; litigation
expenses in the amount of ₱20,000.00 and the sum of ₱1,000.00 per counsel for each court appearance by his
lawyer or lawyers;
 5. The payment of ₱250,000.00 made by respondent Rodolfo P. Diego, with legal interest from the filing of the
Complaint, shall be APPLIED, by way of compensation, to his liabilities to the petitioner and to answer for all
damages and other awards and interests which are owing to the latter under this Decision; and

6. Respondents’ counterclaim is DISMISSED.

Ali Akang v. Municipality of Isulan

G.R. No. 186014

June 26, 2013

Contract to Sell vs. Contract of Sale

FACTS: Ali Akang (petitioner) is a member of the national and cultural community belonging to the Maguindanaon tribe
of Isulan, Province of Sultan Kudarat and the registered owner of a lot. Sometime in 1962, a two-hectare portion of the
property was sold by the petitioner in the amount of Php3,000 to the Municipality of Isulan, Province of Sultan Kudarat
(respondent) through then Isulan Mayor Datu Ampatuan under a Deed of Sale executed on July 18, 1962. The respondent
immediately took possession of the property and began construction of the municipal building.

Thirty-nine (39) years later or on October 26, 2001, the petitioner, together with his wife, Patao Talipasan, filed a civil
action for Recovery of Possession of Subject Property and/or Quieting of Title thereon and Damages against the
respondent, represented by its Municipal Mayor, et al. In his complaint, the petitioner alleged, among others, that the
agreement was one to sell, which was not consummated as the purchase price was not paid.

In its answer, the respondent denied the petitioner’s allegations, claiming, among others: that the petitioner’s cause of
action was already barred by laches; that the Deed of Sale was valid; and that it has been in open, continuous and exclusive
possession of the property for forty (40) years.

After trial, the RTC rendered judgment in favor of the petitioner. The RTC construed the Deed of Sale as a contract to sell,
based on the wording of the contract, which allegedly showed that the consideration was still to be paid and delivered on
some future date – a characteristic of a contract to sell. As regards the payment of the purchase price, the RTC

found the same to have not been made by the respondent. According to the RTC, the Municipal Voucher is not a
competent documentary proof of payment but is merely evidence of admission by the respondent that on the date of the
execution of the Deed of Sale, the consideration stipulated therein had not yet been paid.

The CA reversed the held of the RTC and upheld the validity of the sale. The CA sustained the respondent’s arguments and
ruled that the petitioner is not entitled to recover ownership and possession of the property as the Deed of Sale already
transferred ownership thereof to the respondent. The CA ruled that the Deed of Sale is not a mere contract to sell but a
perfected contract of sale. There was no express reservation of ownership of title by the petitioner and the fact that there
was yet no payment at the time of the sale does not affect the validity or prevent the perfection of the sale. As regards
the issue of whether payment of the price was made, the CA ruled that there was actual payment, as evidenced by the
Municipal Voucher, which the petitioner himself prepared and signed despite the lack of approval of the Municipal
Treasurer. Even if he was not paid the consideration, it does not affect the validity of the contract of sale for it is not the
fact of payment of the price that determines its validity.

ISSUE: Whether or not the Deed of Sale is a contract to sell or a contract of sale.

HELD: The Deed of Sale is a valid contract of Sale.

A contract of sale is defined under Article 1458 of the Civil Code: By the contract of sale, one of the contracting parties
obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price
certain in money or its equivalent.

The elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to transfer ownership in
exchange for the price; (b) determinate subject matter; and (c) price certain in money or its equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code:

A bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to
the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold, whereas in a contract
to sell, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full payment of the
purchase price.

The Deed of Sale executed by the petitioner and the respondent is a perfected contract of sale, all its elements being
present. There was mutual agreement between them to enter into the sale, as shown by their free and voluntary signing
of the contract. There was also an absolute transfer of ownership of the property by the petitioner to the respondent as
shown in the stipulation: "x x x I petitioner hereby sell, transfer, cede, convey and assign as by these presents do have
sold, transferred, ceded, conveyed and assigned, x x x." There was also a determinate subject matter, that is, the
twohectare parcel of land as described in the Deed of Sale. Lastly, the price or consideration is at ₱3,000.00, which was to
be paid after the execution of the contract. The fact that no express reservation of ownership or title to the property can
be found in the Deed of Sale bolsters the absence of such intent, and the contract, therefore, could not be one to sell.

Heirs of Ignacio v. Home Bankers Savings and Trust Company

G.R. No. 177783

January 23, 2013

DECISION

VILLARAMA, JR., J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 assailing the Decision1 dated July 18, 2006 and
Resolution2 dated May 2, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 73551. The CA reversed the Decision3 dated
June 15, 1999 of the Regional Trial Court (RTC) of Pasig City, Branch 151 in Civil Case No. 58980.

The factual antecedents:

In August 1981, petitioner Fausto C. Ignacio mortgaged two parcels of land to Home Savings Bank and Trust Company, the
predecessor of respondent Home Bankers Savings and Trust Company, as security for the ₱500,000.00 loan extended to
him by said bank. These properties which are located in Cabuyao, Laguna are covered by Transfer Certificate of Title Nos.
(T-40380) T-8595 and (T-45804) T-8350 containing an area of 83,303 square meters and 120,110 square meters,
respectively.4

When petitioner defaulted in the payment of his loan obligation, respondent bank proceeded to foreclose the real estate
mortgage. At the foreclosure sale held on January 26, 1983, respondent bank was the highest bidder for the sum of
₱764,984.67. On February 8, 1983, the Certificate of Sale issued to respondent bank was registered with the Registry of
Deeds of Calamba, Laguna. With the failure of petitioner to redeem the foreclosed properties within one year from such
registration, title to the properties were consolidated in favor of respondent bank. Consequently, TCT Nos. T-8595 and T-
8350 were cancelled and TCT Nos. 111058 and 111059 were issued in the name of respondent bank.5

Despite the lapse of the redemption period and consolidation of title in respondent bank, petitioner offered to repurchase
the properties. While the respondent bank considered petitioner's offer to repurchase, there was no repurchase contract
executed. The present controversy was fuelled by petitioner's stance that a verbal repurchase/compromise agreement
was actually reached and implemented by the parties.

In the meantime, respondent bank made the following dispositions of the foreclosed properties already titled in its name:

TCT No. 111059 (Subdivided into six lots with individual titles - TCT Nos. 117771, 117772, 117773, 117774, 117775 and
117776)

A. TCT No. 117771 (16,350 sq.ms.) - Sold to Fermin Salvador and Bella Salvador under Deed of Absolute Sale dated
May 23, 1984 for the price of ₱150,000.00

B. TCT No. 11772 (82,569 sq.ms. subdivided into 2 portions

1) Lot 3-B-1 (35,447 sq.ms.) - Sold to Dr. Oscar Remulla and Natividad Pagtakhan, Dr. Edilberto Torres and
Dra. Rebecca Amores under Deed of Absolute Sale dated April 17, 1985 for the price of ₱150,000.00

2) Lot 3-B-2 covered by separate title TCT No. 124660 (Subdivided into 3 portions -

Lot 3-B-2-A (15,000 sq.ms.) - Sold to Dr. Myrna del Carmen Reyes under Deed of Absolute Sale
dated March 23, 1987 for the price of ₱150,000.00

Lot 3-B-2-B (15,000 sq.ms.) - Sold to Dr. Rodito Boquiren under Deed of Absolute Sale dated March
23, 1987 for the price of ₱150,000.00

Lot 3-B-2-C (17,122 sq.ms.) covered by TCT No. T-154568 -

C. TCT No.117773 (17,232 sq.ms.) - Sold to Rizalina Pedrosa under Deed of Absolute Sale dated June 4, 1984 for
the price of ₱150,000.00

The expenses for the subdivision of lots covered by TCT No. 111059 and TCT No. 117772 were shouldered by petitioner
who likewise negotiated the above-mentioned sale transactions. The properties covered by TCT Nos. T-117774 to 117776
are still registered in the name of respondent bank.6

In a letter addressed to respondent bank dated July 25, 1989, petitioner expressed his willingness to pay the amount of
₱600,000.00 in full, as balance of the repurchase price, and requested respondent bank to release to him the remaining
parcels of land covered by TCT Nos. 111058 and T-154658 ("subject properties").7 Respondent bank however, turned
down his request. This prompted petitioner to cause the annotation of an adverse claim on the said titles on September
18, 1989.8

Prior to the annotation of the adverse claim, on August 24, 1989, the property covered by TCT No. 154658 was sold by
respondent bank to respondent spouses Phillip and Thelma Rodriguez, without informing the petitioner. On October 6,
1989, again without petitioner's knowledge, respondent bank sold the property covered by TCT No T-111058 to
respondents Phillip and Thelma Rodriguez, Catherine M. Zuñiga, Reynold M. Zuñiga and Jeannette M. Zuñiga.9

On December 27, 1989, petitioner filed an action for specific performance and damages in the RTC against the respondent
bank. As principal relief, petitioner sought in his original complaint the reconveyance of the subject properties after his
payment of ₱600,000.00.10 Respondent bank filed its Answer denying the allegations of petitioner and asserting that it
was merely exercising its right as owner of the subject properties when the same were sold to third parties.

For failure of respondent bank to appear during the pre-trial conference, it was declared as in default and petitioner was
allowed to present his evidence ex parte on the same date (September 3, 1990). Petitioner simultaneously filed an "Ex-
Parte Consignation" tendering the amount of ₱235,000.00 as balance of the repurchase price.11 On September 7, 1990,
the trial court rendered judgment in favor of petitioner. Said decision, as well as the order of default, were subsequently
set aside by the trial court upon the filing of a motion for reconsideration by the respondent bank.12

In its Order dated November 19, 1990, the trial court granted the motion for intervention filed by respondents Phillip and
Thelma Rodriguez, Catherine Zuñiga, Reynold Zuñiga and Jeannette Zuñiga. Said intervenors asserted their status as
innocent purchasers for value who had no notice or knowledge of the claim or interest of petitioner when they bought
the properties already registered in the name of respondent bank. Aside from a counterclaim for damages against the
petitioner, intervenors also prayed that in the event respondent bank is ordered to reconvey the properties, respondent
bank should be adjudged liable to the intervenors and return all amounts paid to it.13

On July 8, 1991, petitioner amended his complaint to include as alternative relief under the prayer for reconveyance the
payment by respondent bank of the prevailing market value of the subject properties "less whatever remaining obligation
due the bank by reason of the mortgage under the terms of the compromise agreement.14

On June 15, 1999, the trial court rendered its Decision, the dispositive portion of which reads:

WHEREFORE, findings [sic] the facts aver[r]ed in the complaint supported by preponderance of evidences adduced,
judgment is hereby rendered in favor of the plaintiff and against the defendant and intervenors by:

1. Declaring the two Deeds of Sale executed by the defendant in favor of the intervenors as null and void and the
Register of Deeds in Calamba, Laguna is ordered to cancel and/or annul the two Transfer Certificate of Titles No.
T-154658 and TCT No. T-111058 issued to the intervenors.

2. Ordering the defendant to refund the amount of ₱1,004,250.00 to the intervenors as the consideration of the
sale of the two properties.

3. Ordering the defendant to execute the appropriate Deed of Reconveyance of the two (2) properties in favor of
the plaintiff after the plaintiff pays in full the amount of ₱600,000.00 as balance of the repurchase price.

4. Ordering the defendant bank to pay plaintiff the sum of ₱50,000.00 as attorney's fees.

5. Dismissing the counterclaim of the defendant and intervenors against the plaintiff.

Costs against the defendant.

SO ORDERED.15

The trial court found that respondent bank deliberately disregarded petitioner's substantial payments on the total
repurchase consideration. Reference was made to the letter dated March 22, 1984 (Exhibit "I") 16 as the authority for
petitioner in making the installment payments directly to the Universal Properties, Inc. (UPI), respondent bank's collecting
agent. Said court concluded that the compromise agreement amounts to a valid contract of sale between petitioner, as
Buyer, and respondent bank, as Seller. Hence, in entertaining other buyers for the same properties already sold to
petitioner with intention to increase its revenues, respondent bank acted in bad faith and is thus liable for damages to the
petitioner. Intervenors were likewise found liable for damages as they failed to exercise due diligence before buying the
subject properties.

Respondent bank appealed to the CA which reversed the trial court's ruling, as follows:
WHEREFORE, the foregoing premises considered, the instant appeal is hereby GRANTED. Accordingly, the assailed decision
is hereby REVERSED and SET ASIDE.

SO ORDERED.17

The CA held that by modifying the terms of the offer contained in the March 22, 1984 letter of respondent bank, petitioner
effectively rejected the original offer with his counter-offer. There was also no written conformity by respondent bank's
officers to the amended conditions for repurchase which were unilaterally inserted by petitioner. Consequently, no
contract of repurchase was perfected and respondent bank acted well within its rights when it sold the subject properties
to herein respondents-intervenors.

As to the receipts presented by petitioner allegedly proving the installment payments he had completed, the CA said that
these were not payments of the repurchase price but were actually remittances of the payments made by petitioner's
buyers for the purchase of the foreclosed properties already titled in the name of respondent bank. It was noted that two
of these receipts (Exhibits "K" and "K-1")18 were issued to Fermin Salvador and Rizalina Pedrosa, the vendees of two
subdivided lots under separate Deeds of Absolute Sale executed in their favor by the respondent bank. In view of the
attendant circumstances, the CA concluded that petitioner acted merely as a broker or middleman in the sales transactions
involving the foreclosed properties. Lastly, the respondents-intervenors were found to be purchasers who bought the
properties in good faith without notice of petitioner's interest or claim. Nonetheless, since there was no repurchase
contract perfected, the sale of the subject properties to respondents-intervenors remains valid and binding, and the issue
of whether the latter were innocent purchasers for value would be of no consequence.

Petitioner's motion for reconsideration was likewise denied by the appellate court.

Hence, this petition alleging that:

A.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF
THE TRIAL COURT THAT THERE WAS A PERFECTED CONTRACT TO REPURCHASE BETWEEN PETITIONER AND
RESPONDENT-BANK.

B.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF
THE TRIAL COURT THAT PETITIONER DID NOT ACT AS BROKER IN THE SALE OF THE FORECLOSED PROPERTIES AND
THUS FAILED TO CONSIDER THE EXISTENCE OF OFFICIAL RECEIPTS ISSUED IN THE NAME OF THE PETITIONER THAT
ARE DULY NOTED FOR HIS ACCOUNT.

C.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF
THE TRIAL COURT THAT RESPONDENT-BANK DID NOT HAVE THE RIGHT TO DISPOSE THE SUBJECT PROPERTIES.

D.

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE FINDING OF
THE TRIAL COURT THAT RESPONDENTS-INTERVENORS ARE NOT INNOCENT PURCHASERS FOR VALUE IN GOOD
FAITH.19

It is to be noted that the above issues raised by petitioner alleged grave abuse of discretion committed by the CA, which
is proper in a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, but not in the present
petition for review on certiorari under Rule 45.
The core issue for resolution is whether a contract for the repurchase of the foreclosed properties was perfected between
petitioner and respondent bank.

The Court sustains the decision of the CA.

Contracts are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.20 The requisite acceptance of the offer is expressed in Article
1319 of the Civil Code which states:

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a
counter-offer.

In Palattao v. Court of Appeals,21 this Court held that if the acceptance of the offer was not absolute, such acceptance is
insufficient to generate consent that would perfect a contract. Thus:

Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds. Once there
is concurrence between the offer and the acceptance upon the subject matter, consideration, and terms of payment, a
contract is produced. The offer must be certain. To convert the offer into a contract, the acceptance must be absolute and
must not qualify the terms of the offer; it must be plain, unequivocal, unconditional, and without variance of any sort from
the proposal. A qualified acceptance, or one that involves a new proposal, constitutes a counter-offer and is a rejection of
the original offer. Consequently, when something is desired which is not exactly what is proposed in the offer, such
acceptance is not sufficient to generate consent because any modification or variation from the terms of the offer annuls
the offer.22

The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the
minds.23 Where a party sets a different purchase price than the amount of the offer, such acceptance was qualified which
can be at most considered as a counter-offer; a perfected contract would have arisen only if the other party had accepted
this counter-offer.24 In Villanueva v. Philippine National Bank25 this Court further elucidated on the meaning of unqualified
acceptance, as follows:

…While it is impossible to expect the acceptance to echo every nuance of the offer, it is imperative that it assents to those
points in the offer which, under the operative facts of each contract, are not only material but motivating as well. Anything
short of that level of mutuality produces not a contract but a mere counter-offer awaiting acceptance. More particularly
on the matter of the consideration of the contract, the offer and its acceptance must be unanimous both on the rate of
the payment and on its term. An acceptance of an offer which agrees to the rate but varies the term is
ineffective.26 (Emphasis supplied)

Petitioner submitted as evidence of a perfected contract of repurchase the March 22, 1984 letter (Exhibit "I")27 from Rita
B. Manuel, then President of UPI, a corporation formed by respondent bank to dispose of its acquired assets, with
notations handwritten by petitioner himself. Said letter reads:

March 22, 1984

Honorable Judge Fausto Ignacio

412 Bagumbayan Street, Pateros
Metro Manila

Dear Judge Ignacio:

Your proposal to repurchase your foreclosed properties located at Cabuyao, Laguna consisting of a total area of 203,413
square meters has been favorably considered subject to the following terms and conditions:
 1) Total Selling Price shall be ₱950,000.00

2) Downpayment of ₱150,00000 with the balance

Payable in Three (3) equal installments
as follows:

1st Installment - P 266,667 - on or before May 31, '84

2nd Installment - P 266,667 - on or before Sept. 31, '84

3rd Installment - P 266,666 - on or before Jan. 30, '85

TOTAL - P 800,000.00

3) All expenses pertinent to the subdivision of the parcel of land consisting of 120,110 square meters shall be for
your account.

Thank you,

Very truly yours,

RITA B. MANUEL
President

According to petitioner, he wrote the notations in the presence of a certain Mr. Lazaro, the representative of Mrs. Manuel
(President), and a certain Mr. Fajardo, which notations supposedly represent their "compromise agreement."28 These
notations indicate that the repurchase price would be ₱900,000.00 which shall be paid as follows: ₱150,000 - end of May
'84; ₱150,000 - end of June '84; Balance - "Depending on financial position". Petitioner further alleged the following
conditions of the verbal agreement: (1) respondent bank shall release the equivalent land area for payments made by
petitioner who shall shoulder the expenses for subdivision of the land; (2) in case any portion of the subdivided land is
sold by petitioner, a separate document of sale would be executed directly to the buyer; (3) the remaining portion of the
properties shall not be subject of respondent bank's transaction without the consent and authority of petitioner; (4) the
petitioner shall continue in possession of the properties and whatever portion still remaining, and attending to the needs
of its tenants; and (5) payments shall be made directly to UPI.29

The foregoing clearly shows that petitioner's acceptance of the respondent bank's terms and conditions for the repurchase
of the foreclosed properties was not absolute. Petitioner set a different repurchase price and also modified the terms of
payment, which even contained a unilateral condition for payment of the balance (₱600,000), that is, depending on
petitioner's "financial position." The CA thus considered the qualified acceptance by petitioner as a counter-proposal
which must be accepted by respondent bank. However, there was no evidence of any document or writing showing the
conformity of respondent bank's officers to this counter-proposal.

Petitioner contends that the receipts issued by UPI on his installment payments are concrete proof -- despite denials to
the contrary by respondent bank -- that there was an implied acceptance of his counter-proposal and that he did not
merely act as a broker for the sale of the subdivided portions of the foreclosed properties to third parties. Since all these
receipts, except for two receipts issued in the name of Fermin Salvador and Rizalina Pedrosa, were issued in the name of
petitioner instead of the buyers themselves, petitioner emphasizes that the payments were made for his account.
Moreover, petitioner asserts that the execution of the separate deeds of sale directly to the buyers was in pursuance of
the perfected repurchase agreement with respondent bank, such an arrangement being "an accepted practice to save on
taxes and shortcut paper works."

The Court is unconvinced.

In Adelfa Properties, Inc. v. CA,30 the Court ruled that:

x x x The rule is that except where a formal acceptance is so required, although the acceptance must be affirmatively and
clearly made and must be evidenced by some acts or conduct communicated to the offeror, it may be made either in a
formal or an informal manner, and may be shown by acts, conduct, or words of the accepting party that clearly manifest
a present intention or determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts,
conduct, or words of a party recognizing the existence of the contract of sale.31

Even assuming that the bank officer or employee whom petitioner claimed he had talked to regarding the March 22, 1984
letter had acceded to his own modified terms for the repurchase, their supposed verbal exchange did not bind respondent
bank in view of its corporate nature. There was no evidence that said Mr. Lazaro or Mr. Fajardo was authorized by
respondent bank's Board of Directors to accept petitioner's counter-proposal to repurchase the foreclosed properties at
the price and terms other than those communicated in the March 22, 1984 letter. As this Court ruled in AF Realty &
Development, Inc. v. Dieselman Freight Services, Co.32

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by
the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board
of directors of a corporation validly

delegate some of its functions to individual officers or agents appointed by it.1âwphi1 Thus, contracts or acts of a
corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the
corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held
not binding on the corporation.33

Thus, a corporation can only execute its powers and transact its business through its Board of Directors and through its
officers and agents when authorized by a board resolution or its by-laws.34

In the absence of conformity or acceptance by properly authorized bank officers of petitioner's counter-proposal, no
perfected repurchase contract was born out of the talks or negotiations between petitioner and Mr. Lazaro and Mr.
Fajardo. Petitioner therefore had no legal right to compel respondent bank to accept the ₱600,000 being tendered by him
as payment for the supposed balance of repurchase price.

A contract of sale is consensual in nature and is perfected upon mere meeting of the minds. When there is merely an offer
by one party without acceptance of the other, there is no contract.35 When the contract of sale is not perfected, it cannot,
as an independent source of obligation, serve as a binding juridical relation between the parties.36

In sum, we find the ruling of the CA more in accord with the established facts and applicable law and jurisprudence.
Petitioner's claim of utmost accommodation by respondent bank of his own terms for the repurchase of his foreclosed
properties are simply contrary to normal business practice. As aptly observed by the appellate court:

The submission of the plaintiff-appellee is unimpressive.

First, if the counter-proposal was mutually agreed upon by both the plaintiff-appellee and defendant-appellant, how come
not a single signature of the representative of the defendant-appellant was affixed thereto. Second, it is inconceivable
that an agreement of such great importance, involving two personalities who are both aware and familiar of the practical
and legal necessity of reducing agreements into writing, the plaintiff-appellee, being a lawyer and the defendant-
appellant, a banking institution, not to formalize their repurchase agreement. Third, it is quite absurd and unusual that
the defendant-appellant could have acceded to the condition that the balance of the payment of the repurchase price
would depend upon the financial position of the plaintiff-appellee. Such open[-]ended and indefinite period for payment
is hardly acceptable to a banking institution like the defendant-appellant whose core existence fundamentally depends
upon its financial arrangements and transactions which, most, if not all the times are intended to bear favorable outcome
to its business. Last, had there been a repurchase agreement, then, there should have been titles or deeds of conveyance
issued in favor of the plaintiff-appellee. But as it turned out, the plaintiff-appellee never had any land deeded or titled in
his name as a result of the alleged repurchase agreement. All these, reinforce the conclusion that the counter-proposal
was unilaterally made and inserted by the plaintiff-appellee in Exhibit "I" and could not have been accepted by the
defendant-appellant, and that a different agreement other than a repurchase agreement was perfected between them.37

Petitioner Fausto C. Ignacio passed away on November 11, 2008 and was substituted by his heirs, namely: Marfel D.
Ignacio-Manalo, Milfa D. Ignacio-Manalo and Faustino D. Ignacio.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated July 18, 2006 and Resolution dated May
2, 2007 of the Court of Appeals in CA-G.R. CV No. 73551 are hereby AFFIRMED.

With costs against the petitioners.

United Muslims and Christian Urban Poor Assoc. v. BRYC-V Dev. Corp.

G.R. No. 179653

July 31, 2009

DECISION

NACHURA, J.:

This petition for review on certiorari seeks to set aside the Decision[1] of the Court of Appeals (CA) in CA G.R. CV
No. 62557 which affirmed in toto the Decision[2] of the Regional Trial Court (RTC), Branch 16, Zamboanga City in Civil Case
No. 467(4544).

The facts are simple.

Respondent Sea Foods Corporation (SFC) is the registered owner of Lot No. 300 located in Lower
Calainan, Zamboanga City and covered by Transfer Certificate of Title (TCT) No. 3182 (T-576).

Sometime in 1991, petitioner United Muslim and Christian Urban Poor Association, Inc. (UMCUPAI), an
organization of squatters occupying Lot No. 300, through its President, Carmen T. Diola, initiated negotiations with SFC
for the purchase thereof. UMCUPAI expressed its intention to buy the subject property using the proceeds of its pending
loan application with National Home Mortgage Finance Corporation (NHMF). Thereafter, the parties executed a Letter of
Intent to Sell by [SFC] and Letter of Intent to Purchase by UMCUPAI, providing, in pertinent part:

WHEREAS, [SFC] is the registered owner of a parcel [of] land designated as Lot No. 300 situated
in Lower Calarian, Zamboanga City, consisting of 61,736 square meters, and more particularly described
in Transfer Certificate of Title No. 576 of the Registry of Deeds of Zamboanga City;

WHEREAS, UMCUPAI, an association duly registered with the SEC (Registration No. 403410) and
duly accredited with the Presidential Commission for the Urban Poor, has approached [SFC] and
negotiated for the ACQUISITION of the above-described property of [SFC];
 WHEREAS, in pursuance to the negotiations between [SFC] and UMCUPAI, the latter has taken
steps with the proper government authorities particularly the Mayor of Zamboanga City and its City
Housing Board which will act as Originator in the acquisition of said property which will enable UMCUPAI
to avail of its Community Mortgage Program;

WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance
Corporation for a loan to pay the acquisition price of said land;

WHEREAS, as one of the steps required by the government authorities to initiate proceedings is
to receive a formal manifestation of Intent to Sell from [SFC];

NOW, THEREFORE, for and in consideration of the foregoing premises, the parties hereto agree
as follows:

1. [SFC] expressly declares its intention to sell Lot No. 300 with an area of 61,736 square meters
situated in Lower Calarian, Zamboanga City and covered by TCT No. 576 of the Registry of Deeds of
Zamboanga City to UMCUPAI at the price of P105.00 per square meter, free from all liens, charges and
encumbrances;

2. That UMCUPAI hereby expressly declares its intention to buy the aforesaid property and shall
endeavor to raise the necessary funds to acquire same at the abovementioned price of P105.00 per square
meter;

3. That the Absolute Deed of Sale shall be executed, signed and delivered together with the title
and all other pertinent documents upon full payment of the purchase price;

4. That [SFC] shall pay the capital gains tax and documentary stamps, Registration,
transfer tax and other expenses shall be paid by the UMCUPAI.[3]

However, the intended sale was derailed due to UMCUPAIs inability to secure the loan from NHMF as not all its members
occupying Lot No. 300 were willing to join the undertaking. Intent on buying the subject property, UMCUPAI, in a series
of conferences with SFC, proposed the subdivision of Lot No. 300 to allow the squatter-occupants to purchase a smaller
portion thereof.

Consequently, sometime in December 1994, Lot No. 300 was subdivided into three (3) parts covered by separate
titles:

1. Lot No. 300-A with an area of 41,460 square meters under TCT No. T-117,448;

2. Lot No. 300-B with an area of 1,405 square meters under TCT No. T-117,449; and

3. Lot No. 300-C with an area of 18,872 square meters under TCT No. T-117,450.

On January 11, 1995, UMCUPAI purchased Lot No. 300-A for P4,350,801.58. In turn, Lot No. 300-B was constituted
as road right of way and donated by SFC to the local government.
 UMCUPAI failed to acquire Lot No. 300-C for lack of funds. On March 5, 1995, UMCUPAI negotiated anew with
SFC and was given by the latter another three months to purchase Lot No. 300-C. However, despite the extension, the
three-month period lapsed with the sale not consummated because UMCUPAI still failed to obtain a loan from NHMF.
Thus, on July 20, 1995, SFC sold Lot No. 300-C for P2,547,585.00 to respondent BRYC-V Development Corporation (BRYC).

A year later, UMCUPAI filed with the RTC a complaint against respondents SFC and BRYC seeking to annul the sale
of Lot No. 300-C, and the cancellation of TCT No. T-121,523. UMCUPAI alleged that the sale between the respondents
violated its valid and subsisting agreement with SFC embodied in the Letter of Intent. According to UMCUPAI, the Letter
of Intent granted it a prior, better, and preferred right over BRYC in the purchase of Lot No. 300-C.

In refutation, BRYC said that UMCUPAIs complaint did not state a cause of action since UMCUPAI had
unequivocally recognized its ownership of Lot No. 300-C when UMCUPAI likewise sent BRYC a Letter of Intent dated August
18, 1995 imploring BRYC to re-sell the subject lot.

In a separate Answer, SFC countered that the Letter of Intent dated October 4, 1991 is not, and cannot be
considered, a valid and subsisting contract of sale. On the contrary, SFC averred that the document was drawn and
executed merely to accommodate UMCUPAI and enable it to comply with the loan documentation requirements of NHMF.
In all, SFC maintained that the Letter of Intent dated October 4, 1991 was subject to a condition i.e., payment of the
acquisition price, which UMCUPAI failed to do when it did not obtain the loan from NHMF.

After trial, the RTC dismissed UMCUPAIs complaint. The lower court found that the Letter of Intent was executed
to facilitate the approval of UMCUPAIs loan from NHMF for its intended purchase of Lot No. 300. According to the RTC,
the Letter of Intent was simply SFCs declaration of intention to sell, and not a promise to sell, the subject lot. On the whole,
the RTC concluded that the Letter of Intent was neither a promise, nor an option contract, nor an offer contemplated
under Article 1319 of the Civil Code, or a bilateral contract to sell and buy.

As previously adverted to, the CA, on appeal, affirmed in toto the RTCs ruling.

Hence, this recourse by UMCUPAI positing a sole issue for our resolution:

IS THE LETTER OF INTENT TO SELL AND LETTER OF INTENT TO BUY A BILATERAL RECIPROCAL CONTRACT WITHIN
THE MEANING OR CONTEMPLATION OF ARTICLE 1479, FIRST PARAGRAPH, CIVIL CODE OF THE PHILIPPINES?[4]

The petition deserves scant consideration. We completely agree with the lower courts rulings.

Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by
the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.[5] A
review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances, such
as: (1) when the findings of a trial court are grounded entirely on speculation, surmises or conjectures; (2) when a lower
courts inference from its factual findings is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail
to notice certain relevant facts which, if properly considered, would justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which
they are based, or are premised on the absence of evidence, or are contradicted by evidence on record. [6] None of the
foregoing exceptions necessitating a reversal of the assailed decision obtain in this instance.

UMCUPAI is adamant, however, that the CA erred when it applied the second paragraph of Article 1479 of the
Civil Code instead of the first paragraph thereof. UMCUPAI urges us that the first paragraph of Article 1479 contemplates
a bilateral reciprocal contract which is binding on the parties. Yet, UMCUPAI is careful not to designate the Letter of Intent
as a Contract to Sell. UMCUPAI simply insists that the Letter of Intent is not a unilateral promise to sell or buy which has
to be supported by a consideration distinct from the price for it to be binding on the promissor. In short, UMCUPAI claims
that the Letter of Intent did not merely grant the parties the option to respectively sell or buy the subject property.
Although not stated plainly, UMCUPAI claims that the Letter of Intent is equivalent to a conditional contract of sale subject
only to the suspensive condition of payment of the purchase price.

UMCUPAI appears to labor under a cloud of confusion. The first paragraph of Article 1479 contemplates the
bilateral relationship of a contract to sell as distinguished from a contract of sale which may be absolute or conditional
under Article 1458[7] of the same code. It reads:

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.

The case of Coronel v. Court of Appeals[8] is illuminating and explains the distinction between a conditional
contract of sale under Article 1458 of the Civil Code and a bilateral contract to sell under Article 1479 of the same code:

A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective
buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the
condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract
of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment
of a suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated. However,
if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had
already been previous delivery of the property subject of the sale to the buyer, ownership thereto
automatically transfers to the buyer by operation of law without any further act having to be performed
by the seller.

In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of
the purchase price, ownership will not automatically transfer to the buyer although the property may
 have been previously delivered to him. The prospective seller still has to convey title to the prospective
buyer by entering into a contract of absolute sale.

It is essential to distinguish between a contract to sell and a conditional contract of sale specially
in cases where the subject property is sold by the owner not to the party the seller contracted with, but
to a third person, as in the case at bench. 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.

In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the
sale becomes absolute and this will definitely affect the sellers title thereto.In fact, if there had been
previous delivery of the subject property, the sellers ownership or title to the property is automatically
transferred to the buyer such that, the seller will no longer have any title to transfer to any third
person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had
actual or constructive knowledge of such defect in the sellers title, or at least was charged with the
obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat
the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance
of the property subject of the sale.

In the instant case, however, the parties executed a Letter of Intent, which is neither a contract to sell nor a
conditional contract of sale. As found by the RTC, and upheld by the CA, the Letter of Intent was executed to accommodate
UMCUPAI and facilitate its loan application with NHMF. The 4th and 5th paragraphs of the recitals (whereas clauses)
specifically provide:

WHEREAS, it appears that UMCUPAI will ultimately apply with the Home Mortgage and Finance
Corporation for a loan to pay the acquisition price of said land;

WHEREAS, as one of the steps required by the government authorities to initiate proceedings is
to receive a formal manifestation of Intent to Sell from [SFC].

Nowhere in the Letter of Intent does it state that SFC relinquishes its title over the subject property, subject only
to the condition of complete payment of the purchase price; nor, at the least, that SFC, although expressly retaining
ownership thereof, binds itself to sell the property exclusively to UMCUPAI. The Letter of Intent to Buy and Sell is just that
a manifestation of SFCs intention to sell the property and UMCUPAIs intention to acquire the same. This is quite obvious
from the reference to the execution of an Absolute Deed of Sale in paragraph three[9] of the Letter of Intent.

As the CA did, we quote with favor the RTCs disquisition:

The Decision in this case hinges on the legal interpretation of the Agreement entered into by SFC and
UMCUPAI denominated as Letter of Intent to Sell by Landowner and Letter of Intent to Purchase by United
Muslim and Christian Urban Poor Association, Inc.

Blacks Law Dictionary says that a Letter of Intent is customarily employed to reduce to writing a
preliminary understanding of parties who intend to enter into contract. It is a phrase ordinarily used to
denote a brief memorandum of the preliminary understanding of parties who intend to enter into a
contract. It is a written statement expressing the intention of the parties to enter into a formal agreement
especially a business arrangement or transaction.

In their Agreement, SFC expressly declared its intention to sell and UMCUPAI expressly declared
its intention to buy subject property. An intention is a mere idea, goal, or plan. It simply signifies a course
of action that one proposes to follow. It simply indicates what one proposes to do or accomplish. A mere
intention cannot give rise to an obligation to give, to do or not to do (Article 1156, Civil Code). One cannot
be bound by what he proposes or plans to do or accomplish. A Letter of Intent is not a contract between
the parties thereto because it does not bind one party, with respect to the other, to give something, or to
render some service (Art. 1305, Civil Code).

xxxxxxxxx

The Letter of Intent/Agreement between SFC and UMCUPAI is merely a written preliminary understanding
of the parties wherein they declared their intention to enter into a contract of sale. It is subject to the
condition that UMCUPAI will apply with the Home Mortgage and Finance Corporation for a loan to pay
the acquisition price of said land. One of the requirements for such loan is a formal manifestation of Intent
to Sell from SFC. Thus, the Letter of Intent to Sell fell short of an offer contemplated in Article 1319 of the
Civil Code because it is not a certain and definite proposal to make a contract but merely a declaration of
SFCs intention to enter into a contract. UMCUPAIs declaration of intention to buy is also not certain and
definite as it is subject to the condition that UMCUPAI shall endeavor to raise funds to acquire subject
land. The acceptance of the offer must be absolute; it must be plain and unconditional. Moreover, the
Letter of Intent/Agreement does not contain a promise or commitment to enter into a contract of sale as
it merely declared the intention of the parties to enter into a contract of sale upon fulfillment of a
condition that UMCUPAI could secure a loan to pay for the price of a land.

The Letter of Intent/Agreement is not an option contract because aside from the fact that it is merely a
declaration of intention to sell and to buy subject to the condition that UMCUPAI shall raise the necessary
funds to pay the price of the land, and does not contain a binding promise to sell and buy, it is not
supported by a distinct consideration distinct from the price of the land intended to be sold and to be
bought x x x No option was granted to UMCUPAI under the Letter of Intent/Agreement to buy subject
land to the exclusion of all others within a fixed period nor was SFC bound under said Agreement to Sell
exclusively to UMCUPAI only the said land within the fixed period.

Neither can the Letter of Intent/Agreement be considered a bilateral reciprocal contract to sell and to buy
contemplated under Article 1479 of the Civil Code which is reciprocally demandable. The Letter of
Intent/Agreement does not contain a PROMISE to sell and to buy subject property. There was no promise
or commitment on the part of SFC to sell subject land to UMCUPAI, but merely a declaration of its
intention to buy the land, subject to the condition that UMCUPAI could raise the necessary funds to
acquire the same at the price of P105.00 per square meter x x x

While UMCUPAI succeeded in raising funds to acquire a portion of Lot No. 300-A, it failed to raise funds
to pay for Lot No. 300-C. From October 4, 1991 when the Letter of Intent was signed to June, 1995,
UMCUPAI had about three (3) years and eight (8) months within which to pursue its intention to buy
subject land from SFC. Within that period, UMCUPAI had ample time within which to acquire Lot No. 300-
C, as in fact it had acquired Lot No. 300-A which is much bigger than Lot No. 300-C and occupied by more
members of UMCUPAI. The failure of UMCUPAI to acquire Lot No. 300-C before it was sold to BRYC-V
cannot be blamed on SFC because all that UMCUPAI had to do was to raise funds to pay for Lot No. 300-
C which it did with respect to Lot No. 300-A. SFC had nothing to do with SFCs unilateral action through
Mrs. Antonina Graciano to postpone the processing of the acquisition of Lot No. 300-C, which it referred
to as Phase II, until after the payment to SFC of the acquisition price for Lot No. 300-A or Phase I x x x
 WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals in CA G.R.
CV No. 62557 and the Regional Trial Court in Civil Case No. 467(4544) are AFFIRMED. Costs against the petitioner.

Dantis v. Maghinang

G.R. No. 191696

April 10, 2013

Platinum Plans, Phils. v. Cucueco

FACTS: Respondent Cucueco filed a case for specific performance with damages against petitioner Platinum Plans
pursuant to an alleged contract of sale executed by them for the purchase of a condominium unit.

According to the respondent: sometime in July 1993, he offered to buy from petitioner Platinum Plans Phils a
condominium unit he was leasing from the latter for P 4 million payable in 2 installments of P2 million with the following
terms and conditions:

a. Cucueco will issue a check for P100,00 as earnest money

b. He will issue a post-dated check for P1.9 million to be encashed on September 30, 1993 on the condition that he will
stop paying rentals for the said unit after September 30

c. In case Platinum Plans has an outstanding loan of less than P2 million with the bank as of December 1993, Cucueco
shall assume the same and pay the difference from the remaining P2 million

Cucueco likewise claimed that Platinum Plans accepted his offer—by encashing the checks he issued. However, he was
surprised to learn that Platinum Plans had changed the due date of the installment payment to September 30, 1993.

Respondent argued that there was a perfected sale between him and Platinum plans and as such, he may validly demand
from the petitioner to execute the necessary deed of sale transferring ownership and title over the property in his favor

Platinum Plans denied Cucueco’s allegations and asserted that Cucueco’s initial down payment was forfeited based on the
following terms and conditions:

a. The terms of payment only includes two installments (August 1993 and September 1993)

b. In case of non-compliance on the part of the vendee, all installments made shall be forfeited in favor of the vendor
Platinum Plans

c. Ownership over the property shall not pass until payment of the full purchase price

Petitioners anchor their argument on the claim that there was no meeting of the minds between the two parties, as
evidenced by their letter of non-acceptance.

The trial court ruled in favor of Platinum, citing that since the element of consent was absent there was no perfected
contract. The trial court ordered Platinum Plans to return the P2 million they had received from Cucueco, and for Cucueco
to pay Platinum Plans rentals in arrears for the use of the unit.
Upon appeal, CA held that there was a perfected contract despite the fact that both parties never agreed on the date of
payment of the remaining balance. CA ordered Cucueco to pay the remaining balance of the purchase price and for
Platinum Plans, to execute a deed of sale over the property

ISSUE: WON the contract there is a perfected contract of sale

HELD: No, it is a contract to sell.

In a contract of sale, the vendor cannot recover ownership of the thing sold until and unless the contract itself is resolved
and set aside. Art 1592 provides:

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 upon him either judicially or by a notarial act. After
the demand, the court may not grant him a new term.

Based on the above provision, a party who fails to invoke judicially or by notarial act would be prevented from blocking
the consummation of the same in light of the precept that mere failure to fulfill the contract does not by itself have the
effect of rescission.

On the other hand, a contract to sell is bilateral contract whereby the prospective seller, while expressly reserving the
ownership of the subject property despite its delivery to the prospective buyer, commits to sell the property exclusively
to the prospective buyer upon fulfillment of the condition agreed upon, i.e., full payment of the purchase price. Full
payment here is considered as a positive suspensive condition.

As a result if the party contracting to sell, because of non-compliance with the suspensive condition, seeks to eject the
prospective buyer from, the land, the seller is enforcing the contract and is not resolving it. The failure to pay is not a
breach of contract but an event which prevent the obligation to convey title from materializing.

In the present case, neither side was able to produce any written evidence documenting the actual terms of their
agreement. The trial court was correct in finding that there was no meeting of minds in this case considering that the
acceptance of the offer was not absolute and uncondition. In earlier cases, the SC held that before a valid and binding
contract of sale can exist, the manner of payment of the purchase price must first be established.

Furthermore, the reservation of the title in the name of Platinum Plans clearly indicates an intention of the parties to enter
into a contract of sell. Where the seller promises to execute a deed of absolute sale upon completion of the payment of
purchase price, the agreement is a contract to sell.

The court cannot, in this case, step in to cure the deficiency by fixing the period pursuant to:

The relief sought by Cucueco was for specific performance to compel Platinum Plans to receive the balance of the purchase
price.

The relief provide in Art 1592 only applies to contracts of sale

Because of the differing dates set by both parties, the court would have no basis for granting Cucueco an extension of
time within which to pay the outstanding balance

SELLER CANNOT TREAT THE CONTRACT AS CANCELLED WITHOUT SERVING NOTICE

The act of a party in treating the contract as cancelled should be made known to the other party because this act is subject
to scrutiny and review by the courts in cased the alleged defaulter brings the matter for judicial determination as explained
in UP v. De los Angeles. In the case at bar, there were repeated written notices sent by Platinum Plans to Cucueco that
failure to pay the balance would result in the cancellation of the contract and forfeiture of the down payment already
made. Under these circumstance, the cancellation made by Platinum Plans is valid and reasonable (except for the
forfeiture of the down payment because Cucueco never agreed to the same)

EFFECTS OF CONTRACT TO SELL

A contract to sell would be rendered ineffective and without force and effect by the non-fulfillment of the buyer’s
obligation to pay since this is a suspensive condition to the obligation of the seller to sell and deliver the title of the
property. As an effect, the parties stand as if the conditional obligation had never existed. There can be no rescission of
an obligation that is still non-existent as the suspensive condition has not yet occurred.

CA’S RELIANCE ON LEVY HERMANOS V. GERVACIO IS MISPLACED

It was unnecessary for CA to distinguish whether the transaction between the parties was an installment sale or a straight
sale. In the first place, there is no valid and enforceable contract to speak of.

Ching v. Goyengco

Gr. No. 165879

Nov. 10 2006

FACTS: Respondents claim that in 1961, their parents acquired a 661 square meter property located at 29 F. Cabahug St.,
Cebu City but that as they (the parents) were Chinese citizens at the time, the property was registered in the name of
their aunt, Sulpicia Ventura (Sulpicia).

On May 1, 1993, Sulpicia executed a deed of sale over the property in favor of respondents’ father Goyanko. In turn,
Goyanko executed on October 12, 1993 a deed of sale over the property in favor of his common-law-wifeherein petitioner
Maria B. Ching.

After Goyanko’s death on March 11, 1996, respondents discovered that ownership of the property had already been
transferred in the name of petitioner. Respondents thereupon had the purported signature of their father in the deed of
sale verified by the Philippine National Police Crime Laboratory which found the same to be a forgery.

ISSUE: Is the sale between Goyanko and his commonlaw-wife valid?

HELD: No. The SC held that the proscription against sale of property between spouses applies even to common law
relationships. The Court find that the contract of sale was null and void for being contrary to morals and public policy.
The sale was made by a husband in favor of a concubine after he had abandoned his family and left the conjugal home
where his wife and children lived and from whence they derived their support. The sale was subversive of the stability of
the family, a basic social institution which public policy cherishes and protects. The law emphatically prohibits the
spouses from selling property to each other subject to

certain exceptions. Similarly, donations between spouses during marriage are prohibited. And this is so because if transfers
or conveyances between spouses were allowed during marriage, that would destroy the system of conjugal partnership,
a basic policy in civil law. It was also designed to prevent the exercise of undue influence by one spouse over the other, as
well as to protect the institution of marriage, which is the cornerstone of family law. The prohibitions apply to a couple
living as husband and wife without benefit of marriage, otherwise, "the condition of those who incurred guilt would turn
out to be better than those in legal union."
Paragas v. Heirs of Balacano

G.R. No. 168220

August 31, 2005

RESOLUTION
CHICO-NAZARIO, J.:

This petition for review seeks to annul the Decision[1] dated 15 February 2005 of the Court of Appeals in CA-G.R. CV
No. 64048, affirming with modification the 8 March 1999 Decision[2] of the Regional Trial Court (RTC), Branch 21, of
Santiago City, Isabela, in Civil Case No. 21-2313. The petition likewise seeks to annul the Resolution[3] dated 17 May 2005
denying petitioners motion for reconsideration.
The factual antecedents were synthesized by the Court of Appeals in its decision.

Gregorio Balacano, married to Lorenza Sumigcay, was the registered owner of Lot 1175-E and Lot 1175-F of the Subd. Plan
Psd-38042 [located at Baluarte, Santiago City, Isabela] covered by TCT No. T-103297 and TCT No. T-103298 of the Registry
of Deeds of the Province of Isabela.

Gregorio and Lorenza had three children, namely: Domingo, Catalino and Alfredo, all surnamed Balacano. Lorenza died on
December 11, 1991. Gregorio, on the other hand, died on July 28, 1996.

Prior to his death, Gregorio was admitted at the Veterans General Hospital in Bayombong, Nueva Vizcaya on June 28, 1996
and stayed there until July 19, 1996. He was transferred in the afternoon of July 19, 1996 to the Veterans Memorial
Hospital in Quezon City where he was confined until his death.

Gregorio purportedly sold on July 22, 1996, or barely a week prior to his death, a portion of Lot 1175-E (specifically
consisting of 15,925 square meters from its total area of 22,341 square meters) and the whole Lot 1175-F to the Spouses
Rudy (Rudy) and Corazon Paragas (collectively, the Spouses Paragas) for the total consideration of P500,000.00. This sale
appeared in a deed of absolute sale notarized by Atty. Alexander V. de Guzman, Notary Public for Santiago City, on the
same date July 22, 1996 and witnessed by Antonio Agcaoili (Antonio) and Julia Garabiles (Julia). Gregorios certificates of
title over Lots 1175-E and 1175-F were consequently cancelled and new certificates of title were issued in favor of the
Spouses Paragas.

The Spouses Paragas then sold on October 17, 1996 a portion of Lot 1175-E consisting of 6,416 square meters to Catalino
for the total consideration of P60,000.00.

Domingos children (Dominic, Rodolfo, Nanette and Cyric, all surnamed Balacano;) filed on October 22, 1996 a complaint
for annulment of sale and partition against Catalino and the Spouses Paragas. They essentially alleged in asking for the
nullification of the deed of sale that: (1) their grandfather Gregorio could not have appeared before the notary public on
July 22, 1996 at Santiago City because he was then confined at the Veterans Memorial Hospital in Quezon City; (2) at the
time of the alleged execution of the deed of sale, Gregorio was seriously ill, in fact dying at that time, which vitiated his
consent to the disposal of the property; and (3) Catalino manipulated the execution of the deed and prevailed upon the
dying Gregorio to sign his name on a paper the contents of which he never understood because of his serious condition.
Alternatively, they alleged that assuming Gregorio was of sound and disposing mind, he could only transfer a half portion
of Lots 1175-E and 1175-F as the other half belongs to their grandmother Lorenza who predeceased Gregorio they claimed
that Lots 1175-E and 1175-F form part of the conjugal partnership properties of Gregorio and Lorenza. Finally, they alleged
that the sale to the Spouses Paragas covers only a 5-hectare portion of Lots 1175-E and 1175-F leaving a portion of 6,416
square meters that Catalino is threatening to dispose. They asked for the nullification of the deed of sale executed by
Gregorio and the partition of Lots 1175-E and 1175-F. They likewise asked for damages.
Instead of filing their Answer, the defendants Catalino and the Spouses Paragas moved to dismiss the complaint on the
following grounds: (1) the plaintiffs have no legal capacity - the Domingos children cannot file the case because Domingo
is still alive, although he has been absent for a long time; (2) an indispensable party is not impleaded that Gregorios other
son, Alfredo was not made a party to the suit; and (3) the complaint states no cause of action that Domingos children
failed to allege a ground for the annulment of the deed of sale; they did not cite any mistake, violence, intimidation, undue
influence or fraud, but merely alleged that Gregorio was seriously ill. Domingos children opposed this motion.

The lower court denied the motion to dismiss, but directed the plaintiffs-appellees to amend the complaint to include
Alfredo as a party. Alfredo was subsequently declared as in default for his failure to file his Answer to the Complaint.

The defendants-appellees filed their Answer with Counterclaim on May 7, 1997, denying the material allegations of the
complaint. Additionally, they claimed that: (1) the deed of sale was actually executed by Gregorio on July 19 (or 18), 1996
and not July 22, 1996; (2) the Notary Public personally went to the Hospital in Bayombong, Nueva Vizcaya on July 18, 1996
to notarize the deed of sale already subject of a previously concluded covenant between Gregorio and the Spouses
Paragas; (3) at the time Gregorio signed the deed, he was strong and of sound and disposing mind; (4) Lots 1175-E and
1175-F were Gregorios separate capital and the inscription of Lorenzas name in the titles was just a description of
Gregorios marital status; (5) the entire area of Lots 1175-E and 1175-F were sold to the Spouses Paragas. They interposed
a counterclaim for damages.

At the trial, the parties proceeded to prove their respective contentions.

Plaintiff-appellant Nanette Balacano testified to prove the material allegations of their complaint. On Gregorios medical
condition, she declared that: (1) Gregorio, who was then 81 years old, weak and sick, was brought to the hospital in
Bayombong, Nueva Vizcaya on June 28, 1996 and stayed there until the afternoon on July 19, 1996; (2) thereafter,
Gregorio, who by then was weak and could no longer talk and whose condition had worsened, was transferred in the
afternoon of July 19, 1996 to the Veterans Memorial Hospital in Quezon City where Gregorio died. She claimed that
Gregorio could not have signed a deed of sale on July 19, 1996 because she stayed at the hospital the whole of that day
and saw no visitors. She likewise testified on their agreement for attorneys fees with their counsel and the litigation
expenses they incurred.

Additionally, the plaintiffs-appellees presented in evidence Gregorios medical records and his death certificate.

Defendants-appellees, on the other hand, presented as witnesses Notary Public de Guzman and instrumental witness
Antonio to prove Gregorios execution of the sale and the circumstances under the deed was executed. They uniformly
declared that: (1) on July 18, 1996, they went to the hospital in Bayombong, Nueva Vizcaya where Gregorio was confined
with Rudy; (2) Atty. De Guzman read and explained the contents of the deed to Gregorio; (3) Gregorio signed the deed
after receiving the money from Rudy; (4) Julia and Antonio signed the deed as witnesses. Additionally, Atty. De Guzman
explained that the execution of the deed was merely a confirmation of a previous agreement between the Spouses Paragas
and Gregorio that was concluded at least a month prior to Gregorios death; that, in fact, Gregorio had previously asked
him to prepare a deed that Gregorio eventually signed on July 18, 1996. He also explained that the deed, which appeared
to have been executed on July 22, 1996, was actually executed on July 18, 1996; he notarized the deed and entered it in
his register only on July 22, 1996. He claimed that he did not find it necessary to state the precise date and place of
execution (Bayombong, Nueva Vizcaya, instead of Santiago City) of the deed of sale because the deed is merely a
confirmation of a previously agreed contract between Gregorio and the Spouses Paragas. He likewise stated that of the
stated P500,000.00 consideration in the deed, Rudy paid Gregorio P450,000.00 in the hospital because Rudy had
previously paid Gregorio P50,000.00. For his part, Antonio added that he was asked by Rudy to take pictures of Gregorio
signing the deed. He also claimed that there was no entry on the date when he signed; nor did he remember reading
Santiago City as the place of execution of the deed. He described Gregorio as still strong but sickly, who got up from the
bed with Julias help.

Witness for defendants-appellants Luisa Agsalda testified to prove that Lot 1175-E was Gregorios separate property. She
claimed that Gregorios father (Leon) purchased a two-hectare lot from them in 1972 while the other lot was purchased
from her neighbor. She also declared that Gregorio inherited these lands from his father Leon; she does not know,
however, Gregorios brothers share in the inheritance. Defendant-appellant Catalino also testified to corroborate the
testimony of witness Luisa Agsalda; he said that Gregorio told him that he (Gregorio) inherited Lots 1175-E and 1175-F
from his father Leon. He also stated that a portion of Lot 1175-E consisting of 6,416 square meters was sold to him by the
Spouses Paragas and that he will pay the Spouses ParagasP50,000.00, not as consideration for the return of the land but
for the transfer of the title to his name.

Additionally, the defendants-appellants presented in evidence the pictures taken by Antonio when Gregorio allegedly
signed the deed.[4]

The lower court, after trial, rendered the decision declaring null and void the deed of sale purportedly executed by
Gregorio Balacano in favor of the spouses Rudy Paragas and Corazon Paragas. In nullifying the deed of sale executed by
Gregorio, the lower court initially noted that at the time Gregorio executed the deed, Gregorio was ill. The lower courts
reasoning in declaring the deed of sale null and void and this reasonings premises may be summarized as follows: (1) the
deed of sale was improperly notarized; thus it cannot be considered a public document that is usually accorded the
presumption of regularity; (2) as a private document, the deed of sales due execution must be proved in accordance with
Section 20, Rule 132 of the Revised Rules on Evidence either: (a) by anyone who saw the document executed or written;
or (b) by evidence of the genuineness of the signature or handwriting of the maker; and (3) it was incumbent upon the
Spouses Paragas to prove the deed of sales due execution but failed to do so the lower court said that witness Antonio
Agcaoili is not credible while Atty. Alexander De Guzman is not reliable.[5]
The lower court found the explanations of Atty. De Guzman regarding the erroneous entries on the actual place and
date of execution of the deed of sale as justifications for a lie. The lower court said

The Court cannot imagine an attorney to undertake to travel to another province to notarize a document when he must
certainly know, being a lawyer and by all means, not stupid, that he has no authority to notarize a document in that
province. The only logical thing that happened was that Rudy Paragas brought the deed of sale to him on July 22, 1996
already signed and requested him to notarize the same which he did, not knowing that at that time the vendor was already
in a hospital and [sic] Quezon City. Of course had he known, Atty. De Guzman would not have notarized the document.
But he trusted Rudy Paragas and moreover, Gregorio Balacano already informed him previously in June that he will sell
his lands to Paragas. In addition [sic, (,) was omitted] Rudy Paragas also told him that Balacano received an advance
of P50,000.00.

The intention to sell is not actual selling. From the first week of June when, according to Atty. De Guzman, Gregorio
Balacano informed him that he will sell his land to Rudy Paragas, enough time elapsed to the time he was brought to the
hospital on June 28, 1996. Had there been a meeting of the minds between Gregorio Balacano and Rudy Paragas regarding
the sale, surely Gregorio Balacano would have immediately returned to the office of Atty. De Guzman to execute the deed
of sale. He did not until he was brought to the hospital and diagnosed to have liver cirrhosis. Because of the seriousness
of his illness, it is not expected that Gregorio Balacano would be negotiating a contract of sale. Thus, Rudy Paragas
negotiated with Catalino Balacano, the son of Gregorio Balacano with whom the latter was staying.[6]

The lower court also did not consider Antonio Agcaoili, petitioner Rudy Paragass driver, a convincing witness,
concluding that he was telling a rehearsed story. The lower court said

The only portion of his testimony that is true is that he signed the document. How could the Court believe that he brought
a camera with him just to take pictures of the signing? If the purpose was to record the proceeding for posterity, why did
he not take the picture of Atty. De Guzman when the latter was reading and explaining the document to Gregorio
Balacano? Why did he not take the picture of both Gregorio Balacano and Atty. de Guzman while the old man was signing
the document instead of taking a picture of Gregorio Balacano alone holding a ball pen without even showing the
document being signed? Verily there is a picture of a document but only a hand with a ball pen is shown with it. Why?
Clearly the driver Antonio Agcaoili must have only been asked by Rudy Paragas to tell a concocted story which he himself
would not dare tell in Court under oath.[7]
 The lower court likewise noted that petitioner Rudy Paragas did not testify about the signing of the deed of sale. To
the lower court, Rudys refusal or failure to testify raises a lot of questions, such as: (1) was he (Rudy) afraid to divulge the
circumstances of how he obtained the signature of Gregorio Balacano, and (2) was he (Rudy) afraid to admit that he did
not actually pay the P500,000.00 indicated in the deed of sale as the price of the land?[8]
The lower court also ruled that Lots 1175-E and 1175-F were Gregorios and Lorenzas conjugal partnership properties.
The lower court found that these lots were acquired during the marriage because the certificates of title of these lots
clearly stated that the lots are registered in the name Gregorio, married to Lorenza Sumigcay. Thus, the lower court
concluded that the presumption of law (under Article 160 of the Civil Code of the Philippines) that property acquired
during the marriage is presumed to belong to the conjugal partnership fully applies to Lots 1175-E and 1175-F.[9]
Thus, on 8 March 1999, the RTC, Branch 21, of Santiago City, Isabela, rendered a Decision[10] in Civil Case No. 21-2313,
the dispositive portion of which reads as follows:

WHEREFORE in the light of the foregoing considerations judgment is hereby rendered:

1. DECLARING as NULL and VOID the deed of sale purportedly executed by Gregorio Balacano in favor of the
spouses Rudy Paragas and Corazon Paragas over lots 1175-E and 1175-F covered by TCT Nos. T-103297
and T-103298, respectively;

2. ORDERING the cancellation of TCT Nos. T-258042 and T-258041 issued in the name of the spouses Rudy
and Corazon Paragas by virtue of the deed of sale; and

DECLARING the parcel of lands, lots 1175-E and 1175-F as part of the estate of the deceased spouses Gregorio Balacano
and Lorenza Balacano.[11]

In the assailed Decision dated 15 February 2005, the Court of Appeals affirmed the Decision of the trial court, with
the modification that Lots 1175-E and 1175-F were adjudged as belonging to the estate of Gregorio Balacano. The
appellate court disposed as follows:

WHEREFORE, premises considered, the appeal is hereby DISMISSED. We AFFIRM the appealed Decision for the reasons
discussed above, with the MODIFICATION that Lots 1175-E and 1175-F belong to the estate of Gregorio Balacano.

Let a copy of this Decision be furnished the Office of the Bar Confidant for whatever action her Office may take against
Atty. De Guzman.[12] (Emphasis in the original.)

Herein petitioners motion for reconsideration was met with similar lack of success when it was denied for lack of
merit by the Court of Appeals in its Resolution[13] dated 17 May 2005.
Hence, this appeal via a petition for review where petitioners assign the following errors to the Court of Appeals, viz:
A. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN FINDING
THAT THERE WAS NO PERFECTED AND PARTIALLY EXECUTED CONTRACT OF SALE OVER LOTS 1175-E AND
1175-F PRIOR TO THE SIGNING OF THE DEED OF SALE.
B. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY FAILED TO
APPRECIATE THE SIGNIFICANCE OF THE JUDICIAL ADMISSION ON THE AUTHENTICITY AND DUE EXECUTION
OF THE DEED OF SALE MADE BY THE RESPONDENTS DURING THE PRE-TRIAL CONFERENCE.
C. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, BASED ITS CONCLUSION THAT
GREGORIOS CONSENT TO THE SALE OF THE LOTS WAS ABSENT MERELY ON SPECULATIONS AND SURMISES.
D. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN NOT RULING
ON THE ISSUE OF RESPONDENTS LACK OF LEGAL CAPACITY TO SUE FOR NOT BEING THE PROPER PARTIES IN
INTEREST.
 E. THE HONORABLE COURT OF APPEALS, WITH GRAVE ABUSE OF DISCRETION, SERIOUSLY ERRED IN DISMISSING
ATTY. ALEXANDER DE GUZMAN AND ANTONIO AGCAOILI AS NOT CREDIBLE WITNESSES.[14]
At bottom is the issue of whether or not the Court of Appeals committed reversible error in upholding the findings
and conclusions of the trial court on the nullity of the Deed of Sale purportedly executed between petitioners and the late
Gregorio Balacano.
To start, we held in Blanco v. Quasha[15] that this Court is not a trier of facts. As such, it is not its function to examine
and determine the weight of the evidence supporting the assailed decision. Factual findings of the Court of Appeals, which
are supported by substantial evidence, are binding, final and conclusive upon the Supreme Court,[16] and carry even more
weight when the said court affirms the factual findings of the trial court. Moreover, well- entrenched is the prevailing
jurisprudence that only errors of law and not of facts are reviewable by this Court in a petition for review
on certiorari under Rule 45 of the Revised Rules of Court.
The foregoing tenets in the case at bar apply with greater force to the petition under consideration because the
factual findings by the Court of Appeals are in full agreement with that of the trial court.
Specifically, the Court of Appeals, in affirming the trial court, found that there was no prior and perfected contract of
sale that remained to be fully consummated. The appellate court explained -

In support of their position, the defendants-appellants argue that at least a month prior to Gregorios signing of the deed,
Gregorio and the Spouses Paragas already agreed on the sale of Lots 1175-E and 1175-F; and that, in fact, this agreement
was partially executed by Rudys payment to Gregorio of P50,000.00 before Gregorio signed the deed at the hospital. In
line with this position, defendants-appellants posit that Gregorios consent to the sale should be determined, not at the
time Gregorio signed the deed of sale on July 18, 1996, but at the time when he agreed to sell the property in June 1996
or a month prior to the deeds signing; and in June 1996, Gregorio was of sound and disposing mind and his consent to the
sale was in no wise vitiated at that time. The defendants-appellants further argue that the execution or signing of the deed
of sale, however, irregular it might have been, does not affect the validity of the previously agreed sale of the lots, as the
execution or signing of the deed is merely a formalization of a previously agreed oral contract.

...

In the absence of any note, memorandum or any other written instrument evidencing the alleged perfected contract of
sale, we have to rely on oral testimonies, which in this case is that of Atty. de Guzman whose testimony on the alleged
oral agreement may be summarized as follows: (1) that sometime in the first week of June 1996, Gregorio requested him
(Atty. de Guzman) to prepare a deed of sale of two lots; (2) Gregorio came to his firms office in the morning with a certain
Doming Balacano, then returned in the afternoon with Rudy; (3) he (Atty. de Guzman) asked Gregorio whether he really
intends to sell the lots; Gregorio confirmed his intention; (4) Gregorio and Rudy left the law office at 5:00 p.m., leaving the
certificates of title; (5) he prepared the deed a day after Rudy and Gregorio came. With regard to the alleged partial
execution of this agreement, Atty. de Guzman said that he was told by Rudy that there was already a partial payment
of P50,000.00.

We do not consider Atty. de Guzmans testimony sufficient evidence to establish the fact that there was a prior agreement
between Gregorio and the Spouses Paragas on the sale of Lots 1175-E and 1175-F. This testimony does not conclusively
establish the meeting of the minds between Gregorio and the Spouses Paragas on the price or consideration for the sale
of Lots 1175-E and 1175-F Atty. de Guzman merely declared that he was asked by Gregorio to prepare a deed; he did not
clearly narrate the details of this agreement. We cannot assume that Gregorio and the Spouses Paragas agreed to
a P500,000.00 consideration based on Atty. de Guzmans bare assertion that Gregorio asked him to prepare a deed, as
Atty. de Guzman was not personally aware of the agreed consideration in the sale of the lots, not being privy to the parties
agreement. To us, Rudy could have been a competent witness to testify on the perfection of this prior contract;
unfortunately, the defendants-appellants did not present Rudy as their witness.

We seriously doubt too the credibility of Atty. de Guzman as a witness. We cannot rely on his testimony because of his
tendency to commit falsity. He admitted in open court that while Gregorio signed the deed on July 18, 1996 at Bayombong,
Nueva Vizcaya, he nevertheless did not reflect these matters when he notarized the deed; instead he entered Santiago
City and July 22, 1996, as place and date of execution, respectively. To us, Atty. de Guzmans propensity to distort facts in
the performance of his public functions as a notary public, in utter disregard of the significance of the act of notarization,
seriously affects his credibility as a witness in the present case. In fact, Atty. de Guzmans act in falsifying the entries in his
acknowledgment of the deed of sale could be the subject of administrative and disciplinary action, a matter that we
however do not here decide.

Similarly, there is no conclusive proof of the partial execution of the contract because the only evidence the plaintiffs-
appellants presented to prove this claim was Atty. de Guzmans testimony, which is hearsay and thus, has no probative
value. Atty. de Guzman merely stated that Rudy told him that Rudy already gave P50,000.00 to Gregorio as partial payment
of the purchase price; Atty. de Guzman did not personally see the payment being made.[17]

But, did Gregorio give an intelligent consent to the sale of Lots 1175-E and 1175-F when he signed the deed of sale?
The trial court as well as the appellate court found in the negative. In the Court of Appeals rationale-

It is not disputed that when Gregorio signed the deed of sale, Gregorio was seriously ill, as he in fact died a week after the
deeds signing. Gregorio died of complications caused by cirrhosis of the liver. Gregorios death was neither sudden nor
immediate; he fought at least a month-long battle against the disease until he succumbed to death on July 22, 1996. Given
that Gregorio purportedly executed a deed during the last stages of his battle against his disease, we seriously doubt
whether Gregorio could have read, or fully understood, the contents of the documents he signed or of the consequences
of his act. We note in this regard that Gregorio was brought to the Veterans Hospital at Quezon City because his condition
had worsened on or about the time the deed was allegedly signed. This transfer and fact of death not long after speak
volumes about Gregorios condition at that time. We likewise see no conclusive evidence that the contents of the deed
were sufficiently explained to Gregorio before he affixed his signature. The evidence the defendants-appellants offered
to prove Gregorios consent to the sale consists of the testimonies of Atty. de Guzman and Antonio. As discussed above,
we do not find Atty. de Guzman a credible witness. Thus, we fully concur with the heretofore-quoted lower courts
evaluation of the testimonies given by Atty. de Guzman and Antonio because this is an evaluation that the lower court
was in a better position to make.

Additionally, the irregular and invalid notarization of the deed is a falsity that raises doubts on the regularity of the
transaction itself. While the deed was indeed signed on July 18, 1996 at Bayombong, Nueva Vizcaya, the deed states
otherwise, as it shows that the deed was executed on July 22, 1996 at Santiago City. Why such falsity was committed, and
the circumstances under which this falsity was committed, speaks volume about the regularity and the validity of the sale.
We cannot but consider the commission of this falsity, with the indispensable aid of Atty. de Guzman, an orchestrated
attempt to legitimize a transaction that Gregorio did not intend to be binding upon him nor on his bounty.

Article 24 of the Civil Code tells us that in all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection.[18]

Based on the foregoing, the Court of Appeals concluded that Gregorios consent to the sale of the lots was absent,
making the contract null and void. Consequently, the spouses Paragas could not have made a subsequent transfer of the
property to Catalino Balacano. Indeed, nemo dat quod non habet. Nobody can dispose of that which does not belong to
him.[19]
We likewise find to be in accord with the evidence on record the ruling of the Court of Appeals declaring the
properties in controversy as paraphernal properties of Gregorio in the absence of competent evidence on the exact date
of Gregorios acquisition of ownership of these lots.
On the credibility of witnesses, it is in rhyme with reason to believe the testimonies of the witnesses for the
complainants vis--vis those of the defendants. In the assessment of the credibility of witnesses, we are guided by the
following well-entrenched rules: (1) that evidence to be believed must not only spring from the mouth of a credible witness
but must itself be credible, and (2) findings of facts and assessment of credibility of witness are matters best left to the
trial court who had the front-line opportunity to personally evaluate the witnesses demeanor, conduct, and behavior while
testifying.[20]
 In the case at bar, we agree in the trial courts conclusion that petitioners star witness, Atty. De Guzman is far from
being a credible witness. Unlike this Court, the trial court had the unique opportunity of observing the demeanor of said
witness. Thus, we affirm the trial court and the Court of Appeals uniform decision based on the whole evidence in record
holding the Deed of Sale in question to be null and void.
In Domingo v. Court of Appeals,[21] the Court declared as null and void the deed of sale therein inasmuch as the seller,
at the time of the execution of the alleged contract, was already of advanced age and senile. We held

. . . She died an octogenarian on March 20, 1966, barely over a year when the deed was allegedly executed on January 28,
1965, but before copies of the deed were entered in the registry allegedly on May 16 and June 10, 1966. The general rule
is that a person is not incompetent to contract merely because of advanced years or by reason of physical infirmities.
However, when such age or infirmities have impaired the mental faculties so as to prevent the person from properly,
intelligently, and firmly protecting her property rights then she is undeniably incapacitated. The unrebutted testimony of
Zosima Domingo shows that at the time of the alleged execution of the deed, Paulina was already incapacitated physically
and mentally. She narrated that Paulina played with her waste and urinated in bed. Given these circumstances, there is in
our view sufficient reason to seriously doubt that she consented to the sale of and the price for her parcels of land.
Moreover, there is no receipt to show that said price was paid to and received by her. Thus, we are in agreement with the
trial courts finding and conclusion on the matter: . . .

In the case at bar, the Deed of Sale was allegedly signed by Gregorio on his death bed in the hospital. Gregorio was
an octogenarian at the time of the alleged execution of the contract and suffering from liver cirrhosis at that circumstances
which raise grave doubts on his physical and mental capacity to freely consent to the contract. Adding to the dubiety of
the purported sale and further bolstering respondents claim that their uncle Catalino, one of the children of the decedent,
had a hand in the execution of the deed is the fact that on 17 October 1996, petitioners sold a portion of Lot 1175-E
consisting of 6,416 square meters to Catalino for P60,000.00.[22] One need not stretch his imagination to surmise that
Catalino was in cahoots with petitioners in maneuvering the alleged sale.
On the whole, we find no reversible error on the part of the appellate court in CA-G.R. CV No. 64048 that would
warrant the reversal thereof.
WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision[23] and the Resolution,[24] dated 15
February 2005 and 17 May 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 64048 are hereby AFFIRMED. No
costs.
Calimlim v. Fortun

GR No. L-57499

June 22, 1984

Disqualification under Art. 1490 and 1491

FACTS: Mercedes and Fernando were married ans had 5 children. They were living in a small house erected in a parcel of
land owned by Fernando’s parents. After his parents died, he inherited the land. In 1978, Fernando abandonee his family
and was living with Daguines. They were subsequently charged and was later on convicted with concubinage. On April 15,
1980, Fernando sold the land he inherited to Daguines. Daguines files to quiet the title and damages since Mercedes
refused to leave stating that she and her children were living in the subject property. Judge Fortun of Branch 2 of the CFI
of Pangasinan ruled in favor of Daguines.

ISSUE: Is Daguines the lawful owner? Was the sale valid?

HELD: No. Daguines is not the lawful owner since the sale is invalid. The land and the improvements were part of the
conjugal partnership. Without the consent of one spouse, sale of the property is void. Further, the sale is void for being
contrary to law, morals, good customs, public order and public policy. Additionally, the spouses cannot sell to each other
since it will destroy the system of conjugal partnerships and this rule applies to couples without the benefit of marriage.
Cabalit v. Tabu

G.R. No. 180236

January 17, 2012

DECISION
VILLARAMA, JR., J.:

Three employees from the Land Transportation Office (LTO) in Jagna, Bohol were found by the Ombudsman to have
perpetrated a scheme to defraud the government of proper motor vehicle registration fees. They now seek in the present
consolidated petitions a judgment from this Court annulling the January 18, 2006 Decision1 and September 21, 2007
Resolution2 of the Court of Appeals (CA) which affirmed with modification the Decision3 of the Office of the Ombudsman-
Visayas dismissing them from government service.

The facts follow:

On September 4, 2001, the Philippine Star News, a local newspaper in Cebu City, reported that employees of the LTO
in Jagna, Bohol, are shortchanging the government by tampering with their income reports.4 Accordingly, Regional
Director Ildefonso T. Deloria of the Commission on Audit (COA) directed State Auditors Teodocio D. Cabalitand Emmanuel
L. Coloma of the Provincial Revenue Audit Group to conduct a fact-finding investigation. A widespread tampering of official
receipts of Motor Vehicle Registration during the years 1998, 1999, 2000 and 2001 was then discovered by the
investigators.

According to the investigators, a total of 106 receipts were tampered. The scheme was done by detaching the Plate
Release and Owners copy from the set of official receipts then typing thereon the correct details corresponding to the
vehicle registered, the owners name and address, and the correct amount of registration fees. The other copies, consisting
of the copies for the Collector, EDP, Record, Auditor, and Regional Office, meanwhile, were typed on to make it appear
that the receipts were issued mostly for the registration of motorcycles with much lower registration charges. Incorrect
names and/or addresses were also used on said file copies. The difference between the amounts paid by the vehicle
owners and the amounts appearing on the file copies were then pocketed by the perpetrators, and only the lower amounts
appearing on the retained duplicate file copies were reported in the Report of Collections.5 According to State
Auditors Cabalit and Coloma in their Joint-Affidavit, the scheme was perpetrated by LTO employees Leonardo
G. Olaivar, Gemma P. Cabalit, Filadelfo S. Apit and Samuel T. Alabat, and resulted in an unreported income
totaling P169,642.50.6

On August 8, 2002, COA Regional Cluster Director Atty. Roy L. Ursal reported the tampering of official receipts to Deputy
Ombudsman Primo C. Miro.7 According to Atty. Ursal, the irregularity is penalized under Article 217, in relation to Article
171 of the Revised Penal Code;8 Section 3(e)9 of the Anti-Graft and Corrupt Practices Act, and likewise violates Republic
Act (R.A.) No. 6713.10

In a Joint Evaluation Report, Graft Investigators Pio R. Dargantes and Virginia Palanca-Santiago found grounds to conduct
a preliminary investigation.11 Hence, a formal charge for dishonesty was filed
against Olaivar, Cabalit, Apit and Alabat before the Office of the Ombudsman-Visayas, and the parties were required to
submit their counter-affidavits.
In compliance, Olaivar, Cabalit, Apit and Alabat submitted separate counter-affidavits, all essentially denying knowledge
and responsibility for the anomalies. As to Olaivar, he maintained that the receipts were typed outside his office by regular
and casual employees. He claimed that the receipts were presented to him only for signature and he does not receive the
payment when he signs the receipts.12 Cabalit, for her part, claimed that her duty as cashier was to receive collections
turned over to her and to deposit them in the Land Bank of the Philippines in Tagbilaran City. She claimed that she was
not even aware of any anomaly in the collection of fees prior to the investigation.13 As to Apit, he admitted that he
countersigned the official receipts, but he too denied being aware of any illegal activity in their office. He claimed that
upon being informed of the charge, he verified the photocopies of the tampered receipts and was surprised to find that
the signatures above his name were falsified.14 Alabat, meanwhile, claimed he did not tamper, alter or falsify any public
document in the performance of his duties. He insisted that the initial above his name on Official Receipt No. 64056082
was Apits, while the initial on Official Receipt No. 64056813 was that of Olaivar.15

During the hearing before Graft Investigator Pio R. Dargantes, State Auditor Cabalit testified on the investigation he
conducted in the LTO in Jagna, Bohol. He testified that he was furnished with the owners and duplicate copies of the
tampered receipts. Upon comparison of the Owners copy with the Collector or Records copy, he noticed that the amounts
shown in the original copies were much bigger than those appearing in the file copies. State Auditor Cabalit also declared
that the basis for implicating Olaivaris the fact that his signature appears in all the 106 tampered official receipts and he
signed as verified correct the Report of Collections, which included the tampered receipts. As to Apit and Cabalit, they are
the other signatories of the official receipts.16 In some official receipts, the Owners copy is signed by F.S. Apit as Computer
Evaluator, G.P. Cabalit as Cashier, and Leonardo Olaivar as District Head, but their signatures do not appear on the file
copies.17

On February 12, 2004, the Office of the Ombudsman-Visayas directed18 the parties to submit their position papers
pursuant to Administrative Order (A.O.) No. 17, dated September 7, 2003, amending the Rules of Procedure of the Office
of the Ombudsman.19 No cross-examination of State Auditor Cabalit was therefore conducted.

Complying with the above Order, the COA submitted its position paper on March 18, 2004. Olaivar, Cabalit and Apit, for
their part, respectively submitted their position papers on April 29, 2004, March 18, 2004 and March 15, 2004.

In its position paper,20 the COA pointed out that the signatures of Cabalit, Apit and Olaivar were indispensable to the
issuance of the receipts. As to Olaivar, the original receipts bear his signature, thereby showing that he approved of the
amounts collected for the registration charges. However, when the receipts were reported in the Report of Collections,
the data therein were already tampered reflecting a much lesser amount. By affixing his signature on the Report of
Collections and thereby attesting that the entries therein were verified by him as correct, he allowed the scheme to be
perpetrated. As to Cabalit, the COA pointed out that as cashier, Cabalits signature on the receipts signified that she
received the registration fees. The correct amounts should have therefore appeared in the Report of Collections, but as
already stated, lesser amounts appeared on the Report of Collections, which she prepares. In the same manner, Apit, as
computer evaluator, also signed the subject receipts allowing the irregularities to be perpetuated.

In his position paper,21 Olaivar meanwhile insisted that he had no participation in the anomalies. He stressed that his only
role in the issuance of the official receipts was to review and approve the applications, and that he was the last one to
sign the official receipts. He argued that based on the standard procedure for the processing of applications for registration
of motor vehicles, it could be deduced that there was a concerted effort or conspiracy among the evaluator, typist and
cashier, while he was kept blind of their modus operandi.

Cabalit, for her part, questioned the findings of the investigators. She stressed in her position paper22 that had there been
a thorough investigation of the questioned official receipts, the auditors would have discovered that the signatures
appearing above her name were actually that of Olaivar. She outlined the standard paper flow of a regular transaction at
the LTO. It begins when the registrant goes to the computer evaluator for the computation of applicable fees and proceeds
to the cashier for payment. After paying, the typist will prepare the official receipts consisting of seven (7) copies, which
will be routed to the computer evaluator, to the district head, and to the cashier for signature. The cashier retains the
copies for the EDP, Regional Office, Collector and Auditor, while the remaining copies (Owner, Plate Release and Records
copy) will be forwarded to the Releasing Section for distribution and release.

Cabalit insisted that on several occasions Olaivar disregarded the standard procedure and directly accommodated some
registrants who were either his friends or referred to him by friends. For such transactions, Olaivar assumes the functions
of computer evaluator, typist and cashier, as he is the one who computes the fees, receives the payment and prepares
the official receipts. Olaivar would then remit the payment to her. As the cashier, she has to accept the payment as a
matter of ministerial duty.

Apit, meanwhile, stressed in his position paper23 that the strokes of the signatures appearing above his typewritten name
on the official receipts are different, indicating that the same are falsified. He also explained that considering that the LTO
in Jagna issues around 20 to 25 receipts a day, he signed the receipts relying on the faith that his co-employees had
properly accomplished the forms. He also pointed out that Engr. Dano admitted signing accomplished official receipts
when the regular computer encoder is out, which just shows that other personnel could have signed above the name of
F.S. Apit.

On May 3, 2004, the Office of the Ombudsman-Visayas rendered judgment finding petitioners liable for dishonesty for
tampering the official receipts to make it appear that they collected lesser amounts than they actually collected. The OMB-
Visayas ruled:
WHEREFORE, premises considered, it is hereby resolved that the following respondents be found guilty of the
administrative infraction of DISHONESTY and accordingly be meted out the penalty of DISMISSAL FROM THE SERVICE with
the accessory penalties of cancellation of civil service eligibility, forfeiture of retirement benefits and disqualification from
re-employment in the government service:

1. Leonardo G. Olaivar -Transportation Regulation Officer II/ Office[r]-In-Charge

LTO Jagna District Office
Jagna, Bohol;
2. Gemma P. Cabalit - Cashier II, LTO Jagna District Office Jagna, Bohol;
3. Filadelpo S. Apit - Clerk II, LTO Jagna District Office Jagna, Bohol;
The complaint against respondent Samuel T. Alabat, presently the Head of Apprehension Unit of the Tagbilaran City LTO,
is hereby DISMISSED for insufficiency of evidence.
The complaint regarding the LTO official receipts/MVRRs issued by the LTO Jagna District Office, which are not covered by
original copies are hereby DISMISSED without prejudice to the filing of the appropriate charges upon the recovery of the
original copies thereof.
SO DECIDED.24
Petitioners sought reconsideration of the decision, but their motions were denied by the Ombudsman. 25 Thus, they
separately sought recourse from the CA.

On January 18, 2006, the CA promulgated the assailed Decision in CA-G.R. SP. Nos. 86256, 86394 and 00047. The
dispositive portion of the CA decision reads,
WHEREFORE, premises considered, judgment is hereby rendered by US DISMISSING the instant consolidated petitions.
The assailed decision of the Office of the Ombudsman-Visayas dated May 3, 2004 in OMB-V-A-02-0415-H is hereby
AFFIRMED with a modification that petitioner Olaivar be held administratively liable for gross neglect of duty which carries
the same penalty as provided for dishonesty. No pronouncement as to costs.
SO ORDERED.26

According to the CA, it was unbelievable that from 1998 to 2001, Cabalit and Apit performed vital functions by routinely
signing LTO official receipts but did not have any knowledge of the irregularity in their office. With regard to Olaivar, the
CA believed that the tampering of the receipts could have been avoided had he exercised the required diligence in the
performance of his duties. Thus, the CA held him liable merely for gross neglect of duty.

Petitioners sought reconsideration of the CA decision, but the CA denied their motions.27 Hence, they filed the instant
petitions before the Court.

In her petition, petitioner Cabalit argues that

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE OMBUDSMAN'S DECISION WHICH GAVE
RETROACTIVE EFFECT TO THE NEW ADMINISTRATIVE ORDER NO. 17 IN THE PROCEEDINGS BELOW THAT WAS ALREADY
ON TRIAL IN ACCORDANCE WITH ADMINISTRATIVE ORDER NO. 07.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT ALTHOUGH THE TRIAL TYPE HEARING UNDER
ADMINISTRATIVE ORDER NO. 07 DID NOT PUSH THRU, PETITIONER WAS STILL ACCORDED HER RIGHT TO DUE PROCESS
UNDER THE SUMMARY PROCEEDINGS PURSUANT TO ADMINISTRATIVE ORDER NO. 17.
III. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF
RESPONDENT OMBUDSMAN DESPITE HAVING FAILED TO MAKE A CATEGORICAL RULING ON THE ISSUE OF WHETHER THE
QUESTIONED AND/OR FORGED SIGNATURES BELONG TO PETITIONER GEMMA CABALIT.
IV. THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT FAILED TO RULE ON THE DOCTRINAL
VALUE AND/OR APPLICABILITY OF THE TAPIADOR VS. OFFICE OF THE OMBUDSMAN (G.R. [129124], MARCH 15, 2002)
RULING HERE IN THE INSTANT CASE.28

Meanwhile, Apit interposes the following arguments in his petition:

I. THE COURT OF APPEALS ERRED IN LIMITING ADMINISTRATIVE DUE PROCESS AS AN OPPORTUNITY TO BE HEARD ONLY.
II. THE COURT OF APPEALS ERRED IN CONCLUDING THE DEFENSE OF PETITIONER APIT AS MERE DENIAL.
III. THE COURT OF APPEALS ERRED IN ITS FAILURE TO RECONSIDER THE EVIDENCE THAT CLEARLY PROVED THAT THE
SIGNATURES ABOVE THE NAME OF PETITIONER APIT IN THE QUESTIONED RECEIPTS ARE ALL FORGED AND FALSIFIED.29

As for Olaivar, he assails the CA Decision raising the following issues:

I. WHETHER THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER LEONARDO G.
OLAIVAR IS ADMINISTRATIVELY LIABLE FOR GROSS NEGLIGENCE.

II. WHETHER THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONER LEONARDO
G. OLAIVAR WAS NOT DENIED DUE PROCESS WHEN THE OFFICE OF THE OMBUDSMAN VISAYAS FOUND
HIM GUILTY FOR DISHONESTY AND METED OUT THE PENALTY OF DISMISSAL FROM SERVICE.30
On January 15, 2008, said petitions were consolidated.31

Essentially, the issues for our resolution are: (1) whether there was a violation of the right to due process when the hearing
officer at the Office of the Ombudsman-Visayasadopted the procedure under A.O. No. 17 notwithstanding the fact that
the said amendatory order took effect after the hearings had started; and (2) whether Cabalit, Apit and Olaivar are
administratively liable.

As regards the first issue, petitioners claim that they were denied due process of law when the investigating lawyer
proceeded to resolve the case based only on the affidavits and other evidence on record without conducting a formal
hearing. They lament that the case was submitted for decision without giving them opportunity to present witnesses and
cross-examine the witnesses against them. Petitioner Cabalit also argues that the Office of the Ombudsman erred in
applying the amendments under A.O. No. 17 to the trial of the case, which was already in progress under the old
procedures under A.O. No. 07. She stressed that under A.O. No. 07, she had the right to choose whether to avail of a
formal investigation or to submit the case for resolution on the basis of the evidence on record. Here, she was not given
such option and was merely required to submit her position paper.

Petitioners arguments deserve scant consideration.

Suffice to say, petitioners were not denied due process of law when the investigating lawyer proceeded to resolve the
case based on the affidavits and other evidence on record. Section 5(b)(1)32 Rule 3, of the Rules of Procedure of the Office
of the Ombudsman, as amended by A.O. No. 17, plainly provides that the hearing officer may issue an order directing the
parties to file, within ten days from receipt of the order, their respective verified position papers on the basis of which,
along with the attachments thereto, the hearing officer may consider the case submitted for decision. It is only when the
hearing officer determines that based on the evidence, there is a need to conduct clarificatory hearings or formal
investigations under Section 5(b)(2) and Section 5(b)(3) that such further proceedings will be conducted. But the
determination of the necessity for further proceedings rests on the sound discretion of the hearing officer. As the
petitioners have utterly failed to show any cogent reason why the hearing officers determination should be overturned,
the determination will not be disturbed by this Court. We likewise find no merit in their contention that the new
procedures under A.O. No. 17, which took effect while the case was already undergoing trial before the hearing officer,
should not have been applied.

The rule in this jurisdiction is that one does not have a vested right in procedural rules. In Tan, Jr. v. Court of Appeals,33 the
Court elucidated:

Statutes regulating the procedure of the courts will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retroactive in that sense and to that
extent. The fact that procedural statutes may somehow affect the litigants rights may not preclude their
retroactive application to pending actions. The retroactive application of procedural laws is
not violative of any right of a person who may feel that he is adversely affected. Nor is the retroactive
application of procedural statutes constitutionally objectionable. The reason is that as a general rule no
vested right may attach to, nor arise from, procedural laws. It has been held that a person has no vested
 right in any particular remedy, and a litigant cannot insist on the application to the trial of his case,
whether civil or criminal, of any other than the existing rules of procedure. (Emphasis supplied.)

While the rule admits of certain exceptions, such as when the statute itself expressly or by necessary implication provides
that pending actions are excepted from its operation, or where to apply it would impair vested rights, petitioners failed
to show that application of A.O. No. 17 to their case would cause injustice to them. Indeed, in this case, the Office of the
Ombudsman afforded petitioners every opportunity to defend themselves by allowing them to submit counter-affidavits,
position papers, memoranda and other evidence in their defense. Since petitioners have been afforded the right to be
heard and to defend themselves, they cannot rightfully complain that they were denied due process of law. Well to
remember, due process, as a constitutional precept, does not always and in all situations require a trial-type proceeding.
It is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself. In
administrative proceedings, the filing of charges and giving reasonable opportunity for the person so charged to answer
the accusations against him constitute the minimum requirements of due process. More often, this opportunity is
conferred through written pleadings that the parties submit to present their charges and defenses.34 But as long as a party
is given the opportunity to defend his or her interests in due course, said party is not denied due process.35

Neither is there merit to Cabalits assertion that she should have been investigated under the old rules of procedure of the
Office of the Ombudsman, and not under the new rules. In Marohomsalic v. Cole,36 we clarified that the Office of the
Ombudsman has only one set of rules of procedure and that is A.O. No. 07, series of 1990, as amended. There have been
various amendments made thereto but it has remained, to date, the only set of rules of procedure governing cases filed
in the Office of the Ombudsman. Hence, the phrase as amended is correctly appended to A.O. No. 7 every time it is
invoked. A.O. No. 17 is just one example of these amendments.

But did the CA correctly rule that petitioners Cabalit and Apit are liable for dishonesty while petitioner Olaivar is liable for
gross neglect of duty?

Cabalit argues that the CA erred in affirming the decision of the Ombudsman finding her liable for dishonesty. She asserts
that it was not established by substantial evidence that the forged signatures belong to her. Meanwhile, Apit contends
that the CA erred in not considering evidence which proves that the signatures appearing above his name are falsified.
However, we note that both Cabalit and Apit raise essentially factual issues which are not proper in petitions filed
under Rule 45. Settled jurisprudence dictates that subject to a few exceptions, only questions of law may be brought
before the Court via a petition for review on certiorari. In Diokno v. Cacdac,37 the Court held:

x x x [T]he scope of this Courts judicial review of decisions of the Court of Appeals is generally confined
only to errors of law, and questions of fact are not entertained. We elucidated on our fidelity to this rule,
and we said:

Thus, only questions of law may be brought by the parties and passed upon by
this Court in the exercise of its power to review. Also, judicial review by this Court does
not extend to a reevaluation of the sufficiency of the evidence upon which the proper
x x x tribunal has based its determination. (Emphasis supplied.)
It is aphoristic that a re-examination of factual findings cannot be done through a petition for review on certiorari under
Rule 45 of the Rules of Court because this Court is not a trier of facts; it reviews only questions of law. The Supreme Court
is not duty-bound to analyze and weigh again the evidence considered in the proceedings below. 38

Here, the CA affirmed the findings of fact of the Office of the Ombudsman-Visayas which are supported by substantial
evidence such as affidavits of witnesses and copies of the tampered official receipts.39 The CA found that a perusal of the
questioned receipts would easily reveal the discrepancies between the date, name and vehicle in the Owner's or Plate
Release copies and the File, Auditor, and Regional Office copies. It upheld the factual findings of the Ombudsman that
petitioners Cabalit and Apittampered with the duplicates of the official receipts to make it appear that they collected a
lesser amount. Their participation was found to have been indispensable as the irregularities could not have been
committed without their participation. They also concealed the misappropriation of public funds by falsifying the receipts.

Now, superior courts are not triers of facts. When the findings of fact of the Ombudsman are supported by substantial
evidence, it should be considered as conclusive.40 This Court recognizes the expertise and independence of the
Ombudsman and will avoid interfering with its findings absent a finding of grave abuse of discretion.41 Hence, being
supported by substantial evidence, we find no reason to disturb the factual findings of the Ombudsman which are affirmed
by the CA.

As for Olaivar, he insists that the CA erred in holding him administratively liable for gross negligence when he relied to a
reasonable extent and in good faith on the actions of his subordinates in the preparation of the applications for
registration. He questions the appellate courts finding that he failed to exercise the required diligence in the performance
of his duties.

While as stated above, the general rule is that factual findings of the CA are not reviewable by this Court, we find
that Olaivars case falls in one of the recognized exceptions laid down in jurisprudence since the CAs findings regarding his
liability are premised on the supposed absence of evidence but contradicted by the evidence on record.42

The Office of the Ombudsman-Visayas found Olaivar administratively liable for dishonesty while the CA ruled that he may
not be held liable for dishonesty supposedly for lack of sufficient evidence. The CA ruled that there was no substantial
evidence to show that Olaivar participated in the scheme, but the tampering of the official receipts could have been
avoided had he exercised the required diligence in the performance of his duties as officer-in-charge of the Jagna District
Office. Thus, the CA found him liable only for gross neglect of duty. This, however, is clear error on the part of the CA.

For one, there is clear evidence that Olaivar was involved in the anomalies. Witness Joselito Taladua categorically declared
in his affidavit43 that he personally paid Olaivarthe sum of P2,675 for the renewal of registration of a jeep for which he
was issued Official Receipt No. 47699853. Much to his dismay, Taladua later found out that his payment was not reflected
correctly in the Report of Collections, and that the vehicle was deemed unregistered for the year 2000.

More, Cabalit pointed to Olaivar as the person behind the anomaly in the LTO-Jagna District Office. She narrated in her
position paper that on several times, Olaivar directly accommodated some registrants and assumed the functions of
computer evaluator, typist and cashier, and computed the fees, received payment and prepared the official receipts for
those transactions. She also revealed that Olaivar would ask her for unused official receipts and would later return the
duplicate copies to her with the cash collections. Later, he would verify the Report of Collections as correct.44

Likewise, Motor Vehicle Inspector Engr. Lowell A. Dano confirmed that in several instances, he witnessed Olaivar type the
data himself in the official receipts even if they have a typist in the office to do the job. Engr. Dano added that after
typing, Olaivar personally brought the accomplished official receipts for him (Engr. Dano) to sign.45

Moreover, Jacinto Jalop, the records officer of the LTO in Jagna, Bohol, illustrated how the official receipts were tampered.
He disclosed that the correct charges were typed in the Owners copy and the Plate Release copy of the official receipts,
but a much lower charge and an incorrect address were indicated in the other copies. He asserted that Olaivar was
responsible for tampering the official receipts.46

Neglect of duty implies only the failure to give proper attention to a task expected of an employee arising from either
carelessness or indifference.47 However, the facts of this case show more than a failure to mind ones task. Rather, they
manifest that Olaivar committed acts of dishonesty, which is defined as the concealment or distortion of truth in a matter
of fact relevant to ones office or connected with the performance of his duty. It implies a disposition to lie, cheat, deceive,
or defraud; untrustworthiness; lack of integrity; lack of honesty, probity, or integrity in principle.48 Hence, the CA should
have found Olaivar liable for dishonesty.

But be that as it may, still, the CA correctly imposed the proper penalty upon Olaivar. Under Section 52, Rule IV of
the Uniform Rules on Administrative Cases in the Civil Service, dishonesty, like gross neglect of duty, is classified as a grave
offense punishable by dismissal even if committed for the first time.49 Under Section 58,50 such penalty likewise carries
with it the accessory penalties of cancellation of civil service eligibility, forfeiture of retirement benefits and
disqualification from re-employment in the government service.
One final note. Cabalit contends that pursuant to the obiter in Tapiador v. Office of the Ombudsman,51 the Office of the
Ombudsman can only recommend administrative sanctions and not directly impose them. However, in Office of the
Ombudsman v. Masing,52 this Court has already settled the issue when we ruled that the power of the Ombudsman to
determine and impose administrative liability is not merely recommendatory but actually mandatory. We held,

We reiterated this ruling in Office of the Ombudsman v. Laja, where we emphasized that the
Ombudsmans order to remove, suspend, demote, fine, censure, or prosecute an officer or employee is
not merely advisory or recommendatory but is actually mandatory. Implementation of the order imposing
the penalty is, however, to be coursed through the proper officer. Recently, in Office of the Ombudsman
v. Court of Appeals, we also held

While Section 15(3) of RA 6770 states that the Ombudsman has the power to recommend
x x x removal, suspension, demotion x x x of government officials and employees, the
same Section 15(3) also states that the Ombudsman in the alternative may enforce its
disciplinary authority as provided in Section 21 of RA 6770. (emphasis supplied.)53
 Subsequently, in Ledesma v. Court of Appeals,54 and Office of the Ombudsman v. Court of Appeals,55 the Court
upheld the Ombudsmans power to impose the penalty of removal, suspension, demotion, fine, censure, or prosecution
of a public officer or employee found to be at fault in the exercise of its administrative disciplinary authority. In Office of
the Ombudsman v. Court of Appeals, we held that the exercise of such power is well founded in the Constitution and R.A.
No. 6770, otherwise known as The Ombudsman Act of 1989, thus:

The Court further explained in Ledesma that the mandatory character of the Ombudsmans order
imposing a sanction should not be interpreted as usurpation of the authority of the head of office or any
officer concerned. This is because the power of the Ombudsman to investigate and prosecute any illegal
act or omission of any public official is not an exclusive authority but a shared or concurrent authority in
respect of the offense charged. By stating therefore that the Ombudsman recommends the action to be
taken against an erring officer or employee, the provisions in the Constitution and in Republic Act No.
6770 intended that the implementation of the order be coursed through the proper officer.

Consequently in Ledesma, the Court affirmed the appellate courts decision which had, in turn, affirmed
an order of the Office of the Ombudsman imposing the penalty of suspension on the erring public official.56

The duty and privilege of the Ombudsman to act as protector of the people against the illegal and unjust acts of those
who are in the public service emanate from no less than the 1987 Constitution. Section 12 of Article XI thereof states:
Section 12. The Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any
form or manner against public officials or employees of the Government, or any subdivision, agency or instrumentality
thereof, including government-owned or controlled corporations, and shall, in appropriate cases, notify the complainants
of the action taken and the result thereof.

In addition, Section 15 (3) of R.A. No. 6770, provides:

SEC. 15. Powers, Functions and Duties. The Office of the Ombudsman shall have the following powers,
functions and duties:

xxxx

(3) Direct the officer concerned to take appropriate action against a public officer or employee at fault or
who neglects to perform an act or discharge a duty required by law, and recommend his removal,
suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith; or enforce its
disciplinary authority as provided in Section 21 of this Act: Provided, That the refusal by any officer without
just cause to comply with an order of the Ombudsman to remove, suspend, demote, fine, censure or
prosecute an officer or employee who is at fault or who neglects to perform an act or discharge a duty
required by law shall be a ground for disciplinary action against said officer.

xxxx

Section 19 of R.A. No. 6770 grants to the Ombudsman the authority to act on all administrative complaints:

SEC. 19. Administrative Complaints. The Ombudsman shall act on all complaints relating, but not limited
to acts or omissions which:
(1) Are contrary to law or regulation;
(2) Are unreasonable, unfair, oppressive or discriminatory;
 (3) Are inconsistent with the general course of an agencys functions, though in accordance with law;
(4) Proceed from a mistake of law or an arbitrary ascertainment of facts;
(5) Are in the exercise of discretionary powers but for an improper purpose; or
(6) Are otherwise irregular, immoral or devoid of justification.

In the exercise of his duties, the Ombudsman is given full administrative disciplinary authority. His power is not limited
merely to receiving, processing complaints, or recommending penalties. He is to conduct investigations, hold hearings,
summon witnesses and require production of evidence and place respondents under preventive suspension. This includes
the power to impose the penalty of removal, suspension, demotion, fine, or censure of a public officer or employee.57
The provisions in R.A. No. 6770 taken together reveal the manifest intent of the lawmakers to bestow on the Office of the
Ombudsman full administrative disciplinary authority. These provisions cover the entire gamut of administrative
adjudication which entails the authority to, inter alia, receive complaints, conduct investigations, hold hearings in
accordance with its rules of procedure, summon witnesses and require the production of documents, place under
preventive suspension public officers and employees pending an investigation, determine the appropriate penalty
imposable on erring public officers or employees as warranted by the evidence, and, necessarily, impose the said
penalty.58 Thus, it is settled that the Office of the Ombudsman can directly impose administrative sanctions.

We find it worthy to state at this point that public service requires integrity and discipline. For this reason, public servants
must exhibit at all times the highest sense of honesty and dedication to duty. By the very nature of their duties and
responsibilities, public officers and employees must faithfully adhere to hold sacred and render inviolate the constitutional
principle that a public office is a public trust; and must at all times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty and efficiency.59

WHEREFORE, the petitions for review on certiorari are DENIED. The assailed Decision dated January 18, 2006 and
Resolution dated September 21, 2007 of the Court of Appeals in CA-G.R. SP. Nos. 86256, 86394 and 00047
are AFFIRMED with MODIFICATION. Petitioner Leonardo G. Olaivar is held administratively liable for DISHONESTY and
meted the penalty of dismissal from the service as well as the accessory penalties inherent to said penalty.

With costs against petitioners.

Binayug v. Ugaddan

G.R. No. 181623

December 5, 2012

FACTS: At the crux of this controversy are two parcels of land covered by an OCT in the name of Gerardo Ugaddan, husband
of respondent Basilia Lacambra and father of the other respondents "Eugenio, Rorberto, Pedro, Angelina, Tereso,
Dominga, and Geronima, all bearing the surname Ugaddan. Gerardo acquired title over the subject properties through
the grant of (homestead Patent in his favor. Upon Gerardo’s death, respondents discovered that the OCT had been
cancelled. The records of the Registry of Deeds show that Gerardo, with the consent of his wife Basilia, sold the subject
properties to Juan Binayug. As a result of the sale, the OCT in Gerardo’s name was cancelled and a TCT in Juan’s name was
issued. Juan was the father of petitioner Alejandro Binayug and the subject properties passed on to him and his wife Ana
Ugaddan Binayug upon Juan’s death. After conducting their own investigation, respondents filed a complaint for
declaration of nullity of title, annulment of instrument, and declaration of ownership with damages against petitioners.
Respondents averred that the purported sale between Gerardo and Juan was prohibited under the Public Land Act- and
that the Absolute Deed of Sale between Gerardo (with Basilia’s consent) and Juan was forged. Hence, respondents
asserted that the TCT in Juan’s name was void for having been obtained through fraudulent means. Petitioners essentially
denied that the Absolute Deed of Sale was forged and that they fraudulently obtained the TCT. The RTC declared the TCT
in the name of Juan null and void.

ISSUE: Whether or not Section 445 of the Public Land Act is applicable to their case.

RULING: The Court finds no merit in the petition and denies the same. Section 445 of the Public Land Act, as amended,
reads that except in favor of the Government or any of its branches, units, or institutions, or legally constituted ban6ing
corporations, lands acquired under free patent or homestead provisions shall not be subject to encumbrance or alienation
from the date of the approval of the application and for a term of five years from and after the date of issuance of the
patent or grant. The provisions of law are clear and explicit. A contract which purports to alienate, transfer, convey, or
encumber any homestead within the prohibitory period of five years from the date of the issuance of the patent is void
from its execution. In a number of cases, this Court has held that such provision is mandatory. 1n the present case, it is
settled that homestead patent no. V-6269; was issued to Gerardo on January 12, 1951 and the Absolute Deed of Sale
between Gerardo and Juan was executed on July 10, 1951, after a lapse of only six months. Irrefragably, the alienation of
the subject properties too6 place within the five- year prohibitory period under Section 445 of the Public Land Act, as
amended- and as such, the sale by Gerardo to Juan is null and void right from the very start. As a void contract, the
Absolute Deed of Sale dated July 10, 1951 produces no legal effect whatsoever in accordance with the principle “quod
nullum est nullum producit effectum,” thus, it could not have transferred title to the subject properties from Gerardo to
Juan and there could be no basis for the issuance of TCT in Juan’s name. A void contract is also not susceptible of
ratification, and the action for the declaration of the absolute nullity of such a contract is imprescriptible. Petitioners
contend that only the state can bring action for violation of section 445 of the Public Land Act, as amended. Moreover,
Section 124 of the same Act explicitly provides for the consequence of such a violation. Jurisprudence supports the return
of the subject properties to respondents as Gerardo’s heirs following the declaration that the Absolute Deed of Sale dated
July 10, 1951 between Gerardo and Juan is void for being in violation of Section 445of the Public Land Act, as amended.
That the subject properties should revert to the State under Section 124 of the Public Land Act, as amended, is a non8issue,
the State not even being a party herein. As a final note, although not assigned as an error in their petition, petitioners
raise as an issue and argue extensively in their memorandum that they had acquired acquisitive prescription over the
subject properties. The issue of prescription involves questions of fact, i.e., when and for how long petitioners have
possessed the subject properties and whether their possession is open, continuous, exclusive, notorious, and adverse. The
RTC’s findings that petitioners and their predecessor8in8interest have been in possession of the subject properties for
“quite some time now” or “through the years” are clearly insufficient. To resolve the issue of prescription, the Court must
necessarily go through the evidence presented by the parties, which it cannot do.

Carabeo v. Dingco

G.R. No. 190823

April 4, 2011

DECISION

CARPIO MORALES, J.:

On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as "Kasunduan sa Bilihan ng
Karapatan sa Lupa"1 (kasunduan) with Spouses Norberto and Susan Dingco (respondents) whereby petitioner agreed to
sell his rights over a 648 square meter parcel of unregistered land situated in Purok III, Tugatog, Orani, Bataan to
respondents for ₱38,000.
Respondents tendered their initial payment of ₱10,000 upon signing of the contract, the remaining balance to be paid on
September 1990.

Respondents were later to claim that when they were about to hand in the balance of the purchase price, petitioner
requested them to keep it first as he was yet to settle an on-going "squabble" over the land.

Nevertheless, respondents gave petitioner small sums of money from time to time which totaled ₱9,100, on petitioner’s
request according to them; due to respondents’ inability to pay the amount of the remaining balance in full, according to
petitioner.

By respondents’ claim, despite the alleged problem over the land, they insisted on petitioner’s acceptance of the
remaining balance of ₱18,900 but petitioner remained firm in his refusal, proffering as reason therefor that he would
register the land first.

Sometime in 1994, respondents learned that the alleged problem over the land had been settled and that petitioner had
caused its registration in his name on December 21, 1993 under Transfer Certificate of Title No. 161806. They thereupon
offered to pay the balance but petitioner declined, drawing them to file a complaint before the Katarungan Pambarangay.
No settlement was reached, however, hence, respondent filed a complaint for specific performance before the Regional
Trial Court (RTC) of Balanga, Bataan.

Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain, the kasunduan not
having specified the metes and bounds of the land. In any event, petitioner alleged that if the validity of the kasunduan is
upheld, respondents’ failure to comply with their reciprocal obligation to pay the balance of the purchase price would
render the action premature. For, contrary to respondents’ claim, petitioner maintained that they failed to pay the balance
of ₱28,000 on September 1990 to thus constrain him to accept installment payments totaling ₱9,100.

After the case was submitted for decision or on January 31, 2001,2 petitioner passed away. The records do not show that
petitioner’s counsel informed Branch 1 of the Bataan RTC, where the complaint was lodged, of his death and that proper
substitution was effected in accordance with Section 16, Rule 3, Rules of Court.3

By Decision of February 25, 2001,4 the trial court ruled in favor of respondents, disposing as follows:

WHEREFORE, premises considered, judgment is hereby rendered ordering:

1. The defendant to sell his right over 648 square meters of land pursuant to the contract dated July 10, 1990 by
executing a Deed of Sale thereof after the payment of P18,900 by the plaintiffs;

2. The defendant to pay the costs of the suit.

SO ORDERED.5

Petitioner’s counsel filed a Notice of Appeal on March 20, 2001.

By the herein challenged Decision dated July 20, 2009,6 the Court of Appeals affirmed that of the trial court.

Petitioner’s motion for reconsideration having been denied by Resolution of January 8, 2010, the present petition for
review was filed by Antonio Carabeo, petitioner’s son,7 faulting the appellate court:

(A)

… in holding that the element of a contract, i.e., an object certain is present in this case.
 (B)

… in considering it unfair to expect respondents who are not lawyers to make judicial consignation after herein
petitioner allegedly refused to accept payment of the balance of the purchase price.

(C)

… in upholding the validity of the contract, "Kasunduan sa Bilihan ng Karapatan sa Lupa," despite the lack of
spousal consent, (underscoring supplied)

and proffering that

(D)

[t]he death of herein petitioner causes the dismissal of the action filed by respondents; respondents’ cause of
action being an action in personam. (underscoring supplied)

The petition fails.

The pertinent portion of the kasunduan reads:8

xxxx

Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na may sukat na 27 x 24 metro
kuwadrado, ang nasabing lupa ay may sakop na dalawang punong santol at isang punong mangga, kaya’t ako ay
nakipagkasundo sa mag-asawang Norby Dingco at Susan Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa
halagang ₱38,000.00.

x x x x (underscoring supplied)

That the kasunduan did not specify the technical boundaries of the property did not render the sale a nullity. The
requirement that a sale must have for its object a determinate thing is satisfied as long as, at the time the contract is
entered into, the object of the sale is capable of being made determinate without the necessity of a new or further
agreement between the parties.9 As the above-quoted portion of the kasunduan shows, there is no doubt that the object
of the sale is determinate.

Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal, hence, will not be
considered, in the present case, in the interest of fair play, justice and due process.10

Respecting the argument that petitioner’s death rendered respondents’ complaint against him dismissible, Bonilla v.
Barcena11 enlightens:

The question as to whether an action survives or not depends on the nature of the action and the damage sued for. In the
causes of action which survive, the wrong complained [of] affects primarily and principally property and property rights,
the injuries to the person being merely incidental, while in the causes of action which do not survive, the injury complained
of is to the person, the property and rights of property affected being incidental. (emphasis and underscoring supplied)

In the present case, respondents are pursuing a property right arising from the kasunduan, whereas petitioner is invoking
nullity of the kasunduan to protect his proprietary interest. Assuming arguendo, however, that the kasunduan is deemed
void, there is a corollary obligation of petitioner to return the money paid by respondents, and since the action involves
property rights,12 it survives.1avvphi1
It bears noting that trial on the merits was already concluded before petitioner died. Since the trial court was not informed
of petitioner’s death, it may not be faulted for proceeding to render judgment without ordering his substitution. Its
judgment is thus valid and binding upon petitioner’s legal representatives or successors-in-interest, insofar as his interest
in the property subject of the action is concerned.13

In another vein, the death of a client immediately divests the counsel of authority.14 Thus, in filing a Notice of Appeal,
petitioner’s counsel of record had no personality to act on behalf of the already deceased client who, it bears reiteration,
had not been substituted as a party after his death. The trial court’s decision had thereby become final and executory, no
appeal having been perfected.

WHEREFORE, the petition is DENIED.

Rufloe v. Burgos

G.R. No. 143573

January 30, 2009

DECISION

LEONARDO-DE CASTRO, J.:

Under consideration is this petition for review under Rule 45 of the Rules of Court seeking the reversal and setting aside
of the Decision[1] dated January 17, 2000 of the Court of Appeals (CA) in CA-G.R. CV. No. 49939, and its Resolution[2]
dated June 9, 2000, denying petitioners motion for reconsideration.

The assailed decision reversed and set aside the February 10, 1995 decision[3] of the Regional Trial Court (RTC) at
Muntinlupa, Metro Manila, Branch 276,[4] in its Civil Case No. 90-359, an action for Declaration of Nullity of Contract and
Cancellation of Transfer Certificate of Titles and Damages, commenced by the petitioners against herein respondents.

The factual antecedents are as follows:

Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners Alfredo and Rodrigo are their
children. During the marriage of Adoracion and Angel, they acquired a 371-square meter parcel of land located at Barangay
Bagbagan, Muntinlupa, and covered by Transfer Certificate of Title (TCT) No. 406851 which is the subject of the present
controversy.

Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and Angel in a Deed of Sale dated
September 8, 1978 to make it appear that the disputed property was sold to her by the spouses Rufloe. On the basis of
the said deed of sale, Delos Reyes succeeded in obtaining a title in her name, TCT No. S-74933.

Thus, in November 1979, the Rufloes filed a complaint for damages against Delos Reyes with the RTC of Pasay City alleging
that the Deed of Sale was falsified as the signatures appearing thereon were forged because Angel Rufloe died in 1974,
which was four (4) years before the alleged sale in favor of Delos Reyes. The complaint was docketed as Civil Case No. M-
7690.[5] They also filed a notice of adverse claim on November 5, 1979.

On December 4, 1984, during the pendency of Civil Case No. M-7690, Delos Reyes sold the subject property to respondent
siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new title, TCT No. 135860, was then issued in their names.

On December 12, 1985, the Burgos siblings, in turn, sold the same property to their aunt, Leonarda Burgos. However, the
sale in favor of Leonarda was not registered. Thus, no title was issued in her name. The subject property remained in the
name of the Burgos siblings who also continued paying the real estate taxes thereon.
On February 6, 1989, the RTC of Pasay City, Branch 108,[6] rendered its decision in Civil Case No. M-7690 declaring that
the Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses Rufloe had been forged. The trial
court ruled that Delos Reyes did not acquire ownership over the subject property. Said decision had become final and
executory.

Such was the state of things when, on February 8, 1990, in the RTC of Muntinlupa, the Rufloes filed their complaint for
Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles against respondents Leonarda and the
Burgos siblings, and Delos Reyes. In their complaint, docketed as Civil Case No. 90-359, the Rufloes basically alleged that
inasmuch as the Deed of Sale in favor of Delos Reyes was falsified, no valid title was ever conveyed to the Burgos
siblings.[7] The Burgos siblings executed a simulated deed of sale in favor of Leonarda knowing fully well that their title
was a nullity.

In their common Answer, respondents maintained that they bought the property in good faith after they were shown a
genuine copy of the title of the disputed property by Delos Reyes. They also insisted that they were innocent purchasers
in good faith and for value.

On February 10, 1995, the trial court rendered a decision declaring that Leonarda and the Burgos siblings were not
innocent purchasers for value and did not have a better right to the property in question than the true and legal owners,
the Rufloes. The trial court also held that the subsequent conveyance of the disputed property to Leonarda by the Burgos
siblings was simulated to make it appear that Leonarda was a buyer in good faith. The trial court then directed the Register
of Deeds of Makati, Rizal to reinstate the title of the spouses Rufloe, and to cancel all other titles subsequent to the said
title particularly TCT No. S-74933 issued to Delos Reyes and TCT No. 135860 issued to the Burgos siblings.

Respondents interposed an appeal to the CA, whereat the appellate recourse was docketed as CA-G.R. CV. No. 49939.

As stated at the threshold hereof, the CA, in its decision dated January 17, 2000, reversed and set aside that of the trial
court, declaring in the process that respondents were purchasers in good faith and for value. In so ruling, the CA explained:

Measured by this yardstick, defendants-appellants [herein respondents] are purchasers in good faith and for
value. Amado Burgos bought the subject property (for his children Anita, Angelina, Angelito and Amy) free from
any lien or encumbrance or any notice of adverse claim annotated thereto. He was presented with a clean title
already in the name of the seller. If a person purchases a piece of land on the assurance that the sellers title
thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. If we
were to void a sale of property covered by a clean and unencumbered torrens title, public confidence in the
Torrens System would be eroded and transactions would have to be attended by complicated and inconclusive
investigations and uncertain proof of ownership. The consequences would be that land conflicts could proliferate
and become more abrasive, if not violent. (Words in bracket ours).

Their motion for reconsideration having been denied by the CA in its equally challenged resolution of June 9, 2000,
petitioners are now with us via the present recourse, faulting the CA as follows:

A. THE HONORABLE COURT OF APPEALS DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH THE APPLICABLE DECISIONS
OF THE HONORABLE SUPREME COURT.

B. THERE ARE SPECIAL AND IMPORTANT REASONS THAT REQUIRE A REVIEW OF THE CA DECISION.

C. THE HONORABLE CA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
COUNTERMANDED THE FINDINGS OF THE REGIONAL TRIAL COURT EVEN ON POINTS AND QUESTIONS OF CREDIBILITY.

D. THE CA JUDGMENT THAT REVERSED THE RTC DECISION IS NOT SUPPORTED BY THE EVIDENCE ON RECORD AND IS
CONTRARY TO ESTABLISHED PRECEDENTS LAID DOWN BY THE HONORABLE SUPREME COURT.
E. THE CA ERRED IN LAW IN PRACTICALLY HOLDING THAT A DEAD MAN ANGEL RUFLOE (ANGEL NEVER SIGNED) VALIDLY
DISPOSED OF HIS PROPERTY (A HOUSE AND LOT COVERED BY A TCT THROUGH A FALSIFIED DEED OF SALE) AFTER HIS
DEATH FOUR (4) YEARS BEFORE THE EXECUTION OF THE DEED.

F. THE CA ERRED IN LAW IN HOLDING ANITA, ANGELINA, AMY AND ANGELITO BURGOS AND THEIR SUCCESOR-IN-
INTEREST (THEIR AUNT) LEONARDA BURGOS ARE BUYERS IN GOOD FAITH.

G. THE CA IGNORED THE PLAIN PROVISIONS OF THE CIVIL CODE THAT IN ALL CONTRACTUAL, PROPERTY OR OTHER
RELATIONS, WHEN ONE OF THE PARTIES IS AT A DISADVANTAGE ON ACCOUNT OF HIS MORAL DEPENDENCE, IGNORANCE,
INDIGENCE, MENTAL WEAKNESS, TENDER AGE OR OTHER HANDICAP, THE COURT MUST BE VIGILANT FOR HIS
PROTECTION.

In a gist, the issues to be resolved are (1) whether the sale of the subject property by Delos Reyes to the Burgos siblings
and the subsequent sale by the siblings to Leonarda were valid and binding; and (2) whether respondents were innocent
purchasers in good faith and for value despite the forged deed of sale of their transferor Delos Reyes.

The issues necessitate an inquiry into the facts. While, as a rule, factual issues are not within the province of this Court,
nonetheless, in light of the conflicting factual findings of the two (2) courts below, an examination of the facts obtaining
in this case is in order.

The Rufloes aver that inasmuch as the Deed of Sale purportedly executed by them in favor of Delos Reyes was a forgery,
she could not pass any valid right or title to the Burgos siblings and Leonarda. The Rufloes also contend that since the
Burgos siblings and Leonarda acquired the subject property with notice that another person has a right to or interest in
such property, they cannot be considered innocent purchasers in good faith and for value.

For their part, the Burgos siblings and Leonarda insist that their title is valid and binding. They maintain that under the
Torrens System, a person dealing with registered land may safely rely on the correctness on the certificate of title without
the need of further inquiry. For this reason, the Court cannot disregard the right of an innocent third person who relies
on the correctness of the certificate of title even if the sale is void.

We find merit in the petition.

The issue concerning the validity of the deed of sale between the Rufloes and Delos Reyes had already been resolved with
finality in Civil Case No. M-7690 by the RTC of Pasay City which declared that the signatures of the alleged vendors, Angel
and Adoracion Rufloe, had been forged.[12] It is undisputed that the forged deed of sale was null and void and conveyed
no title. It is a well-settled principle that no one can give what one does not have, nemo dat quod non habet. One can sell
only what one owns or is authorized to sell, and the buyer can acquire no more right than what the seller can transfer
legally.[13] Due to the forged deed of sale, Delos Reyes acquired no right over the subject property which she could convey
to the Burgos siblings. All the transactions subsequent to the falsified sale between the spouses Rufloe and Delos Reyes
are likewise void, including the sale made by the Burgos siblings to their aunt, Leonarda.

We now determine whether respondents Burgos siblings and Leonarda Burgos were purchasers in good faith. It has been
consistently ruled that a forged deed can legally be the root of a valid title when an innocent purchaser for value
intervenes.

An innocent purchaser for value is one who buys the property of another without notice that some other person has a
right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of
another persons claim.[15] The burden of proving the status of a purchaser in good faith and for value lies upon one who
asserts that status. This onus probandi cannot be discharged by mere invocation of the ordinary presumption of good
faith.
As a general rule, every person dealing with registered land, as in this case, may safely rely on the correctness of the
certificate of title issued therefor and will in no way oblige him to go beyond the certificate to determine the condition of
the property. However, this rule admits of an unchallenged exception:

a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the
need of inquiring further except when the party has actual knowledge of facts and circumstances that would impel
a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of
title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title
of the property in litigation. The presence of anything which excites or arouses suspicion should then prompt the
vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said
certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a
purchaser in good faith and, hence, does not merit the protection of the law.

The circumstances surrounding this case point to the absolute lack of good faith on the part of respondents. The evidence
shows that the Rufloes caused a notice of adverse claim to be annotated on the title of Delos Reyes as early as November
5, 1979.[18] The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of
real property, and serves as a notice and warning to third parties dealing with said property that someone is claiming an
interest on the same or may have a better right than the registered owner thereof. Despite the notice of adverse claim,
the Burgos siblings still purchased the property in question.

Too, at the time the Burgos siblings bought the subject property on December 4, 1984, Civil Case No. M-7690,[19] an
action for damages, and Criminal Case No. 10914-P,[20] for estafa, filed by the Rufloes against Delos Reyes, were both
pending before the RTC of Pasay City. This circumstance should have alerted the Burgos siblings as to the validity of Delos
Reyes title and her authority and legal right to sell the property.

Equally significant is the fact that Delos Reyes was not in possession of the subject property when she sold the same to
the Burgos siblings. It was Amado Burgos who bought the property for his children, the Burgos siblings. Amado was not
personally acquainted with Delos Reyes prior to the sale because he bought the property through a real estate broker, a
certain Jose Anias, and not from Delos Reyes herself. There was no showing that Amado or any of the Burgos siblings
exerted any effort to personally verify with the Register of Deeds if Delos Reyes certificate of title was clean and authentic.
They merely relied on the title as shown to them by the real estate broker. An ordinarily prudent man would have inquired
into the authenticity of the certificate of title, the propertys location and its owners. Although it is a recognized principle
that a person dealing with registered land need not go beyond its certificate of title, it is also a firmly established rule that
where circumstances exist which would put a purchaser on guard and prompt him to investigate further, such as the
presence of occupants/tenants on the property offered for sale, it is expected that the purchaser would inquire first into
the nature of possession of the occupants, i.e., whether or not the occupants possess the land in the concept of an owner.
Settled is the rule that a buyer of real property that is in the possession of a person other than the seller must be wary
and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded
as a buyer in good faith.

In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was the Rufloes who continued to
have actual possession of the property, Leonarda should have investigated the nature of their possession.

We cannot ascribe good faith to those who have not shown any diligence in protecting their rights. Respondents had
knowledge of facts that should have led them to inquire and investigate in order to acquaint themselves with possible
defects in the title of the seller of the property. However, they failed to do so. Thus, Leonarda, as well as the Burgos
siblings, cannot take cover under the protection the law accords to purchasers in good faith and for value. They cannot
claim valid title to the property.

Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a
flaw in the title of his transferor. To be effective, the inscription in the registry must have been made in good faith. A
holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield
for fraud.
We quote with approval the following findings of the trial court showing that the sale between the Burgos siblings and
Leonarda is simulated:

1. The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true vendee would not
brook any delay in registering the sale in his favor. Not only because registration is the operative act that effects property
covered by the Torrens System, but also because registration and issuance of new title to the transferee, enable this
transferee to assume domiciliary and possessory rights over the property. These benefits of ownership shall be denied
him if the titles of the property shall remain in the name of vendor. Therefore, it is inconceivable as contrary to behavioral
pattern of a true buyer and the empirical knowledge of man to assume that a buyer who invested on the property he
bought would be uninvolved and not endeavor to register the property he bought. The nonchalance of Leonarda amply
demonstrates the pretended sale to her, and the evident scheme of her brother Amado who invested on the property he
bought.

2. Despite the sale of property to Leonarda, the sellers continued paying taxes on the property from the time they
acquired it from Elvira in 1984 up to the present or a period of ten years. The tax payment receipts remained in the name
of Anita and her siblings, (Exhibits 16 to 16-H). On the other hand, Leonarda does not even pretend to have paid any tax
on the land she allegedly bought in 1985. Even the Tax Declaration issued in 1988, three years after the sale to her
(Leonarda) is still in the name of her nieces and nephew. These circumstances can only account for the fact that her nieces
and nephew remained the owners of the land and continued paying taxes thereon.

3. Leonarda never exercised the attributes of ownership. Far from it, she vested the exercise of domiciliary and
possessory rights in her brother Amado the father of Anita, Angelina, Angelito and Amy, by constituting him with full
power including the ejectment of plaintiffs, to defend and to enter a compromise of any case he may file. She allowed the
children of Amado to remain as the registered owners of the property without pressing for its transfer to her.

4. And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister
Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not
plausibly assume the stance of a buyer in good faith from the forger Elvira Delos Reyes, knowing of Elviras defective title,
Amado hoped that the entry of his sister Leonarda, might conjure the image and who might pass off as an innocent
purchaser, specially considering that the notice of adverse claim of the Plaintiffs which was annotated in Elviras title was
not, strangely enough, NOT carried over in the title of his children, who were made to appear as the sellers to their Aunt
Leonarda. It was a neat chicanery of Amado to bring the property out of the reach of Plaintiffs thru a series of transfers
involving a third party, to make her appear as an innocent purchaser for value. His sister could be manipulated to evict or
oust the real owners from their own property thru a documentary manipulation. Unfortunately, his scheme has not passed
unnoticed by a discerning and impartial evaluator, like this court. The Municipal Court of Muntinlupa in Civil Case No.
17446 has even established that Amados children Anita and others are buyers in bad faith who knew of the defective title
of their transferor Elvira Delos Reyes, the forger, as aforestated.

These circumstances taken altogether would show that the sale, which occurred between Leonarda and the Burgos
siblings, was simply a scheme designed to cleanse the title passed on to them by the forger Delos Reyes. Respondents had
to resort to this strategy because they were fully aware that their title, having originated from the forged deed of sale of
Delos Reyes, was not a clean and valid title. The trial court explained, thus:

And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister
Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not
plausibly assume the stamp of a buyer in good faith from the forger Elvira Delos Reyes, knowing Elviras defective title,
Amado had hoped that the entry of his sister Leonarda, might conjure the image and might pass off as an innocent
purchaser. xxx. It was a neat chicanery of Amado to bring the property out of the reach of plaintiffs [herein petitioners]
thru a series of transfers involving a third party, to make her appear as an innocent purchaser for value. Unfortunately,
his scheme has not passed unnoticed by a discerning and impartial evaluator, like this Court.[23] (Words in bracket ours)

Patently, the Burgos siblings were not innocent purchasers for value and the simulated sale to Leonarda did not remove
the defect in their title.
Accordingly, we sustain the trial courts award of P20,000.00 as moral damages, P50,000.00 as exemplary damages, and
P50,000.00 as attorneys fees.[24]

However, the actual damages in the amount of P134,200.00 should be deleted. In view of this Courts ruling that the
property rightfully belongs to petitioners and must be restored to them, there is no more basis for the award of said actual
damages to the Rufloes.

WHEREFORE, the petition for review is hereby GRANTED. The assailed decision and resolution of the Court of Appeals in
CA-G.R. CV. No. 49939 are REVERSED and SET ASIDE. Accordingly, the decision of the trial court is hereby REVIVED, except
the award of actual damages which must be deleted.

Formaran v. Ong

GR. No. 186264

July 8, 2013

FACTS: Plaintff owns a parcel of land which donated to her by her uncle and aunt. Defendant and her father, came to her
residence asking for help that they were borrowing half of her land so that the defendant could obtain a loan form the
bank to buy a dental chair, Plaintiff signed a deed of sale, covering the land in question without money or consideration
involved.

Plaintiff inquired from her uncle if they have obtained the loan. The latter informed her that they did not push through
with the loan because the bank’s interest was high. Her uncle informed her that they already crampled the Deed of Sale.

Plaintiff did not bother anymore about the document, she transferred residence. Defendant filed a case of unlawful
detainer against her. She learned for the first time that the Deed of Sale was registered and declared for taxation purposes
in the name of the defendant.

Plaintiff consequently suffered anxiety, sleepless nights and besmirched reputation; and that to protect her rights and
interest over the land in question, she was constrained to file the instant case.

ISSUE: Whether or not the subject Deed of Sale is simulated.

HELD: Yes. The Court believes and so holds that the subject Deed of Sale is indeed simulated as it is totally devoid of
consideration.

The amplitude of foregoing undisputed facts and circumstances clearly shows that the sale of the land in question was
purely simulated. It

is void from the very beginning (Article 1346, New Civil Code). If the sale was legitimate, defendant Glenda should have
immediately taken possession of the land, declared in her name for taxation purposes, registered the sale, paid realty
taxes, introduced improvements therein and should not have allowed plaintiff to mortgage the land. These omissions
properly militated against defendant Glenda’s submission that the sale was legitimate and the consideration was paid.
These are facts and circumstances which may be considered badges of bad faith that tip the balance in favor of petitioner.
While the Deed of Absolute Sale was notarized, it cannot justify the conclusion that the sale is a true conveyance to which
the parties are irrevocably and undeniably bound. Although the notarization of Deed of Absolute Sale, vests in its favor
the presumption of regularity, it does not validate nor make binding an instrument never intended, in the first place, to
have any binding legal effect upon the parties thereto.
Intac v. CA

GR No. 173211

October 11, 2012

FACTS: Ireneo Mendoza married to Salvacion Fermin was the owner of the subject property located at Bagong Pag-asa,
Quezon City. Ireneo had two children, Josefina and Martina, Salvacion being their stepmother. They also took care of
Angelina, Ireneo’s niece. On October 25, 1977, Ireneo, with the consent of his wife executed a deed of absolute sale of
the subject property in favor of Angelina and her husband, Mario Intac. They are referred to as spouses Intac. Ireneo and
his family continued staying in the premises and paying taxes thereon. Ireneo died, intestate in 1982. After Salvacion died,
Josefina and Martina still possessed the subject land, paying taxes thereon, leasing portions of it and collecting rentals.
The controversy arose when Ireneo’s children sought the cancellation of the title issued in the name of Angelina as result
of the sale made on October 25, 1977. They filed a case for cancellation of title and reconveyance. They argue that the
sale was only made to accommodate Angelina and her husband who borrowed the title of the property so that they can
use it as collateral for a loan. Further, that during Ireneo’s lifetime and in a conference, he informed them that he wished
for the property to be equally divided among his heirs after his death. The spouses Intac was present at this conference
and never objected thereto. They found out that a new title over the land was obtained in the name of spouses Intac after
the death of Salvacion, rumors spread in their neighborhood of such fact. Upon verification with the Registry of Deeds, it
proved true. Spouses Intac argue that the sale was valid and it was for a valuable consideration. Further, they contend
that the action has already prescribed and that they tolerated the occupation of Ireneo’s family thereon because they did
not need it at that time.

ISSUE: What is the status of the sale?

HELD: The sale was void ab intio. Consideration and consent are essential elements in a contract of sale. Where a party’s
consent to a contract of sale is vitiated or where there is lack of consideration due to a simulated price, the contract is null
and void.

The deed of absolute sale between the parties was absolutely simulated for lack of consideration, cause, and intent to
sell, therefore, void. The Civil Code provides under Art. 1345 Simulation of a contract may be absolute or relative. The
former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true
agreement. Under art. 1346; An absolutely simulated or fictitious contract is void. A relative simulation, when it does not
prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public
policy binds the parties to their real agreement.

If the parties state a false cause in the contract to conceal their real agreement, the contract is only relatively simulated
and the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present
and the simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable
between the parties and their successors in interest. In absolute simulation, there is a colorable contract but it has no
substance as the parties have no intention to be bound by it. The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious contract is void, and the parties may recover from each other
what they may have given under the contract.

Aside from their plain denial, petitioners failed to present any concrete evidence. They claimed that they actually paid
P150,000.00 for the subject property. They, however, failed to adduce proof, even by circumstantial evidence, that they
did, in fact, pay it. Even for the consideration of P60,000.00 as stated in the contract, petitioners could not show any
tangible evidence of any payment therefor.
The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a
contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined
not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the
parties.

Villaceran v. De Guzman

G.R. No. 169055

February 22, 2012

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari assailing the November 26, 2004 Decision1 and June 29, 2005 Resolution2 of
the Court of Appeals (CA) in CA-G.R. CV No. 71831. The CA had affirmed with modification the Decision3 of the Regional
Trial Court (RTC), Branch 24, of Echague, Isabela, in Civil Case No. 24-0495 entitled "Josephine De Guzman vs. Spouses
Jose and Milagros Villaceran, et al."

The antecedent facts follow:

Josephine De Guzman filed a Complaint4 with the RTC of Echague, Isabela against the spouses Jose and Milagros Villaceran
and Far East Bank & Trust Company (FEBTC), Santiago City Branch, for declaration of nullity of sale, reconveyance,
redemption of mortgage and damages with preliminary injunction. The complaint was later amended to include
annulment of foreclosure and Sheriff’s Certificate of Sale.

In her Amended Complaint,5 De Guzman alleged that she is the registered owner of a parcel of land covered by Transfer
Certificate of Title (TCT) No. T-236168,6 located in Echague, Isabela, having an area of 971 square meters and described as
Lot 8412-B of the Subdivision Plan Psd-93948. On April 17, 1995, she mortgaged the lot to the Philippine National Bank
(PNB) of Santiago City to secure a loan of ₱600,000. In order to secure a bigger loan to finance a business venture, De
Guzman asked Milagros Villaceran to obtain an additional loan on her behalf. She executed a Special Power of Attorney
in favor of Milagros. Considering De Guzman’s unsatisfactory loan record with the PNB, Milagros suggested that the title
of the property be transferred to her and Jose Villaceran and they would obtain a bigger loan as they have a credit line of
up to ₱5,000,000 with the bank.

On June 19, 1996, De Guzman executed a simulated Deed of Absolute Sale7 in favor of the spouses Villaceran. On the same
day, they went to the PNB and paid the amount of ₱721,891.67 using the money of the spouses Villaceran. The spouses
Villaceran registered the Deed of Sale and secured TCT No. T-2574168 in their names. Thereafter, they mortgaged the
property with FEBTC Santiago City to secure a loan of ₱1,485,000. However, the spouses Villaceran concealed the loan
release from De Guzman. Later, when De Guzman learned of the loan release, she asked for the loan proceeds less the
amount advanced by the spouses Villaceran to pay the PNB loan. However, the spouses Villaceran refused to give the
money stating that they are already the registered owners of the property and that they would reconvey the property to
De Guzman once she returns the ₱721,891.67 they paid to PNB.9

De Guzman offered to pay ₱350,000 provided that the spouses Villaceran would execute a deed of reconveyance of the
property. In view of the simulated character of their transaction, the spouses Villaceran executed a Deed of Absolute
Sale10 dated September 6, 1996 in favor of De Guzman. They also promised to pay their mortgage debt with FEBTC to avoid
exposing the property to possible foreclosure and auction sale. However, the spouses Villaceran failed to settle the loan
and subsequently the property was extrajudicially foreclosed. A Sheriff’s Certificate of Sale was issued in favor of FEBTC
for the amount of ₱3,594,000. De Guzman asserted that the spouses Villaceran should be compelled to redeem their
mortgage so as not to prejudice her as the real owner of the property.11
On the other hand, the spouses Villaceran and FEBTC, in their Amended Answer,12 averred that in 1996 De Guzman was
introduced to Milagros by a certain Digna Maranan. Not long afterwards, De Guzman requested Milagros to help her
relative who had a loan obligation with the PNB in the amount of ₱300,000. As a consideration for the accommodation,
De Guzman would convey her property located at Maligaya, Echague, Isabela which was then being held in trust by her
cousin, Raul Sison. Because of this agreement, Milagros paid De Guzman’s obligation with the PNB in the amount of
₱300,000.

When Milagros asked for the title of the lot, De Guzman explained that her cousin would not part with the property unless
he is reimbursed the amount of ₱200,000 representing the amount he spent tilling the land. Milagros advanced the
amount of ₱200,000 but De Guzman’s cousin still refused to reconvey the property. In order for De Guzman to settle her
obligation, she offered to sell her house and lot in Echague, Isabela. At first, Milagros signified her non-interest in acquiring
the same because she knew that it was mortgaged with the PNB Santiago for ₱600,000. De Guzman proposed that they
will just secure a bigger loan from another bank using her house and lot as security. The additional amount will be used in
settling De Guzman’s obligation with PNB. Later, De Guzman proposed that she borrow an additional amount from
Milagros which she will use to settle her loan with PNB. To this request, Milagros acceded. Hence, they went to the PNB
and paid in full De Guzman’s outstanding obligation with PNB which already reached ₱880,000.13

Since De Guzman’s total obligation already reached ₱1,380,000, the spouses Villaceran requested her to execute a deed
of absolute sale over the subject property in their favor. Thus, the Deed of Absolute Sale is supported by a valuable
consideration, and the spouses Villaceran became the lawful owners of the property as evidenced by TCT No. 257416
issued by the Office of the Register of Deeds of Isabela. Later, they mortgaged the property to FEBTC for ₱1,485,000.

The spouses Villaceran denied having executed a deed of conveyance in favor of De Guzman relative to the subject
property and asserted that the signatures appearing on the September 6, 1996 Deed of Sale, which purported to sell the
subject property back to De Guzman, are not genuine but mere forgeries.14

After due proceedings, the trial court rendered its decision on September 27, 2000.

The RTC ruled that the Deed of Sale dated June 19, 1996 executed by De Guzman in favor of the spouses Villaceran covering
the property located in Echague, Isabela was valid and binding on the parties. The RTC ruled that the said contract was a
relatively simulated contract, simulated only as to the purchase price, but nonetheless binding upon the parties insofar as
their true agreement is concerned. The RTC ruled that De Guzman executed the Deed of Absolute Sale dated June 19,
1996 so that the spouses Villaceran may use the property located in Echague, Isabela as collateral for a loan in view of De
Guzman’s need for additional capital to finance her business venture. The true consideration for the sale, according to the
RTC, was the ₱300,000 the spouses Villaceran gave to De Guzman plus the ₱721,891.67 they paid to PNB in order that the
title to the subject property may be released and used to secure a bigger loan in another bank.

The RTC also found that although the spouses Villaceran had already mortgaged the subject property with FEBTC and the
title was already in the possession of FEBTC -- which facts were known to De Guzman who even knew that the loan
proceeds amounting to ₱1,485,000 had been released -- the spouses Villaceran were nonetheless still able to convince De
Guzman that they could still reconvey the subject property to her if she pays the amount they had paid to PNB. The RTC
found that the Deed of Sale dated September 6, 1996 was actually signed by the spouses Villaceran although De Guzman
was able to pay only ₱350,000, which amount was stated in said deed of sale as the purchase price. The RTC additionally
said that the spouses Villaceran deceived De Guzman when the spouses Villaceran mortgaged the subject property with
the understanding that the proceeds would go to De Guzman less the amounts the spouses had paid to PNB. Hence,
according to the RTC, the spouses Villaceran should return to De Guzman (1) the ₱350,000 which she paid to them in
consideration of the September 6, 1996 Deed of Sale, which sale did not materialize because the title was in the possession
of FEBTC; and (2) the amount of ₱763,108.33 which is the net proceeds of the loan after deducting the ₱721,891.67 that
the spouses paid to PNB. Thus, the decretal portion of the RTC decision reads:

WHEREFORE, judgment is hereby rendered as follows:

a) declaring the Deed of Sale, dated June 1996 (Exhibit "B") as valid and binding;
 b) ordering defendants Villaceran to pay to plaintiff the amount of P763,108.33 and P350,000.00 or the total
amount of P1,113,108.33 plus the legal rate of interest starting from the date of the filing of this case;

c) declaring the Extrajudicial Foreclosure and the Certificate of Sale as valid;

d) ordering defendants Villaceran to pay attorney’s fees in the amount of P20,000.00 and to pay the costs of suit.

SO ORDERED.15

Aggrieved, the spouses Villaceran appealed to the CA arguing that the trial court erred in declaring the June 19, 1996 Deed
of Sale as a simulated contract and ordering them to pay De Guzman ₱1,113,108.33 plus legal rate of interest and
attorney’s fees.16

On November 26, 2004, the CA rendered its Decision, the dispositive portion of which reads as follows:

IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby AFFIRMED with MODIFICATION, to read as
follows:

WHEREFORE, judgment is hereby rendered as follows:

1. Declaring the Deed of Sale dated June 16, 1996 (Exh. "B") and September 6, 1996, as not reflective of the true
intention of the parties, as the same were merely executed for the purpose of the loan accommodation in favor
of the plaintiff-appellee by the defendants-appellants;

2. Ordering defendants-appellants Villaceran to pay plaintiff-appellee the difference between the FEBTC loan of
₱1,485,000.00 less ₱721,891.67 (used to redeem the PNB loan), plus legal interest thereon starting from the date
of the filing of this case;

3. Declaring the extrajudicial foreclosure and certificate of sale in favor of FEBTC, as valid; and

4. For the appellants to pay the costs of the suit.

SO ORDERED.17

The CA ruled that the RTC was correct in declaring that there was relative simulation of contract because the deeds of sale
did not reflect the true intention of the parties. It found that the evidence established that the documents were executed
for the purpose of an agency to secure a higher loan whereby the spouses Villaceran only accommodated De Guzman.
However, the CA did not find any evidence to prove that De Guzman actually parted away with the ₱350,000 as
consideration of the reconveyance of the property. Thus, it held the trial court erred in ordering the spouses Villaceran to
return the ₱350,000 to De Guzman.

Furthermore, the CA observed that the spouses Villaceran were the ones who redeemed the property from the mortgage
with PNB by paying ₱721,891.67 so that De Guzman’s title could be released. Once registered in their name, the spouses
Villaceran mortgaged the property with FEBTC for ₱1,485,000. With the loan proceeds of ₱1,485,000, there was no need
for the spouses Villaceran to demand for the return of the ₱721,891.67 they paid in releasing the PNB loan before the
property is reconveyed to De Guzman. All they had to do was to deduct the amount of ₱721,891.67 from the ₱1,485,000
FEBTC loan proceeds. Hence, the CA ruled that only the balance of the ₱1,485,000 loan proceeds from FEBTC minus the
₱721,891.67 used to redeem the PNB loan should be paid by the spouses Villaceran to De Guzman. The CA also deleted
the grant of attorney’s fees for lack of factual, legal or equitable justification.

On December 22, 2004, the spouses Villaceran filed a motion for reconsideration of the foregoing decision. Said motion,
however, was denied for lack of merit by the CA in its Resolution dated June 29, 2005. Hence, this appeal.
In their petition for review on certiorari, the spouses Villaceran allege that:

1. THE RESPONDENT COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN DECLARING THE DEED
OF SALE DATED JUNE 19, 1996 AS SIMULATED AND THAT THE SAME WAS MERELY EXECUTED FOR THE PURPOSE
OF THE LOAN ACCOMODATION OF PETITIONERS VILLACERAN IN FAVOR OF THE RESPONDENT DE GUZMAN
INSTEAD OF DECLARING SAID DEED AS A VALID DEED OF ABSOLUTE SALE, THE CONTENTS OF WHICH ARE CLEARLY
REFLECTIVE OF THEIR TRUE INTENTION TO ENTER INTO A CONTRACT OF SALE AND NOT OTHERWISE, IN DIRECT
CONTRAVENTION OF THE RULES ON EVIDENCE AND OF THE ADMISSIONS OF THE PARTIES AND THE HONORABLE
COURT’S RULINGS OR JURISPRUDENCE ON THE MATTER; AND

2. THE RESPONDENT COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN ORDERING
PETITIONERS VILLACERAN TO PAY RESPONDENT DE GUZMAN THE DIFFERENCE BETWEEN THE FAR EAST BANK
AND TRUST COMPANY (FEBTC) LOAN OF PHP1,485,000.00 LESS P721,891.67 (USED TO PAY THE PHILIPPINE
NATIONAL BANK [PNB] LOAN) PLUS LEGAL INTEREST THEREON AND TO PAY THE COSTS OF SUIT.18

Essentially, the issue for our resolution is whether the CA erred in ruling that the Deed of Sale dated June 19, 1996 is a
simulated contract and not a true sale of the subject property.

Petitioners contend that the previous loans they extended to De Guzman in the amounts of ₱300,000, ₱600,000 and
₱200,000 should have been considered by the CA. When added to the ₱721,891.67 used to settle the PNB loan, De
Guzman’s total loan obtained from them would amount to ₱1,821,891.67. Thus, it would clearly show that the Deed of
Sale dated June 19, 1996, being supported by a valuable consideration, is not a simulated contract.

We do not agree.

Article 134519 of the Civil Code provides that the simulation of a contract may either be absolute or relative. In absolute
simulation, there is a colorable contract but it has no substance as the parties have no intention to be bound by it. The
main characteristic of an absolute simulation is that the apparent contract is not really desired or intended to produce
legal effect or in any way alter the juridical situation of the parties.20 As a result, an absolutely simulated or fictitious
contract is void, and the parties may recover from each other what they may have given under the contract. However, if
the parties state a false cause in the contract to conceal their real agreement, the contract is only relatively simulated and
the parties are still bound by their real agreement. Hence, where the essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract, the agreement is absolutely binding and enforceable
between the parties and their successors in interest.21

The primary consideration in determining the true nature of a contract is the intention of the parties. If the words of a
contract appear to contravene the evident intention of the parties, the latter shall prevail. Such intention is determined
not only from the express terms of their agreement, but also from the contemporaneous and subsequent acts of the
parties.22 In the case at bar, there is a relative simulation of contract as the Deed of Absolute Sale dated June 19, 1996
executed by De Guzman in favor of petitioners did not reflect the true intention of the parties.

It is worthy to note that both the RTC and the CA found that the evidence established that the aforesaid document of sale
was executed only to enable petitioners to use the property as collateral for a bigger loan, by way of accommodating De
Guzman. Thus, the parties have agreed to transfer title over the property in the name of petitioners who had a good credit
line with the bank. The CA found it inconceivable for De Guzman to sell the property for ₱75,000 as stated in the June 19,
1996 Deed of Sale when petitioners were able to mortgage the property with FEBTC for ₱1,485,000. Another indication
of the lack of intention to sell the property is when a few months later, on September 6, 1996, the same property, this
time already registered in the name of petitioners, was reconveyed to De Guzman allegedly for ₱350,000.

As regards petitioners’ assertion that De Guzman’s previous loans should have been considered to prove that there was
an actual sale, the Court finds the same to be without merit. Petitioners failed to present any evidence to prove that they
indeed extended loans to De Guzman in the amounts of ₱300,000, ₱600,000 and ₱200,000. We note that petitioners tried
to explain that on account of their close friendship and trust, they did not ask for any promissory note, receipts or
 documents to evidence the loan. But in view of the substantial amounts of the loans, they should have been duly covered
by receipts or any document evidencing the transaction. Consequently, no error was committed by the CA in holding that
the June 19, 1996 Deed of Absolute Sale was a simulated contract.

The issue of the genuineness of a deed of sale is essentially a question of fact.1âwphi1 It is settled that this Court is not
duty-bound to analyze and weigh again the evidence considered in the proceedings below. This is especially true where
the trial court’s factual findings are adopted and affirmed by the CA as in the present case. Factual findings of the trial
court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal.23

The Court has time and again ruled that conclusions and findings of fact of the trial court are entitled to great weight and
should not be disturbed on appeal, unless strong and cogent reasons dictate otherwise. This is because the trial court is
in a better position to examine the real evidence, as well as to observe the demeanor of the witnesses while testifying in
the case.24 In sum, the Court finds that there exists no reason to disturb the findings of the CA.

WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated November 26, 2004 and Resolution dated
June 29, 2005 of the Court of Appeals in CA-G.R. CV No. 71831 are AFFIRMED.

With costs against the petitioners.

Heirs of Ureta v. Heirs of Ureta

FACTS:

· Alfonso begot 14 children, namely, Policronio, Liberato, Narciso, Prudencia, Vicente, Francisco, Inocensio, Roque,
Adela, Wenefreda, Merlinda, Benedicto, Jorge, and Andres. The children of Policronio (Team P), are opposed to the rest
of Alfonso’s children and their descendants (Team A).

· Alfonso and four of his children, namely, Policronio, Liberato, Prudencia, and Francisco, met at the house of Liberato.
Francisco, who was then a municipal judge, suggested that in order to reduce the inheritance taxes, their father should
make it appear that he had sold some of his lands to his children.

· Alfonso executed 4 Deeds of Sale covering several parcels of land in favor of Policronio, Liberato, Prudencia, and his
common-law wife, Valeriana Dela Cruz. The Deed of Sale executed on Oct 25, 1969, in favor of Policronio, covered six
parcels of land, which are the properties in dispute in this case.

· Since the sales were only made for taxation purposes and no monetary consideration was given, Alfonso continued to
own, possess and enjoy the lands and their produce.

· Policronio died on Nov 22, 1974. Except for the said portion of parcel 5, neither Policronio nor his heirs ever took
possession of the subject lands.

· Alfonso’s heirs executed a Deed of EJP, which included all the lands that were covered by the 4 deeds of sale.
Conrado, Policronio’s eldest son, representing Team P, signed the Deed of EJP in behalf of his co-heirs.

· Team P found tax declarations in his name covering the six parcels of land. They obtained a copy of the Deed of Sale
executed on Oct 25, 1969 by Alfonso in favor of Policronio.

· Believing that the six parcels of land belonged to their late father as such, excluded from the Partition, Team P sought
to amicably settle the matter with the Team A.

· Team P filed a Complaint for Declaration of Ownership, Recovery of Possession, Annulment of Docs, Partition against
the Team A before the RTC where the ff issues were submitted:

ISSUES:
o (1) WON the Deed of Sale was valid;

 (2) WON the Deed of EJP was valid; and

The Ruling of the RTC

deed of sale was void

· No money involved in the sale. Even granting that there was, the amount was grossly inadequate (P2K). Team P only
paid real estate taxes in 1996 and 1997.

· Policronio must have been aware that the transfer was merely for taxation purposes because he did not subsequently
take possession of the properties even after the death of his father.

deed of EJP valid

· The Deed of EJP was declared valid by the RTC as all the Team A were represented and received equal shares and all
the requirements of a valid EJP were met.

The Ruling of the CA

· Deed of Sale: ABSOLUTELY SIMULATED based on the testimony of Amparo Castillo.

· EJP: ANNULLED THE DEED OF EJP due to the incapacity of one of the parties to give his consent to the contract.
Without a SPA, it was held that Conrado lacked the legal capactiy to give the consent of his co-heirs.

· Remanded to the RTC for the proper partition of the estate, with the option that the parties may still voluntarily effect
the partition by executing another agreement or by adopting the EJP or through compulsory partition.

Team P

· RTC violated the BER in giving credence to the testimony of Amparo Castillo with regard to the simulation of the Deed
of Sale, and thatprescription had set in precluding any question on the validity of the contract.

· CA held that the oral testimony was admissible under Rule 130, Sec 9 (b) and (c), which provides that
evidence aliunde may be allowed to explain the terms of the written agreement if the same failed to express the true
intent and agreement of the parties thereto, or when the validity of the written agreement was put in issue.

· Team P waived their right to object to evidence aliunde having failed to do so during trial and for raising such only for
the first time on appeal.

· Re prescription: action for the declaration of the inexistence of a contract does not prescribe (NCC 1410)

· Team A argued that the Deed of EJP should not have been annulled, and instead the preterited heirs should be given
their share.

main issue #1: won the Deed of Sale is valid

deed of sale was absolutely simulated

· 2 veritable legal presumptions bear on the validity of the Deed of Sale:

o (1) that there was sufficient consideration for the contract; and

o (2) that it was the result of a fair and regular private transaction.

o If shown to hold, these presumptions infer prima facie the transaction’s validity, except that it must yield to the evidence
adduced.
· The Deed of Sale was not a fair and regular private transaction because it was absolutely simulated. It was made only
for tax purposes. Even Policronio did not disclose the sale to his heirs.

· For lack of consideration, the Deed of Sale is once again found to be void. It states that Policronio paid, and Alfonso
received, the ₱2K purchase price on the date of the signing of the contract:

· Although, on its face, the Deed of Sale appears to be supported by valuable consideration, the RTC found that there
was no money involved in the sale.

PER

· Team P:

o PER and hearsay were violated by the CA in ruling that the Deed of Sale was void.

o Team A and, specifically, Amparo Castillo, were not in a position to prove the terms outside of the contract because they
were not parties nor successors-in-interest in the Deed of Sale in question. Thus, it is argued that the testimony of
Amparo Castillo violates the PER.

o PER may not be properly invoked by either party in the litigation against the other, where at least 1 of the parties to the
suit is not a party or a privy of a party to the written instrument in question and does not base a claim on the instrument
or assert a right originating in the instrument or the relation established thereby.

· SC: The objection against the admission of any evidence must be made at the proper time, as soon as the grounds
therefor become reasonably apparent, and if not so made, it will be understood to have been waived. In the case of
testimonial evidence, the objection must be made when the objectionable question is asked or after the answer is given
if the objectionable features become apparent only by reason of such answer. Team P failed to timely object to the
testimony of Amparo Castillo and they are, thus, deemed to have waived the benefit of the PER.

· Granting that Team P timely objected to the testimony of Amparo, their argument would still fail.

· The failure of the Deed of Sale to express the true intent and agreement of the parties was clearly put in issue in the
Answer of the Team A to the Complaint. The exception in par (b) is allowed to enable the court to ascertain the true
intent of the parties, and once the intent is clear, it shall prevail over what the doc appears to be on its face.

· The VALIDITY of the Deed of Sale was also put in issue in the Answer. The operation of the PER requires the existence
of a valid written agreement. It is, thus, not applicable in a proceeding where the validity of such agreement is the fact in
dispute, such as when a contract may be void for lack of consideration.

· The applicability of the PER requires that the case be between parties and their successors-in-interest. Both the Team
A and Team P are successors-in-interest of the parties to the Deed of Sale as they claim rights under Alfonso and
Policronio, respectively. The PER excluding evidence aliunde, however, still cannot apply because the present case falls
under 2 exceptions to the rule, as discussed above.

hearsay evidence

· Team P: hearsay rule was violated when the testimony of Amparo was given weight in proving that the subject lands
were only sold for taxation purposes as she was a person alien to the contract.

· GR: Hearsay evidence whether objected to or not cannot be given credence for having no probative value.

· E: This principle, however, has been relaxed in cases where, in addition to the failure to object to the admissibility of
the subject evidence, there were other pieces of evidence presented or there were other circumstances prevailing to
support the fact in issue.

· Other circumstances in this case:

o other Deeds of Sale which were executed in favor of Liberato, Prudencia, and Valeriana on the same day as that of
Policronio’s were all presented in evidence.

o all the properties subject therein were included in the Deed of EJP of the estate of Alfonso.

o Policronio, during his lifetime, never exercised acts of ownership over the subject properties

o Policronio never informed his children of the sale.

Prior Action Unnecessary

· Team P: Team A should have filed an action to declare the sale void prior to executing the Deed of EJP. The sale should
enjoy the presumption of regularity, and until overturned by a court, the Team A had no authority to include the land in
the inventory of properties of Alfonso’s estate.

· SC: A simulated contract of sale is without any cause or consideration, and is, therefore, null and void; in such case, no
independent action to rescind or annul the contract is necessary, and it may be treated as non-existent for all
purposes. A void contract produces no effect whatsoever either against or in favor of anyone; it does not create, modify
or extinguish the juridical relation to which it refers. It was not necessary for the Team A to first file an action to declare
the nullity of the Deed of Sale prior to executing the Deed of EJP.

Personality to Question Sale

· Team P contended that the Team A are not parties, heirs under the contemplation of law to clothe them with the
personality to question the Deed of Sale. They posited that the Team A were not parties to the contract; neither did they
appear to be beneficiaries by way of assignment or inheritance.

· Unlike themselves who are direct Team P, the Team A are not Alfonso’s direct heirs. For the Team A to qualify as
parties, under Art 1311 of the Civil Code, they must first prove that they are either heirs or assignees. Being neither, they
have no legal standing to question the Deed of Sale.

· SC: The right to set up the nullity of a void or non-existent contract is not limited to the parties, as in the case of
annullable or voidable contracts; it is extended to third persons who are directly affected by the contract. Team A are
clearly his heirs and successors-in-interest and, as such, their interests are directly affected, thereby giving them the
right to question the legality of the Deed of Sale.

Inapplicability of Art 842

· Art refers to the principle of freedom of disposition by will. What is involved in the case at bench is not a disposition
by will but by Deed of Sale. Team A need not first prove that the disposition substantially diminished their successional
rights or unduly prejudiced their legitimes.

Inapplicability of Art 1412

· Art 1412 is not applicable to fictitious or simulated contracts, because they refer to contracts with an illegal cause or
subject-matter.This Art presupposes the existence of a cause, it cannot refer to fictitious or simulated contracts which
are in reality non-existent.

Prescription

· As the Deed of Sale is a void contract, the action for the declaration of its nullity, even if filed 21 years after its
execution, cannot be barred by prescription for it is imprescriptible. Furthermore, the right to set up the defense of
inexistence or absolute nullity cannot be waived or renounced.

main issue #2: won the Deed of EJP is valid.

Unenforceability
· Team A:

o CA was mistaken in annulling the Deed of EJP due to the incapacity of Conrado to give the consent of his co-heirs for lack
of a SPA. They argue that the Deed of EJP is not a voidable or an annullable contract, but rather, it is an unenforceable
or, more specifically, an unauthorized contract under Arts 1403 (1) and 1317 of the Civil Code. As such, the Deed of EJP
should not be annulled but only be rendered unenforceable against the siblings of Conrado.

o NCC 1317 when the persons represented without authority have ratified the unauthorized acts, the contract becomes
enforceable and binding. Team P ratified the Deed of EJP when Conrado took possession of 1 of the parcels of land
adjudicated to him and his siblings. The Deed of EJP having been ratified and its benefits accepted, the same thus
became enforceable and binding upon them.

· Team P

o subject properties should not have been included in the estate of Alfonso, and because Conrado lacked the written
authority to represent his siblings.

o Team P denied that they ratified the Deed of EJP.

· Partition among heirs is not legally deemed a conveyance of real property resulting in change of ownership. Hence, a
special power of attorney is not necessary.

· Conrado’s failure to obtain authority from his co-heirs to sign the Deed of EJP in their behalf did not result in his
incapacity to give consent so as to render the contract voidable, but rather, it rendered the contract valid but
unenforceable against Conrado’s co-heirs for having been entered into without their authority.

· The Deed of EJP is not unenforceable but, in fact, valid, binding and enforceable against all Team P for having given
their consent to the contract.

o EJP was executed on April 19, 1989, and Team P claim that they only came to know of its existence on July 30, 1995
through an issue of the Aklan Reporter.

o Conrado retained possession of 1 of the land adjudicated to him in the Deed of EJP.

o more than a year before they claimed to have discovered the existence of the Deed of EJP on July 30, 1995, some of
Team P executed a SPA in favor of their sister Gloria Gonzales, authorizing her to obtain a loan from a bank and to
mortgage 1 of the parcels of land adjudicated to them in the Deed of EJP to secure payment of the loan.

o in the letter sent by the counsel of Team P to the Team there was no mention that Conrado’s consent to the Deed of EJP
was vitiated by mistake and undue influence.

· The allegation of Conrado’s vitiated consent and lack of authority to sign in behalf of his co-heirs was a mere
afterthought on the part of Team P.

Preterition

· The Team A were of the position that the absence of Team P in the partition at the very least, in their preterition and
not in the invalidity of the entire deed of partition.

· Preterition is thus a concept of testamentary succession and requires a will. In the case at bench, there is no will
involved. Therefore, preterition cannot apply.

Remand Unnecessary
Considering that the Deed of Sale has been found void and the Deed of EJP valid, with the consent of all Team P duly
given, there is no need to remand the case to the court of origin for partition.

The Roman Catholic Church v. Pante

G.R. No. 174118

April 11, 2012

DECISION

BRION, J.:

Through a petition for review on certiorari,[1] the petitioner Roman Catholic Church (Church) seeks to set aside the May
18, 2006 decision[2] and the August 11, 2006 resolution[3] of the Court of Appeals (CA) in CA-G.R.-CV No. 65069. The CA
reversed the July 30, 1999 decision[4] of the Regional Trial Court (RTC) of Naga City, Branch 24, in Civil Case No. 94-3286.

THE FACTUAL ANTECEDENTS

The Church, represented by the Archbishop of Caceres, owned a 32-square meter lot that measured 2x16 meters
located in Barangay Dinaga, Canaman, Camarines Sur.[5] On September 25, 1992, the Church contracted with respondent
Regino Pante for the sale of the lot (thru a Contract to Sell and to Buy[6]) on the belief that the latter was an actual occupant
of the lot. The contract between them fixed the purchase price at P11,200.00, with the initial P1,120.00 payable as down
payment, and the remaining balance payable in three years or until September 25, 1995.

On June 28, 1994, the Church sold in favor of the spouses Nestor and Fidela Rubi (spouses Rubi) a 215-square meter lot
that included the lot previously sold to Pante.The spouses Rubi asserted their ownership by erecting a concrete fence over
the lot sold to Pante, effectively blocking Pante and his familys access from their family home to the municipal road. As
no settlement could be reached between the parties, Pante instituted with the RTC an action to annul the sale between
the Church and the spouses Rubi, insofar as it included the lot previously sold to him.[7]

The Church filed its answer with a counterclaim, seeking the annulment of its contract with Pante. The Church alleged
that its consent to the contract was obtained by fraud when Pante, in bad faith, misrepresented that he had been an actual
occupant of the lot sold to him, when in truth, he was merely using the 32-square meter lot as a passageway from his
house to the town proper. It contended that it was its policy to sell its lots only to actual occupants. Since the spouses
Rubi and their predecessors-in-interest have long been occupying the 215-square meter lot that included the 32-square
meter lot sold to Pante, the Church claimed that the spouses Rubi were the rightful buyers.
During pre-trial, the following admissions and stipulations of facts were made:
 1. The lot claimed by Pante is a strip of land measuring only 2x16 meters;
2. The lot had been sold by the Church to Pante on September 25, 1992;
3. The lot was included in the sale to the spouses Rubi by the Church; and
4. Pante expressly manifested and represented to the Church that he had been actually occupying the lot he offered
to buy.[8]

In a decision dated July 30, 1999,[9] the RTC ruled in favor of the Church, finding that the Churchs consent to the
sale was secured through Pantes misrepresentation that he was an occupant of the 32-square meter lot. Contrary to his
claim, Pante was only using the lot as a passageway; the Churchs policy, however, was to sell its lots only to those who
actually occupy and reside thereon. As the Churchs consent was secured through its mistaken belief that Pante was a
qualified occupant, the RTC annulled the contract between the Church and Pante, pursuant to Article 1390 of the Civil
Code.[10]

The RTC further noted that full payment of the purchase price was made only on September 23, 1995, when Pante
consigned the balance of P10,905.00 with the RTC, after the Church refused to accept the tendered amount. It considered
the three-year delay in completing the payment fatal to Pantes claim over the subject lot; it ruled that if Pante had been
prompt in paying the price, then the Church would have been estopped from selling the lot to the spouses Rubi. In light
of Pantes delay and his admission that the subject lot had been actually occupied by the spouses Rubis predecessors, the
RTC upheld the sale in favor of the spouses Rubi.

Pante appealed the RTCs decision with the CA. In a decision dated May 18, 2006,[11] the CA granted Pantes appeal and
reversed the RTCs ruling. The CA characterized the contract between Pante and the Church as a contract of sale, since the
Church made no express reservation of ownership until full payment of the price is made. In fact, the contract gave the
Church the right to repurchase in case Pante fails to pay the installments within the grace period provided; the CA ruled
that the right to repurchase is unnecessary if ownership has not already been transferred to the buyer.

Even assuming that the contract had been a contract to sell, the CA declared that Pante fulfilled the condition
precedent when he consigned the balance within the three-year period allowed under the parties agreement; upon full
payment, Pante fully complied with the terms of his contract with the Church.

After recognizing the validity of the sale to Pante and noting the subsequent sale to the spouses Rubi, the CA
proceeded to apply the rules on double sales in Article 1544 of the Civil Code:
 Article 1544. If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title, provided there
is good faith. [Emphasis ours.]

Since neither of the two sales was registered, the CA upheld the full effectiveness of the sale in favor of Pante who first
possessed the lot by using it as a passageway since 1963.

The Church filed the present petition for review on certiorari under Rule 45 of the Rules of Court to contest the CAs ruling.

THE PETITION

The Church contends that the sale of the lot to Pante is voidable under Article 1390 of the Civil Code, which states:

Article 1390. The following contracts are voidable or annullable, even though there may have
been no damage to the contracting parties:

(1) Those where one of the parties is incapable of giving consent to a contract;
(2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or
fraud.

These contracts are binding, unless they are annulled by a proper action in court. They are
susceptible of ratification. [Emphasis ours.]

It points out that, during trial, Pante already admitted knowing that the spouses Rubi have been residing on the lot. Despite
this knowledge, Pante misrepresented himself as an occupant because he knew of the Churchs policy to sell lands only to
occupants or residents thereof. It thus claims that Pantes misrepresentation effectively vitiated its consent to the sale;
hence, the contract should be nullified.

For the Church, the presence of fraud and misrepresentation that would suffice to annul the sale is the primary
issue that the tribunals below should have resolved. Instead, the CA opted to characterize the contract between the
Church and Pante, considered it as a contract of sale, and, after such characterization, proceeded to resolve the case in
Pantes favor. The Church objects to this approach, on the principal argument that there could not have been a contract
at all considering that its consent had been vitiated.
 THE COURTS RULING

The Court resolves to deny the petition.

No misrepresentation existed vitiating the

sellers consent and invalidating the contract

Consent is an essential requisite of contracts[12] as it pertains to the meeting of the offer and the acceptance upon
the thing and the cause which constitute the contract.[13] To create a valid contract, the meeting of the minds must be
free, voluntary, willful and with a reasonable understanding of the various obligations the parties assumed for
themselves.[14] Where consent, however, is given through mistake, violence, intimidation, undue influence, or fraud, the
contract is deemed voidable.[15] However, not every mistake renders a contract voidable. The Civil Code clarifies the nature
of mistake that vitiates consent:

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

Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or
qualifications have been the principal cause of the contract.

A simple mistake of account shall give rise to its correction. [Emphasis ours.]

For mistake as to the qualification of one of the parties to vitiate consent, two requisites must concur:
1. the mistake must be either with regard to the identity or with regard to the qualification of one of the contracting
parties; and
2. the identity or qualification must have been the principal consideration for the celebration of the contract.[16]

In the present case, the Church contends that its consent to sell the lot was given on the mistaken impression arising from
Pantes fraudulent misrepresentation that he had been the actual occupant of the lot. Willful misrepresentation existed
because of its policy to sell its lands only to their actual occupants or residents. Thus, it considers the buyers actual
occupancy or residence over the subject lot a qualification necessary to induce it to sell the lot.

Whether the facts, established during trial, support this contention shall determine if the contract between the
Church and Pante should be annulled. In the process of weighing the evidentiary value of these established facts, the
courts should consider both the parties objectives and the subjective aspects of the transaction, specifically, the parties
circumstances their condition, relationship, and other attributes and their conduct at the time of and subsequent to the
contract. These considerations will show what influence the alleged error exerted on the parties and their intelligent, free,
and voluntary consent to the contract.[17]

Contrary to the Churchs contention, the actual occupancy or residency of a buyer over the land does not appear
to be a necessary qualification that the Church requires before it could sell its land. Had this been indeed its policy, then
neither Pante nor the spouses Rubi would qualify as buyers of the 32-square meter lot, as none of them actually occupied
or resided on the lot. We note in this regard that the lot was only a 2x16-meter strip of rural land used as a passageway
from Pantes house to the municipal road.
We find well-taken Pantes argument that, given the size of the lot, it could serve no other purpose than as a mere
passageway; it is unthinkable to consider that a 2x16-meter strip of land could be mistaken as anyones residence. In fact,
the spouses Rubi were in possession of the adjacent lot, but they never asserted possession over the 2x16-meter lot when
the 1994 sale was made in their favor; it was only then that they constructed the concrete fence blocking the passageway.

We find it unlikely that Pante could successfully misrepresent himself as the actual occupant of the lot; this was a fact that
the Church (which has a parish chapel in the same barangay where the lot was located) could easily verify had it conducted
an ocular inspection of its own property. The surrounding circumstances actually indicate that the Church was aware that
Pante was using the lot merely as a passageway.

The above view is supported by the sketch plan,[18] attached to the contract executed by the Church and Pante,
which clearly labeled the 2x16-meter lot as a RIGHT OF WAY; below these words was written the name of Mr. Regino
Pante. Asked during cross-examination where the sketch plan came from, Pante answered that it was from the
Archbishops Palace; neither the Church nor the spouses Rubi contradicted this statement.[19]

The records further reveal that the sales of the Churchs lots were made after a series of conferences with the
occupants of the lots.[20] The then parish priest of Canaman, Fr. Marcaida, was apparently aware that Pante was not an
actual occupant, but nonetheless, he allowed the sale of the lot to Pante, subject to the approval of the Archdioceses
Oeconomous. Relying on Fr. Marcaidas recommendation and finding nothing objectionable, Fr. Ragay (the Archdioceses
Oeconomous) approved the sale to Pante.

The above facts, in our view, establish that there could not have been a deliberate, willful, or fraudulent act
committed by Pante that misled the Church into giving its consent to the sale of the subject lot in his favor. That Pante
was not an actual occupant of the lot he purchased was a fact that the Church either ignored or waived as a requirement. In
any case, the Church was by no means led to believe or do so by Pantes act; there had been no vitiation of the Churchs
consent to the sale of the lot to Pante.
 From another perspective, any finding of bad faith, if one is to be made, should be imputed to the Church. Without
securing a court ruling on the validity of its contract with Pante, the Church sold the subject property to the spouses Rubi.
Article 1390 of the Civil Code declares that voidable contracts are binding, unless annulled by a proper court action. From
the time the sale to Pante was made and up until it sold the subject property to the spouses Rubi, the Church made no
move to reject the contract with Pante; it did not even return the down payment he paid. The Churchs bad faith in selling
the lot to Rubi without annulling its contract with Pante negates its claim for damages.

In the absence of any vitiation of consent, the contract between the Church and Pante stands valid and
existing. Any delay by Pante in paying the full price could not nullify the contract, since (as correctly observed by the CA)
it was a contract of sale. By its terms, the contract did not provide a stipulation that the Church retained ownership until
full payment of the price.[21] The right to repurchase given to the Church in case Pante fails to pay within the grace period
provided[22]would have been unnecessary had ownership not already passed to Pante.
The rule on double sales

The sale of the lot to Pante and later to the spouses Rubi resulted in a double sale that called for the application
of the rules in Article 1544 of the Civil Code:

Article 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in
good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was
first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided
there is good faith. [Emphasis ours.]

As neither Pante nor the spouses Rubi registered the sale in their favor, the question now is who, between the two, was
first in possession of the property in good faith.

Jurisprudence has interpreted possession in Article 1544 of the Civil Code to mean both actual physical
delivery and constructive delivery.[23] Under either mode of delivery, the facts show that Pante was the first to acquire
possession of the lot.

Actual delivery of a thing sold occurs when it is placed under the control and possession of the vendee.[24] Pante claimed
that he had been using the lot as a passageway, with the Churchs permission, since 1963. After purchasing the lot in 1992,
he continued using it as a passageway until he was prevented by the spouses Rubis concrete fence over the lot in
1994. Pantes use of the lot as a passageway after the 1992 sale in his favor was a clear assertion of his right of ownership
that preceded the spouses Rubis claim of ownership.

Pante also stated that he had placed electric connections and water pipes on the lot, even before he purchased it
in 1992, and the existence of these connections and pipes was known to the spouses Rubi.[25] Thus, any assertion of
possession over the lot by the spouses Rubi (e.g., the construction of a concrete fence) would be considered as made in
bad faith because works had already existed on the lot indicating possession by another. [A] buyer of real property in the
possession of persons other than the seller must be wary and should investigate the rights of those in possession. Without
such inquiry, the buyer can hardly be regarded as a buyer in good faith and cannot have any right over the property."[26]

Delivery of a thing sold may also be made constructively. Article 1498 of the Civil Code states that:

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

Under this provision, the sale in favor of Pante would have to be upheld since the contract executed between the Church
and Pante was duly notarized, converting the deed into a public instrument.[27] In Navera v. Court of Appeals,[28] the Court
ruled that:

[A]fter the sale of a realty by means of a public instrument, the vendor, who resells it to another, does
not transmit anything to the second vendee, and if the latter, by virtue of this second sale, takes material
possession of the thing, he does it as mere detainer, and it would be unjust to protect this detention
against the rights of the thing lawfully acquired by the first vendee.
Thus, under either mode of delivery, Pante acquired prior possession of the lot.

WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision of the Court of Appeals
dated May 18, 2006, and its resolution dated August 11, 2006, issued in CA-G.R.-CV No. 65069. Costs against the Roman
Catholic Church.

Santiago v. Villamor

Facts:
 Spouses Villamor are the parents of respondents Mancer, Carlos and Domingo Jr. (respondents) and the
grandparents of respondent John Villamor.
 In January 1982: Spouses Villamor mortgaged their 4.5-hectare coconut land in Masbate to the San Jacinto Bank as
security for a P10,000.00 loan.
  For failure to pay the loan, the property was extra-judicially foreclosed by the bank. Spouses Villamor failed to
redeem the property so San Jacinto Bank obtained a final deed of sale in its favor in 1991. The San Jacinto Bank
then offered the land for sale to any interested buyer.
 The children of spouses Villamor agreed to buy the property.
 The San Jacinto Bank agreed with the respondents and Catalina (one of the sisters of the respondents) to a
P65,000.00 sale, payable in installments.
 Upon full payment of the children of spouses Catalina, San Jacinto bank refused to issue the deed of conveyance.
Hence, they filed an action for specific performance
 Specific performance case (RTC and CA):

o RTC ruled that the issuance of the deed of registration of San Jacinto Bank in favor of spouses Villamor was done in good
faith.
o CA reversed RTC ruling saying that the children of Spouses Villamor did not act as representatives of their parents.
 In 1994 (Before the action for specific performance was filed), spouses Villamor sold the land to petitioner-spouses
Santiago for P150k.
 When the children of spouses VIllamor refused to vacate the land after spouses Santiago’s demand, the latter also
filed an action for quieting of title.

Quieting of Title case (RTC and CA):

o RTC ruled that spouses Villamor were purchasers in good faith, hence they are the legal owners. RTC also said that the
notarized deed of sale in their favor resulted in constructive delivery of the land.
o CA ruled that spouses Villamor’s action for quieting of title cannot prosper for they have no legal or equitable title over
the land.
 Spouses Villamor that the deed of sale executed in their favor was equivalent to delivery of the land under Article
1498 of the CC and that they are purchasers in good faith since they had no knowledge of the supposed
transaction between the San Jacinto Bank and the respondents and Catalina.
 The children of Spouses Villamor (respondents) hold that they have a legal title to the land since they perfected
the sale with the San Jacinto Bank as early as November 4, 1991, the first installment payment, and are in actual
possession of the land; and that petitioners-spouses Santiago are not purchasers in good faith because they failed
to show why they are not in possession of the property.

Issue: WON Spouses Santiago has a legal title over the property. NO
Relevance: If they have legal title, they can file for action for quieting of title and for reconveyance.

Held:

The Court said that spouses Santiago failed to prove that they have any legal or equitable title over the disputed land.

Execution of the deed of sale only a prima facie presumption of delivery

Article 1477 of the Civil Code recognizes that the "ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof."
Related to this article is Article 1497 which provides that "the thing sold shall be understood as delivered, when it is placed
in the control and possession of the vendee."

"A person who does not have actual possession of the thing sold cannot transfer constructive possession by the
execution and delivery of a public instrument."
With respect to incorporeal property, Article 1498 of the Civil Code lays down the general rule: the execution of a public
instrument "shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred." However, the execution of a public instrument gives rise only to a prima
facie presumption of delivery, which is negated by the failure of the vendee to take actual possession of the land sold.

No constructive delivery of the land in favor of spouses Santiago

In this case, no constructive delivery of the land transpired upon the execution of the deed of sale since it was not the
spouses Villamor, Sr. but the respondents who had actual possession of the land. The presumption of constructive delivery
is inapplicable and must yield to the reality that the petitioners were not placed in possession and control of the land.

Spouses Santiago were not purchasers in good faith

In this case, the spouses Villamor, Sr. were not in possession of the land. The petitioners, as prospective vendees, carried
the burden of investigating the rights of the respondents who were then in actual possession of the land. The petitioners
cannot take refuge behind the allegation that, by custom and tradition in San Jacinto, Masbate, the children use their
parents' property, since they offered no proof supporting their bare allegation.

The burden of proving the status of a purchaser in good faith lies upon the party asserting that status and cannot be
discharged by reliance on the legal presumption of good faith. The petitioners failed to discharge this burden.

Villamar v. Mangaoil

GR No. 188661

April 11, 2012

Facts: Estelita Villamar a registered owner of 3.6080 hectares of parcel of land, decided to sell it Balbino Mangaoil with
the certain conditions; The price of the land is ONE HUNDRED AND EIGHTY THOUSAND (180,000.00) PESOS per hectare
but only the 3.5000 hec. shall be paid and the rest shall be given free, so that the total purchase or selling price shall be
[P]630,000.00 only. The respondent paid the amount of 185,000 as a down payment for the land title to be given to him .
After some time, Mangaoil decided to back out from the agreement because the area is not yet fully cleared by
incumbrances as these are tenants who are not willing to vacate the land without giving them back the amount that they
mortgage the lad.

Mangaoil demanded a refund for his 185,000, reiterating his demand on another date but the same as unheeded. The
respondent filed a complaint in the RTC and the latter ordered the rescission of the agreement and the deed of absolute
sale in accordance of Art. 1458 and Art. 1191 of the Civil Code. The petitioner filed before the CA an appeal to challenge
the foregoing. She ascribed error on the part of the RTC when the latter ruled that the agreement and deed of sale
executed by and between the parties can be rescinded as she failed to deliver to the respondent both the subject property
and the certificate of title covering the same. On February 20, 2009, the CA rendered the now assailed decision dismissing
the petitioners appeal.

The Petitioner filed an instant petition in the supreme court. The petitioner contends that in her case, she had already
complied with her obligations under the agreement and the law when she had caused the release of TCT No. T-92958-A
from the Rural Bank of Cauayan, paid individual mortgagees Romeo Lacaden and Florante Parangan, and executed an
absolute deed of sale in the respondent’s favor.

Issue: Whether or not the failure of petitioner-seller to deliver the certificate of title over the property to respondent-
buyer is a breach of obligation in a contract of sale of real property that would warrant rescission of the contract?

Held: The RTC and CA both found the petitioner failed to comply with her obligations to deliver to the respondent both
the possession of the subject property and the certificate of title covering the same.
The petition was denied for failure to deliver to the respondent the possession of the subject property due to the
continued presence and occupation of one Parangan and Lacaden. The Court directed the rescission of the agreement
and absolute deed of sale entered by Estelita Villamar and Balbino Mangaoil and return of the down payment made for
the purchase of the subject property. And an interest of 12% per annum on the sum of 185,000 to be returned to Balbino
Mangaoil.

Beatingo v. Gasis

G.R. No. 179641

February 9, 2011

FACTS:
Petitioner Dolorita Beatingo bought a piece of land, denominated as Lot No. 7219 from Flora G. Gasis on May 19, 1998.
Petitioner went to the Register of Deeds to have the sale registered. She, however, failed to obtain registration as she
could not produce the owner’s duplicate certificate of title. She, thus, filed a petition for the issuance of the owner’s
duplicate certificate of title but was opposed by respondent Lilia Bu Gasis, claiming that she was in possession of the
Original Certificate of Title (OCT) as she purchased the subject property from Flora on January 27, 1999.

Petitioner filed a Complaint for Annulment and Cancellation of Sale, Reconveyance, Delivery of Title and Damages against
respondent before the Regional Trial Court. Respondent claimed that she purchased the subject property from Flora
without knowledge of the prior sale of the same subject property to petitioner, which makes her an innocent purchaser
for value.

The RTC considered the controversy as one of double sale and since the two sales – that of petitioner and that of
respondent – were not registered with the Registry of Property, the RTC held that whoever was in possession had the
better right. Hence, it decided in favor of respondent.

Petitioner elevated the matter to the CA via a Notice of Appeal. However, due to pressures of work in equally important
cases with other clients, counsel for petitioner requested for an extension of ninety (90) days within which to file the brief.
Instead of filing the Appellant’s Brief within the extended period, petitioner twice moved for extension of time to file the
brief.

The CA denied the motions for extension to file brief. Thus, for failure to file the Appellant’s Brief, the appellate court
dismissed the appeal.

ISSUE:

Did the CA err in not reviewing the merits of the appeal?

HELD:
Evidently, petitioner’s counsel was negligent in failing to file the required brief not only within 45 days from receipt of the
notice but also within the extended period of ninety (90) days granted by the appellate court.
The excuse forwarded above is unacceptable. An attorney is bound to protect his client’s interest to the best of his ability
and with utmost diligence. Failure to file brief certainly constitutes inexcusable negligence, more so if the delay results in
the dismissal of the appeal.

The failure to file the Appellant’s Brief, though not jurisdictional, results in the abandonment of the appeal which may be
the cause for its dismissal.

Nevertheless, to put an end to the controversy, the Court carefully perused the records of the case and reached the
conclusion that the decision dated December 29, 2005 of the RTC is in perfect harmony with law and jurisprudence. The
rules on double sales, as discussed above, apply.

DENIED

Monasterio- Pe v. Tong

G.R. No. 151369

March 23, 2011

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal and
nullification of the Decision1 and Order,2 respectively dated October 24, 2001 and January 18, 2002, of the Regional Trial
Court (RTC) of Iloilo City, Branch 24.

The instant petition stemmed from an action for ejectment filed by herein respondent Jose Juan Tong (Tong) through his
representative Jose Y. Ong (Ong) against herein petitioners Anita Monasterio-Pe (Anita) and the spouses Romulo Tan
and Editha Pe-Tan (Spouses Tan). The suit was filed with the Municipal Trial Court in Cities (MTCC), Branch 3, Iloilo City
and docketed as Civil Case No. 2000(92).

In the Complaint, it was alleged that Tong is the registered owner of two parcels of land known as Lot Nos. 40 and 41 and
covered by Transfer Certificate of Title (TCT) Nos. T-9699 and T-9161, together with the improvements thereon, located
at Barangay Kauswagan, City Proper, Iloilo City; herein petitioners are occupying the house standing on the said parcels
of land without any contract of lease nor are they paying any kind of rental and that their occupation thereof is simply by
mere tolerance of Tong; that in a letter dated December 1, 1999, Tong demanded that respondents vacate the house they
are occupying, but despite their receipt of the said letter they failed and refused to vacate the same; Tong referred his
complaint to the Lupon of Barangay Kauswagan, to no avail.3

In their Answer with Defenses and Counterclaim, herein petitioners alleged that Tong is not the real owner of the disputed
property, but is only a dummy of a certain alien named Ong Se Fu, who is not qualified to own the said lot and, as such,
Tong's ownership is null and void; petitioners are the true and lawful owners of the property in question and by reason
thereof they need not lease nor pay rentals to anybody; a case docketed as CA-G.R. CV No. 52676 (RTC Civil Case No.
20181) involving herein petitioner Pe and respondent is pending before the Court of Appeals (CA) where the ownership
of the subject property is being litigated; respondent should wait for the resolution of the said action instead of filing
the ejectment case; petitioners also claimed that there was, in fact, no proper barangay conciliation as Tong was bent on
filing the ejectment case before conciliation proceedings could be validly made.4

On March 19, 2001, the MTCC rendered judgment in favor of herein respondent, the dispositive portion of which reads as
follows:
WHEREFORE, judgment is rendered, finding the defendants Anita Monasterio-Pe, and Spouses
Romulo Tan and Editha Pe-Tan to be unlawfully withholding the property in litigation, i.e., Lot. Nos. 40 and
 41 covered by TCT Nos. T-9699 and 9161, respectively, together with the buildings thereon, located
at Brgy. Kauswagan, Iloilo City Proper, and they are hereby ordered together with their families and
privies, to vacate the premises and deliver possession to the plaintiff and/or his representative.

The defendants are likewise ordered to pay plaintiff reasonable compensation for the use and occupancy
of the premises in the amount of P15,000.00 per month starting January, 2000 until they actually vacate
and deliver possession to the plaintiff and attorney's fees in the amount of P20,000.00.

Costs against the defendants.

SO DECIDED.5

Aggrieved by the above-quoted judgment, petitioners appealed the decision of the MTCC with the RTC of Iloilo City.

In its presently assailed Decision, the RTC of Iloilo City, Branch 24 affirmed in its entirety the appealed decision of the
MTCC.

Hence, the instant petition for review on certiorari.

At the outset, it bears emphasis that in a petition for review on certiorari under Rule 45 of the Rules of Court, only
questions of law may be raised by the parties and passed upon by this Court.6 It is a settled rule that in the exercise of this
Court's power of review, it does not inquire into the sufficiency of the evidence presented, consistent with the rule that
this Court is not a trier of facts.7 In the instant case, a perusal of the errors assigned by petitioners would readily show that
they are raising factual issues the resolution of which requires the examination of evidence. Certainly, issues which are
being raised in the present petition, such as the questions of whether the issue of physical possession is already included
as one of the issues in a case earlier filed by petitioner Anita and her husband, as well as whether respondent complied
with the law and rules on barangay conciliation, are factual in nature.

Moreover, the appeal under Rule 45 of the said Rules contemplates that the RTC rendered the judgment, final order or
resolution acting in its original jurisdiction.8 In the present case, the assailed Decision and Order of the RTC were issued in
the exercise of its appellate jurisdiction.

Thus, petitioners pursued the wrong mode of appeal when they filed the present petition for review on certiorari with this
Court. Instead, they should have filed a petition for review with the CA pursuant to the provisions of Section 1,9 Rule 42
of the Rules of Court.

On the foregoing bases alone, the instant petition should be denied.

In any case, the instant petition would still be denied for lack of merit, as discussed below.
In their first assigned error, petitioners contend that the RTC erred in holding that the law authorizes an attorney-in-fact
to execute the required certificate against forum shopping in behalf of his or her principal. Petitioners argue that
Tong himself, as the principal, and not Ong, should have executed the certificate against forum shopping.

The Court is not persuaded.

It is true that the first paragraph of Section 5,10 Rule 7 of the Rules of Court, requires that the certification should be
signed by the petitioner or principal party himself. The rationale behind this is because only the petitioner himself has
actual knowledge of whether or not he has initiated similar actions or proceedings in different courts or
agencies.11 However, the rationale does not apply where, as in this case, it is the attorney-in-fact who instituted the
action.12 Such circumstance constitutes reasonable cause to allow the attorney-in-fact to personally sign the Certificate of
Non-Forum Shopping. Indeed, the settled rule is that the execution of the certification against forum shopping by the
attorney-in-fact is not a violation of the requirement that the parties must personally sign the same. 13 The attorney-in-
fact, who has authority to file, and who actually filed the complaint as the representative of the plaintiff, is a party to
the ejectment suit.14 In fact, Section 1,15 Rule 70 of the Rules of Court includes the representative of the owner in
an ejectment suit as one of the parties authorized to institute the proceedings. In the present case, there is no dispute
that Ong is respondent's attorney-in-fact. Hence, the Court finds that there has been substantial compliance with the rules
proscribing forum shopping.

Petitioners also aver that the certificate against forum shopping attached to the complaint in Civil Case No. 2000(92)
falsely stated that there is no other case pending before any other tribunal involving the same issues as those raised
therein, because at the time the said complaint was filed, Civil Case No. 20181 was, in fact, still pending with the CA (CA-
G.R. CV No. 52676), where the very same issues of ejectment and physical possession were already included.

Corollarily, petitioners claim that the MTCC has no jurisdiction over Civil Case No. 2000(92) on the ground that the issue
of physical possession raised therein was already included by agreement of the parties in Civil Case No. 20181. As such,
petitioners assert that respondent is barred from filing the ejectment case, because in doing so he splits his cause of action
and indirectly engages in forum shopping.

The Court does not agree.

The Court takes judicial notice of the fact that the disputed properties, along with three other parcels of land, had been
the subject of two earlier cases filed by herein petitioner Anita and her husband Francisco against herein respondent and
some other persons. The first case is for specific performance and/or rescission of contract and reconveyance of property
with damages. It was filed with the then Court of First Instance (CFI) of Iloilo City and docketed as Civil Case No. 10853.
The case was dismissed by the CFI. On appeal, the Intermediate Appellate Court (IAC) upheld the decision of the trial court.
When the case was brought to this Court,16 the decision of the IAC was affirmed. Subsequently, the Court's judgment in
this case became final and executory per Entry of Judgment issued on May 27, 1991.

Subsequently, in 1992, the Spouses Pe filed a case for nullification of contract, cancellation of titles, reconveyance and
damages with the RTC of Iloilo City. This is the case presently cited by petitioners. Eventually, the case, docketed as Civil
Case No. 20181, was dismissed by the lower court on the ground of res judicata. The RTC held that Civil Case No. 10853
serves as a bar to the filing of Civil Case No. 20181, because both cases involve the same parties, the same subject matter
and the same cause of action. On appeal, the CA affirmed the dismissal of Civil Case No. 20181. Herein petitioner Anita
assailed the judgment of the CA before this Court, but her petition for review on certiorari was denied via a
Resolution17 dated January 22, 2003. On June 25, 2003, the said Resolution became final and executory. The Court notes
that the case was disposed with finality without any showing that the issue of ejectment was ever raised. Hence,
respondent is not barred from filing the instant action for ejectment.

In any case, it can be inferred from the judgments of this Court in the two aforementioned cases that respondent, as
owner of the subject lots, is entitled to the possession thereof. Settled is the rule that the right of possession is a necessary
incident of ownership.18 Petitioners, on the other hand, are consequently barred from claiming that they have the right to
possess the disputed parcels of land, because their alleged right is predicated solely on their claim of ownership, which is
already effectively debunked by the decisions of this Court affirming the validity of the deeds of sale transferring
ownership of the subject properties to respondent.

Petitioners also contend that respondent should have filed an accion publiciana and not an unlawful detainer case,
because the one-year period to file a case for unlawful detainer has already lapsed.

The Court does not agree.

Sections 1 and 2, Rule 70 of the Rules of Court provide:

Section 1. Who may institute proceedings and when. Subject to the provisions of the next succeeding
section, a person deprived of the possession of any land or building by force, intimidation, threat, strategy,
or stealth, or a lessor, vendor, vendee, or other person against whom the possession of any land or
building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue
of any contract, express or implied, or the legal representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year after such unlawful deprivation or
withholding of possession, bring an action in the proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of possession, or any person or persons claiming under them,
for the restitution of such possession, together with damages and costs.

Section 2. Lessor to proceed against lessee only after demand. Unless otherwise stipulated, such action by
the lessor shall be commenced only after demand to pay or comply with the conditions of the lease and
to vacate is made upon the lessee, or by serving written notice of such demand upon the person found on
the premises, or by posting such notice on the premises if no person be found thereon, and the lessee fails
to comply therewith after fifteen (15) days in the case of land or five (5) days in the case of buildings.

Respondent alleged in his complaint that petitioners occupied the subject property by his mere tolerance. While tolerance
is lawful, such possession becomes illegal upon demand to vacate by the owner and the possessor by tolerance refuses to
comply with such demand.19 Respondent sent petitioners a demand letter dated December 1, 1999 to vacate the subject
property, but petitioners did not comply with the demand. A person who occupies the land of another at the latter's
tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the proper remedy against him.20 Under Section 1,
Rule 70 of the Rules of Court, the one-year period within which a complaint for unlawful detainer can be filed should be
counted from the date of demand, because only upon the lapse of that period does the possession become
unlawful.21 Respondent filed the ejectment case against petitioners on March 29, 2000, which was less than a year from
December 1, 1999, the date of formal demand. Hence, it is clear that the action was filed within the one-year period
prescribed for filing an ejectment or unlawful detainer case.

Neither is the Court persuaded by petitioners' argument that respondent has no cause of action to recover physical
possession of the subject properties on the basis of a contract of sale because the thing sold was never delivered to the
latter.

It has been established that petitioners validly executed a deed of sale covering the subject parcels of land in favor of
respondent after the latter paid the outstanding account of the former with the Philippine Veterans Bank.

Article 1498 of the Civil Code provides that when the sale is made through a public instrument, the execution thereof
shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred. In the instant case, petitioners failed to present any evidence to show that they had
no intention of delivering the subject lots to respondent when they executed the said deed of sale. Hence, petitioners'
execution of the deed of sale is tantamount to a delivery of the subject lots to respondent. The fact that petitioners
remained in possession of the disputed properties does not prove that there was no delivery, because as found by the
lower courts, such possession is only by respondent's mere tolerance.

Lastly, the Court does not agree with petitioners' assertion that the filing of the unlawful detainer case was premature,
because respondent failed to comply with the provisions of the law on barangay conciliation. As held by the
RTC, Barangay Kauswagan City Proper, through its Pangkat Secretary and Chairman, issued not one but two certificates
to file action after herein petitioners and respondent failed to arrive at an amicable settlement. The Court finds no error
in the pronouncement of both the MTCC and the RTC that any error in the previous conciliation proceedings leading to
the issuance of the first certificate to file action, which was alleged to be defective, has already been cured by the MTCC's
act of referring back the case to the Pangkat Tagapagkasundo of Barangay Kauswagan for proper conciliation and
mediation proceedings. These subsequent proceedings led to the issuance anew of a certificate to file action.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Order of the Regional Trial Court of Iloilo City,
Branch 24, are AFFIRMED.

Lim v. Equitable PCI Bank

G.R. No. 183918

January 15, 2014

DECISION

DEL CASTILLO, J.:

The basic rule is that he who alleges must prove his case.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the July 30, 2008 Decision2 of the Court
of Appeals CA) in CA-G.R. CV No. 85139.

Factual Antecedents

On November 17, 1988, petitioner Francisco Lim (petitioner) executed an Irrevocable Special Power of Attorney3 in favor
of his brother, Franco Lim (Franco), authorizing the latter to mortgage his share in the property covered by by Transfer
Certificate of Title (TCT) No. 57176,4 which they co-owned.5

On February 9, 1989, Banco De Oro Savings and Mortgage Bank released a loan in the amount of ₱8.5 million by virtue of
the said Irrevocable Special Power of Attorney, which was entered in the Register of Deeds of San Juan, Metro Manila.6

On December 28, 1992, the loan was fully paid by Franco.7

On June 14, 1996, petitioner, Franco, and their mother Victoria Yao Lim (Victoria) obtained from respondent Equitable PCI
Bank (respondent; formerly Equitable Banking Corporation) a loan in the amount of ₱30 million in favor of Sun Paper
Products, Inc. To secure the loan, petitioner and Franco executed in favor of respondent a Real Estate Mortgage8 over the
same property.9

However, when the loan was not paid, respondent foreclosed the mortgaged property.10

On September 29, 1999, TCT No. 947011 and Tax Declaration No. 96-3180712 were issued in the name of respondent.13

Thereafter, a Writ of Possession14 in favor of respondent was issued by the Regional Trial Court (RTC) of Pasig City, Branch
158, in LRC Case No. R-5818.

On January 11, 2001, petitioner filed before the RTC of Pasig a Motion for the Issuance of Temporary Restraining Order
(TRO)15 and a Complaint16 for Cancellation of Special Power of Attorney, Mortgage Contract, Certificate of Sale, TCT No.
9470, and Tax Declaration No. 96-31807, with Damages and Issuance of Preliminary Mandatory Injunction, docketed as
Civil Case No. 68214 and raffled to Branch 267, against respondent, Franco, and Victoria. Petitioner alleged that he did
not authorize Franco to mortgage the subject property to respondent and that his signatures in the Real Estate Mortgage
and the Surety Agreement17 were forged.

On January 19, 2001, the RTC issued an Order18 granting petitioner’s Motion for the issuance of a TRO to prevent
respondent from enforcing the Writ of Possession. Thus:

WHEREFORE, considering that grave and irreparable injury will result on [petitioner] before the application of injunctive
relief can be heard on notice and pursuant to Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended, let a
Temporary Restraining Order (TRO) be issued upon posting by [petitioner] of a bond executed to the party enjoined
([respondent] Equitable PCI Bank) in the amount of ONE HUNDRED THOUSAND PESOS (₱100,000.00) bond to be approved
by the Court, to the effect that [petitioner] will pay to such party all damages which [respondent and] defendants may
sustain by reason of the TRO if the Court should finally decide that the [petitioner] is not really entitled thereto.
Consequently, [respondent and] defendants, their agents, officers, representatives and all persons acting on their behalf,
are restrained from further executing the Notice of Compliance and/or Writ of Possession.

SO ORDERED.19

Respondent, for its part, filed an Answer Cum Motion to Dismiss20 contending that the trial court has no jurisdiction to
issue a TRO or a preliminary injunction enjoining the implementation of the Writ of Possession issued by a co-equal
court.21 Respondent also argued that it is not privy to the execution of the Irrevocable Special Power of Attorney22 and
that since there is no allegation that the foreclosure was defective or void, there is no reason to cancel TCT No. 9470 and
Tax Declaration No. 96-31807.23
On April 19, 2001, the RTC issued an Order24 granting petitioner’s application for injunctive relief, to wit:

WHEREFORE, considering that based from testimonial and documentary evidence, there is sufficient reason to believe
that grave and irreparable injury will result on [petitioner] before the main case can be heard on notice and pursuant to
Section 4, Rule 58 of the 1997 Rules of Civil Procedure, as amended, let a writ of preliminary injunction be issued upon
posting by [petitioner] of a bond executed to the party enjoined ([respondent] Equitable PCI Bank) in the amount of THREE
MILLION PESOS (Php3,000,000.00) bond to be approved by the Court, to the effect that [petitioner] will pay to such party
all damages which [respondent and] defendants may sustain by reason of the said writ if the Court should finally decide
that the [petitioner] is not really entitled thereto. Consequently, [respondent and] defendants, their agents, officers,
representatives and all persons acting on their behalf, are restrained from further executing the Notice of Compliance
and/or Writ of Possession.

SO ORDERED.25

Franco and Victoria, however, did not participate in the proceedings.26

Ruling of the Regional Trial Court

On April 4, 2005, the RTC rendered a Decision27 in favor of petitioner. It ruled that petitioner was able to prove by
preponderance of evidence that he did not participate in the execution of the mortgage contract giving rise to the
presumption that his signature was forged.28 The dispositive portion of the Decision reads:

WHEREFORE, IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in favor of [petitioner]
Francisco Lim and against the [respondent] Equitable PCI Bank, Franco Lim and Victoria Yao Lim.

Accordingly, the Real Estate Mortgage Contract dated 14 June 1996 covered by Transfer Certificate of Title No. 57176; the
Certificate of Sale dated 23 December 1997 covering the same title; TCT No. 9470 in the name of [respondent] Bank; and
Tax Declaration No. 96-31807 issued in the name of the [respondent] Bank are hereby declared null and void and of no
force and effect.

The writ of preliminary injunction which was issued by the Court as per Order dated 19 April 2001 is hereby made
permanent.

SO ORDERED.29

Ruling of the Court of Appeals

On appeal, the CA reversed the RTC Decision. It ruled that petitioner’s mere allegation that his signature in the mortgage
contract was forged is not sufficient to overcome the presumption of regularity of the notarized document.30 Thus, the CA
disposed of the case in this wise:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The assailed Decision of the Regional Trial
Court is SET ASIDE. The complaint filed by [petitioner] Francisco Lim against [respondent] Equitable PCI Banking
Corporation is DISMISSED for lack of merit.

SO ORDERED.31

Issues

Hence, this recourse by petitioner raising the following questions:

Did the [CA] err when it held that no evidence was presented to support Petitioner’s claim that his signature was forged?
Corollary to the issue above, is the presentation of expert evidence indispensable in order that forgery may be sufficiently
proven in this case?

Did the [CA] err when it set aside the Decision rendered by the Trial Court on 04 April 2005 and forthwith dismissed the
complaint filed by Francisco Lim against Equitable PCI Banking Corporation for lack of merit?

Did Respondent Bank exercise the diligence required of it in the subject mortgage transaction; if it did not, did Respondent
Bank’s failure violate the rights of Petitioner?32

In a nutshell, the issues boil down to whether petitioner was able to prove that his signature was forged.

Petitioner’s Arguments

Petitioner contends that his signature in the mortgage contract was forged as he was not in the Philippines at the time of
its execution.33 He posits that the presentation of expert witnesses is not required to prove forgery as the court may make
its own determination based on the evidence presented.34 He claims that respondent was negligent in approving the loan
and in accepting the subject property as security for the loan.35 He also blames respondent for not conducting a more in-
depth inquiry before approving the loan since it was a "take-out" from a mortgage36constituted in favor of Planters
Development Bank.37 Lastly, he insists that respondent should have been alerted by the fact that the mortgage contract
was executed without the consent of his wife.38

Respondent’s Arguments

Respondent, on the other hand, echoes the ruling of the CA that petitioner’s mere denial is not enough to prove that his
signature was forged.39 Respondent points out that there was, in fact, no attempt on petitioner’s part to compare the
alleged forged signature with any of his genuine signatures.40 Also, no evidence was presented to show that respondent
did not exercise due diligence when it approved the loan and accepted the mortgage.41 More important, petitioner cannot
feign ignorance of the execution and existence of the mortgage because he even communicated with respondent to settle
the loan and, when the property was foreclosed, to repurchase the same.42 Hence, petitioner is estopped from assailing
the validity of the mortgage contract.43

Our Ruling

The Petition is bereft of merit.

Petitioner failed to prove that his signature was forged.

Allegations of forgery, like all other allegations, must be proved by clear, positive, and convincing evidence by the party
alleging it.44 It should not be presumed45 but must be established by comparing the alleged forged signature with the
genuine signatures.46 Although handwriting experts are often offered as witnesses, they are not indispensable because
judges must exercise independent judgment in determining the authenticity or genuineness of the signatures in
question.47

In this case, the alleged forged signature was not compared with the genuine signatures of petitioner as no sample
signatures were submitted. What petitioner submitted was another mortgage contract48 executed in favor of Planters
Development Bank, which he claims was also forged by his brother. But except for this, no other evidence was submitted
by petitioner to prove his allegation of forgery. His allegation that he was in the US at the time of the execution of the
mortgage contract is also not sufficient proof that his signature was forged.

Petitioner failed to prove negligence on the part of respondent.

Likewise without merit is petitioner’s allegation of negligence on the part of respondent.

Before entering into a mortgage contract, banks are expected to exercise due diligence.49 However, in this case, no
evidence was presented to show that respondent did not exercise due diligence or that it was negligent in accepting the
mortgage.50 That petitioner was erroneously described as single and a Filipino citizen in the mortgage contract, when in
fact he is married and an American citizen, cannot be attributed to respondent considering that the title of the mortgaged
property was registered under "FRANCISCO LIM and FRANCO LIM, both Filipino citizens, of legal age, single."

The nature of the property was never raised as an issue.

The absence of his wife’s signature on the mortgage contract also has no bearing in this case.

We are not unaware that all property of the marriage is presumed to be conjugal, unless it is shown that it is owned
exclusively by the husband or the wife;51 that this presumption is not overcome by the fact that the property is registered
in the name of the husband or the wife alone;52 and that the consent of both spouses is required before a conjugal
property may be mortgaged.53 However, we find it iniquitous to apply the foregoing presumption especially since the
nature of the mortgaged property was never raised as an issue before the RTC, the CA, and even before this Court. In fact,
petitioner never alleged in his Complaint that the said property was conjugal in nature. Hence, respondent had no
opportunity to rebut the said presumption.

Worth mentioning, in passing, is the ruling in Philippine National Bank v. Court of Appeals54 to wit:

The well-known rule in this jurisdiction is that a person dealing with a registered land has a right to rely upon the face of
the torrens certificate of title and to dispense with the need of inquiring further, except when the party concerned has
actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry.

A torrens title concludes all controversy over ownership of the land covered by a final [decree] of registration. Once the
title is registered the owner may rest assured without the necessity of stepping into the portals of the court or sitting in
the mirador de su casa to avoid the possibility of losing his land.

Article 160 of the Civil Code provides as follows:

"Art. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife."

The presumption applies to property acquired during the lifetime of the husband and wife. In this case, it appears on the
face of the title that the properties were acquired by Donata Montemayor when she was already a widow. When the
property is registered in the name of a spouse only and there is no showing as to when the property was acquired by said
spouse, this is an indication that the property belongs exclusively to said spouse. And this presumption under Article 160
of the Civil Code cannot prevail when the title is in the name of only one spouse and the rights of innocent third parties
are involved.

The PNB had a reason to rely on what appears on the certificates of title of the properties mortgaged. For all legal
purposes, the PNB is a mortgagee in good faith for at the time the mortgages covering said properties were constituted
the PNB was not aware to any flaw of the title of the mortgagor. (Emphasis supplied)

Petitioner’s allegation of forgery is belied by the evidence.

Moreover, petitioner’s subsequent actions belie his allegation of forgery.1âwphi1 Before the expiration of the redemption
period, petitioner sent respondent a letter55 signifying his intention to reacquire the said property. He even visited the
bank to discuss the matter.56 Clearly, his acts contradict his claim of forgery, which appears to be an afterthought and a
last-ditch effort to recover the said property.

All told, we find no error on the part of the CA in upholding the validity of the mortgage contract.57
WHEREFORE, the Petition is hereby DENIED. The July 30 2008 Decision of the Court of Appeals in CA-G.R. CV No. 85139 is
hereby AFFIRMED.

Rosaroso v. Soria

G.R. No. 194846

June 19, 2013

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the December 4, 2009 Decision1 of
the Court of Appeals (CA). in CA G.R. CV No. 00351, which reversed and set aside the July 30, 2004 Decision2 of the Regional
Trial Court, Branch 8, 7th Judicial Region, Cebu City (RTC), in Civil Case No. CEB-16957, an action for declaration of nullity
of documents.

The Facts

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real properties in Daan Bantayan, Cebu
City, including the subject properties. The couple had nine (9) children namely: Hospicio, Arturo, Florita, Lucila, Eduardo,
Manuel, Cleofe, Antonio, and Angelica. On April 25, 1952, Honorata died. Later on, Luis married Lourdes Pastor Rosaroso
(Lourdes).

On January 16, 1995, a complaint for Declaration of Nullity of Documents with Damages was filed by Luis, as one of the
plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucila’s daughter, Laila S. Solutan (Laila); and Meridian Realty
Corporation (Meridian). Due to Luis’ untimely death, however, an amended complaint was filed on January 6, 1996, with
the spouse of Laila, Ham Solutan (Ham); and Luis’ second wife, Lourdes, included as defendants.3

In the Amended Complaint, it was alleged by petitioners Hospicio D. Rosaroso, Antonio D. Rosaroso (Antonio), Angelica D.
Rosaroso (Angelica), and Cleofe R. Labindao (petitioners) that on November 4, 1991, Luis, with the full knowledge and
consent of his second wife, Lourdes, executed the Deed of Absolute Sale4 (First Sale) covering the properties with Transfer
Certificate of Title (TCT) No. 31852 (Lot No. 8); TCT. No. 11155 (Lot 19); TCT No. 10885 (Lot No. 22); TCT No. 10886 (Lot
No. 23); and Lot Nos. 5665 and 7967, all located at Daanbantayan, Cebu, in their favor.5

They also alleged that, despite the fact that the said properties had already been sold to them, respondent Laila, in
conspiracy with her mother, Lucila, obtained the Special Power of Attorney (SPA),6 dated April 3, 1993, from Luis (First
SPA); that Luis was then sick, infirm, blind, and of unsound mind; that Lucila and Laila accomplished this by affixing Luis’
thumb mark on the SPA which purportedly authorized Laila to sell and convey, among others, Lot Nos. 8, 22 and 23, which
had already been sold to them; and that on the strength of another SPA7 by Luis, dated July 21, 1993 (Second SPA),
respondents Laila and Ham mortgaged Lot No. 19 to Vital Lending Investors, Inc. for and in consideration of the amount
of ₱150,000.00 with the concurrence of Lourdes.8

Petitioners further averred that a second sale took place on August 23, 1994, when the respondents made Luis sign the
Deed of Absolute Sale9 conveying to Meridian three (3) parcels of residential land for ₱960,500.00 (Second Sale); that
Meridian was in bad faith when it did not make any inquiry as to who were the occupants and owners of said lots; and
that if Meridian had only investigated, it would have been informed as to the true status of the subject properties and
would have desisted in pursuing their acquisition.

Petitioners, thus, prayed that they be awarded moral damages, exemplary damages, attorney’s fees, actual damages, and
litigation expenses and that the two SPAs and the deed of sale in favor of Meridian be declared null and void ab initio.10
On their part, respondents Lucila and Laila contested the First Sale in favor of petitioners. They submitted that even
assuming that it was valid, petitioners were estopped from questioning the Second Sale in favor of Meridian because they
failed not only in effecting the necessary transfer of the title, but also in annotating their interests on the titles of the
questioned properties. With respect to the assailed SPAs and the deed of absolute sale executed by Luis, they claimed
that the documents were valid because he was conscious and of sound mind and body when he executed them. In fact, it
was Luis together with his wife who received the check payment issued by Meridian where a big part of it was used to
foot his hospital and medical expenses.11

Respondent Meridian, in its Answer with Compulsory Counterclaim, averred that Luis was fully aware of the conveyances
he made. In fact, Sophia Sanchez (Sanchez), Vice-President of the corporation, personally witnessed Luis affix his thumb
mark on the deed of sale in its favor. As to petitioners’ contention that Meridian acted in bad faith when it did not endeavor
to make some inquiries as to the status of the properties in question, it countered that before purchasing the properties,
it checked the titles of the said lots with the Register of Deeds of Cebu and discovered therein that the First Sale
purportedly executed in favor of the plaintiffs was not registered with the said Register of Deeds. Finally, it argued that
the suit against it was filed in bad faith.12

On her part, Lourdes posited that her signature as well as that of Luis appearing on the deed of sale in favor of petitioners,
was obtained through fraud, deceit and trickery. She explained that they signed the prepared deed out of pity because
petitioners told them that it was necessary for a loan application. In fact, there was no consideration involved in the First
Sale. With respect to the Second Sale, she never encouraged the same and neither did she participate in it. It was purely
her husband’s own volition that the Second Sale materialized. She, however, affirmed that she received Meridian’s
payment on behalf of her husband who was then bedridden.13

RTC Ruling

After the case was submitted for decision, the RTC ruled in favor of petitioners. It held that when Luis executed the second
deed of sale in favor of Meridian, he was no longer the owner of Lot Nos. 19, 22 and 23 as he had already sold them to his
children by his first marriage. In fact, the subject properties had already been delivered to the vendees who had been
living there since birth and so had been in actual possession of the said properties. The trial court stated that although the
deed of sale was not registered, this fact was not prejudicial to their interest. It was of the view that the actual registration
of the deed of sale was not necessary to render a contract valid and effective because where the vendor delivered the
possession of the parcel of land to the vendee and no superior rights of third persons had intervened, the efficacy of said
deed was not destroyed. In other words, Luis lost his right to dispose of the said properties to Meridian from the time he
executed the first deed of sale in favor of petitioners. The same held true with his alleged sale of Lot 8 to Lucila
Soria.14 Specifically, the dispositive portion of the RTC decision reads:

IN VIEW OF THE FOREGOING, the Court finds that a preponderance of evidence exists in favor of the plaintiffs and against
the defendants. Judgment is hereby rendered:

a. Declaring that the Special Power of Attorney, Exhibit "K," for the plaintiffs and Exhibit "3" for the defendants
null and void including all transactions subsequent thereto and all proceedings arising therefrom;

b. Declaring the Deed of Sale marked as Exhibit "E" valid and binding;

c. Declaring the Deed of Absolute Sale of Three (3) Parcels of Residential Land marked as Exhibit "F" null and void
from the beginning;

d. Declaring the Deed of Sale, Exhibit "16" (Solutan) or Exhibit "FF," null and void from the beginning;

e. Declaring the vendees named in the Deed of Sale marked as Exhibit "E" to be the lawful, exclusive and absolute
owners and possessors of Lots Nos. 8, 19, 22, and 23;

f. Ordering the defendants to pay jointly and severally each plaintiff ₱50,000.00 as moral damages; and
 g. Ordering the defendants to pay plaintiffs ₱50,000.00 as attorney’s fees; and ₱20,000.00 as litigation expenses.

The crossclaim made by defendant Meridian Realty Corporation against defendants Soria and Solutan is ordered dismissed
for lack of sufficient evidentiary basis.

SO ORDERED."15

Ruling of the Court of Appeals

On appeal, the CA reversed and set aside the RTC decision. The CA ruled that the first deed of sale in favor of petitioners
was void because they failed to prove that they indeed tendered a consideration for the four (4) parcels of land. It relied
on the testimony of Lourdes that petitioners did not pay her husband. The price or consideration for the sale was simulated
to make it appear that payment had been tendered when in fact no payment was made at all.16

With respect to the validity of the Second Sale, the CA stated that it was valid because the documents were notarized and,
as such, they enjoyed the presumption of regularity. Although petitioners alleged that Luis was manipulated into signing
the SPAs, the CA opined that evidence was wanting in this regard. Dr. Arlene Letigio Pesquira, the attending physician of
Luis, testified that while the latter was physically infirmed, he was of sound mind when he executed the first SPA.17

With regard to petitioners’ assertion that the First SPA was revoked by Luis when he executed the affidavit, dated
November 24, 1994, the CA ruled that the Second Sale remained valid. The Second Sale was transacted on August 23,
1994, before the First SPA was revoked. In other words, when the Second Sale was consummated, the First SPA was still
valid and subsisting. Thus, "Meridian had all the reasons to rely on the said SPA during the time of its validity until the time
of its actual filing with the Register of Deeds considering that constructive notice of the revocation of the SPA only came
into effect upon the filing of the Adverse Claim and the aforementioned Letters addressed to the Register of Deeds on 17
December 1994 and 25 November 1994, respectively, informing the Register of Deeds of the revocation of the first
SPA."18 Moreover, the CA observed that the affidavit revoking the first SPA was also revoked by Luis on December 12,
1994.19

Furthermore, although Luis revoked the First SPA, he did not revoke the Second SPA which authorized respondent Laila
to sell, convey and mortgage, among others, the property covered by TCT T-11155 (Lot No. 19). The CA opined that had it
been the intention of Luis to discredit the

Second Sale, he should have revoked not only the First SPA but also the Second SPA. The latter being valid, all transactions
emanating from it, particularly the mortgage of Lot 19, its subsequent redemption and its second sale, were valid.20 Thus,
the CA disposed in this wise:

WHEREFORE, the appeal is hereby GRANTED. The Decision dated 30 July 2004 is hereby REVERSED AND SET ASIDE, and in
its stead a new decision is hereby rendered:

1. DECLARING the Special Power of Attorney, dated 21 July 1993, as valid;

2. DECLARING the Special Power of Attorney, dated 03 April 1993, as valid up to the time of its revocation on 24
November 1994;

3. DECLARING the Deed of Absolute sale, dated 04 November 1991, as ineffective and without any force and
effect;

4. DECLARING the Deed of Absolute Sale of Three (3) Parcels of Residential Land, dated 23 August 1994, valid and
binding from the very beginning;

5. DECLARING the Deed of Absolute Sale, dated 27 September 1994, also valid and binding from the very
beginning;
 6. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellant Meridian Realty
Corporation the sum of Php100,000.00 as moral damages, Php100,000.00 as attorney’s fee and Php100,000.00
as litigation expenses; and

7. ORDERING the substituted plaintiffs to pay jointly and severally the defendant-appellants Leila Solutan et al.,
the sum of Php50,000.00 as moral damages.

SO ORDERED.21

Petitioners filed a motion for reconsideration, but it was denied in the CA Resolution,22 dated November 18, 2010.
Consequently, they filed the present petition with the following ASSIGNMENT OF ERRORS

I.

THE HONORABLE COURT OF APPEALS (19TH DIVISION) GRAVELY ERRED WHEN IT DECLARED AS VOID THE FIRST SALE
EXECUTED BY THE LATE LUIS ROSAROSO IN FAVOR OF HIS CHILDREN OF HIS FIRST MARRIAGE.

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT SUSTAINING AND AFFIRMING THE RULING OF THE TRIAL
COURT DECLARING THE MERIDIAN REALTY CORPORATION A BUYER IN BAD FAITH, DESPITE THE TRIAL COURT’S FINDINGS
THAT THE DEED OF SALE (First Sale), IS GENUINE AND HAD FULLY COMPLIED WITH ALL THE LEGAL FORMALITIES.

III.

THE HONORABLE COURT OF APPEALS FURTHER ERRED IN NOT HOLDING THE SALE (DATED 27 SEPTEMBER 1994), NULL
AND VOID FROM THE VERY BEGINNING SINCE LUIS ROSAROSO ON NOVEMBER 4, 1991 WAS NO LONGER THE OWNER OF
LOTS 8, 19, 22 AND 23 AS HE HAD EARLIER DISPOSED SAID LOTS IN FAVOR OF THE CHILDREN OF HIS (LUIS ROSAROSO)
FIRST MARRIAGE.23

Petitioners argue that the second deed of sale was null and void because Luis could not have validly transferred the
ownership of the subject properties to Meridian, he being no longer the owner after selling them to his children. No less
than Atty. William Boco, the lawyer who notarized the first deed of sale, appeared and testified in court that the said deed
was the one he notarized and that Luis and his second wife, Lourdes, signed the same before him. He also identified the
signatures of the subscribing witnesses.24 Thus, they invoke the finding of the RTC which wrote:

In the case of Heirs of Joaquin Teves, Ricardo Teves versus Court of Appeals, et al., G.R. No. 109963, October 13, 1999, the
Supreme Court held that a public document executed [with] all the legal formalities is entitled to a presumption of truth
as to the recitals contained therein. In order to overthrow a certificate of a notary public to the effect that a grantor
executed a certain document and acknowledged the fact of its execution before him, mere preponderance of evidence
will not suffice. Rather, the evidence must (be) so clear, strong and convincing as to exclude all reasonable dispute as to
the falsity of the certificate. When the evidence is conflicting, the certificate will be upheld x x x .

A notarial document is by law entitled to full faith and credit upon its face. (Ramirez vs. Ner, 21 SCRA 207). As such it …
must be sustained in full force and effect so long as he who impugns it shall not have presented strong, complete and
conclusive proof of its falsity or nullity on account of some flaw or defect provided against by law (Robinson vs. Villafuerte,
18 Phil. 171, 189-190).25

Furthermore, petitioners aver that it was erroneous for the CA to say that the records of the case were bereft of evidence
that they paid the price of the lots sold to them. In fact, a perusal of the records would reveal that during the cross-
examination of Antonio Rosaroso, when asked if there was a monetary consideration, he testified that they indeed paid
their father and their payment helped him sustain his daily needs.26
Petitioners also assert that Meridian was a buyer in bad faith because when its representative visited the site, she did not
make the necessary inquiries. The fact that there were already houses on the said lots should have put Meridian on its
guard and, for said reason, should have made inquiries as to who owned those houses and what their rights were over
the same.27

Meridian’s assertion that the Second Sale was registered in the Register of Deeds was a falsity. The subject titles, namely:
TCT No. 11155 for Lot 19, TCT No. 10885 for Lot 22, and TCT No. 10886 for Lot 23 were free from any annotation of the
alleged sale.28

After an assiduous assessment of the records, the Court finds for the petitioners.

The First Deed Of Sale Was Valid

The fact that the first deed of sale was executed, conveying the subject properties in favor of petitioners, was never
contested by the respondents. What they vehemently insist, though, is that the said sale was simulated because the
purported sale was made without a valid consideration.

Under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have
been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for
a contract.29 These presumptions operate against an adversary who has not introduced proof to rebut them. They create
the necessity of presenting evidence to rebut the prima facie case they created, and which, if no proof to the contrary is
presented and offered, will prevail. The burden of proof remains where it is but, by the presumption, the one who has
that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption
stands in the place of evidence unless rebutted.30

In this case, the respondents failed to trounce the said presumption. Aside from their bare allegation that the sale was
made without a consideration, they failed to supply clear and convincing evidence to back up this claim. It is elementary
in procedural law that bare allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of
Court.31

The CA decision ran counter to this established rule regarding disputable presumption. It relied heavily on the account of
Lourdes who testified that the children of Luis approached him and convinced him to sign the deed of sale, explaining that
it was necessary for a loan application, but they did not pay the purchase price for the subject properties.32 This testimony,
however, is self-serving and would not amount to a clear and convincing evidence required by law to dispute the said
presumption. As such, the presumption that there was sufficient consideration will not be disturbed.

Granting that there was no delivery of the consideration, the seller would have no right to sell again what he no longer
owned. His remedy would be to rescind the sale for failure on the part of the buyer to perform his part of their obligation
pursuant to Article 1191 of the New Civil Code. In the case of Clara M. Balatbat v. Court Of Appeals and Spouses Jose
Repuyan and Aurora Repuyan,33 it was written:

The failure of the buyer to make good the price does not, in law, cause the ownership to revest to the seller unless the
bilateral contract of sale is first rescinded or resolved pursuant to Article 1191 of the New Civil Code. Non-payment only
creates a right to demand the fulfillment of the obligation or to rescind the contract. [Emphases supplied]

Meridian is Not a
Buyer in Good Faith

Respondents Meridian and Lucila argue that, granting that the First Sale was valid, the properties belong to them as they
acquired these in good faith and had them first recorded in the Registry of Property, as they were unaware of the First
Sale.34

Again, the Court is not persuaded.

The fact that Meridian had them first registered will not help its cause. In case of double sale, Article 1544 of the Civil Code
provides:

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it
in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in possession; and, in
the absence thereof; to the person who presents the oldest title, provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double sale 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. The requirement of the law then is two-fold: acquisition in good faith and registration in good faith.
Good faith must concur with the registration. If it would be shown that a buyer was in bad faith, the alleged registration
they have made amounted to no registration at all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of a double
sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be deemed the owner. Verily, the act of registration must be coupled
with good faith— that is, the registrant must have no knowledge of the defect or lack of title of his vendor or must not
have been aware of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor.)35 [Emphases and underlining supplied]

When a piece of land is in the actual possession of persons other than the seller, the buyer must be wary and should
investigate the rights of those in possession. Without making such inquiry, one cannot claim that he is a buyer in good
faith. When a man proposes to buy or deal with realty, his duty is to read the public manuscript, that is, to look and see
who is there upon it and what his rights are. A want of caution and diligence, which an honest man of ordinary prudence
is accustomed to exercise in making purchases, is in contemplation of law, a want of good faith. The buyer who has failed
to know or discover that the land sold to him is in adverse possession of another is a buyer in bad faith. 36 In the case of
Spouses Sarmiento v. Court of Appeals,37 it was written:

Verily, 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 certificate to determine the condition of the property. Thus, the
general rule is that a purchaser may be considered a purchaser in good faith when he has examined the latest certificate
of title. An exception to this rule is when there exist important facts that would create suspicion in an otherwise reasonable
man to go beyond the present title and to investigate those that preceded it. Thus, it has been said that a person who
deliberately ignores a significant fact which would create suspicion in an otherwise reasonable man is not an innocent
purchaser for value. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and
then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. As we have held:

The failure of appellees to take the ordinary precautions which a prudent man would have taken under the circumstances,
specially in buying a piece of land in the actual, visible and public possession of another person, other than the vendor,
constitutes gross negligence amounting to bad faith.

In this connection, it has been held that where, as in this case, the land sold is in the possession of a person other than
the vendor, the purchaser is required to go beyond the certificate of title to make inquiries concerning the rights of the
actual possessor. Failure to do so would make him a purchaser in bad faith. (Citations omitted).

One who purchases real property which is in the actual possession of another should, at least make some inquiry
concerning the right of those in possession. The actual possession by other than the vendor should, at least put the
purchaser upon inquiry. He can scarely, in the absence of such inquiry, be regarded as a bona fide purchaser as against
such possessors. (Emphases supplied)

Prescinding from the foregoing, the fact that private respondent RRC did not investigate the Sarmiento spouses' claim
over the subject land despite its knowledge that Pedro Ogsiner, as their overseer, was in actual possession thereof means
that it was not an innocent purchaser for value upon said land. Article 524 of the Civil Code directs that possession may
be exercised in one's name or in that of another. In herein case, Pedro Ogsiner had informed RRC that he was occupying
the subject land on behalf of the Sarmiento spouses. Being a corporation engaged in the business of buying and selling
real estate, it was gross negligence on its part to merely rely on Mr. Puzon's assurance that the occupants of the property
were mere squatters considering the invaluable information it acquired from Pedro Ogsiner and considering further that
it had the means and the opportunity to investigate for itself the accuracy of such information. [Emphases supplied]

In another case, it was held that if a vendee in a double sale registers the sale after he has acquired knowledge of a
previous sale, the registration constitutes a registration in bad faith and does not confer upon him any right. If the
registration is done in bad faith, it is as if there is no registration at all, and the buyer who has first taken possession of the
property in good faith shall be preferred.38

In the case at bench, the fact that the subject properties were already in the possession of persons other than Luis was
never disputed. Sanchez, representative and witness for Meridian, even testified as follows:

x x x; that she together with the two agents, defendant Laila Solutan and Corazon Lua, the president of Meridian Realty
Corporation, went immediately to site of the lots; that the agents brought with them the three titles of the lots and Laila
Solutan brought with her a special power of attorney executed by Luis B. Rosaroso in her favor but she went instead
directly to Luis Rosaroso to be sure; that the lots were pointed to them and she saw that there were houses on it but she
did not have any interest of the houses because her interest was on the lots; that Luis Rosaroso said that the houses
belonged to him; that he owns the property and that he will sell the same because he is very sickly and he wanted to buy
medicines; that she requested someone to check the records of the lots in the Register of Deeds; that one of the titles was
mortgaged and she told them to redeem the mortgage because the corporation will buy the property; that the registered
owner of the lots was Luis Rosaroso; that in more or less three months, the encumbrance was cancelled and she told the
prospective sellers to prepare the deed of sale; that there were no encumbrances or liens in the title; that when the deed
of absolute sale was prepared it was signed by the vendor Luis Rosaroso in their house in Opra x x x.39 (Underscoring
supplied)

From the above testimony, it is clear that Meridian, through its agent, knew that the subject properties were in possession
of persons other than the seller. Instead of investigating the rights and interests of the persons occupying the said lots,
however, it chose to just believe that Luis still owned them. Simply, Meridian Realty failed to exercise the due diligence
required by law of purchasers in acquiring a piece of land in the possession of person or persons other than the seller.

In this regard, great weight is accorded to the findings of fact of the RTC. Basic is the rule that the trial court is in a better
position to examine real evidence as well as to observe the demeanor of witnesses who testify in the case.40

WHEREFORE, the petition is GRANTED. The December 4, 2009 Decision and the November 18, 201 0 Resolution of the
Court of Appeals, in CA-G.R. CV No. 00351, are REVERSED and SET ASIDE. The July 30, 2004 Decision of the Regional Trial
Court, Branch 8, 7th Judicial Region, Cebu City, in Civil Case No. CEB-16957, is hereby REINSTATED.

Valido v. Pono

Vda. De Viray v. Usi

G.R. No. 192486

November 21, 2012

 DECISION

VELASCO, JR., J.:

The Case

Petitioners have availed of Rule 45 to assail and nullify the Decision1 dated July 24, 2009, as effectively reiterated in a
Resolution2 of June 2, 2010, both rendered by the Court of Appeals (CA) in CA-G.R. CV No. 90344, setting aside the
Decision3 dated June 21, 2007 of the Regional Trial Court (RTC), Branch 55 in Macabebe, Pampanga, in Civil Case No. 01-
1118(M), an accion publiciana/reivindicatoria, which respondents commenced with, but eventually dismissed by, that
court.

The Facts

At the core of the present controversy are several parcels of land which form part of what was once Lot No. 733, Cad-305-
D, Masantol Cadastre (Lot 733 hereinafter), registered in the name of Ellen P. Mendoza (Mendoza), married to Moses
Mendoza, under Transfer Certificate of Title No. (TCT) 141-RP of the Registry of Deeds of Pampanga. With an area of 9,137
square meters, more or less, Lot 733 is located in Brgy. Bebe Anac, Masantol, Pampanga.

On April 28, 1986, Geodetic Engineer Abdon G. Fajardo prepared a subdivision plan4 (Fajardo Plan, for short) for Lot 733,
in which Lot 733 was divided into six (6) smaller parcels of differing size dimensions, designated as: Lot 733-A, Lot 733-B,
Lot 733-C, Lot 733-D, Lot 733-E, and Lot 733-F consisting of 336, 465, 3,445, 683, 677 and 3,501 square meters,
respectively.

The following day, April 29, 1986, Mendoza executed two separate deeds of absolute sale, the first, transferring Lot 733-
F to Jesus Carlo Gerard Viray (Jesus Viray),5 and the second deed conveying Lot 733-A to spouses Avelino Viray and
Margarita Masangcay (Sps. Viray).6 The names McDwight Mendoza, Mendoza’s son, and one Ernesto Bustos appear in
both notarized deeds as instrumental witnesses. As of that time, the Fajardo Plan has not been officially approved by the
Land Management Bureau (LMB), formerly the Bureau of Lands. And at no time in the course of the controversy did the
spouses Viray and Jesus Viray, as purchasers of Lots 733-A and 733-F, respectively, cause the annotations of the conveying
deeds of sale on TCT 141-RP.

Herein petitioner, Ruperta Cano Vda. de Viray (Vda. de Viray), is the surviving spouse of Jesus Viray, who died in April
1992.

As of April 29, 1986, the dispositions made on and/or the ownership profile of the subdivided lots appearing under the
Fajardo Plan are as follows:

Lot No. Area Conveyances by Mendoza

Lot 733-A 366 square meters Sold to Sps. Avelino and

Margarita Viray

Lot 733-B 465 square meters Unsold

Lot 733-C 3,445 square meters Unsold

Lot 733-D 683 square meters Proposed Road

Lot 733-E 677 square meters Unsold

Lot 733-F 3,501 square meters Sold to Jesus Viray

The aforementioned conveyances notwithstanding, Mendoza, Emerenciana M. Vda. de Mallari (Vda. de Mallari) and
respondent spouses Jose Usi and Amelita T. Usi (Sps. Usi or the Usis), as purported co-owners of Lot 733, executed on
August 20, 1990 a Subdivision Agreement,7 or the

1st subdivision agreement (1st SA). Pursuant to this agreement which adopted, as base of reference, the LMB-approved
subdivision plan prepared by Geodetic Engineer Alfeo S. Galang (Galang Plan), Lot 733 was subdivided into three lots, i.e.,
Lots A to C, with the following area coverage: Lots 733-A, 465 square meters, 733-B, 494 square meters, and 733-C, 6,838
square meters. In its pertinent parts, the 1st SA reads:

That the above-parties are the sole and exclusive owners of a certain parcel of land situated in the Bo. of Bebe Anac,
Masantol, Pampanga, which is known as Lot No. 733 under TCT No. 141 R.P. of the Registry of Deeds of Pampanga, under
Psd-No. 03-10-025242;

That for the convenience of the parties hereto that the existing community of the said Lot be terminated and their
respective share be determined by proper adjudication;

That the parties hereto agreed to subdivided (sic) the above-mentioned property by Geodetic Engineer Alfeo S. Galang,
as per tracing cloth and blue print copy of plan Psd-03-025242 and technical description duly approved by the Bureau of
Lands, hereto Attached and made internal part of this instrument in the following manner:

Lot 733-A - - - - - - - To Emerencia M. Vda. Mallari;

Lot 733-B - - - - - - - To Sps. Jose B. Usi and Amelita B. Usi;

Lot 733-C - - - - - - - To Ellen P. Mendoza8 (Emphasis added.)

TCT 141-RP would eventually be canceled and, in lieu thereof, three derivative titles were issued to the following, as
indicated: TCT 1584-RP for Lot 733-A to Mallari; TCT 1585-RP9 for Lot 733-B to Sps. Usi; and TCT 1586-RP for Lot 733-C to
Mendoza.

On April 5, 1991, Mendoza, McDwight P. Mendoza, Bismark P. Mendoza, Beverly P. Mendoza, Georgenia P. Mendoza, Sps.
Alejandro Lacap and Juanita U. Lacap, Sps. Nestor Coronel and Herminia Balingit, Sps. Bacani and Martha Balingit, Sps.
Ruperto and Josefina Jordan, and Sps.

Jose and Amelita Usi executed another Subdivision Agreement10 (2nd SA) covering and under which the 8,148-sq. m. Lot
733-C was further subdivided into 13 smaller lots (Lot 733-C-1 to Lot 733-C-13 inclusive). The subdivision plan11 for Lot
733-C, as likewise prepared by Engr. Galang on October 13, 1990, was officially approved by the LMB on March 1, 1991.

The 2nd SA partly reads:

1. That we are the sole and exclusive undivided co-owners of a parcel of land situated at Barrio Putat and Arabia, Bebe
Anac, Masantol, Pampanga, identified as Lot No. 733-C of Psd-No. 03-041669, containing an area of 8,148 sq. meters and
covered by T.C.T. No. 1586 R.P. of the

Register of Deeds of Pampanga;

2. That it is for the benefit and best interest of the parties herein that the [sic] their co-ownership relation over the above-
mentioned parcel of land be terminated and their respective share over the co-ownership be allotted [sic] to them;

Wherefore, by virtue of the foregoing premises, we have agreed, as we hereby agree to subdivide our said parcel of land
x x x.12 (Emphasis added.)
Consequent to the subdivision of Lot 733-C in line with the Galang Plan and its subsequent partition and distribution to
the respective allotees pursuant to the 2nd SA, the following individuals appeared as owners of the subdivided units as
indicated in the table below:

Lot No. Land Area Partitioned to:

Lot 733-C-1 200 square meters Sps. Jose and Amelita Usi

Lot 733-C-2 1,000 square meters Sps. Alejandro & Juanita Lacap

Lot 733-C-3 300 square meters Sps. Nestor & Herminia Coronel

Lot 733-C-4 500 square meters Sps. Nestor & Herminia Coronel
and Sps. Bacani & Martha Balingit

Lot 733-C-5 400 square meters Sps. Ruperto & Josefina Jordan

Lot 733-C-6 500 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

Lot 733-C-7 220 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

Lot 733-C-8 1,000 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

Lot 733-C-9 500 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

Lot 733-C-10 1,000 square meters Sps. Jose and Amelita Usi

Lot 733-C-11 668 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

Lot 733-C-12 550 square meters Ellen, McDwight, Bismark, Beverly

and Georgenia Mendoza

[Lot 733-C-13] [1,310 square meters] [Allotted for a proposed road]

In net effect, the two subdivision agreements paved the way for the issuance, under the Sps. Usi’s name, of TCT Nos. 1585-
RP,13 2092-RP,14 and 2101-RP,15 covering Lots 733-B, 733-C-1 and 733-C-10, respectively.

On the other hand, the subdivision of Lot 733, per the Galang Plan, and the two subdivision agreements concluded based
on that plan, virtually resulted in the loss of the identity of what under the Fajardo Plan were Lot 733-A and Lot 733-F. The
Sps. Viray and the late Jesus Viray, to recall, purchased Lot 733-A and Lot 733-F, respectively, from Mendoza.

Then came the ocular inspection and survey16 conducted on Lot 733, as an undivided whole, by Geodetic Engr. Angelito
Nicdao of the LMB. Some highlights of his findings:

(a) Lot 733-A of the Fajardo Plan with an area of 336 square meters that Sps. Viray bought is within Lot 733-B
(Galang Plan) allotted under 1st SA to Sps. Jose and Amelita Usi; and
 (b) Lot 733-F of the Fajardo Plan with an area of 3,501 square meters is almost identical to the combined area of
Lots 733-C-8 to 733-C-12 awarded to Ellen Mendoza and her children—McDwight, Bismark, Beverly and
Georgenia, and a portion (1,000 square meters) of Lot 733-C-10 of the Galang Plan awarded to Sps. Jose and
Amelita Usi.

As to be expected, the foregoing overlapping transactions involving the same property or portions thereof spawned
several suits and counter- suits featuring, in particular, herein petitioners and respondents, viz:

(a) A suit for Annulment of Deed of Absolute Sale filed before the RTC, Branch 55 in Macabebe, Pampanga, docketed as
Civil Case No. 88-0265-M, in which the Usis and Mendoza, as plaintiffs, assailed the validity and sought the annulment of
the deed of absolute sale executed by Mendoza on April 29, 1986 conveying Lot 733-A (Fajardo Plan) to defendants Sps.
Viray.

(b) A similar suit for Annulment of Deed of Absolute Sale commenced by Mendoza against Jesus Viray before RTC-Br. 55
in Macabebe, Pampanga, docketed as Civil Case No. 88-0283-M, entitled Ellen P. Mendoza v. Jesus Carlo Gerard Viray,
also seeking to nullify the April 29, 1986 Deed of Absolute Sale conveying Lot 733-F (Fajardo Plan) to Jesus Viray and to
declare the plaintiff as entitled to its possession.

The adverted Civil Case Nos. 88-0265-M and 88-0283-M were jointly tried by RTC-Br. 55, which, on August 1, 1989,
rendered a Joint Decision17 finding for the Sps. Viray and Jesus Viray, as defendants, and accordingly dismissing the
separate complaints to annul the deeds of sale subject of the joint cases.

On appeal, the CA, in CA-G.R. CV Nos. 24981-82, and later this Court, in its Decision of December 11, 1995, in G.R. No.
122287 in effect affirmed in toto the RTC dismissal decision.18 The Court, via its Resolution of April 17, 1998, would
eventually deny with finality19 Mendoza and the Usis’ motion for reconsideration of the aforesaid December 11, 1995
Decision.

(c) A forcible entry case filed on November 19, 1991 by the late Jesus Viray against the Sps. Usi before the Municipal Circuit
Trial Court (MCTC) in Macabebe, Pampanga, docketed as Civil Case No. 91 (13), entitled Jesus Carlo Gerard Viray v. Spouses
Jose Usi and Emelita Tolentino, to eject the Usis from Lot 733-F (Fajardo Plan).

On July 29, 1998, the MCTC rendered a Decision20 in favor of Jesus Viray, the dispositive portion of which pertinently reads:

WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff the late petitioner Jesus Viray, and
accordingly, the defendants Sps. Usi and any other persons claiming under them are hereby ordered to vacate the subject
premises, Lot 733-F embraced in T.C.T. No. 141-R.P., Register of Deeds Pampanga, and Lot 733-A, both situated at Bebe
Anac, Masantol, Pampanga and to remove at their own expense, all structures or improvements they built and introduced
thereon.

Defendants are likewise sentenced to pay plaintiff the amount of THREE HUNDRED (P300.00) PESOS per month from
November 19, 1991, until they vacate the premises, as reasonable compensation for the use and occupation thereof x x
x.

xxxx

SO ORDERED.21

The Decision eventually became final and executory, the Usis having opted not to appeal it.

(d) A Petition for Annulment of the MCTC’s July 29, 1998 Decision filed by the Sps. Usi before the RTC, docketed as Civil
Case No. 99-0914M, entitled Sps. Jose & Amelita Usi v. Hon. Pres. Judge MCTC, Macabebe, Pampanga, the Court Sheriff,
MCTC, Macabebe, Pampanga and
Ruperta Cano Vda. de Viray, which decision placed Jesus Viray’s widow, Ruperta, in possession of Lot 733-F of the Fajardo
Plan.

As may be noted, the spouses Usi, instead of appealing from the July 29, 1998 MCTC Decision in Civil Case No. 91 (13),
sought, after its finality, its annulment before the RTC. By Decision22 dated June 29, 2000, the RTC dismissed the petition
to annul. The Usis’ appeal to the CA, docketed as CA-G.R. CV No. 67945, merited the same dismissal action.23 And finally,
in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano Vda. de Viray), the Court denied, on February 12, 2003,
Sps. Usi’s petition for review of the CA’s Decision. The denial became final on April 8, 2003 and an Entry of
Judgment24 issued in due course.

(e) A Petition for Accion Publiciana/ Reivindicatoria 25 instituted on December 12, 2001 by Sps. Usi against the late Jesus
Viray, as substituted by Vda. de Viray, et al., before the RTC in Macabebe, Pampanga, docketed as Civil Case No. 01-
1118(M), involving Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan) covered by TCT Nos. 1585-RP, 2092-RP and 2101-RP.

The execution of the July 29, 1998 MCTC Decision in Civil Case No. 91 (13), as the Sps. Usi asserted in their petition, would
oust them from their own in fee simple lots even though the dispositive portion of said forcible entry Decision mentioned
Lots 733-A and 733-F (Fajardo Plan) and not Lots 733-B, 733-C-1 and 733-C-10 (Galang Plan) which are registered in their
names per TCT Nos. 1585-RP, 2092-RP and 2101-RP.

In time, Vda. de Viray moved for the dismissal26 of these publiciana/ reivindicatoria actions on grounds, among others, of
litis pendentia and res judicata, on account of (1) the Sps. Usi’s appeal, then pending before the CA, from the dismissal by
the RTC of Civil Case No. 99-0914M;27 and (2) the August 1, 1989 RTC Decision in Civil Case Nos. 88-0265-M and 88-0283-
M, as effectively affirmed by the CA, and finally by the Court in G.R. No. 122287. This motion to dismiss would, however,
be denied by the RTC through an Order28 of March 8, 2002, compelling Vda. de Viray to file an answer,29 again invoking in
defense the doctrine of res judicata. Sps. Usi’s Reply to Answer30contained an averment that their titles over the subject
lots are the best evidence of their ownership.

(f) An action for Cancellation of Titles or Surrender of Original Titles with Damages31 commenced by Vda. de Viray, et al.,
against the Sps. Usi, Mendoza and eight others before the RTC, Branch 54 in Macabebe, Pampanga, docketed as Civil Case
No. (02)-1164(M), seeking the cancellation of TCT Nos. 3614-R.P., 2099-R.P., 2101-R.P., 7502-R.P. and 2103-R.P. covering
Lots 733-C-8 to 733-C-12 as subdivided under the 2nd SA of April 5, 1991 which taken together is basically identical to Lot
733-F (Fajardo Plan) sold to Jesus Viray.

To recap, the six (6) cases thus filed involving portions of Lot 733 and their status are:

Civil Case No. The Parties Action/Suit for Subject Lot(s) Disposition

88-0265-M Sps. Usi v. Sps. Annulment of 733-A Decision in

Viray Deed of Absolute favor of Sps.
Sale (Fajardo Plan) Viray. Decision
is now final.

88-0283-M Mendoza v. Jesus Annulment of 733-F Decision in

Viray Deed of Absolute favor of Sps.
Sale (Fajardo Plan) Viray.

Subject of CA-
G.R. CV Nos.
24981-82 –
denied.
Subject of G.R.
No. 122287 –
 petition
denied.

91 (13) Jesus Viray v. Sps. Forcible Entry 733-F Judgment in

Usi favor of Viray.
(Fajardo Plan) No appeal.

90-0914M Sps. Usi v. Vda. de Petition for 733-F RTC dismissed

Viray Annulment of petition.
MCTC (Fajardo Plan)
CA-G.R. CV No.
Decision in CC No. 67945 – appeal
91 (13) dismissed. G.R.
No. 154538 –
petition
denied.

(02)-1164(M) Vda. de Viray v. Cancellation of Lots 733-C-8 Pending before

Mendoza, et al. Titles before RTC, the RTC.
Br. 55, Pampanga To 733-C-12

(Lot 733-F
(Fajardo Plan)

01-1118(M) Sps. Usi v. Vda. de Petition for 733-B, 733-C- Petition

Viray dismissed.
Accion Publiciana 1 and 733-C-
and CA-G.R. CV No.
Reivindicatoria 10 (Galang Plan) 90344 –
before RTC, Br. reversed RTC
55, Pampanga Decision.
Subject of
instant case,
G.R. No.
192486

In sum, of the six (6) cases referred to above, the first four (4) have been terminated and the main issue/s therein
peremptorily resolved. To a precise point, the matter of the validity of the April 29, 1986 deeds of absolute sale conveying
Lots 733-A and 733-F under the Fajardo Plan to Sps. Viray and Vda. de Viray (vice Jesus Viray), respectively, is no longer a
contentious issue by force of the Court’s Decision in G.R. No. 122287 effectively upholding the dismissal of the twin
complaints to nullify the deeds aforementioned. Likewise, the issue of who has the better possessory right independent
of title over the disputed lots has been resolved in favor of Vda. de Viray and the Sps. Viray and against the Usis and
veritably put to rest by virtue of the Court’s final, affirmatory Decision in G.R. No. 154538.

Only two cases of the original six revolving around Lot 733 remained unresolved. The first refers to the petition for review
of the decision of the CA in CA-G.R. CV No. 90344 which, in turn, is an appeal from the decision of the RTC in Civil Case No.
01-1118(M), a Petition for Accion Publiciana/ Reivindicatoria and Damages, and the second is Civil Case No. (02)-1164(M)
for Cancellation of Titles or Surrender of Original Titles with Damages. The first case is subject of the present recourse,
while the second is, per records, still pending before the RTC, Branch 54 in Macabebe, Pampanga, its resolution doubtless
on hold in light of the instant petition.

In the meantime, the Sps. Usi have remained in possession of what in the Galang Plan are designated as Lots 733-B, 733-
C-1 and 733-C-10.
The Ruling of the RTC in Civil Case No. 01-1118(M)

As may be recalled, on June 21, 2007 in Civil Case No. 01-1118(M), the Macabebe, Pampanga RTC rendered judgment
dismissing the petition of the Sps. Usi32 for Accion Publiciana/Reivindicatoria. In its dismissal action, the RTC held that the
Sps. Usi failed to establish by preponderance of evidence to support their claim of title, possession and ownership over
the lots subject of their petition.

Following the denial of their motion for reconsideration per the RTC’s Order33 of September 25, 2007, the Sps. Usi
interposed an appeal before the CA, docketed as CA-G.R. CV No. 90344.

The Ruling of the CA

On July 24, 2009, the CA rendered the assailed decision, reversing and setting aside the appealed June 21, 2007 RTC
decision. The fallo of the CA decision reads:

WHEREFORE, the instant appeal is GRANTED and the assailed Decision of the Regional Trial Court, REVERSED and SET
ASIDE. Judgment is hereby rendered declaring as legal and valid, the right of ownership of petitioner-appellant
respondents herein spouses Jose Usi and Amelita T. Usi over Lot Nos. 733-B, 733-C-1 and 733-C-10 covered by TCT Nos.
1585-R.P., 2092-R.P, and 2101-R.P., respectively. Consequently, respondents-appellees herein petitioners are hereby
ordered to cease and desist from further committing acts of dispossession or from disturbing possession and ownership
of petitioners-appellants of the said property as herein described and specified. Claims for damages, however, are hereby
denied x x x.

SO ORDERED.

The CA predicated its ruling on the interplay of the following premises and findings: (a) the validity of the two (2) duly
notarized subdivision agreements, or the 1st SA and 2nd SA, which the LMB later approved; (b) the subdivisions of Lot 733
on the basis of the Galang Plan actually partook the nature of the partition of the shares of its co-owners; (c) what Mendoza
conveyed through the April 29, 1986 deeds of absolute sale is only her ideal, abstract or pro-indiviso share of Lot 733 of
which she had full ownership, the conveyance or sale subject to the eventual delineation and partition of her share; (d)
Vda. de Viray has not shown that fraud surrounded the execution of the partition of Lot 733 through the subdivision
agreements of August 20, 1990 and April 5, 1991; (e) the certificates of title of the Sps. Usi constitute indefeasible proof
of their ownership of Lots 733-B, 733-C-1 and 733-C-10; (f) said certificate entitled the Sps. Usi to take possession thereof,
the right to possess being merely an attribute of ownership; (g) Vda. de Viray can only go after the partitioned shares of
Mendoza in Lot 733; and (h) the issue of possessory right has been mooted by the judgment of ownership in favor of the
Sps. Usi over Lots 733-B, 733-C-1 and 733-C-10.

Vda. de Viray sought but was denied reconsideration per the assailed June 2, 2010 CA Resolution.

Hence, We have this petition.

The Issue

WHETHER OR NOT THE COURT A QUO GRAVELY AND SERIOUSLY ERRED IN REVERSING AND SETTING ASIDE THE DECISION
OF THE RTC DISMISSING RESPONDENTS’ PETITION.34

The Court’s Ruling

In the main, the issue tendered in this proceeding boils down to the question of whether the two (2) subdivision
agreements dated August 20, 1990 and April 5, 1991, respectively, partake of a bona fide and legally binding partition
contracts or arrangements among co-owners that validly effectuated the transfer of the subject lots to respondent
spouses Usi. Intertwined with the main issue is the correlative question bearing on the validity of the deeds of absolute
sale upon which the petitioners hinged their claim of ownership and right of possession over said lots.
The Court rules in favor of petitioners.

Petitioners contend first off that the CA erred in its holding that the partitions of Lot 733 and later of the divided unit Lot
733-C following the Galang Plan were actually the partitions of the pro-indiviso shares of its co-owners effectively
conveying to them their respective specific shares in the property.

We agree with petitioners.

First, the CA’s holding aforestated is neither supported by, nor deducible from, the evidentiary facts on record. He who
alleges must prove it. Respondents have the burden to substantiate the factum probandum of their complaint or the
ultimate fact which is their claimed ownership over the lots in question. They were, however, unsuccessful in adducing
the factum probans or the evidentiary facts by which the factum probandum or ultimate fact can be established. As shall
be discussed shortly, facts and circumstances obtain arguing against the claimed co-ownership over Lot 733.

Second, the earlier sale of Lot 733-A and Lot 733-F (Fajardo Plan) on April 29, 1986 was valid and effective conveyances of
said portions of Lot 733. The subsequent transfers to the Sps. Usi of substantially the same portions of Lot 733
accomplished through the subdivision agreements constitute in effect double sales of those portions. This aberration was
brought to light by the results of the adverted survey conducted sometime in June 22, 1999 of Engr. Nicdao of the LMB.

Third, even granting arguendo that the subject subdivision agreements were in fact but partitions of the pro-indiviso
shares of co-owners, said agreements would still be infirm, for the Sps. Viray and Vda. de Viray (vice Jesus Viray) were
excluded from the transaction. Like Vda. de Mallari, Sps. Viray and Jesus Viray had validly acquired and, hence, owned
portions of Lot 733 and are themselves co-owners of Lot 733.

And last, over and above the foregoing considerations, the instant petition must be resolved in favor of petitioners, the
underlying reinvindicatory and possessory actions in Civil Case No. 01-1118 (M) being barred by the application of the res
judicata principle. What is more, the issue of superior possessory rights of petitioner Vda. de Viray over Lot 733-F (Fajardo
Plan) has been laid to rest with finality in Civil Case No. 91 (13). Besides, Sps. Usi’s action to assail the final and executory
July 29, 1998 MCTC Decision in Civil Case No. 91 (13) has been denied with finality in G.R. No. 154538.

The subdivision agreements not partition of co-owners

Partition, in general, is the separation, division, and assignment of a thing held in common by those to whom it may
belong.35

Contrary to the finding of the CA, the subdivision agreements forged by Mendoza and her alleged co-owners were not for
the partition of pro-indiviso shares of co-owners of Lot 733 but were actually conveyances, disguised as partitions, of
portions of Lot 733 specifically Lots 733-A and 733-B, and portions of the subsequent subdivision of Lot 733-C.

Notably, after a full-blown trial in Civil Case No. 01-1118 (M) wherein the spouses Usi merged an accion publiciana with
an accion reinvindicatoria in one petition, the RTC held that Sps. Usi failed to prove their case. However, in CA G.R. CV No.
90344, an appeal from said RTC decision, the CA, while acknowledging the existence of the April 29, 1986 deeds of absolute
sale, nonetheless accorded validity to the August 20, 1990 and April 5, 1991 subdivision agreements. This is incorrect. The
CA held that the two (2) subdivision agreements, as notarized, enjoy the presumption of regularity and effectuated the
property transfers covered thereby, obviously glossing over the mala fides attendant the execution of the two subdivision
agreements. It cannot be overemphasized enough that the two (2) deeds of absolute sale over portions of substantially
the same parcel of land antedated the subdivision agreements in question and their execution acknowledged too before
a notary public.

The appellate court found and so declared the subdivision agreements valid without so much as explaining, let alone
substantiating, its determination. The CA never elucidated how the Sps. Usi became, in the first place co-owners, with
Mendoza over Lot 733. On its face, TCT 141-RP covering Lot 733 was in the name of spouses Ellen and Moses Mendoza
only. Then too, the CA did not explain how under the 2nd SA the Sps. Usi, the Sps. Lacap, the Sps. Balingit and the Sps.
Jordan became co-owners with Mendoza over Lot 733-C, when Mendoza, under the 1st SA, virtually represented herself
as the sole owner of Lot 733-C.

A scrutiny of the records with a fine-tooth comb likewise fails to substantially show a partition of Lot 733 by its co-owners.
While the 1st and 2nd SAs purport to be deeds of partition by and among co-owners of the lot/s covered thereby, partition
as a fact is belied by the evidence extant on record. Consider:

It is undisputed that TCT 141 RP covering Lot 733 was originally in the name of Ellen P. Mendoza and husband, Moses.36 The
joint decision of the RTC in Civil Case Nos. 88-0265 and 88-0283-M narrated how the couple came to own Lot 733, thus:
"Lot 733 was acquired by Spouses Moses Mendoza and Ellen Mendoza and Spouses Pacifico Bustos and Maria Roman
from Donato Lacap for P5,000.00 (Exh. "1") in 1977. After two years, Spouses Pacifico Bustos and Maria Roman sold one-
half pro-indiviso portion of Lot 733 to spouses Moses Mendoza and Ellen Mendoza for P6,000.00 (Exh. "2") and the
acquisition cost of the whole lot is only P8,500.00 and x x x."37

Mendoza and the Sps. Usi, in their separate complaints for annulment of deeds of sale, docketed as Civil Case Nos. 88-
0265 and 88-0283-M of the Macabebe, Pampanga RTC, alleged that Moses Mendoza authorized Atty. Venancio Viray to
sell the subject lot for at least PhP 200 per square meter, and that after his (Moses’) death on April 5, 1986, Lot 733 was
included in the proceedings for the settlement of his estate docketed as Sp. Proc. Case No. 86-0040-M of the RTC, Branch
55 in Macabebe, Pampanga, The events thus alleged by Mendoza and the Usis can be gleaned from the final and executory
joint decision in Civil Case Nos. 88-0265-M and 88-0283-M which petitioner Vda. de Viray attached as Annex "5" in her
Answer with Counterclaim38 to the Usis’ petition for accion publicana/reivindicatoria. Said Joint Decision amply shows, in
gist, the allegations39 of both the Sps. Usi and Mendoza in Civil Case Nos. 88-0265-M and 88-0283-M asserting said facts.
And these assertions, made in their complaints, are judicial admissions under Sec. 4,40 Rule 129 of the Rules of Court.

Unlike Vda. de Mallari who, per Vda. de Viray’s own admission, purchased the 416-square meter portion of Lot 733 on
February 14, 1984, thus constituting her (Vda. de Mallari) as co-owner of Mendoza to the extent of said area
purchased,41 the Sps. Usi have not been shown to be co-owners with Mendoza. There is simply nothing in the records to
demonstrate how the Sps. Usi became co-owners of Lot 733 before or after the death of Moses Mendoza. Elsewise put,
no evidence had been adduced to show how the alleged interest of the Sps. Usi, as co-owner, came about, except for the
bare assertions in the 1st and 2nd SAs that they co-owned Lot 733 and Lot 733-C (Galang Plan).

It is fairly clear that Lot 733, even from the fact alone of its being registered under the name of the late Moses Mendoza
and Ellen Mendoza, formed part of the couple’s conjugal property at the time Moses’ demise on April 5, 1986. Equally
clear, too, is that Vda. de Mallari became a co-owner of Lot 733 by virtue of the purchase of its 416-square meter portion
on February 14, 1984, during the lifetime of Moses. Be that as it may and given that the Sps. Usi have not been shown to
be co-owners of Mendoza and Vda. de Mallari prior to the sale by Mendoza on April 29, 1986 of Lots 733-A and 733-F
(Fajardo Plan) to the Sps. Viray and Jesus Viray, respectively, then the execution of the 1st SA on August 20, 1990 could
not have been a partition by co-owners of Lot 733. The same could be said of the 2nd SA of April 5, 1991 vis-à-vis Lot 733-
C, for the records are similarly completely bereft of any evidence to show on how the purported participating co-owners,
namely Sps. Usi, the Sps. Lacap, the Sps. Balingit and the Sps. Jordan became co-owners with Mendoza and her children,
i.e., McDwight, Bismark, Beverly and Georgenia.

The April 29, 1986 Deeds of Absolute Sale

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

It must be noted that the RTC, in its decision in Civil Case Nos. 88-0265-M and 88-0283-M, upheld the validity of the
separate April 29, 1986 deeds of absolute sale of Lots 733-A and 733-F (Fajardo Plan). The combined area of Lot 733-A
(366 sq. m.) and Lot 733-F (3,501) is less than one half of the total area coverage of Lot 733 (9,137). The sale of one-half
portion of the conjugal property is valid as a sale. It cannot be gainsaid then that the deeds, executed as they were by the
property owner, were sufficient to transfer title and ownership over the portions covered thereby. And the aforesaid RTC
decision had become final and executory as far back as December 11, 1995 when the Court, in G.R. No. 122287, in effect,
affirmed the RTC decision. Likewise, the MCTC’s decision in Civil Case No. 91 (13) for forcible entry, declaring Vda. de Viray,
as successor-in-interest of Jesus Viray, as entitled to the physical possession, or possession de facto, of Lot 733-F (Fajardo
Plan), and the RTC’s decision in Civil Case No. 99-0914M, disposing of the belated appeal of the MCTC decision in the
forcible entry case, have become final and executory on February 12, 2003 under G.R. No. 154538.

In light of the convergence of the foregoing disposed-of cases, there can be no question as to the ownership of the Sps.
Viray and Vda. de Viray (vice Jesus Viray) over the specified and delineated portions of Lot 733 which they purchased for
value from Mendoza. And Mendoza, as vendor, was bound to transfer the ownership of and deliver, as well as warrant,
the thing which is the object of the sale.42

In the instant case, the April 29, 1986 deeds of absolute sale indeed included the technical description of that part of Lot
733 subject of the transactions, thus clearly identifying the portions (Lots 733-A and 733-F under the Fajardo Plan) sold by
Mendoza to the Sps. Viray and Vda. de Viray (vice Jesus Viray). Hence, there can be no mistaking as to the identity of said
lots.

The deeds in question were, to reiterate, not only valid but constitute prior conveyances of the disputed portions of Lot
733. Accordingly, the subsequent conveyances in 1990 and 1991 to the Sps. Usi through transfer contracts, styled as
subdivision agreements, resulted, in effect, in a double sale situation involving substantially the same portions of Lot 733.

The survey report of LMB surveyor, Engr. Nicdao, would support a finding of double sale. His report, as earlier indicated,
contained the following key findings: (1) Lot 733-A (Fajardo Plan) with an area of 336 square meters thus sold to the Sps.
Viray is within Lot 733-B (Galang Plan), the part assigned to Sps. Usi under the division; and (2) Lot 733-F (Fajardo Plan)
with an area of 3,501 square meters is almost identical to the combined area of Lots 733-C-8 to 733-C-12 awarded to Ellen
Mendoza and her children, McDwight, Bismark, Beverly and Georgenia, and a portion (1,000 square meters) of Lot 733-C-
10 (Galang Plan) adjudicated to Sps. Usi.

A double sale situation, which would call, if necessary, the application of Art. 1544 of the Civil Code, arises when, as
jurisprudence teaches, the following requisites concur:

(a) The two (or more) sales transactions must constitute valid sales;

(b) The two (or more) sales transactions must pertain to exactly the same subject matter;

(c) The two (or more) buyers at odds over the rightful ownership of the subject matter must each represent
conflicting interests; and

(d) The two (or more) buyers at odds over the rightful ownership of the subject matter must each have bought
from the very same seller.43

From the facts, there is no valid sale from Mendoza to respondents Usi. The parties did not execute a valid deed of sale
conveying and transferring the lots in question to respondents. What they rely on are two subdivision agreements which
do not explicitly chronicle the transfer of said lots to them. Under the 1st SA, all that can be read is the declaration that
respondents, together with others, are the "sole and exclusive owners" of the lots subject of said agreement. Per the 2nd
SA, it simply replicates the statement in the 1st SA that respondents are "sole and exclusive undivided co-owners" with
the other parties. While respondents may claim that the SAs of 1990 and 1991 are convenient conveying vehicles Mendoza
resorted to in disposing portions of Lot 733 under the Galang Plan, the Court finds that said SAs are not valid legal
conveyances of the subject lots due to non-existent prestations pursuant to Article 1305 which prescribes "a meeting of
minds between two persons whereby one binds himself, with respect to the other, to give something or to render some
service." The third element of cause of the obligation which is established under Art. 1318 of the Civil Code is likewise
visibly absent from the two SAs. The transfer of title to respondents based on said SAs is flawed, irregular, null and void.
Thus the two SAs are not "sales transactions" nor "valid sales" under Art. 1544 of the Civil Code and, hence, the first
essential element under said legal provision was not satisfied.1âwphi1
Given the above perspective, the Sps. Viray and Vda. de Viray (vice Jesus Viray) have, as against the Sps. Usi, superior
rights over Lot 733-A and Lot 733-F (Fajardo Plan) or portions thereof.

Res Judicata Applies

Notably, the Sps. Viray and Vda. de Viray, after peremptorily prevailing in their cases supportive of their claim of ownership
and possession of Lots 733-A and 733-F (Fajardo Plan), cannot now be deprived of their rights by the expediency of the
Sps. Usi maintaining, as here, an accion publiciana and/or accion reivindicatoria, two of the three kinds of actions to
recover possession of real property. The third, accion interdictal, comprises two distinct causes of action, namely forcible
entry and unlawful detainer,44 the issue in both cases being limited to the right to physical possession or possession de
facto, independently of any claim of ownership that either party may set forth in his or her pleadings, 45 albeit the court
has the competence to delve into and resolve the issue of ownership but only to address the issue of priority of
possession.46 Both actions must be brought within one year from the date of actual entry on the land, in case of forcible
entry, and from the date of last demand to vacate following the expiration of the right to possess, in case of unlawful
detainer.47

When the dispossession or unlawful deprivation has lasted more than one year, one may avail himself of accion publiciana
to determine the better right of possession, or possession de jure, of realty independently of title. On the other hand,
accion reivindicatoria is an action to recover ownership which necessarily includes recovery of possession.48

Now then, it is a hornbook rule that once a judgment becomes final and executory, it may no longer be modified in any
respect, even if the modification is meant to correct an erroneous conclusion of fact or law, and regardless of whether the
modification is attempted to be made by the court rendering it or by the highest court of the land, as what remains to be
done is the purely ministerial enforcement or execution of the judgment.49 Any attempt to reopen a close case would
offend the principle of res judicata.

Res judicata embraces two concepts or principles, the first is designated as "bar by prior judgment" and the other,
"conclusiveness of judgment." Tiongson v. Court of Appeals50 describes the effects of res judicata, as a bar by prior
judgment, in the following manner:

There is no question that where as between the first case where the judgment is rendered and the second where such
judgment is invoked, there is identity of parties, subject matter and cause of action, the judgment on the merits in the
first case constitutes an absolute bar to the subsequent action not only as to every matter which was offered and received
to sustain or defeat the claim or demand, but also as to any other admissible matter which might have been offered for
that purpose and to all matters that could have been adjudged in that case. x x x

Res judicata operates as bar by prior judgment if the following requisites concur: (1) the former judgment or order must
be final; (2) the judgment or order must be on the merits; (3) the decision must have been rendered by a court having
jurisdiction over the subject matter and the parties; and (4) there must be, between the first and second action, identity
of parties, of subject matter and of causes of action.51 All the requisites are present in the instant case.

The better right to possess and the right of ownership of Vda. de Viray (vice Jose Viray) and the Sps. Viray over the disputed
parcels of land cannot, by force of the res judicata doctrine, be re-litigated thru actions to recover possession and vindicate
ownership filed by the Sps. Usi. The Court, in G.R. No. 122287 (Ellen P. Mendoza and Jose and Amelita Usi v. Spouses
Avelino Viray and Margarita Masangcay and Jesus Carlo Gerard Viray), has in effect determined that the conveyances and
necessarily the transfers of ownership made to the Sps. Viray and Vda. de Viray (vice Jose Viray) on April 29, 1986 were
valid. This determination operates as a bar to the Usis reivindicatory action to assail the April 29, 1986 conveyances and
precludes the relitigation between the same parties of the settled issue of ownership and possession arising from
ownership. It may be that the spouses Usi did not directly seek the recovery of title or possession of the property in
question in their action for annulment of the deed sale of sale. But it cannot be gainsaid that said action is closely
intertwined with the issue of ownership, and affects the title, of the lot covered by the deed. The prevalent doctrine, to
borrow from Fortune Motors, (Phils.), Inc. v. Court of Appeals,52 "is that an action for the annulment or rescission of a sale
of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to
recover said real property."

And lest it be overlooked, the Court, in G.R. No. 154538 (Spouses Jose and Amelita Usi v. Ruperta Cano Vda. de Viray),
again in effect ruled with finality that petitioner Vda. de Viray has a better possessory right over Lot 733-F (Fajardo Plan).
Thus, the Court’s decision in G.R. No. 122287 juxtaposed with that in G.R. No. 154538 would suffice to bar the Sps. Usi’s
accion publiciana, as the spouses had invoked all along their ownership over the disputed Lot 733-F as basis to defeat any
claim of the right of possessiOn. While an accion reivindicatoria is not barred by a judgment in an ejectment case, such
judgment constitutes a bar to the institution of the accion publiciana, because the matter of possessioq between the same
parties has become res judicata and cannot be delved into in a new action.53

The doctrine of res judicata is a basic postulate to the end that controversies and issues once decided on the merits by a
court of competent jurisdiction shall remain in repose. It is simply unfortunate that the RTC, in Civil Case No. 01-1118(M),
did not apply the doctrine of res judicata to the instant case, despite petitioners, as respondents below, had raised that
ground both in their motion to dismiss and answer to the underlying petition.

WHEREFORE, the instant petition is GRANTED. The assailed Decision dated July 24, 2009 and Resolution dated June 2,
2010 of the Court of Appeals in CA-G.R. CV No. 90344 are REVERSED and SET ASIDE. The Decision dated June 21, 2007 in
Civil Case No. 01-1118(M) of the RTC, Branch 55 in Macabebe, Pampanga is accordingly REINSTATED.

Costs against respondents.

Estate of M.D. Cabacungan v. Laigo

G.R. No. 175073

August 15, 2011

FACTS:
Unknown to the other children of Margarita, the mother transferred the tax declarations of her three
(3) lands to her son, Roberto, to support his application for travel to the US. Upon returning, Roberto
married Estella and adopted her two children, Pedro and Marilou. Sometime later, Roberto sold one of
the lands to the spouses Campos, and separately sold the two remaining lands to his two adopted
children. Margarita came to know of the sale during the wake of Roberto. Hence, Roberto’s siblings
filed a complaint for annulment of the said sales and for the recovery of ownership and possession of
the land.

The trial court ruled against the plaintiffs on the basis that there was no express trust between Roberto
and his mother. The Court of Appeals affirmed the decision of the trial court.

ISSUE:
Whether the trial and appellate court’s ruling were correct.

RULING:
Yes. The Court held that “A trust is the legal relationship between one person having an equitable
ownership of property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the exercise of certain
powers by the latter. Trusts are either express or implied.”
 The Court also held that “Express or direct trusts are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by oral declaration in words evincing an intention to create
a trust.”

The Court, moreover, held that “Implied trusts—also called “trusts by operation of law,” “indirect
trusts” and “involuntary trusts”—arise by legal implication based on the presumed intention of the
parties or on equitable principles independent of the particular intention of the parties. They are those
which, without being expressed, are deducible from the nature of the transaction as matters of intent
or, independently of the particular intention of the parties, as being inferred from the transaction by
operation of law basically by reason of equity.”

In addition, the Court held that “Implied trusts are further classified into constructive trusts and
resulting trusts. Constructive trusts, on the one hand, come about in the main by operation of law and
not by agreement or intention. They arise not by any word or phrase, either expressly or impliedly,
evincing a direct intention to create a trust, but one which arises in order to satisfy the demands of
justice.”

The Court further held that “Resulting trusts arise from the nature or circumstances of the
consideration involved in a transaction whereby one person becomes invested with legal title but is
obligated in equity to hold his title for the benefit of another. This is based on the equitable doctrine
that valuable consideration and not legal title is determinative of equitable title or interest and is always
presumed to have been contemplated by the parties.”

Finally, the Court held that “A trust will follow the property—through all changes in its state and form
as long as such property, its products or its proceeds, are capable of identification, even into the hands
of a transferee other than a bona fide purchaser for value, or restitution will be enforced at the election
of the beneficiary through recourse against the trustee or the transferee personally. This is grounded
on the principle in property law that ownership continues and can be asserted by the true owner against
any withholding of the object to which the ownership pertains, whether such object of the ownership
is found in the hands of an original owner or a transferee, or in a different form, as long as it can be
identified.”

De Leon v. Ong

G.R. No. 170405

February 2, 2010

Facts:
On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land to Benita T. Ong(respondent). The said
properties were mortgaged to a financial institution; Real Savings & Loan Association Inc. (RSLAI). The parties then
executed a notarized deed of absolute sale with assumption of mortgage. As indicated in the deed of mortgage, the parties
stipulated that the petitioner (de Leon) shall execute a deed of assumption of mortgage in favor of Ong (respondent)after
full payment of the P415,000. They also agreed that the respondent (Ong) shall assume the mortgage. The respondent
then subsequently gave petitioner P415,000 as partial payment. On the other hand, de Leon handed the keys to Ong and
de Leon wrote a letter to inform RSLAI that the mortgage will be assumed by Ong. Thereafter, the respondent took repairs
and made improvements in the properties. Subsequently, respondent learned that the same properties were sold to a
certain Viloria after March 10, 1993 and changed the locks, rendering the keys given to her useless. Respondent proceeded
to RSLAI but she was informed that the mortgage has been fully paid and that the titles have been given to the said person.
Respondent then filed a complaint for specific performance and declaration of nullity of the second sale and damages. The
petitioner contended that respondent does not have a cause of action against him because the sale was subject to a
condition which requires the approval of RSLAI of the mortgage. Petitioner reiterated that they only entered into a
contract to sell. The RTC dismissed the case. On appeal, the CA upheld the sale to respondent and nullified the sale to
Viloria. Petitioner moved for reconsideration to the SC.

Issue:
Whether the parties entered into a contract of sale or a contract to sell?

Held:
In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. The
non-payment of the price is a negative resolutory condition. Contract to sell is subject to a positive suspensive condition.
The buyer does not acquire ownership of the property until he fully pays the purchase price.In the present case, the deed
executed by the parties did not show that the owner intends to reserve ownership of the properties. The terms and
conditions affected only the manner of payment and not the immediate transfer of ownership. It was clear that the owner
intended a sale because he unqualifiedly delivered and transferred ownership of the properties to the respondent.

Pudadera v. Magallanes

G.R. No. 170073

October 18, 2010

DECISION

DEL CASTILLO, J.:

One is considered a buyer in bad faith not only when he purchases real estate with knowledge of a defect or lack of title
in his seller but also when he has knowledge of facts which should have alerted him to conduct further inquiry or
investigation.

This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeal’s (CA’s) June 6, 2005 Decision1 in
CA-G.R. CV No. 55850, which affirmed the September 3, 1996 Decision2 of the Regional Trial Court (RTC) of Iloilo City,
Branch 39 in Civil Case No. 22234. Likewise assailed is the September 20, 2005 Resolution3denying petitioners’ motion for
reconsideration.

Factual Antecedents

Belen Consing Lazaro (Lazaro) was the absolute owner of a parcel of land, Lot 11-E, with an area of 5,333 square meters
(sq. m.) located in the District of Arevalo, Iloilo City and covered by Transfer Certificate of Title (TCT) No. T-51250. On
March 13, 1979, Lazaro sold a 400 sq. m. portion of Lot 11-E to Daisy Teresa Cortel Magallanes (Magallanes) for the sum
of ₱22,000.00 under a "Contract To Sale"4 [sic] payable in two years. On July 21, 1980, upon full payment of the monthly
installments, Lazaro executed a "Deed of Definite Sale"5 in favor of Magallanes. Thereafter, Magallanes had the lot fenced
and had a nipa hut constructed thereon.

The other portions of Lot 11-E were, likewise, sold by Lazaro to several buyers, namely, Elizabeth Norada, Jose Macaluda,
Jose Melocoton, Nonilon Esteya, Angeles Palma, Medina Anduyan, Evangelina Anas and Mario Gonzales.6 On July 14, 1980,
Lazaro executed a "Partition Agreement"7 in favor of Magallanes and the aforesaid buyers delineating the portions to be
owned by each buyer. Under this agreement, Magallanes and Mario Gonzales were assigned an 800 sq. m. portion of Lot
11-E, with each owning 400 sq. m. thereof, denominated as Lot No. 11-E-8 in a Subdivision Plan8 which was approved by
the Director of Lands on August 25, 1980.

It appears that the "Partition Agreement" became the subject of legal disputes because Lazaro refused to turn over the
mother title, TCT No. T-51250, of Lot 11-E to the aforesaid buyers, thus, preventing them from titling in their names the
subdivided portions thereof. Consequently, Magallanes, along with the other buyers, filed an adverse claim with the
Register of Deeds of Ilolilo City which was annotated at the back of TCT No. T-51250 on April 29, 1981.9 Thereafter,
Magallanes and Gonzales filed a motion to surrender title in Cadastral Case No. 9741 with the then Court of First Instance
of Iloilo City, Branch 1 and caused the annotation of a notice of lis pendens at the back of TCT No. T-51250 on October 22,
1981.10

On November 23, 1981, Lazaro sold Lot 11-E-8, i.e., the lot previously assigned to Magallanes and Mario Gonzales under
the aforesaid "Partition Agreement," to her niece, Lynn Lazaro, and the latter’s husband, Rogelio Natividad (Spouses
Natividad), for the sum of ₱8,000.00.11 As a result, a new title, TCT No. T-58606,12 was issued in the name of Spouses
Natividad. Due to this development, Magallanes pursued her claims against Spouses Natividad by filing a civil case for
specific performance, injunction and damages. On September 2, 1983, Magallanes caused the annotation of a notice of lis
pendens at the back of TCT No. T-58606.13 Subsequently, Spouses Natividad subdivided Lot 11-E-8 into two, Lot 11-E-8-A
and Lot 11-E-8-B, each containing 400 sq. m.

The civil case filed by Magallanes was later dismissed by the trial court for lack of jurisdiction as per an Order dated
September 16, 1985 which was inscribed at the back of TCT No. T-58606 on July 7, 1986.14 Four days prior to this inscription
or on July 3, 1986, Spouses Natividad sold Lot 11-E-8-A (subject lot) to petitioner Ramy Pudadera (who later married
petitioner Zenaida Pudadera on July 31, 1989) as evidenced by a "Deed of Sale"15 for the sum of ₱25,000.00. As a
consequence, a new title, TCT No. 72734,16 was issued in the name of the latter.

Sometime thereafter Magallanes caused the construction of two houses of strong materials on the subject lot. On April
20, 1990, petitioners filed an action for forcible entry against Magallanes with the Municipal Trial Court in Cities of Iloilo
City, Branch 2. On July 17, 1991, the trial court dismissed the action.17 It held that Magallanes was first in possession of
the subject lot by virtue of the "Deed of Definite Sale" dated July 21, 1980 between Lazaro and Magallanes. After the
aforesaid sale, Magallanes filled the lot with soil; put up a fence; and built a small hut thereon. On the other hand, the
trial court found that when petitioner Ramy Pudadera bought the subject lot from Spouses Natividad on July 3, 1986, the
former had notice that someone else was already in possession of the subject lot.

Having failed to recover the possession of the subject lot through the aforesaid forcible entry case, petitioners commenced
the subject action for Recovery of Ownership, Quieting of Title and Damages against Magallanes and her husband, Ireneo,
in a Complaint18 dated February 25, 1995. Petitioners alleged that they are the absolute owners of Lot 11-E-8-A as
evidenced by TCT No. T-72734; that Magallanes is also claiming the said lot as per a "Deed of Definite Sale" dated July 21,
1980; that the lot claimed by Magallanes is different from Lot 11-E-8-A; and that Magallanes constructed, without the
consent of petitioners, several houses on said lot. They prayed that they be declared the rightful owners of Lot 11-E-8-A
and that Magallanes be ordered to pay damages.

In her Answer,19 Magallanes countered that she is the absolute lawful owner of Lot 11-E-8-A; that Lot 11-E-8-A belongs to
her while Lot 11-E-8-B belongs to Mario Gonzales; that petitioners had prior knowledge of the sale between her and
Lazaro; that she enclosed Lot 11-E-8-A with a fence, constructed a house and caused soil fillings on said lot which
petitioners were aware of; and that she has been in actual possession of the said lot from March 11, 1979 up to the
present. She prayed that TCT No. T-72734 in the name of petitioner Ramy Pudadera be cancelled and a new one be issued
in her name.

During the pendency of this case, Magallanes passed away and was substituted by her heirs, herein respondents.

Ruling of the Regional Trial Court

On September 6, 1996, the trial court rendered judgment in favor of respondents, viz:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the [respondents] and against the
[petitioners]:
 1. Declaring the [respondent] Daisy Teresa Cortel Magallanes, substituted by her heirs, Nelly M. Magallanes, Eliseo
Magallanes and Angel Magallanes and Ireneo Magallanes, as the rightful owners of Lot 11-E-8-A, Psd-06-002539,
which is now covered by Transfer Certificate of Title No. T-72734, still in the name of Ramy Pudadera, situated in
the District of Arevalo, Iloilo City, with an area of 400 square meters more or less;

2. The [petitioners] spouses Ramy Pudadera and Zenaida Pudadera are hereby ordered to execute the necessary
Deed of Reconveyance in favor of the above-named parties, namely[,] Nelly M. Magallanes, Eliseo Magallanes, x
x x Angel Magallanes, and Ireneo Magallanes;

3. Ordering the [petitioners] to pay jointly and severally the [respondents] the amount of ₱10,000.00 as attorney’s
fees and the costs of the suit.

SO ORDERED.20

The trial court ruled that respondents are the rightful owners of the subject lot which was sold by Lazaro to their
predecessor-in-interest, Magallanes, on July 21, 1980. When Lazaro sold the subject lot for a second time to Spouses
Natividad on November 23, 1981, no rights were transmitted because, by then, Magallanes was already the owner thereof.
For the same reason, when Spouses Natividad subsequently sold the subject lot to petitioners on July 3, 1986, nothing
was transferred to the latter.

The trial court further held that petitioners cannot be considered buyers in good faith and for value because after
Magallanes bought the subject lot from Lazaro, Magallanes immediately took possession of the lot, and constructed a
fence with barbed wire around the property. The presence of these structures should, thus, have alerted petitioners to
the possible flaw in the title of the Spouses Natividad considering that petitioners visited the subject lot several times
before purchasing the same. Neither can petitioners claim that the title of the subject lot was clean considering that a
notice of lis pendens was annotated thereon in connection with a civil case that Magallanes filed against Spouses Natividad
involving the subject lot. Although the notice of lis pendens was subsequently cancelled on July 7, 1986, the deed of sale
between petitioners and Spouses Natividad was executed on July 3, 1986 or four days before said cancellation. Thus,
petitioners had notice that the subject property was under litigation. Since respondents are the rightful owners of the
subject lot, petitioners should execute a deed of conveyance in favor of the former so that a new title may be issued in
the name of the respondents.1awp++il

Ruling of the Court of Appeals

On June 6, 2005, the CA rendered the assailed Decision:

WHEREFORE, with all the foregoing, the decision of the Regional Trial Court, Branch 39, Iloilo City dated September 3,
1996 in civil case no. 22234 for Quieting of Title, Ownership and Damages is hereby AFFIRMED in toto.

All other claims and counterclaims are hereby dismissed for lack of factual and legal basis.

No pronouncement as to cost.

SO ORDERED.21

In affirming the ruling of the trial court, the appellate court reasoned that under the rule on double sale what finds
relevance is whether the second buyer registered the second sale in good faith, that is, without knowledge of any defect
in the title of the seller. Petitioners’ predecessor-in-interest, Spouses Natividad, were not registrants in good faith. When
Magallanes first bought the subject lot from Lazaro on July 21, 1980, Magallanes took possession of the same and had it
fenced and filled with soil. This was made way ahead of the November 23, 1981 Deed of Sale between Lazaro and Spouses
Natividad. With so much movement and transactions involving the subject lot and given that Lyn Lazaro-Natividad is the
niece of Lazaro, the appellate court found it hard to believe that the Spouses Natividad were completely unaware of any
controversy over the subject lot.
The CA, likewise, agreed with the trial court that at the time petitioners acquired the subject lot from Spouses Natividad
on July 3, 1986, a notice of lis pendens was still annotated at the back of TCT No. T-58606 due to a civil case filed by
Magallanes against Spouses Natividad. Although the case was subsequently dismissed by the trial court for lack of
jurisdiction, the notice of lis pendens was still subsisting at the time of the sale of the subject lot between Spouses
Natividad and petitioners on July 3, 1986 because the lis pendens notice was cancelled only on July 7, 1986. Consequently,
petitioners cannot be considered buyers and registrants in good faith because they were aware of a flaw in the title of the
Spouses Natividad prior to their purchase thereof.

Issues

1. The Court of Appeals erred in not considering the judicial admissions of Magallanes as well as the documentary
evidence showing that she was claiming a different lot, Lot No. 11-E-8-B, and not Lot 11-E-8-A which is registered
in the name of petitioners under TCT No. T-72734, consequently, its findings that Magallanes is the rightful owner
of Lot 11-E-8-A is contrary to the evidence on record;

2. The Court of Appeals erred in applying the principle of innocent purchasers for value and in good faith to
petitioners. Granting that the said principle may be applied, the Court of Appeals erred in finding that petitioners
are not innocent purchasers for value;

3. The Court of Appeals erred in affirming the award of attorney’s fees against the petitioners.22

Petitioners’ Arguments

Petitioners postulate that the subject lot is different from the lot which Magallanes bought from Lazaro. As per Magallanes’
testimony in the ejectment case, she applied for the zoning permit for Lot 11-E-8-B and not Lot 11-E-8-A. Further, the tax
declarations submitted in evidence therein showed that Magallanes paid for the real estate taxes of Lot 11-E-8-B and not
Lot 11-E-8-A. Hence, there is no conflict of claims since petitioners are asserting their rights over Lot 11-E-8-A while
respondents claim ownership over Lot 11-E-8-B. Moreover, assuming that there was a double sale, the same did not
involve petitioners. The first sale was between Lazaro and Magallanes while the second sale was between Lazaro and
Spouses Natividad. It was erroneous for the appellate court to conclude that Lyn Natividad was in bad faith simply because
she is the niece of Lazaro. The Spouses Natividad were not impleaded in this case and cannot be charged as buyers in bad
faith without giving them their day in court. Petitioners claim that respondents should first impugn the validity of Spouses
Natividad’s title by proving that the latter acted in bad faith when they bought the subject lot from Lazaro. Petitioners
aver that the evidence on record failed to overcome the presumption of good faith. Considering that Spouses Natividad
were buyers in good faith and considering further that petitioners’ title was derived from Lazaro, petitioners should,
likewise, be considered buyers in good faith.

Petitioners further argue that the rule on notice of lis pendens was improperly applied in this case. The trial court’s order
dismissing the civil case filed by Magallanes against Spouses Natividad had long become final and executory before
petitioners bought the subject lot from Spouses Natividad. While it is true that the order of dismissal was annotated at
the back of TCT No. T-58606 only on July 7, 1986 or four days after the sale between Spouses Natividad and petitioners,
the cancellation of the notice of lis pendens was a mere formality. In legal contemplation, the notice was, at the time of
the sale on July 3, 1986, ineffective. Citing Spouses Po Lam v. Court of Appeals,23[23] petitioners contend that the then
existing court order for the cancellation of the lis pendens notice at the time of the sale made them buyers in good faith.

Finally, petitioners question the award of attorney’s fees in favor of respondents for lack of basis. Petitioners claim that
they should be awarded damages because respondents unlawfully prevented them from taking possession of the subject
lot.

Respondents’ Arguments

Respondents counter that they are in possession of, and claiming ownership over the subject lot, i.e., Lot 11-E-8-A, and
not Lot 11-E-8-B. The claim of petitioners that the subject lot is different from what respondents assert to be lawfully
theirs is, thus, misleading. The subject lot was acquired by respondents’ predecessor-in-interest, Magallanes, when Lazaro
sold the same to Magallanes through a contract to sell in 1979 and a deed of sale in 1980 after full payment of the monthly
installments.

After executing the contract to sell, Magallanes immediately took possession of the subject lot; constructed a fence with
barbed wire; and filled it up with soil in preparation for the construction of concrete houses. She also built a nipa hut and
stayed therein since 1979 up to her demise. Respondents emphasize that upon payment of the full purchase price under
the contract to sell and the execution of the deed of sale, Magallanes undertook steps to protect her rights due to the
refusal of Lazaro to surrender the mother title of the subject lot. Magallanes recorded an adverse claim at the back of the
mother title of the subject lot and an initial notice of lis pendens thereon. She then filed a civil case against Lazaro, and,
later on, against Lazaro’s successors-in-interest, Spouses Natividad, which resulted in the inscription of a notice of lis
pendens on TCT No. 51250 and TCT No. T-58606. When petitioners bought the subject lot from Spouses Natividad on July
3, 1986, the said notice of lis pendens was subsisting because the court dismissal of said case was inscribed on the title
only on July 7, 1986. Petitioners cannot, therefore, be considered buyers in good faith.

Our Ruling

We affirm the decision of the CA with modifications.

Petitioners and respondents are claiming ownership over the same lot.

Petitioners contend that they are claiming ownership over Lot 11-E-8-A while Magallanes’ claim is over Lot 11-E-8-B. Thus,
there is no conflict between their claims.

The argument is specious.

It is clear that Magallanes is claiming ownership over Lot 11-E-8-A and not Lot 11-E-8-B. In her Answer to the Complaint,
she alleged that she is "the absolute lawful owner of Lot 11-E-8-A."24[24] Her act of fencing Lot 11-E-8-A and constructing
two houses of strong materials thereon further evince her claim of ownership over the subject lot. Thus, in the forcible
entry case which petitioners previously filed against Magallanes involving the subject lot, the trial court noted:

At the pre-trial conference held on June 13, 1990, both parties agreed to a relocation survey of the lot whereupon the
Court commissioned the Bureau of Lands to undertake a relocation survey of the lot in question.

On October 1, 1990, the Bureau of Lands thru Engr. Filomeno P. Daflo submitted the relocation survey report with the
following findings: x x x

xxxx

5. That it was ascertained in our investigation that the entire lot occupied by [Magallanes] (lot 11-E-8-A) is the very same
lot claimed by the [petitioners], as pointed out by its representative.25[25] (Emphasis supplied.)

After losing in the aforesaid forcible entry case, petitioners commenced the subject action for quieting of title and recovery
of ownership over Lot 11-E-8-A. Plainly, both parties are asserting ownership over the same lot, i.e. Lot 11-E-8-A,
notwithstanding the error in the entries made by Magallanes in her zoning application and tax declaration forms.

The notice of lis pendens at the back of the mother title of the subject lot was already ordered cancelled at the time of
the sale of the subject lot to petitioners, hence, said notice cannot be made a basis for finding petitioners as buyers in bad
faith.

A notice of lis pendens at the back of the mother title (i.e., TCT No. T-58606) of Lot 11-E-8-A was inscribed on September
2, 1983 in connection with the civil case for specific performance, injunction and damages which Magallanes filed against
Spouses Natividad. This case was subsequently dismissed by the trial court for lack of jurisdiction in an Order dated
September 16, 1985 which has already become final and executory as per the Certification dated June 16, 1986 issued by
the Branch Clerk of Court of the RTC of Iloilo City, Branch 33.26 The aforesaid court dismissal was, however, inscribed only
on July 7, 1986 or three days after the sale of the subject lot to petitioners.27

Based on these established facts, petitioners correctly argue that the said notice of lis pendens cannot be made the basis
for holding that they are buyers in bad faith. Indeed, at the time of the sale of the subject lot by Spouses Natividad to
petitioners on July 7, 1986, the civil case filed by Magallanes against Spouses Natividad had long been dismissed for lack
of jurisdiction and the said order of dismissal had become final and executory. In Spouses Po Lam v. Court of Appeals,28 the
buyers similarly bought a property while a notice of lis pendens was subsisting on its title. Nonetheless, we ruled that the
buyers cannot be considered in bad faith because the alleged flaw, the notice of lis pendens, was already being ordered
cancelled at the time of the sale and the cancellation of the notice terminated the effects of such notice.29

This notwithstanding, petitioners cannot be considered buyers in good faith because, as will be discussed hereunder, they
were aware of other circumstances pointing to a possible flaw in the title of Spouses Natividad prior to the sale of the
subject lot. Despite these circumstances, petitioners did not take steps to ascertain the status of the subject lot but instead
proceeded with the purchase of the same.

One who buys a property with knowledge of facts which should put him upon inquiry or investigation as to a possible defect
in the title of the seller acts in bad faith.

Lot 11-E-8, of which the subject lot (i.e., Lot 11-E-8-A) forms part, was sold by Lazaro to two different buyers. As narrated
earlier, Lot 11-E-8 is a portion of Lot 11-E, a 5,333 sq. m. lot covered by TCT No. T-51250. Lazaro subdivided the said lot
and sold portions thereof to several buyers. One of these buyers was Magallanes who purchased a 400 sq. m. portion on
March 13, 1979. The metes and bounds of this lot were later delineated in a "Partition Agreement" dated July 14, 1980
executed by Lazaro in favor of the aforesaid buyers. As per this agreement, Magallanes and Mario Gonzales were assigned
Lot 11-E-8 comprising 800 sq. m with each owning a 400 sq. m. portion thereof. This was the first sale involving Lot 11-E-
8.

After the aforesaid sale, it appears Lazaro refused to turnover the mother title of Lot 11-E which resulted in the filing of
legal suits by Magallanes and the other buyers against her (Lazaro). While these suits were pending, Lazaro sold Lot 11-E-
8 to her niece Lynn and the latter’s husband Rogelio Natividad on November 23, 1981. Consequently, a new title, TCT No.
T-58606, was issued covering Lot 11-E-8 in the name of Spouses Natividad. This was the second sale of Lot 11-E-8.

Subsequently, Spouses Natividad subdivided Lot 11-E-8 into two, i.e., Lot 11-E-8-A and Lot 11-E-8-B, with each containing
400 sq. m. On July 3, 1986, they sold Lot 11-E-8-A to petitioners. Lot 11-E-8-A is the 400 sq. m. portion of Lot 11-E-8 which
Magallanes claims to be owned by her pursuant to the aforesaid "Partition Agreement" while the other half, Lot 11-E-8-
B, pertains to the lot of Mario Gonzales.

The question before us, then, is who between petitioners and respondents have a better right over Lot 11-E-8-A?

Article 1544 of the Civil Code provides:

Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it
in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession;
and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.

Thus, in case of a double sale of immovables, ownership shall belong to "(1) the first registrant in good faith; (2) then, the
first possessor in good faith; and (3) finally, the buyer who in good faith presents the oldest title." 30However, mere
registration is not enough to confer ownership. The law requires that the second buyer must have acquired and registered
the immovable property in good faith. In order for the second buyer to displace the first buyer, the following must be
shown: "(1) the second buyer must show that he acted in good faith (i.e., in ignorance of the first sale and of the first
buyer’s rights) from the time of acquisition until title is transferred to him by registration or failing registration, by delivery
of possession; and (2) the second buyer must show continuing good faith and innocence or lack of knowledge of the first
sale until his contract ripens into full ownership through prior registration as provided by law."31

One is considered a purchaser in good faith if he buys the property without notice that some other person has a right to
or interest in such property and pays its fair price before he has notice of the adverse claims and interest of another person
in the same property.32 Well-settled is the rule that 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 beyond the certificate to
determine the condition of the property.33 "However, this rule shall not apply when the party has actual knowledge of
facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has
knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire
into the status of the title of the property in litigation."34 "His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect in his vendor’s title will not make him an innocent purchaser
for value if it later develops that the title was in fact defective, and it appears that he had such notice of the defect had he
acted with that measure of precaution which may reasonably be required of a prudent man in a like situation."351avvphi1

In the case at bar, both the trial court and CA found that petitioners were not buyers and registrants in good faith owing
to the fact that Magallanes constructed a fence and small hut on the subject lot and has been in actual physical possession
since 1979. Hence, petitioners were aware or should have been aware of Magallanes’ prior physical possession and claim
of ownership over the subject lot when they visited the lot on several occasions prior to the sale thereof. Thus, the trial
court held:

This Court believes the version of [Magallanes], that when she bought the property from [Lazaro], she took immediate
possession of the 400-square meter portion and constructed a fence [with] barbed wire surrounding the said property.
She also constructed a house made of nipa, bamboo and concrete materials. This fact was even confirmed by [petitioner]
Zenaida Pudadera in her testimony.

This Court cannot believe the testimony of [petitioner] Zenaida Pudadera that they were the ones who constructed the
fence surrounding the 400-square meter portion, because there was already an existing fence made of bamboos and
barbed wire put up by [Magallanes]. When the [petitioners] therefore, visited the land in question, several times before
the purchase, particularly [petitioner] Ramy Pudadera, he must have seen the fence surrounding the property in question.
He should have been curious why there was an existing fence surrounding the property? [sic] He should have asked or
verified as to the status of the said property. A real estate buyer must exercise ordinary care in buying x x x real estate,
especially the existence of the fence in this case which must have [alerted him to inquire] whether someone was already
in possession of the property in question.36

We find no sufficient reason to disturb these findings. The factual findings of the trial court are accorded great weight and
respect and are even binding on this Court particularly where, as here, the findings of the trial and appellate courts
concur.37 Although this rule is subject to certain exceptions, we find none obtaining in this case.

Petitioners next argue that since the second sale involves Lazaro and their predecessor-in-interest, Spouses Natividad, due
process requires that Spouses Natividad should first be allowed to establish that they (Spouses Natividad) are second
buyers and first registrants in good faith before any finding on petitioners’ own good faith can be made considering that
they (petitioners) merely acquired their title from Spouses Natividad. Petitioners lament that Spouses Natividad were not
impleaded in this case. Thus, the finding that petitioners acted in bad faith was improper.

The argument fails on two grounds.

First, as previously explained, the evidence duly established that petitioners were aware of facts pointing to a possible
flaw in the title of Spouses Natividad when they visited the subject lot on several occasions prior to the sale. This, by itself,
was sufficient basis to rule that they acted in bad faith. Stated differently, the presence or absence of good faith on the
part of Spouses Natividad during the second sale involving the subject lot will not erase the bad faith of petitioners in
purchasing the subject lot from Spouses Natividad.

Second, petitioners miscomprehend the right to due process. The records indicate that at no instance during the trial of
this case were they prevented from presenting evidence, including the testimonies of Spouses Natividad, to support their
claims. Thus, they were not denied their day in court. Petitioners seem to forget that they were the ones who filed this
action to recover ownership and quiet title against Magallanes. If petitioners intended to bolster their claim of good faith
by impleading the Spouses Natividad in this case, there was nothing to prevent them from doing so. Time and again, we
have ruled that the burden of proof to establish the status of a purchaser and registrant in good faith lies upon the one
who asserts it.38 This onus probandi cannot be discharged by mere invocation of the legal presumption of good faith.39

In sum, petitioners were negligent in not taking the necessary steps to determine the status of the subject lot despite the
presence of circumstances which would have impelled a reasonably cautious man to do so. Thus, we affirm the findings
of the lower courts that they cannot be considered buyers and registrants in good faith. Magallanes, as the first buyer and
actual possessor, was correctly adjudged by the trial court as the rightful owner of the subject lot and the conveyance
thereof in favor of her heirs, herein respondents, is proper under the premises. In addition, the trial court should be
ordered to cause the cancellation of TCT No. T-72734 by the Register of Deeds of Iloilo City and the issuance of a new
certificate of title in the names of respondents.40 This is without prejudice to any remedy which petitioners may have
against Spouses Natividad and/or Lazaro.

The award of attorney’s fees is improper.

On the issue of the propriety of attorney’s fees which the trial court awarded in favor of respondents, we are inclined to
agree with petitioners that the same should be deleted for lack of basis. An award of attorney’s fees is the exception rather
than the rule.41 "The right to litigate is so precious that a penalty should not be charged on those who may exercise it
erroneously."42 It is not given merely because the defendant prevails and the action is later declared to be unfounded
unless there was a deliberate intent to cause prejudice to the other party.43 We find the evidence of bad faith on the part
of petitioners in instituting the subject action to be wanting. Thus, we delete the award of attorney’s fees.

WHEREFORE, the petition is PARTIALLY GRANTED. The June 6, 2005 Decision and September 20, 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 55850 are AFFIRMED with the following MODIFICATIONS: (1) The Regional Trial Court
of Iloilo City, Branch 39 is ORDERED to cause the cancellation by the Register of Deeds of Iloilo City of TCT No. T-72734
and the issuance, in lieu thereof, of the corresponding certificate of title in the names of respondents, heirs of Daisy Teresa
Cortel Magallanes, and (2) The award of attorney’s fees in favor of respondents is DELETED.

Kings Properties Corporation v. Galido

G.R. No. 170023

November 27, 2009

DECISION

CARPIO, J.:

The Case

Kings Properties Corporation (petitioner) filed this Petition for Review on Certiorari[1]assailing the Court of Appeals
Decision[2]dated 20 December 2004 in CA-G.R. CV No. 68828 as well as the Resolution[3]dated 10 October 2005 denying
the Motion for Reconsideration. In the assailed decision, the Court of Appeals reversed the Regional Trial Courts
Decision[4]dated 4 July 2000. This case involves an action for cancellation of certificates of title, registration of deed
of sale and issuance of certificates of title filed by Canuto A. Galido (respondent) before Branch 71 of the Regional Trial
Court of Antipolo City (trial court).

The Facts

On 18 April 1966, the heirs of Domingo Eniceo, namely Rufina Eniceo and Maria Eniceo, were awarded with Homestead
Patent No. 112947 consisting of four parcels of land located in San Isidro, Antipolo, Rizal (Antipolo property) and
particularly described as follows:

1. Lot No. 1 containing an area of 96,297 square meters;

Lot No. 3 containing an area of 25,170 square meters;

Lot No. 4 containing an area of 26,812 square meters; and

Lot No. 5 containing an area of 603 square meters.

The Antipolo property with a total area of 14.8882 hectares was registered under Original Certificate of Title (OCT) No.
535.[5]The issuance of the homestead patent was subject to the following conditions:
To have and to hold the said tract of land, with the appurtenances thereunto of right belonging unto the said Heirs of
Domingo Eniceo and to his heir or heirs and assigns forever, subject to the provisions of sections 118, 121, 122 and 124 of
Commonwealth Act No. 141, as amended, which provide that except in favor of the Government or any of its branches,
units or institutions, the land hereby acquired shall be inalienable and shall not be subject to incumbrance for a period of
five (5) years next following the date of this patent, and shall not be liable for the satisfaction of any debt contracted prior
to the expiration of that period; that it shall not be alienated, transferred or conveyed after five (5) years and before
twenty-five (25) years next following the issuance of title, without the approval of the Secretary of Agriculture and Natural
Resources; that it shall not be incumbered, alienated, or transferred to any person, corporation, association, or
partnership not qualified to acquire public lands under the said Act and its amendments; x x x [6]

On 10 September 1973, a deed of sale covering the Antipolo property was executed between Rufina Eniceo and Maria
Eniceo as vendors and respondent as vendee. Rufina Eniceo and Maria Eniceo sold the Antipolo property to respondent
for P250,000.[7] A certain Carmen Aldana delivered the owners duplicate copy of OCT No. 535 to respondent.[8]

Petitioner alleges that when Maria Eniceo died in June 1975, Rufina Eniceo and the heirs of Maria Eniceo (Eniceo
heirs),[9]who continued to occupy the Antipolo property as owners, thought that the owners duplicate copy of OCT No.
535 was lost.[10]

On 5 April 1988, the Eniceo heirs registered with the Registry of Deeds of Marikina City (Registry of Deeds) a Notice of Loss
dated 2 April 1988 of the owners copy of OCT No. 535. The Eniceo heirs also filed a petition for the issuance of a new
owners duplicate copy of OCT No. 535 with Branch 72 of the Regional Trial Court (RTC) of Antipolo, Rizal. The case was
docketed as LRC Case No. 584-A.[11]

On 31 January 1989, the RTC rendered a decision finding that the certified true copy of OCT No. 535 contained no
annotation in favor of any person, corporation or entity. The RTC ordered the Registry of Deeds to issue a second owners
copy of OCT No. 535 in favor of the Eniceo heirs and declared the original owners copy of OCT NO. 535 cancelled and
considered of no further value.[12]

On 6 April 1989, the Registry of Deeds issued a second owners copy of OCT No. 535 in favor of the Eniceo heirs.[13]

Petitioner states that as early as 1991, respondent knew of the RTC decision in LRC Case No. 584-A because respondent
filed a criminal case against Rufina Eniceo and Leonila Bolinas (Bolinas) for giving false testimony upon a material fact
during the trial of LRC Case No. 584-A.[14]

Petitioner alleges that sometime in February 1995, Bolinas came to the office of Alberto Tronio Jr. (Tronio), petitioners
general manager, and offered to sell the Antipolo property. During an on-site inspection, Tronio saw a house and
ascertained that the occupants were Bolinas relatives. Tronio also went to the Registry of Deeds to verify the records on
file. Tronio ascertained that OCT No. 535 was clean and had no lien and encumbrances. After the necessary verification,
petitioner decided to buy the Antipolo property.[15]

On 14 March 1995, respondent caused the annotation of his adverse claim in OCT No. 535[16]

On 20 March 1995, the Eniceo heirs executed a deed of absolute sale in favor of petitioner covering lots 3 and 4 of the
Antipolo property for P500,000.[17]

On the same date, Transfer Certificate of Title (TCT) Nos. 277747 and 277120 were issued. TCT No. 277747 covering lots
1 and 5 of the Antipolo property was registered in the names of Rufina Eniceo, Ambrosio Eniceo, Rodolfo Calove, Fernando
Calove and Leonila Calove Bolinas.[18]TCT No. 277120 covering lots 3 and 4 of the Antipolo property was registered in the
name of petitioner.[19]

On 5 April 1995, the Eniceo heirs executed another deed of sale in favor of petitioner covering lots 1 and 5 of the Antipolo
property for P1,000,000. TCT No. 278588 was issued in the name of petitioner and TCT No. 277120 was cancelled.[20]

On 17 August 1995, the Secretary of the Department of Environment and Natural Resources (DENR Secretary) approved
the deed of sale between the Eniceo heirs and respondent.[21]

On 16 January 1996, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner.
Respondent prayed for the cancellation of the certificates of title issued in favor of petitioner, and the registration of the
deed of sale and issuance of a new transfer certificate of title in favor of respondent.[22]

On 4 July 2000, the trial court rendered its decision dismissing the case for lack of legal and factual basis.[23]

Respondent appealed to the Court of Appeals (CA). On 20 December 2004, the CA rendered a decision reversing the trial
courts decision.[24] Respondent filed a motion for reconsideration, which the CA denied in its Resolution dated 10 October
2005.
Aggrieved by the CAs decision and resolution, petitioner elevated the case before this Court.

The Ruling of the Trial Court

The trial court stated that although respondent claims that the Eniceo heirs sold to him the Antipolo property, respondent
did not testify in court as to the existence, validity and genuineness of the purported deed of sale and his possession of
the duplicate owners copy of OCT No. 535. The trial court stated that as owner of a property consisting of hectares of land,
respondent should have come to court to substantiate his claim and show that the allegations of the Eniceo heirs and
petitioner are mere fabrications.[25]
The trial court noticed that respondent did not register the deed of sale with the Register of Deeds immediately after its
alleged execution on 10 September 1973. Further, respondent waited for 22 long years before he had the sale approved
by the DENR Secretary. The trial court declared that respondent slept on his rights. The trial court concluded that
respondents failure to register the sale and secure the cancellation of OCT No. 535 militates against his claim of ownership.
The trial court believed that respondent has not established the preponderance of evidence necessary to justify the relief
prayed for in his complaint.[26]

The trial court stated that Bolinas was able to prove that the Eniceo heirs have remained in actual possession of the land.
The filing of a petition for the issuance of a new owners duplicate copy requires the posting of the petition in three
different places which serves as a notice to the whole world. Respondents failure to oppose this petition can be deemed
as a waiver of his right, which is fatal to his cause.[27]

The trial court noted that petitioner is a buyer in good faith and for value because petitioner has exercised due diligence
in inspecting the property and verifying the title with the Register of Deeds.[28]

The trial court held that even if the court were to believe that the deed of sale in favor of respondent were genuine, still
it could not be considered a legitimate disposition of property, but merely an equitable mortgage. The trial court stated
that respondent never obtained possession of the Antipolo property at any given time and a buyer who does not take
possession of a property sold to him is presumed to be a mortgagee only and not a vendee.[29]

The Ruling of the Court of Appeals

The CA ruled that the deed of sale in favor of respondent, being a notarized document, has in its favor the presumption
of regularity and carries the evidentiary weight conferred upon it with respect to its due execution. The CA added that
whoever asserts forgery has the burden of proving it by clear, positive and convincing evidence because forgery can never
be presumed. The CA found that petitioner and the Eniceo heirs have not substantiated the allegation of forgery.[30]

The CA pointed out that laches has not set in. One of the requisites of laches, which is injury or prejudice to the defendant
in the event relief is accorded to the complainant or the suit is not held to be barred, is wanting in the instant case. The
CA added that unrecorded sales of land brought under the Torrens system are valid between parties because registration
of the instrument is merely intended to bind third persons.[31]
The CA declared that petitioners contention regarding the validity of the questioned deed on the ground that it was
executed without the approval of the DENR Secretary is untenable. The DENR Secretary approved the deed of sale on 17
August 1995. However, even supposing that the sale was not approved, the requirement for the DENR Secretarys approval
is merely directory and its absence does not invalidate any alienation, transfer or conveyance of the homestead after 5
years and before 25 years from the issuance of the title which can be complied with at any time in the future.[32]

The CA ruled that petitioner is a buyer in bad faith because it purchased the disputed properties from the Eniceo heirs
after respondent had caused the inscription on OCT No. 535 of an adverse claim. Registration of the adverse claim serves
as a constructive notice to the whole world. Petitioner cannot feign ignorance of facts which should have put it on guard
and then claim that it acted under the honest belief that there was no defect in the title of the vendors. Knowing that an
adverse claim was annotated in the certificates of title of the Eniceo heirs, petitioner was forewarned that someone is
claiming an interest in the disputed properties.[33]
The CA found no merit in petitioners contention that the questioned deed of sale is an equitable mortgage. The CA stated
that for the presumption of an equitable mortgage to arise, one must first satisfy the requirement that the parties entered
into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of
mortgage.[34]

The CA stated that the execution of the notarized deed of sale, even without actual delivery of the disputed properties,
transferred ownership from the Eniceo heirs to respondent. The CA held that respondents possession of the owners
duplicate copy of OCT No. 535 bolsters the contention that the Eniceo heirs sold the disputed properties to him by virtue
of the questioned deed.[35]

The CA reversed the trial courts decision. The dispositive portion of the CA decision reads:

WHEREFORE, the appealed decision of the Regional Trial Court of Rizal (Antipolo, Branch 71) is REVERSED
and SET ASIDE and another rendered as follows:

1. DECLARING NULL AND VOID TRANSFER CERTIFICATES OF TITLES NOS. 277747, 277120
AND 278588 OF THE REGISTRY OF DEEDS OF MARIKINA CITY (THE LAST TWO IN THE NAME OF
DEFENDANT-APPELLEE KINGS PROPERTIES CORPORATION), THE DERIVATIVE TITLES THEREOF
AND THE INSTRUMENTS WHICH WERE THE BASES OF THE ISSUANCE OF SAID CERTIFICATES OF
TITLE; AND

2. DECLARING PLAINTIFF-APPELLANT CANUTO A. GALIDO THE OWNER OF FEE SIMPLE OF

LOT NOS. 1, 3, 4, 5 FORMERLY REGISTERED UNDER ORIGINAL CERTIFICATE OF TITLE NO. 535
IN THE NAME OF THE HEIRS OF DOMINGO ENICEO, REPRESENTED BY RUFINA ENICEO, AND
ORDERING THE REGISTER OF DEEDS OF MARIKINA CITY TO ISSUE NEW TRANSFER
CERTIFICATES OF TITLE FOR SAID PARCELS OF LAND IN THE NAME OF PLAINTIFF-APPELLANT
CANUTO A. GALIDO, UPON PAYMENT OF THE PROPER FEES AND PRESENTATION OF THE DEED
OF SALE DATED SEPTEMBER 10, 1973 EXECUTED BY RUFINA ENICEO AND MARIA ENICEO, AS
SOLE HEIRS OF THE LATE DOMINGO ENICEO, IN FAVOR OF THE LATTER.[36]

The Issues

Petitioner raises two issues in this petition:

1. Whether the adverse claim of respondent over the Antipolo property should be barred by laches;[37]and

2. Whether the deed of sale delivered to respondent should be presumed an equitable mortgage pursuant to
Article 1602(2) and 1604 of the Civil Code.[38]
The Ruling of the Court

Validity of the deed of sale to respondent

The contract between the Eniceo heirs and respondent executed on 10 September 1973 was a perfected contract of sale.
A contract is perfected once there is consent of the contracting parties on the object certain and on the cause of the
obligation.[39]In the present case, the object of the sale is the Antipolo property and the price certain is P250,000.

The contract of sale has also been consummated because the vendors and vendee have performed their respective
obligations under the contract. In a contract of sale, the seller obligates himself to transfer the ownership of the
determinate thing sold, and to deliver the same to the buyer, who obligates himself to pay a price certain to the
seller.[40]The execution of the notarized deed of sale and the delivery of the owners duplicate copy of OCT No. 535 to
respondent is tantamount to a constructive delivery of the object of the sale. In Navera v. Court of Appeals, the Court
ruled that since the sale was made in a public instrument, it was clearly tantamount to a delivery of the land resulting in
the symbolic possession thereof being transferred to the buyer.[41]
Petitioner alleges that the deed of sale is a forgery. The Eniceo heirs also claimed in their answer that the deed of sale is
fake and spurious.[42]However, as correctly held by the CA, forgery can never be presumed. The party alleging forgery is
mandated to prove it with clear and convincing evidence.[43]Whoever alleges forgery has the burden of proving it. In this
case, petitioner and the Eniceo heirs failed to discharge this burden.

Petitioner invokes the belated approval by the DENR Secretary, made within 25 years from the issuance of the homestead,
to nullify the sale of the Antipolo property. The sale of the Antipolo property cannot be annulled on the ground that the
DENR Secretary gave his approval after 21 years from the date the deed of sale in favor of respondent was executed.
Section 118 of Commonwealth Act No. 141 or the Public Land Act (CA 141), as amended by Commonwealth Act No.
456,[44]reads:
SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT OR ANY OF ITS BRANCHES, UNITS, OR INSTITUTIONS,
OR LEGALLY CONSTITUTED BANKING CORPORATIONS, LANDS ACQUIRED UNDER FREE PATENT OR
HOMESTEAD PROVISIONS SHALL NOT BE SUBJECT TO ENCUMBRANCE OR ALIENATION FROM THE DATE
OF THE APPROVAL OF THE APPLICATION AND FOR A TERM OF FIVE YEARS FROM AND AFTER THE DATE
OF THE ISSUANCE OF THE PATENT OR GRANT X X X

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after the issuance
of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources,[45]which approval shall
not be denied except on constitutional and legal grounds.

In Spouses Alfredo v. Spouses Borras,[46]the Court explained the implications of Section 118 of CA 141. Thus:

A grantee or homesteader is prohibited from alienating to a private individual a land grant within five
years from the time that the patent or grant is issued. A violation of this prohibition renders a sale void.
This , however, expires on the fifth year. From then on until the next 20 years, the land grant may be
alienated provided the Secretary of Agriculture and Natural Resources approves the alienation. The
Secretary is required to approve the alienation unless there are constitutional and legal grounds to deny
the approval. In this case, there are no apparent or legal grounds for the Secretary to disapprove the sale
of the Subject Land.

The failure to secure the approval of the Secretary does not ipso factomake a sale void. The absence of
approval by the Secretary does not a sale made after the expiration of the 5-year period, for in such event
the requirement of Section 118 of the Public Land Act becomes merely directory or a formality. The
approval may be secured later, producing the effect of ratifying and adopting the transaction as if the sale
had been previously authorized. (Underscoring supplied)

Equitable Mortgage
Petitioner contends that the deed of sale in favor of respondent is an equitable mortgage because the Eniceo heirs
remained in possession of the Antipolo property despite the execution of the deed of sale.

An equitable mortgage is one which although lacking in some formality, or form or words, or other requisites demanded
by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains
nothing impossible or contrary to law.[47]The essential requisites of an equitable mortgage are:

1. The parties entered into a contract denominated as a contract of sale; and

2. Their intention was to secure existing debt by way of a mortgage.[48]

In Lim v. Calaguas,[49]the Court held that in order for the presumption of equitable mortgage to apply, there must be: (1)
something in the language of the contract; or (2) in the conduct of the parties which shows clearly and beyond doubt that
they intended the contract to be a mortgage and not a pacto de retro sale.[50]Proof by parol evidence should be presented
in court. Parol evidence is admissible to support the allegation that an instrument in writing, purporting on its face to
transfer the absolute title to property, was in truth and in fact given merely as security for the payment of a loan. The
presumption of equitable mortgage under Article 1602 of the Civil Code is not conclusive. It may be rebutted by competent
and satisfactory proof of the contrary.[51]

Petitioner claims that an equitable mortgage can be presumed because the Eniceo heirs remained in possession of the
Antipolo property. Apart from the fact that the Eniceo heirs remained in possession of the Antipolo property, petitioner
has failed to substantiate its claim that the contract of sale was intended to secure an existing debt by way of mortgage.
In fact, mere tolerated possession is not enough to prove that the transaction was an equitable mortgage.[52]

Furthermore, petitioner has not shown any proof that the Eniceo heirs were indebted to respondent. On the contrary, the
deed of sale executed in favor of respondent was drafted clearly to convey that the Eniceo heirs sold and transferred the
Antipolo property to respondent. The deed of sale even inserted a provision about defrayment of registration expenses
to effect the transfer of title to respondent.

In any event, as pointed out by respondent in his Memorandum, this defense of equitable mortgage is available only to
petitioners predecessors-in-interest who should have demanded, but did not, for the reformation of the deed of sale.[53] A
perusal of the records shows that the Eniceo heirs never presented the defense of equitable mortgage before the trial
court. In their Answer[54]and Memorandum[55]filed before the trial court, the Eniceo heirs claimed that the alleged deed of
sale dated 10 September 1973 between Rufina Eniceo and Maria Eniceo was fake and spurious. The Eniceo heirs
contended that even assuming there was a contract, no consideration was involved. It was only in the Appellees
Brief[56]filed before the CA that the Eniceo heirs claimed as an alternative defense that the deed should be presumed as
an equitable mortgage.

IN PHILIPPINE PORTS AUTHORITY V. CITY OF ILOILO,[57]WE RULED THAT A PARTY WHO ADOPTS A CERTAIN THEORY UPON
WHICH THE CASE IS TRIED AND DECIDED BY THE LOWER COURT WILL NOT BE PERMITTED TO CHANGE THE THEORY ON
APPEAL. A THEORY OF THE CASE NOT BROUGHT TO THE ATTENTION OF THE LOWER COURT WILL NOT BE CONSIDERED BY
A REVIEWING COURT, AS A NEW THEORY CANNOT BE RAISED FOR THE FIRST TIME AT SUCH LATE STAGE.

ALTHOUGH PETITIONER RAISED THE DEFENSE OF EQUITABLE MORTGAGE IN THE LOWER COURT, HE CANNOT CLAIM THAT
THE DEED WAS AN EQUITABLE MORTGAGE BECAUSE PETITIONER WAS NOT A PRIVY TO THE DEED OF SALE DATED 10
SEPTEMBER 1973. PETITIONER MERELY STEPPED INTO THE SHOES OF THE ENICEO HEIRS. PETITIONER, WHO MERELY
ACQUIRED ALL THE RIGHTS OF ITS PREDECESSORS, CANNOT ESPOUSE A THEORY THAT IS CONTRARY TO THE THEORY OF
THE CASE CLAIMED BY THE ENICEO HEIRS.

The Court notes that the Eniceo heirs have not appealed the CAs decision, hence, as to the Eniceo heirs, the CAs decision
that the contract was a sale and not an equitable mortgage is now final. Since petitioner merely assumed the rights of the
Eniceo heirs, petitioner is now estopped from questioning the deed of sale dated 10 September 1973.

Petitioner is not a buyer in good faith

Petitioner maintains that the subsequent sale must be upheld because petitioner is a buyer in good faith, having exercised
due diligence by inspecting the property and the title sometime in February 1995.

In Agricultural and Home Extension Development Group v. Court of Appeals,[58] a buyer in good faith is defined as one who
buys the property of another without notice that some other person has a right to or interest in such property and pays a
full and fair price for the same at the time of such purchase or before he has notice of the claim or interest of some other
person in the property.

In Balatbat v. Court of Appeals,[59]the Court held that in the realm of double sales, the registration of an adverse claim
places any subsequent buyer of the registered land in bad faith because such annotation was made in the title of the
property before the Register of Deeds and he could have discovered that the subject property was already sold.[60]The
Court explained further, thus:
A purchaser of a valued piece of property cannot just close his eyes to facts which should put a reasonable
man upon his guard and then claim that he acted in good faith and under the belief that there were no
defect in the title of the vendor. One who purchases real estate with knowledge of a defect or lack of title
in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the
land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as be necessary to acquaint him with the defects
in the title of his vendor.[61]

Petitioner does not dispute that respondent registered his adverse claim with the Registry of Deeds on 14 March 1995.
The registration of the adverse claim constituted, by operation of law, notice to the whole world. [62]From that date
onwards, subsequent buyers were deemed to have constructive notice of respondents adverse claim.

PETITIONER PURCHASED THE ANTIPOLO PROPERTY ONLY ON 20 MARCH 1995 AND 5 APRIL 1995 AS SHOWN BY THE DATES
IN THE DEEDS OF SALE. ON THE SAME DATES, THE REGISTRY OF DEEDS ISSUED NEW TCTS IN FAVOR OF PETITIONER WITH
THE ANNOTATED ADVERSE CLAIM.CONSEQUENTLY, THE ADVERSE CLAIM REGISTERED PRIOR TO THE SECOND SALE
CHARGED PETITIONER WITH CONSTRUCTIVE NOTICE OF THE DEFECT IN THE TITLE OF ENICEO HEIRS. THEREFORE,
PETITIONER CANNOT BE DEEMED AS A PURCHASER IN GOOD FAITH WHEN THEY BOUGHT AND REGISTERED THE ANTIPOLO
PROPERTY.
IN CARBONELL V. COURT OF APPEALS,[63]THIS COURT RULED THAT IN DOUBLE SALES, THE FIRST BUYER ALWAYS HAS
PRIORITY RIGHTS OVER SUBSEQUENT BUYERS OF THE SAME PROPERTY. BEING THE FIRST BUYER, HE IS NECESSARILY IN
GOOD FAITH COMPARED TO SUBSEQUENT BUYERS. THE GOOD FAITH OF THE FIRST BUYER REMAINS ALL THROUGHOUT
DESPITE HIS SUBSEQUENT ACQUISITION OF KNOWLEDGE OF THE SUBSEQUENT SALE. ON THE OTHER HAND, THE
SUBSEQUENT BUYER, WHO MAY HAVE ENTERED INTO A CONTRACT OF SALE IN GOOD FAITH, WOULD BECOME A BUYER
IN BAD FAITH BY HIS SUBSEQUENT ACQUISITION OF ACTUAL OR CONSTRUCTIVE KNOWLEDGE OF THE FIRST SALE.[64]THE
SEPARATE OPINION OF THEN JUSTICE TEEHANKEE IS INSTRUCTIVE, THUS:
The governing principle here is prius tempore, potior jure(first in time, stronger in right). Knowledge
gained by the first buyer of the second sale cannot defeat the first buyers rights except only as provided
by the Code and that is where the second buyer first registers in good faith the second sale ahead of the
first. Such knowledge of the first buyer does bar her from availing of her rights under the law, among
them, to first her purchase as against the second buyer. But in converso knowledge gained by the second
buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge
taints his prior registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the
first buyer: that before the second buyer can obtain priority over the first, he must show that he acted in
good faith throughout (i.e., in ignorance of the first sale and of the first buyers rights) from the time of
acquisition until the title is transferred to him by registration or failing registration, by delivery of
possession. The second buyer must show continuing good faith and innocence or lack of knowledge of
the first sale until his contract ripens into full ownership through prior registration as provided by law.[65]

Laches

PETITIONER CONTENDS THAT RESPONDENT IS GUILTY OF LACHES BECAUSE HE SLEPT ON HIS RIGHTS BY FAILING TO
REGISTER THE SALE OF THE ANTIPOLO PROPERTY AT THE EARLIEST POSSIBLE TIME. PETITIONER CLAIMS THAT DESPITE
RESPONDENTS KNOWLEDGE OF THE SUBSEQUENT SALE IN 1991, RESPONDENT STILL FAILED TO HAVE THE DEED OF SALE
REGISTERED WITH THE REGISTRY OF DEEDS.

The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which,
through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it
had either abandoned or declined to assert it.[66]

Respondent discovered in 1991 that a new owners copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed
a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning
to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when
respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the
trial court against the Eniceo heirs and petitioner. Respondents actions negate petitioners argument that respondent is
guilty of laches.

True, unrecorded sales of land brought under Presidential Decree No. 1529 or the Property Registration Decree (PD 1529)
are effective between and binding only upon the immediate parties. The registration required in Section 51 of PD 1529 is
intended to protect innocent third persons, that is, persons who, without knowledge of the sale and in good faith, acquire
rights to the property.[67] Petitioner, however, is not an innocent purchaser for value.
WHEREFORE, we DENY the petition. We AFFIRM the 20 December 2004 Decision and 10 October 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 68828.
Integrated Packaging Corporation v. CA

G.R. No. 115117

June 8, 2000

FACTS:

 May 5, 1978: Integrated Packaging Corp agreed to deliver to Fil-anchor paper co., inc. 3,450 reams of printing paper.
Materials were to be paid within 30-90 days
 June 7, 1978: Integrated entered into a contract with Philippine Appliance Corporation (Philacor) to print three
volumes of "Philacor Cultural Books"
 July 30, 1979: only 1,097 out of the 3,450 had been delivered so it wrote to Fil-anchor that delay will prejudice them
 July 23, 1981: Fil-anchor delivered amounting to P766,101.70 of printing paper
 August 27, 1981: Integrated paid P97,200.00 which was applied to its back accounts covered by delivery invoices
dated September 29-30, 1980 and October 1-2, 1980
 Integrated entered into an additional printing contract with Philacor but it failed to comply so Philacor demanded
compensation for the delay and damage it suffered on account of Integrated's failure
 Fil-anchor filed a collection suit of P766,101.70 against Integrated representing unpaid purchase price of printing
paper bought on credit
 By way of counterclaim, Fil-anchor alleged the delivery was short of 2,875 reams so it suffered actual damages and
failed to realize expected profits and that complaint was prematurely filed
 RTC: Integrated ordered to pay Fil-anchor P27,222.60 as compensatory and actual damages after deducting
P763,101.70 for the value of materials received, P100K as moral damages, P30K for attorney's fees and cost of
suit. However, the counterclaim is also meritorious - Integrated could have sold books to Philacor and realized
profit of P790,324.30 for which the award of moral damages was justified
 CA: reversed and set aside the judgment of the trial court ordered to pay Fil-anchor P763,101.70 for unpaid printing
paper and deleted the award of P790,324.30 as compensatory damages as well as the award of moral damages and
attorney's fees, for lack of factual and legal basis
ISSUE: W/N Integrated should be awarded compensatory and moral damages.

HELD: YES. CA affirmed

 suspension of its deliveries to Integrated whenever the latter failed to pay on time, as in this case, is legally justified
under the second paragraph of Article 1583 of the Civil Code hence the Fil-anchor did not violate the order
agreement
 Fil-anchor is not a party to the agreement between Philacor neither is it a contract pour autrui so no direct bearing
 indemnification for damages comprehends not only the loss suffered, that is to say actual damages (damnum
emergens), but also profits which the obligee failed to obtain, referred to as compensatory damages (lucrum
cessans). However, to justify a grant of actual or compensatory damages, it is necessary to prove with a reasonable
degree of certainty, premised upon competent proof and on the best evidence obtainable by the injured party, the
actual amount of loss.
 trial court in arriving at the amount are mere estimates or self-serving claim of unrealized profitprepared by
Integrated
 deletion of the award of moral damages is proper, since private respondent could not be held liable for breach of
contract. Moral damages may be awarded when in a breach of contract the defendant acted in bad faith, or was
guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation. Finally, since
the award of moral damages is eliminated, so must the award for attorney's fees be also deleted.
 Fule v. CA

G.R. No. 112212

March 2, 1998

Facts:
· Gregorio Fule, a banker and jeweler, acquired a 10 hectare of property in Rizal which used to be under the name of Fr.
Jacobe on which (Jacobe) mortgaged the land to the Bank of Alaminos to secure a loan of P10,000. The mortgage was
forclosed and the property later offered for public auction.
· 1984, Gregorio asked Remilia and Oliva to look for a buyer (property), the found Dr. Cruz, just so happens that Gregorio
wants the 2.5 carat EMERALD CUT EARRINGS of Dr. Ninevetch Cruz (MD), Gregorio offered to buy the jewelry for
P100,000, was refused, he then offered $6000 in the exchange rate of $1 is to P25, was still refused. They agreed,
however, on the land of Fule for the jewelry.
· Dr. Cruz asked her counsel, Atty. Belarmino to check the land for any impediments. There was. Gregorio then executed
to a DEED OF REDEMPTION to cut through the legal impediment. Land is now A-Okay J
· Dr. Cruz went to the bank with Gregorio to show the jewelry and said (non-verbatim “Oy bobo check this shit out, tapat
mo sa ilaw to see if it’s fake or not. ICE ba?”. Gregorio checked it and was happy. Gregorio and the counsel executed
a DEED OF ABSOLUTE SALE. The Property was for P200,000 and the Jewelry for P160,000, both agreed that Dr. Cruz will
pay the remaining P40,000 by cash.
· Gregorio happy with his jewelry, went straight to a appraiser named *wait for it* DIMAYUGAhahahahaha but anyway,
Dimayuga said that the jewel is fake.
· Gregorio then filed a complaint before the RTC, praying for the CONTRACT OF SALE be deemed null and void.
· RTC ruled in favor of Cruz stating that Gerggy boy was in badfaith. CA affirmed.

Issue: W/ON CA erred in upholding the validity of the Contract of Sale

Held: No. The NCC provides that the Contract of Sale is consensual, and is perfected when the minds met. Contract may
be rendered void if (1) Party has no capacity to give consent, and (2) if consent was gained because of VIMFU (Violence,
Intimidation, Mistake, Fraud, and Undue Influence). Dr. Cruz was not Fraudulent. SC said that Greggy Boy was also a
jeweler, he was given time to inspect the jewel before perfecting the contract.

Sps. Felipe Solitarios & Julia Torda v. Sps. Gaston and lIlia Jaque

G.R. No. 199852

November 12, 2014

DECISION

VELASCO, JR., J.:

Nature of the Case

In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, petitioners spouses Felipe Solitarios and
Julia Torda (spouses Solitarios) seek the reversal of the August 31, 2010 Decision and November 24, 2011 Resolution of
the Court of Appeals (CA) in CA-G.R. CEB-CV No. 00112, which in tum set aside the Decision of the Regional Trial Court of
Calbayog City, Branch 31 (RTC), in Civil Case No. 772.

The Facts
The property subject of this suit is a parcel of agricultural land designated as Lot 4089, consisting of 40,608 square
meters (sq. m.), and located in Calbayog, Samar. It was originally registered in the name of petitioner Felipe Solitarios
under Original Certificate of Title (OCT) No. 1249, and, thereafter, in the name of the respondents, spouses Gaston and
Lilia Jaque (the Jaques), under Transfer Certificate of Title (TCT) No. 745.

In a Complaint for Ownership and Recovery of Possession with the RTC of Calbayog City, the respondents spouses Jaque
alleged that they purchased Lot 4089 from the petitioners, spouses Solitarios in stages. According to respondents, they
initially bought one-half of Lot No. 4089 for ₱7,000.00. This sale is allegedly evidenced by a notarized Deed of Sale dated
May 8, 1981. Two months later, the spouses Solitarios supposedly mortgaged the remaining half of Lot 4089 to the
Jaques via a Real Estate Mortgage (REM) dated July 15, 1981, to securea loan amounting to ₱3,000.00.

After almost two (2) years, the spouses Solitarios finally agreed to sell the mortgaged half. However, instead of
executing a separate deed of sale for the second half, they executed a Deed of Sale dated April 26, 1983 for the whole
lot to save on taxes, by making it appear that the consideration for the sale of the entire lot was only ₱12,000.00 when
the Jaques actually paid ₱19,000.00 in cash and condoned the spouses Solitarios’ ₱3,000.00 loan.

On the basis of this second notarized deed, the Jaques had OCT No. 1249 cancelled and registered Lot 4089 in their
name under Transfer Certificate of Title (TCT) No. 745.

In spite of the sale, the Jaques, supposedly out of pity for the spouses Solitarios, allowed the latter to retain possession
of Lot 4089, subject only to the condition that the spouses Solitarioswill regularly deliver a portion of the property’s
produce. In an alleged breach of their agreement, however, the spouses Solitarios stopped delivering any produce
sometime in 2000. Worse, the spouses Solitarios even claimed ownership over Lot 4089. Thus, the Jaques filed the
adverted complaint with the RTC.

For their part, the spouses Solitarios denied selling Lot 4089 and explained that they merely mortgaged the same to the
Jaques after the latter helped them redeem the land from the Philippine National Bank (PNB).

The spouses Solitarios narrated that, way back in 1975, they obtained a loan from PNB secured by a mortgage over Lot
4089. They were able to pay this loan and redeem their property with their own funds. Shortly thereafter, in 1976, they
again mortgaged their property to PNB to secure a ₱5,000.00 loan. This time, the Jaques volunteered to pay the
mortgage indebtedness, including interests and charges and so gave the spouses Solitarios ₱7,000.00 for this purpose.
However, this accommodation was made, so the spouses Solitarios add, with the understanding that they would pay
back the Jaques by delivering to them a portion of the produce of Lot 4089, in particular, onehalf of the produce of the
rice land and one-fourth of the produce of the coconut land. The spouses Solitarios contended that this agreement was
observed by the parties until May 2000, when Gaston Jaque informed them that he was taking possession of Lot 4089 as
owner. And to their surprise, Gaston Jaque showed them the Deeds of Sale dated May 8, 1981 and April 26, 1983, the
REM contract dated July 15, 1981, and TCT No. 745 to prove his claim. The spouses Solitarios contended that these
deeds of sale were fictitious and their signatures therein forged. Further, the spouses Solitarios challenge the validity of
TCT No. 745, alleging thatthe Jaques acquired it through fraud and machinations and by taking advantage of their
ignorance and educational deficiency. Thus, they prayed that the RTC: (1) cancel TCT No. 745; (2) declare the adverted
deeds of sales dated May 8, 1981 and April 26, 1983 as null and void; (3) declare them the true and lawful owners of Lot
4089; and (4) award them moral and actual damages.

During the course of the trial, and in compliance with the February 7, 2001 Order of the RTC, the spouses Solitarios
deposited with the court a quothe Jaques’ purported share in the produce of Lot 4089 for the years 2001-2003, which
amounted to 16,635.60.1

On April 15, 2004, the RTC rendered a Decision2 upholding the validity of the deeds of sale in question and TCT No. 745,
rejecting the allegations of forgery and fraud. However, in the same breath, the RTC declared that what the parties
entered into was actually an equitable mortgage as defined under Article 1602 in relation to Article 1604 of the New
Civil Code, and not a sale. Consequently, the RTC ordered, among others, the reformation of the Deeds ofSale dated
May 9,1981 and April 26, 1983, and the cancellation of TCT No. 745 in the name of the Jaques. The dispositive portion of
the RTC Decision reads:

WHEREFORE, this Court dismisses the instant case and pronounces Judgment against plaintiffs and hereby orders the
following:

1. Reformation of the Deed of Sale dated May 9, 1981 (Exhibit "E") and the Deed of Sale dated April 26, 1983
(Exhibit "G") into contracts of mortgage;

2. Cancellation of TCT No. 745 in the name of spouses Gaston Jaque and Lilia Laure Jaque;

3. Considering the total mortgage debt of Php 12,000.00 as totally paid pursuant to Article 1602 of the New Civil
Code;

4. Release of the amounts deposited to the Court by defendants to them minus lawful charges for their
safekeeping, if any; and

5. Payment of costs of the proceedings by the plaintiffs.

SO ORDERED.3

The RTC anchored its holding on the nature of the pertinent contracts in question on its findings that: (1) after the
alleged sale, the spouses Solitarios remained in possession ofthe land; (2) the Jaques did not physically occupy Lot 4089;
(3) the consideration for the sale of the whole land as stated in the Deed of Sale dated April 26, 1983, was only
₱12,000.00, an amount grossly inadequate for a titled coconut and rice lands consisting of 40,608 sq. m.; (3) the Jaques
did not disturb the possession of Lot 4089 by Leonora Solitarios, Felipe’s sister-in-law, who resided therein; and (4) the
Jaques never had a tenant in the subject property.

On appeal, the CA4 reversed and set aside the RTC Decision, rejecting the trial court’s holding that the contract between
the parties constituted an equitable mortgage.

The CA noted that the allegation thatthe transaction is an equitable mortgage and not one of sale was not presented
before the trial court and was raised belatedly on appeal. Even then, the CA held that the spouses Solitarios failed to
convincingly prove that the deeds of sale were sham, noting that their bare denial as to their authenticity was
insufficient to overcome the positive value of the notarized deeds of sale. The CA further found that the spouses
Solitarios’ claim of inadequacy of the purchase price is unsupported by any evidence on record and that the spouses
Solitarios’ possession of Lot 4089 after the sale was not in the concept of an owner. In addition, the appellate court gave
weight to the fact that the Jaques paid the taxes on Lot 4089 since 1984. The CA, thus, concluded that based on the
parties’ actuations before, during, and after the transactions, it was unmistakable that they had no other intention but
to enter into a contract of sale of Lot 4089.

Their Motion for Reconsideration having thereafter been denied by the CA in its Resolution dated November 24, 2011,
the spouses Solitarios5 have filed the instant petition.

Issue

From the foregoing narration of facts,it is abundantly clear that the only material point of inquiry is whether the parties
effectively entered into a contract of absolute sale or anequitable mortgage of Lot 4089.

The Court's Ruling

The petition is impressed with merit.

At the outset, We note that, contrary to the finding of the CA, petitioner spouses Solitarios actually presented before the
RTC their position that the real agreement between the parties was a mortgage, and not a sale. Being unlettered,
petitioners may have averred that the deeds of sale and TCT presented by respondents were forgeries, obtained as they
were through fraud and machination. However, their saying that the sale instruments were "fictitious" and their
signatures thereon were "forged" amounts to alleging that they never agreed to the sale of their lot, and they never
intended to sign such conveyances. This reality is supported by the testimony of petitioner Felipe Solitarios that was
offered to prove the true intention of the parties ―that Lot 4089 was only mortgaged, not sold, to the Jaques. Before
Felipe’s direct examination, his counsel stated thus-

"ATTY. MARTIRES

With the permission of the Court.This witness is one of the defendants; he will testify that the land was just mortgaged
to the plaintiff contrary to the claim of the plaintiff that the defendants sold the same to the plaintiffs; he will also testify
that the defendants never executed deed of sale in favor of the plaintiffs; he will also testify that ½ of the produce of the
cocoland subject of this case was delivered by the defendants to the plaintiffs and with regards to the riceland, ¼ of the
produce was also delivered to the plaintiffs; and he will also testify other matters related to this case."6

The Court is, therefore, not precluded from looking into the real intentions of the parties in order to resolve the present
controversy. For that reason, the Court takes guidance from Article 1370 of the Civil Code, which instructs that "if the
words [of a contract] appear to be contrary to the evident intention of the parties, the latter shall prevail over the
former." Indeed, it is firmly settled that clarity of contract terms and the name given to it does not bar courts from
determining the true intent of the parties. In Zamora vs. Court of Appeals,7 the Court elucidated that —

In determining the nature of a contract, courts are not bound by the title or name given by the parties. The decisive
factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in
the contract but by their conduct, words, actions and deeds prior to, during and immediately after executing the
agreement. As such therefore, documentary and parol evidence may be submitted and admitted to prove such
intention.8 Further, in resolving this kind of controversy, the doctrinal teaching of Reyes vs. Court of Appeals9 impels us
to give utmost consideration to the intention of the parties in light of the relative situation of each, and the
circumstances surrounding the execution of the contract, thus: In determining whether a deed absolute in form is a
mortgage, the court is not limited to the written memorials of the transaction. The decisive factor in evaluating such
agreement is the intention of the parties, as shown not necessarily bythe terminology used in the contract but by all the
surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct,
declarations of the parties, the negotiations between them leading to the deed, and generally, all pertinent facts having
a tendency to fix and determine the real nature of their design and understanding. x x x

There is no single conclusive test to determine whether a deed of sale, absolute on its face, is really a simple loan
accommodation secured by a mortgage.10 However, Article 1602 in relation to Article 1604 of the Civil Code enumerates
several instances whena contract, purporting to be, and in fact styled as, an absolute sale, is presumed to be an
equitable mortgage, thus:

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 withright to repurchase is unusually inadequate;

(2) When the vendor remains inpossession 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 case 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.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall
be considered as interest which shall be subject to the usury laws.11 Art. 1604. The provisions of Article 1602 shall also
apply to a contract purporting to be an absolute sale.

As evident from Article 1602 itself, the presence of anyof the circumstances set forth therein suffices for a contract to be
deemed an equitable mortgage. No concurrence or an overwhelming number is needed.12

With the foregoing in mind, We thus declare that the transaction between the parties of the present case is actually one
of equitable mortgage pursuant to the foregoing provisions ofthe Civil Code. It has never denied by respondents that the
petitioners, the spouses Solitarios, have remained in possession of the subject property and exercised acts of ownership
over the said lot even after the purported absolute sale of Lot 4089. This fact is immediately apparent from the
testimonies of the parties and the evidence extant on record, showing that the real intention of the parties was for the
transaction to secure the payment of a debt. Nothing more.

Petitioner’s Possession of the Subject Property after the Purported Sale

During pre-trial, the Jaques admitted that the spouses Solitarios were in possession of the subject property.13Gaston
Jaque likewise confirmed that petitioners were allowed to produce copra and till the rice field, which comprise one-half
of the lot that was previously covered by the real estate mortgage, after said portion was allegedly sold to them.14

This Court had held that a purportedcontract of sale where the vendor remains in physical possession of the land, as
lessee or otherwise, is an indiciumof an equitable mortgage.15 In Rockville v. Sps. Culla,16 We explained that the reason
for this rule lies in the legal reality that in a contract of sale, the legal title to the property is immediately transferred to
the vendee. Thus, retention by the vendor of the possession of the property is inconsistent with the vendee’s acquisition
of ownership under a true sale. It discloses, in the alleged vendee, a lack of interest in the property that belies the
truthfulness of the sale.

During the period material to the present controversy, the petitioners, spouses Solitarios, retained actual possession of
the property. This was never disputed. If the transaction had really been one of sale, as the Jaques claim, they should
have asserted their rights for the immediate delivery and possession of the lot instead of allowing the spouses Solitarios
to freely stay in the premises for almost seventeen (17) years from the time of the purported sale until their filing ofthe
complaint. Human conduct and experience reveal that an actual owner of a productive land will not allow the passage of
a long period of time, as in this case, without asserting his rights of ownership.

Further, Gaston Jaque first claimed possession of the subject property through his mother-in-law, and then through
hired workers when the latter passed away;17 not personally. It is also undisputed that the Jaques never installed a
tenant on Lot 4089 and did not disturb the Solitarios’ possession of the same.18 On this note, We agree with the finding
of the RTC that the Jaques’ alleged possession of the subject property is suspect and unsubstantial, and they never
possessed the same in the concept of owners, viz:

Even as to the first half portion of the land allegedly sold by the defendants to the plaintiffs, the evidence too tends to
show that the plaintiffs did not really possess it asowners. Plaintiffs’ evidence with regards to their possession over this
portion is very doubtful. According to plaintiff Gaston Jaque when he testified in Court, they possessed this portion
through his mother-in-law till she died in 1992 or 1992: that when she died, they possessed it already through hired
workers. However, in the statement of facts of the resolution of the public prosecutor in the case of Qualified Theft
which plaintiffs filed against the defendants, it is clearly shown that the plaintiffs stated thatthe defendants took
possession of the entire property since 1983 yet.

On the other hand, in this case, they are now claiming that it was actually in the year 2000 that the defendants bid claim
on this land.
 xxxx

Third, the fact that defendants’ witness Leonora Solitarios [Felipe’s sister] resides and has a house in the land in question
without having been disturbed by the plaintiffs and the fact that the plaintiffs never have a tenant in the land even if
they reside in Cebu City also show in some manner that they are not really the owners of the land, but the defendants.19

Not only is there a presumption that the deeds of sale are an equitable mortgage, it has been amply demonstrated by
petitioners that the deed of sale is intended to be one of mortgage based on the proof presented by petitioners and
propped up even by the admissions of respondents. The intention of the parties was for the transaction to secure the
payment of a debt

To stress, Article 1602(6) of the Civil Code provides that a transaction is presumed to be an equitable mortgage:

(6) In any other case 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.

This provision may very well be applied in this case. There is sufficient basis to indulge in the presumption that the
transaction between the parties was that of an equitable mortgage and that the spouses Solitarios never wanted to sell
the same to the Jaques.

The foregoing presumption finds support in the following: First, the very testimony of Gaston Jaque and the documents
he presented establish the existence of two loans, which the Jaques extended to the spouses Solitarios, that were
secured by the subject property; and, second, the testimonies of the parties reveal that they came to an agreement as
to how these loans would be paid.

The first loan was contracted when Gaston Jaque gave the spouses Solitarios ₱7,000.00 to help them redeem the subject
property from PNB.20 In effect, by extending the ₱7,000.00 financial assistance to the spouses Solitarios, Gaston Jaque
took over the loan, became the lender and assumed the role of mortgagee in place of PNB.

Thereafter, the spouses Solitarios obtained a second loan from the Jaques amounting to ₱3,000.00. This is evidenced by
an REM dated July 15, 1981 by virtue of which the spouses Solitarios mortgaged one-half of the subject property to the
Jaques to secure the payment of said loan.

The parties testified that they entered into a verbal agreement on the sharing of the produce of the subject property.
For his part, it seemed that Gaston Jaque wanted to impress upon the lower court that this sharing agreement was fixed
as a condition for his allowing the Solitarios’ continued possession and cultivation of the subject property. However,
there is a strong reason to believe that this arrangement was, in fact, a payment scheme for the debts that the spouses
Solitarios incurred.

During his testimony, Felipe Solitarios explained that after the Jaques gave him funds to redeemthe property from PNB,
they entered into an agreement on the sharing of the produce and that this arrangement would last until they shall have
redeemed the land from the Jaques. We note that this assertion by Felipe Solitarios was never refuted on cross or re-
cross examination. Felipe Solitarios explained–

DIRECT EXAMINATION BY

ATTY. MELINDA MARTIRES

Q When did Lilia Jaque give you the money to redeem the mortgage indebtedness from the Philippine National Bank?

A In 1976
Q How much did she give you?

A ₱5,000.00

Q After giving you the amount of 5,000.00 to be used to redeem the mortgage indebtedness, was there any agreement
between you and Lilia Jaque?

A Our agreement was, on the produce of the riceland, she will be given 1/4 and on the coconut land 1/2.21

xxx xxx xxx

Q Where were the spouses when the land was already redeemed from the PNB?

A They were in Cebu.

Q So, to whom did you deliver their share of the produce of the land?

A To Yaning, the mother of Ma Lilia.

Q When did you start delivering the share of the plaintiff of the land in question?

A From the time I mortgaged this land to them.

Q You mean to say from 1976?

A Yes.

Q How many times did you deliver tothe parents of the plaintiffs the share of the plaintiffs ofthe produce of the land?

A Every harvest, we deliver their share and everytime we make copra, we also deliver their share to Ma Yaning.

xxx xxx xxx

ATTY. MARTIRES

Q Per condition with the plaintiffs which you have told us a while ago, for how long will you deliver their share?

A Every harvest we have to give their share because we have not yet redeemed the land.

Q So there was no duration of your giving their share of the land?

A If I desire to redeem the land from them.22

Furthermore, Gaston Jaque himself testified receiving a portion of the produce of the subject property preciselybecause
of the loan covered by the July 15, 1981 REM.23

It is, thus, clear from the foregoing that the Jaques extended two loans to the spouses Solitarios, who in exchange,
offered tothe former the subject property, not to transfer ownership thereto, but to merely secure the payment of their
debts. This may be deduced from the testimonies of both Felipe Solitarios and Gaston Jaque, revealing the fact that they
agreed upon terms for the payment of the loans, in particular, the sharing in the produce of the lot.
Verily, the fact that the parties agreed on payment terms is inconsistent with the claim of the Jaques that when the
spouses Solitarios executed the questioned deeds of sale they had no other intention but to transfer ownership over the
subject property.

Thus, there is ground to presume that the transaction between the parties was an equitable mortgage and not a sale.
There is nothing in the records sufficient enough to overturn this presumption.

The contracts of sale and mortgage are of doubtful veracity

Furthermore, an examination of the transaction documents casts doubts on their validity. As alleged by petitioners, their
signatures therein appear to be forged. We distinctlyobserve that each of the three (3) documents bears different
versions of petitioner Julia Solitarios’ signatures. First, on the first page of the 1981 Deed of Sale, particularly on the
space provided for Julia Solitarios to express her marital consent to the sale, the signature "Julia Torda Solitarios"
appears.24 What is strange is that in the acknowledgement page of the very same document, Julia Solitarios purportedly
signed as "Julia T. Solitarios,"25 which is obviously different from the signature appearing on the first page. Further, while
the 1981 REM document contains the signature "Julia Turda,"26 the 1983 Deed of Sale bears the signature "Julia Torda."
These discrepancies suggest that the documents were signed by different persons.

Nevertheless, assuming arguendo that these documents were really signed by petitioners, there is reason to believe that
they did so without understanding their real nature and thatthe Jaques never explained to them the effects and
consequencesof signing the same.

In negotiating the transactions, the parties did not deal with each other on equal terms

The Civil Code provisions that consider certain types of sales as equitable mortgages are intended for the protection of
the unlettered such as the spouses Solitarios, who are penurious vis-à-vis their creditors.27 In Cruz v. Court of
Appeals,28 the Court held -

Vendors covered by Art. 1602 usually find themselves in an unequal position when bargaining with the vendees, and will
readily sign onerous contracts to get the money they need. Necessitous men are not really free men in the sense that
toanswer a pressing emergency they will submit to any terms that the crafty may impose on them. This is precisely the
evil that Art. 1602 seeks to guard against. The evident intent of the provision is to give the supposed vendor maximum
safeguards for the protection of his legal rights under the true agreement of the parties.

Without doubt, the spouses Solitarios need the protection afforded by the Civil Code provisions on equitable mortgage.
Certainly, the parties were negotiating on unequal footing. As opposed to the uneducated29 and impoverished farmer,
Felipe Solitarios,30 Gaston Jaque, was a 2nd Lieutenant of the Armed Forces of the Philippines when he
retired.31 Further, Felipe Solitarios was constantly infinancial distress. He was constantly in debt and in dire financial
need. That he borrowed money from the PNB twice, first in 1975 then in 1976, and mortgaged the subject property to
the Jaques suggest as much.

While Felipe Solitarios was able to settle his 1975 loan and redeem the mortgage with his own money,32 he no longer
had enough funds to redeem the subject property after obtaining a loan in 1976. Thus, he was impelled to borrow
money from the Jaques to get his property back in 1981. Shortly after, on July 15, 1981, Felipe Solitarios, again
indesperate need, borrowed money from Gaston Jaque and mortgaged to the latter a portion of the subject property.

It is, therefore, not difficult to imagine that Felipe Solitarios quickly consented to arrangements proposed to him by a
seemingly trustworthy Gaston Jaque, and mindlessly signed instrumental documents that were never explained to him
and he never fully understood but nonetheless assured him of fast cash and easy payment terms. What the court a quo
wrote in this regard merits concurrence:

Still another fact which militates against plaintiffs’ cause is their failure to prove during trial that they really endeavored
to explain to the defendants the real nature of the contract they were entering into, it appearing that the defendants
are of low education compared to them especially plaintiff Gaston Jaque who is a retired military officer. The law
requires that in case one of the partiesto a contract is unable to read (or maybe of low education), and fraud isalleged,
the person enforcing the contract must show that the term thereof have been fully explained to the former (Spouses
Nena Arriola and Francisco Adolfo, et.al. vs. Demetrio Lolita, Pedro, Nena, Braulio and Dominga, all surnamed Mahilum,
et. al. G.R. No. 123490, August 9, 2000).33

The law favors the least transmission of rights

It is further established that when doubt exists as to the true nature of the parties’ transaction, courts must construe
such transaction purporting to be a sale as an equitable mortgage, as the latter involves a lesser transmission of rights
and interests over the property in controversy.34 Thus, in several cases, the Court has not hesitated to declare a
purported contract of sale to be an equitable mortgage based solely on one of the enumerated circumstances under
Article 1602. So it should be in the present case.

In Sps. Raymundo v. Sps. Bandong,35 the Court observed that it is contrary to human experience that a person would
easily part with his property after incurring a debt. Rather, he would first look for means to settle his obligation, and the
selling of a propertyon which the house that shelters him and his family stands, would be his last resort.

Here, the Court finds the spouses Solitarios’ alleged sale of the subject property in favor of the Jaques simply contrary to
normal human behavior. Be it remembered that the spouses Solitarios depended much on this property as source of
income and livelihood. Further, they made use of it to obtain and secure badly needed loans. This property was so
important to them that they had to borrow money from the Jaques to raise funds to ensure its redemption.
Furthermore, even after the supposed sale, the spouses Solitarios remained tied to this land asthey never left it to live in
another place and continued tilling and cultivating the same. Thus, considering how valuable this land was to the
spouses Solitarios, being their main, if not, only source of income, it is hard to believe that they would easily part with it
and sell the same to another.

Furthermore, it is also difficult to understand why, after going through all the complications in redeeming the property
from PNB, the spouses Solitarios would simply transfer this tothe Jaques. It is inconceivable that the spouses Solitarios
would sell their property just to pay the PNB loan. It is more believable that, if at all, they conveyed their land on a
temporary basis only, without any intention to transfer ownership thereto and with the assurance that upon the
payment of their debts, the same would be returned to them.

The only reasonable conclusion that may be derived from the execution of the Deeds of Sale in favor of the Jaques is to
ensure that the Solitarios will pay their obligation.

The transfer of the subject property is a pactum commissorium

Further, We cannot allow the transfer of ownership ofLot 4098 to the Jaques as it would amount to condoning the
prohibited practice of pactum comissorium. Article 2088 of the Civil Code clearly provides that a creditor cannot
appropriate or consolidate ownership over a mortgaged property merely upon failure of the mortgagor to pay a debt
obligation,36 viz.:

Art. 2088. The creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.

The essence of pactum commissorium is that ownership of the security will pass to the creditor by the mere default of
the debtor. This Court has repeatedly declared such arrangements as contrary to morals and public policy.37

As We have repeatedly held, the only right of a mortgagee in case of non-payment of debt secured by mortgage would
be to foreclose the mortgage and have the encumbered property sold to satisfy the outstanding indebtedness. The
mortgagor’s default does not operate to automatically vest on the mortgagee the ownership of the encumbered
property, for any such effect is against public policy, as earlier indicated.38
Applying the principle of pactum commissorium to equitable mortgages, the Court, in Montevirgen vs. CA,39enunciated
that the consolidation of ownership in the person of the mortgagee in equity, merely upon failure of the mortgagor in
equityto pay the obligation, would amount to a pactum commissorium.The Court further articulated that if a mortgagee
in equity desires to obtain title to a mortgaged property, the mortgagee’s proper remedy is to cause the foreclosure of
the mortgage in equity and buy it at a foreclosure sale.

In Sps. Cruz vs. CA,40 the Court again reiteratedthat, in an equitable mortgage, perfect title over the mortgaged property
may not be secured in a pactum commissorium fashion, but only by causing the foreclosure of the mortgage and buying
the same in an auction sale. The Court held –

Indeed, all the circumstances, taken together, are familiar badges of an equitable mortgage. Private respondents could
not in a pactum commissorium fashion appropriate the disputed property for themselves as they appeared to have
done; otherwise, their act will not be countenanced by this Court being contrary to goodmorals and public policy hence
void. If they wish to secure a perfect title over the mortgaged property, they should do so in accordance with law, i.e., by
foreclosing the mortgage and buying the property in the auction sale.

It does not appear, under the premises, that the Jaques availed themselves of the remedy of foreclosure, or that they
bought the subject property in an auction sale after the spouses Solitarios failed to pay their debt obligation. What
seems clear is that the Jaques took advantage of the spouses Solitarios’ intellectual and educational deficiency and
urgent need of money and made it appear that the latter executed in their favor the questioned Deeds of Sale, thereby
automatically appropriating unto themselves the subject property upon their debtors’ default. The amount reflected in
the 1981 Deedof Sale is telling. The sum of ₱7,000.00 representing the alleged purchase price of one-half of the subject
property in the 1981 Deed of Sale is actually the amount advanced to the spouses Solitarios by way of loan. Other than
the testimony of Gaston Jaque, there is no evidence showing that this purchase price was actually paid or that the
subject property was bought in a foreclosure sale.

Further, it can be gleaned from the testimony of Gaston Jaque that when the spouses Solitarios failed to pay their loan
of ₱3,000.00, reflected in the July 15, 1981 REM covering the remaining half of the subject property,41 the Jaques did not
foreclose the mortgage and purchase the said lot in an auction sale. Rather, they supposedly bought the lot directly from
the spouses Solitarios and offset the loan amount against a portion of the supposed purchase price they agreed upon.42

Indubitably, the subject property was transferred to the Jaques in a prohibited pactum commisorium manner and,
therefore, void. Thus, the foregoing transaction and the registration of the deeds of sale, by virtue of which the Jaques
were able to obtain the impugned TCT No. 745 must be declared void.43

Furthermore, given that the transaction between the parties is an equitable mortgage, this means that the title to the
subject property actually remained with Felipe Solitarios, as owner-mortgagor, conformably with the well-established
doctrine that the mortgagee does not become the owner of the mortgaged property because the ownership remains
with the mortgagor.44 Thus, Felipe Solitarios’ ownership over the subject property is not affected by the fact that the
same was already registered in the name of the Jaques. The pronouncement in Montevirgen v. Court of Appeals is
instructive:

x x x Equity looks through the form and considers the substance, and no kind of engagement can be allowed which will
enable the parties to escape from the equitable doctrine adverted to. In other words, a conveyance of land,
accompanied by registration in the name of the transferee and the issuance of a new certificate, is no more secured
from the operation of this equitable doctrine than the most informal conveyance that could be devised.

Finally, the circumstance that the original transaction was subsequently declared to be an equitable mortgage must
mean that the title to the subject landwhich had been transferred to private respondents actually remained or is
transferred back to petitioners herein as ownersmortgagors, conformably to the well-established doctrine that the
mortgagee does not become the owner of the mortgaged property because the ownership remains with the mortgagor
(Art. 2088, New Civil Code).45
Finally, We agree with the RTC that the mortgage debt of the spouses Solitarios had been fully paid.1âwphi1 This holds
true whether the amount of the debt is ₱12,000.00, as found by the RTC or ₱22,000.00, the amount which the Jaques
claim they paid for the subject property. The RTC elucidated as follows -

2. The total mortgage debt of Php12,000.00 which was the consideration in Exh. "G" is deemed totally paid.

This finding is based on the last paragraph of Article 1602 of the New Civil Code of the Philippines which provides that
"In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to the usury laws." (underscoring ours)

If this Court will take at its face value plaintiffs’ claim in their complaint that they get Php10,000.00 every quarter or
Php40,000.00 a year from the coconut portion and Php5,000.00 every planting season or Php10,000.00 a year from the
rice land portion of the subject land, then plaintiffs could have earned Php50,000.00 a year or more or less one million
pesos already when they filed this case in the year 2000.

But this Court has given more credence to defendants’ assertion that from 1976 to 2000, hewas giving the one-half
share of the plaintiffs from the proceeds of the copras and rice land to plaintiffs’ alleged caretaker, Yaning. So, if the
produce of the land in question as claimed by the plaintiffs is about Php50,000.00 a year, one-half (1/2) of it would be
Php25,000.00 which is 25 times higher than the Php1,000.00 interest at 12% per year for the alleged purchase price of
Php12,000.00 of the land in question. The Php24,000.00 excess interest would have already been sufficient to pay even
the principal of Php12,000.00. Thus, clearly, the Php12,000.00 purchase price of the land should now be considered fully
paid.

WHEREFORE, premises considered, the petition is GRANTED. The assailed August 31, 2010 Decision and November 24,
2011 Resolution of the Court of Appeals in CA-G.R. CEB-CV No. 00112 are, thus, SET ASIDE. The Decision of the Regional
Trial Court, Calbayog City Branch 21 in Civil Case No. 772 is REINSTATED, with modification that the reformation of the
Deeds of Absolute Sale dated May 9, 1981 and April 26, 1983 is deleted as it is unnecessary, and that the transfer of the
title to the name of petitioners shall be exempt from registration fees and taxes and other charges. As Modified, the
Decision of the trial court shall read:

WHEREFORE, this Court dismisses the instant case and pronounces Judgment against plaintiffs and hereby orders the
following:

1. TCT No. 745 in the name of spouses Gaston Jaque and Lilia Laure Jaque is declared void and cancelled.
Furthermore, the Register of Deeds of the City of Calbayog is ordered to issue a new title in the name of
petitioners Felipe Solitarios and Julia Torda without need of payment of registration fees, taxes, and other
charges;

2. The total mortgage debt is considered and deemed totally paid pursuant to Article 1602 of the New Civil
Code;

3. The amounts deposited to the Court by defendants Solitarios are ordered released to plaintiffs Spouses
Gaston and Lilia Jaque minus lawful charges for their safekeeping, if any; and

4. The costs of the proceedings shall be paid by the plaintiffs.

Bautista v. Unangst

G.R. No. 173002

July 4, 2008

DECISION

REYES, R.T., J.:

THE presumption of equitable mortgage imposes a burden on the buyer to present clear evidence to rebut it. He
must overthrow it, lest it persist.[1] To overturn that prima facie presumption, the buyer needs to adduce substantial and
credible evidence to prove that the contract was a bona fide deed of sale with right to repurchase.

This petition for review on certiorari impugns the Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No.
85942[3] which reversed and set aside that[4]of the Regional Trial Court (RTC) in an action for specific performance or
recovery of possession, for sum of money, for consolidation of ownerships and damages.

The Facts

On November 15, 1996, Hamilton Salak rented a car from GAB Rent-A-Car, a car rental shop owned by petitioner
Benjamin Bautista. The lease was for three (3) consecutive days at a rental fee of P1,000.00 per day.[5] However, Salak
failed to return the car after three (3) days prompting petitioner to file a complaint against him for estafa, violation of
Batas Pambansa Blg. 22 and carnapping.[6]

On February 2, 1997, Salak and his common-law wife, respondent Shirley G. Unangst, were arrested by officers of the
Criminal Investigation Service Group (CISG) of the Philippine National Police while riding the rented car along Quezon
City. The next day, petitioner demanded from Salak at the CISG Office the sum of P232,372.00 as payment for car rental
fees, fees incurred in locating the car, attorneys fees, capital gains tax, transfer tax, and other incidental expenses.[7]

Salak and respondent expressed willingness to pay but since they were then short on cash, Salak proposed to sell
to petitioner a house and lot titled in the name of respondent. Petitioner welcomed the proposal after consulting his wife,
Cynthia. Cynthia, on the other hand, further agreed to pay the mortgage loan of respondent over the subject property to
a certain Jojo Lee in the amount of P295,000.00 as the property was then set to be publicly auctioned on February 17,
1997.[8]

To formalize their amicable settlement, Cynthia, Salak and respondent executed a written agreement.[9] They stipulated
that respondent would sell, subject to repurchase, her residential property in favor of Cynthia for the total amount
of P527,372.00 broken down, as follows: (1) P295,000.00 for the amount paid by Cynthia to Lee to release the mortgage
on the property; and (2) P232,372.00, which is the amount due to GAB Rent-A-Car. Cynthia also agreed to desist from
pursuing the complaint against Salak and respondent.[10]

Respondent and petitioner also executed a separate deed of sale with right to repurchase,[11] specifying, among others,
that: (1) respondent, as vendor, shall pay capital gains tax, current real estate taxes and utility bills pertaining to the
property; (2) if respondent fails to repurchase the property within 30 days from the date of the deed, she and her assigns
shall immediately vacate the premises and deliver its possession to petitioner without need of a judicial order; and (3)
respondents refusal to do so will entitle petitioner to take immediate possession of the property.[12]

Respondent failed to repurchase the property within the stipulated period. As a result, petitioner filed, on June 5, 1998, a
complaint for specific performance or recovery of possession, for sum of money, for consolidation of ownership and
damages against respondent and other unnamed persons before the RTC of Olongapo City.

In his complaint,[13] petitioner alleged, among others, that after respondent failed to repurchase the subject realty, he
caused the registration of the deed of sale with the Register of Deeds and the transfer of the tax declarations in his name;
that respondent failed to pay the capital gains taxes and update the real estate taxes forcing him to pay said amounts in
the sum of P71,129.05 and P11,993.72, respectively; and that respondent violated the terms of the deed when she, as
well as the other unnamed persons, refused to vacate the subject property despite repeated demands.[14]

Petitioner prayed before the RTC that an order be issued in his favor directing respondents to: (1) surrender the
possession of the property; (2) pay P150,000.00 for the reasonable compensation for its use from March 7, 1997 to June
7, 1998, plus P10,000.00 per month afterward; (3) pay the amount advanced by petitioner, to wit: P71,129.05
and P11,993.72 for the payment of capital gains tax and real estate taxes, respectively; and P70,000.00 for attorneys
fees.[15]

On June 16, 1998, petitioner filed an amended complaint,[16] reiterating his previous allegations but with the
added prayer for consolidation of ownership pursuant to Article 1607 of the Civil Code.[17]

On the other hand, respondents controverted the allegations in the complaint and averred in their Answer,[18] among
others, that plaintiff had no cause of action inasmuch as respondent Unangst signed the subject deed of sale under duress
and intimidation employed by petitioner and his cohorts; that, assuming that her consent was freely given, the contract
of sale was simulated and fictitious since the vendor never received the stipulated consideration; that the sale should be
construed as an equitable mortgage pursuant to Articles 1602 and 1604 of the Civil Code because of its onerous conditions
and shockingly low consideration; that their indebtedness in the form of arrears in car rentals merely amounts
to P90,000.00; and that the instant action was premature as plaintiff had not yet consolidated ownership over the
property. Defendants counterclaimed for moral damages in the amount of P500,000.00 and attorneys fees in the amount
of P50,000.00, plus P500.00 per appearance.[19]

On July 29, 2004, after due proceedings, the RTC rendered a decision in favor of petitioner, disposing as follows:
WHEREFORE, judgment is rendered finding the Deed of Sale with Right to Repurchase (Exh. C) as, indeed,
a document of sale executed by the defendant in favor of the plaintiff covering the parcel of land house
(sic) situated at Lot 3-B, Blk. 10, Waterdam Road, Gordon Heights, Olongapo City, declared under Tax
Declaration Nos. 004-7756R and 7757R (Exhs. I and I-1). The defendant and any person taking rights from
her is (sic) ordered to immediately vacate from the place and turn over its possession to the plaintiff. They
are likewise directed not to remove any part of the building on the lot.

The ownership of the said property is properly consolidated in the name of the plaintiff.
 The defendant is further ordered to pay to the plaintiff the amount of P10,000.00 a month from March 7,
1997 up to the time possession of the lot and house is restored to the plaintiff representing the reasonable
value for the use of the property; the amount of P71,129.05 representing the payment made by the
plaintiff on the capital gain taxes and the further amount of P70,000.00 for attorneys fees and the costs
of suit.

SO ORDERED.[20]

Respondents failed to interpose a timely appeal. However, on September 10, 2004, respondent Unangst filed a petition
for relief pursuant to Section 38 of the 1997 Rules on Civil Procedure. She argued that she learned of the decision of
the RTC only on September 6, 2004 when she received a copy of the motion for execution filed by petitioner.[21]

Petitioner, on the other hand, moved for the dismissal of respondents petition on the ground that the latter paid an
insufficient sum of P200.00 as docket fees.[22]

It appears that respondent Unangst initially paid P200.00 as docket fees as this was the amount assessed by the
Clerk of Court of the RTC.[23] Said amount was insufficient as the proper filing fees amount to P1,715.00. Nevertheless, the
correct amount was subsequently paid by said respondent on February 22, 2005.[24]

In their comment,[25] respondents countered that they should not be faulted for paying deficient docket fees as it was due
to an erroneous assessment of the Clerk of Court.[26]

The RTC granted the petition for relief. Subsequently, it directed respondents to file a notice of appeal within twenty-four
(24) hours from receipt of the order.[27]Accordingly, on February 23, 2005, respondents filed their notice of appeal.[28]

Respondents contended before the CA that the RTC erred in: (1) not annulling the deed of sale with right to repurchase;
(2) declaring that the deed of sale with right to repurchase is a real contract of sale; (3) ordering the consolidation of
ownership of the subject property in the name of petitioner.[29] They argued that respondent Unangsts consent to the
deed of sale with right to repurchase was procured under duress and that even assuming that her consent was
freely given, the contract partakes of the nature of an equitable mortgage.[30]

On the other hand, petitioner insisted, among others, that although the petition for relief of respondents was filed
on time, the proper filing fees for said petition were paid beyond the 60-day reglementary period. He posited that
jurisdiction is acquired by the court over the action only upon full payment of prescribed docket fees.[31]

CA Disposition

In a Decision[32] dated April 7, 2006, the CA reversed and set aside the RTC judgment.[33] The dispositive part of the
appellate courts decision reads, thus:
IN VIEW OF ALL THE FOREGOING, the instant appeal is hereby GRANTED, the challenged Decision
dated July 29, 2004 hereby (sic) REVERSED and SET ASIDE, and a new one entered declaring the Deed of
Sale With Right Of Repurchase dated February 4, 1997 as an equitable mortgage. No cost.

SO ORDERED.[34]
 The CA declared that the Deed of Sale with Right of Repurchase executed by the parties was an equitable
mortgage. On the procedural aspect pertaining to the petition for relief filed by respondent Unangst, the CA ruled that
the trial court, in opting to apply the rules liberally, cannot be faulted for giving due course to the questioned petition for
relief which enabled appellants to interpose the instant appeal.[35] It ratiocinated:
Appellee recognizes the timely filing of appellants petition for relief to be able to appeal judgment
but nonetheless points out that the proper filing fees were paid beyond the 60-day reglementary
period. Arguing that the court acquires jurisdiction over the action only upon full payment of the
prescribed docket fees, he submits that the trial court erred in granting appellants petition for relief
despite the late payment of the filing fees.

While this Court is fully aware of the mandatory nature of the requirement of payment of
appellate docket fee, the High Court has recognized that its strict application is qualified by the following:
first, failure to pay those fees within the reglementary period allows only discretionary, not automatic,
dismissal; second, such power should be used by the court in conjunction with its exercise of sound
discretion in accordance with the tenets of justice and fair play, as well as with a great deal of
circumspection in consideration of all attendant circumstances (Meatmasters International Corporation
v. Lelis Integrated Development Corporation, 452 SCRA 626 [2005], citing La Salette College v. Pilotin, 418
SCRA 380 [2003]).

Applied in the instant case, the docket fees were admittedly paid only on February 22, 2005, or a
little less than two (2) months after the period for filing the petition lapsed.Yet, this matter was sufficiently
explained by appellants. The records bear out that appellants initially paid P200.00 as docket fees because
this was the amount assessed by the Clerk of Court of the RTC of Olongapo City (p. 273, Records). As it
turned out, the fees paid was insufficient, the proper filing fees being P1,715.00, which was eventually
paid by appellants on February 1, 2005 (p. 296, Records). As such, appellants cannot be faulted for their
failure to pay the proper docket fees for, given the prevailing circumstances, such failure was clearly not
a dilatory tactic nor intended to circumvent the Rules of Court. On the contrary, appellants demonstrated
their willingness to pay the docket fees when they subsequently paid on the same day they were assessed
the correct fees (p. 299, Records). Notably, in Yambao v. Court of Appeals (346 SCRA 141 [2000]), the High
Court declared therein that the appellate court may extend the time for the payment of the docket fees
if appellants is able to show that there is a justifiable reason for his failure to pay the correct amount of
docket fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or a similar
supervening casualty, without fault on the part of appellant.Verily, the trial court, in opting to apply the
rules liberally, cannot be faulted for giving due course to the questioned petition for relief which enabled
appellants to interpose the instant appeal.[36]

On the substantial issues, the CA concluded that While the records is bereft of any proof or evidence that appellee
employed unlawful or improper pressure against appellant Unangst to give her consent to the contract of sale, there is,
nevertheless, sufficient basis to hold the subject contract as one of equitable mortgage.[37] It explained:
Jurisprudence has consistently held that the nomenclature used by the contracting parties to
describe a contract does not determine its nature. The decisive factor in determining the true nature of
the transaction between the parties is the intent of the parties, as shown not necessarily by the
terminology used in the contract but by all the surrounding circumstances, such as the relative situations
of the parties at that time; the attitudes, acts, conduct, and declarations of the parties; the negotiations
between them leading to the deed; and generally, all pertinent facts having a tendency to fix and
determine the real nature of their design and understanding (Legaspi v. Ong, 459 SCRA 122 [2005]).
It must be stressed, however, that there is no conclusive test to determine whether a deed absolute on
its face is really a simple loan accommodation secured by a mortgage. In fact, it is often a question difficult
to resolve and is frequently made to depend on the surrounding circumstances of each case. When in
doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable
mortgage, which involves a lesser transmission of rights and interests over the property in controversy
(Legaspi, ibid.).

Article 1602 of the Civil Code enumerates the instances where a contract shall be presumed to be an
equitable mortgage when (a) the price of a sale with right to repurchase is unusually inadequate; (b) the
vendor remains in possession as lessee or otherwise; (c) upon or after the expiration of the right to
repurchase another instrument extending the period of redemption or granting a new period is executed;
(d) the purchaser retains for himself a part of the purchase price; (e) the vendor binds himself to pay taxes
on the thing sold; and, (f) in any other case 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 (Legaspi, supra; Martinez v. Court of Appeals, 358 SCRA 38 [2001]).

For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites must concur:
(a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention
was to secure an existing debt by way of a mortgage. Any of the circumstance laid out in Article 1602, not
the concurrence nor an overwhelming number of the circumstances therein enumerated, suffices to
construe a contract of sale to be one of equitable mortgage (Lorbes v. Court of Appeals, 351 SCRA 716
[2001]).
Applying the foregoing considerations in the instant case, there is hardly any doubt that the true intention
of the parties is that the transaction shall secure the payment of a debt. It is not contested that before
executing the subject deed, Unangst and Salak were under police custody and were sorely pressed for
money. Such urgent prospect of prolonged detention helps explain why appellants would subscribe to an
agreement like the deed in the instant case. This might very well explain appellants insistence that
Unangst was not truly free when she signed the questioned deed. Besides, there is no gainsaying that
when appellee allowed appellants to retain possession of the realty sold for 30 days, as part of the
agreement, that period of time surely signaled a time allotted to Salak and Unangst, as debtors, within
which to pay their mortgage indebtedness.

The High Court, in several cases involving similar situations, has declared that while it was true that
plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed,
however, that they signed knowing that said contracts did not express their real intention, and if they did
so notwithstanding this, it was due to the urgent necessity of obtaining funds. Necessitous men are not,
truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may
impose upon them (Lorbes, ibid.; Reyes v. Court of Appeals, 339 SCRA 97 [2000]; Lao v. Court of
Appeals, 275 SCRA 237 [1997]; Zamora v. Court of Appeals, 260 SCRA 10 [1996]; Labasan v. Lacuesta, 86
SCRA 16 [1978]).

After all, Article 1602(6) provides that a contract of sale with right to repurchase is presumed to
be an equitable mortgage in any other case 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 obligation. In
fine, a careful review of the records convincingly shows that the obtaining facts in this case qualify the
controversial agreement between the parties as an equitable mortgage under Article 1602 of the New
Civil Code.[38]

Issues

Petitioner has resorted to the present recourse under Rule 45, assigning to the CA the following errors:
 (a) The Honorable Court of Appeals committed grave error in finding that the respondent
perfected an appeal via Petition for Relief To Be Able To Appeal Judgment even when the proper docket
fees were paid beyond the period prescribed to bring such action under Section 3 of Rule 38 of the 1997
Rules of Civil Procedure in relation to the pronouncements by the Honorable Court in the cases
of Philippine Rabbit Bus Lines, Inc. v. Arciaga [148 SCRA 433], Philippine Pryce Assurance Corp. v. Court of
Appeals [148 SCRA 433] and Sun Insurance Office, Ltd. v. Asuncion [170 SCRA 274].

(b) The Honorable Court of Appeals erred on a question of law in reversing the Decision of the
Court a quo finding the Deed of Sale with Right to Repurchase a document of sale executed by the
respondent in favor of the petitioner and in further holding such contract as one of equitable mortgage.[39]

Our Ruling

On the first issue, petitioner contends that respondents Petition for Relief to Be Able to Appeal Judgment, which
paved the way for the allowance of respondents appeal of the RTC decision, was filed within the prescriptive period but
the proper docket fees for it were belatedly paid.[40] He thus posits that the RTCdid not acquire jurisdiction over said
petition. Having no jurisdiction, the RTC could not have allowed respondents to appeal.

On this issue, respondent counters that the belated payment of proper docket fees was not due to their fault but
to the improper assessment by the Clerk of Court. Respondent asserts the ruling of the CA that the court may extend the
time for the payment of the docket fees if there is a justifiable reason for the failure to pay the correct amount. Moreover,
respondent argues that petitioner failed to contest the RTC Order dated February 21, 2004 that allowed the payment of
supplementary docket fees. Petitioner failed to file a motion for reconsideration or a petition for certiorari to the higher
court to question said order.

We agree with respondents. Their failure to pay the correct amount of docket fees was due to a justifiable reason.

The right to appeal is a purely statutory right. Not being a natural right or a part of due process, the right to appeal
may be exercised only in the manner and in accordance with the rules provided therefor.[41] For this reason, payment of
the full amount of the appellate court docket and other lawful fees within the reglementary period is mandatory and
jurisdictional.[42] Nevertheless, as this Court ruled in Aranas v. Endona,[43] the strict application of the jurisdictional nature
of the above rule on payment of appellate docket fees may be mitigated under exceptional circumstances to better serve
the interest of justice. It is always within the power of this Court to suspend its own rules, or to except a particular case
from their operation, whenever the purposes of justice require it.[44]

In not a few instances, the Court relaxed the rigid application of the rules of procedure to afford the parties the
opportunity to fully ventilate their cases on the merits. This is in line with the time-honored principle that cases should be
decided only after giving all parties the chance to argue their causes and defenses.[45] For, it is far better to dispose of a
case on the merit which is a primordial end, rather than on a technicality, if it be the case, that may result in
injustice.[46] The emerging trend in the rulings of this Court is to afford every party-litigant the amplest opportunity for the
proper and just determination of his cause, free from the constraints of technicalities.[47]
 As early as 1946, in Segovia v. Barrios,[48] the Court ruled that where an appellant in good faith paid less than the
correct amount for the docket fee because that was the amount he was required to pay by the clerk of court, and he
promptly paid the balance, it is error to dismiss his appeal because (e)very citizen has the right to assume and trust that a
public officer charged by law with certain duties knows his duties and performs them in accordance with law. To penalize
such citizen for relying upon said officer in all good faith is repugnant to justice.[49]

Technicality and procedural imperfections should thus not serve as bases of decisions.[50] In that way, the ends of
justice would be better served. For, indeed, the general objective of procedure is to facilitate the application of justice to
the rival claims of contending parties, bearing always in mind that procedure is not to hinder but to promote the
administration of justice.[51]

We go now to the crux of the petition. Should the deed of sale with right to repurchase executed by the parties
be construed as an equitable mortgage? This is the pivotal question here.

According to petitioner, the deed should not be construed as an equitable mortgage as it does not fall under any
of the instances mentioned in Article 1602 of the Civil Code where the agreement can be construed as an equitable
mortgage. He added that the language and terms of the Deed of Sale with Right to Repurchase executed by respondent
in favor of the petition are clear and unequivocal. Said contract must be construed with its literal sense.[52]

We cannot agree.

Respondent is correct in alleging that the deed of sale with right to repurchase qualifies as an equitable mortgage
under Article 1602. She merely secured the payment of the unpaid car rentals and the amount advanced by petitioner to
Jojo Lee.

The transaction between the parties is one of equitable mortgage and not a sale with right to purchase as
maintained by petitioners. Article 1602 of the New Civil Code provides that the contract is presumed to be an equitable
mortgage in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;

(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 case 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.
 In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to the usury laws.[53] (Emphasis
ours)

The conclusion that the deed of sale with right to repurchase is an equitable mortgage is buttressed by the
following:

First, before executing the deed, respondent and Salak were under police custody due to the complaint lodged
against them by petitioner. They were sorely pressed for money, as they would not be released from custody unless they
paid petitioner. It was at this point that respondent was constrained to execute a deed of sale with right to
repurchase. Respondent was in no position whatsoever to bargain with their creditor,
petitioner. Nel consensui tam contrarium est quam vis atquimetus. There can be no consent when under force or
duress. Bale wala ang pagsang-ayon kung itoy nakuha sa pamimilit o paraang di malaya.

It is established that respondent signed the deed only because of the urgent necessity of obtaining funds. When
the vendor is in urgent need of money when he executes the sale, the alleged sale with pacto de retro will be construed
as an equitable mortgage.[54] Necessitous men are not, truly speaking, free men; but to answer a present emergency will
submit to any terms that the crafty may impose upon them.[55]

Second, petitioner allowed respondent and Salak to retain the possession of the property despite the execution
of the deed. In fact, respondent and Salak were not bound to deliver the possession of the property to petitioner if they
would pay him the amount he demanded.[56]

Where in a contract of sale with pacto de retro, the vendor remains in possession, as a lessee or otherwise, the
contract shall be presumed to be an equitable mortgage.[57] The reason for the presumption lies in the fact that in a
contract of sale with pacto de retro, the legal title to the property is immediately transferred to the vendee, subject to the
vendors right to redeem. Retention, therefore, by the vendor of the possession of the property is inconsistent with the
vendees acquisition of the right of ownership under a true sale.[58] It discloses, in the alleged vendee, a lack of interest in
the property that belies the truthfulness of the sale a retro.[59]

Third, it is likewise undisputed that the deed was executed by reason of: (1) the alleged indebtedness of Salak to
petitioner, that is, car rental payments; and (2) respondents own obligation to petitioner, that is, reimbursement of what
petitioner paid to the mortgagee, Jojo Lee. Fact is, the purchase price stated in the deed was the amount of the
indebtedness of both respondent and Salak to petitioner.[60]

Apparently, the deed purports to be a sale with right to purchase. However, since it was executed in consideration
of the aforesaid loans and/or indebtedness, said contract is indubitably an equitable mortgage. The rule is firmly settled
that whenever it is clearly shown that a deed of sale with pacto de retro, regular on its face, is given as security for a loan,
it must be regarded as an equitable mortgage.[61]

The above-mentioned circumstances preclude the Court from declaring that the parties intended the transfer of
the property from one to the other by way of sale. They are more than sufficient to show that the true intention of the
parties is to secure the payment of said debts. Verily, an equitable mortgage under paragraphs 2 and 6 of Article 1602
exists here. Settled is the rule that to create the presumption enunciated by Article 1602, the existence of one
circumstance is enough.[62]
 Moreover, under Article 1603 of the Civil Code it is provided that: (i)n case of doubt, a contract purporting to be
a sale with right to repurchase shall be construed as an equitable mortgage. In this case, We have no doubt that the
transaction between the parties is that of a loan secured by said property by way of mortgage.

In Lorbes v. Court of Appeals,[63] the Court held that:

The decisive factor in evaluating such agreement is the intention of the parties, as shown not
necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the
relative situation of the parties at that time, the attitude, acts, conduct, declarations of the parties, the
negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fix
and determine the real nature of their design and understanding. As such, documentary and parol
evidence may be submitted and admitted to prove the intention of the parties.

Sales with rights to repurchase, as defined by the Civil Code, are not favored. We will not construe instruments to
be sales with a right to repurchase, with the stringent and onerous effects which follow, unless the terms of the document
and the surrounding circumstances require it. Whenever, under the terms of the writing, any other construction can fairly
and reasonably be made, such construction will be adopted and the contract will be construed as a mere loan unless the
court can see that, if enforced according to its terms, it is not an unconscionable one.[64]

Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by contracts of sale with right
of repurchase, such as the circumvention of the laws against usury and pactum commissorium.[65]

WHEREFORE, the petition is DENIED for lack of merit.

Roberts v. Papio

G.R. No. 166714

February 9, 2007

FACTS:

The Spouses Papio were the owners of a 274 sq m residential lot located in Makati. In order to secure a59k loan
from the Amparo Investments Corp, they executed a real estate mortgage on the property. Upon Papio’s failure to pay
the loan, the corporation filed a petition for the extrajudicial foreclosure of the mortgage.* Since the couple needed
money to redeem the property and to prevent the foreclosure of the real estate mortgage, they executed a Deed of
Absolute Sale over the property in favor of Martin Papio’s cousin,Amelia Roberts.* Of the 95k purchase price, 59k was
paid to the Amparo Investments Corp, while the 26k difference was retained by the spouses. As soon as the spouses had
settled their obligation, the corporation returned the owner’s duplicate TCT which was then delivered to Amelia Roberts.
* The parties (A. Roberts as lessor and Martin Papio as lessee) executed a 2-year contract of lease. The contract
was subject to renewal or extension for a like period at the option of the lessor, the lessee waiving thereby the benefits
of an implied new lease. The lessee was obliged to pay monthly rentals of 800 to be deposited in the lessor’s account.
* A new TCT was issued in the name of Amelia Roberts as owner. Martin Papio paid the rentals and thereafter for
another year. He then failed to pay rentals, but he and his family nevertheless remained in possession of the property for
almost 13 years.* A. Roberts reminded Papio that he failed to pay monthly rentals amounting to a total liability of 410k.She
demanded that Papio vacate the property within 15days from receipt of the letter in case he failed to settle the amount.*
A. Roberts filed a complaint for unlawful detainer and damages against Martin Papio

ISSUE:
W/N THE DEED OF ABSOLUTE SALE AND CONTRACT OF LEASE EXECUTED BY THE PARTIES IS AN EQUITABLE
MORTGAGE OVER THE PROPERTY
RULING:
NO. An equitable mortgage is one that, 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 contain nothing impossible or contrary to law. A contract between the parties is an equitable mortgage if the following
requisites are present: a. the parties entered into a contract denominated as a contract of sale and b. the intention was
to secure an existing debt by way of mortgage. The decisive factor is the intention of the parties.In an equitable mortgage,
the mortgagor retains ownership over the property but subject to foreclosure and sale at public auction upon failure of
the mortgagor to pay his obligation.In contrast, in a pacto de retro sale, ownership of the property sold is immediately
transferred to the vendee a retro subject only to the right of the vendor a retro to repurchase the property upon
compliance with legal requirements for the repurchase. The failure of the vendor a retro to exercise the right to repurchase
within the agreed time vests upon the vendee a retro, by operation of law, absolute title over the property.One
repurchases only what one has previously sold.The right to repurchase presupposes a valid contract of sale between same
parties. By insisting that he had repurchased the property, Papio thereby admitted that the deed of absolute sale executed
by him and Roberts was in fact and in law a deed of absolute sale and not an equitable mortgage; he had acquired
ownership over the property based on said deed.Respondent, is thus estopped from asserting that the contract under the
deed of absolute sale is an equitable mortgage unless there is an allegation and evidence of palpable mistake on the part
of respondent, or a fraud on the part of Roberts

Ramos v. Sarao

G.R. No. 149756

February 11, 2005

FACTS:

Spouses Jonas Ramos and Myrna Ramos executed a contract over their conjugal house and lot in favor of respondent for
and in consideration of P1,310,430. Entitled “DEED OF SALE UNDER PACTO DE RETRO,” the contract, inter alia, granted
the Ramos spouses the option to repurchase the property within six months plus an interest of 4.5 percent. Petitioner
tendered to Sarao the amount of P1,633,034.20 in the form of two manager’s checks, which the latter refused to accept
for being allegedly insufficient. Myrna filed a Complaint, and she deposited with the RTC two checks that Sarao refused to
accept. Sarao filed against the Ramos spouses a Petition “for consolidation of ownership in pacto de retro sale”. Both RTC
and CA dismissed petitioner’s complaint and appeal respectively in favor of respondent Sarao.

ISSUE: Whether or not the pacto de retro sale was in reality an equitable mortgage?

RULING: YES. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall
be principally considered (Art.1371, NCC). 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 repurchase is unusually inadequate; (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 case
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. (Art. 1602, NCC)