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PHILIPPINE CHRISTIAN UNIVERSITY


COLLEGE OF LAW
AY 2013-2014

REAL ESTATE TRANSACTIONS
Outline and Case Assignments
Sale of Real Property

A. Introduction: Section 51, Republic Act 1529

B. Requirements of Form
1. Unchuan v. Lozada, G.R. No. 172671, 16 April 2009
2. Estreller v. Ysmael, G.R. No. 170264, 12 March 2009

C. Sale of Conjugal Real Property
1. Guiang v. Court of Appeals, G.R. No. 125172, 26 June 1998
2. Felipe v. Aldon, G.R. No. L-60174, 16 February 1983

D. Contract of Sale v. Contract to Sell
1. Ayala Life Assurance, Inc. v. Ray Burton Development Corp., G.R. No. 163075, 23 January 2006
2. Carrascoso v. Court of Appeals, G.R. No. 123672, 14 December 2005

E. Delivery of Real Property
1. De Leon v. Ong, G.R. No. 170405, 2 February 2010
2. San Lorenzo Development Corporation v. Court of Appeals, G.R. No. 124242, 21 January 2005
3. Agricultural Credit Cooperative Association v. Yusay, G.R. No. L-13313, 28 April 1960

F. Double Sales
1. Fudot v. Cattleya Land, Inc., G.R. No. 171008, 13 September 2007
2. Liao v. Court of Appeals, G.R. Nos. 102961-62, 27 January 2000
3. Naawan Community Rural Bank, Inc. v. Court of Appeals, G.R. No. 128573, 13 January 2003
4. Gatioan v. Gaffud, G.R. No. L-21953, 28 March 1969
5. Solid Homes, Inc. v. Spouses Tan, G.R. Nos. 145156-57, 29 July 2005
6. Laperal v. Solid Homes, Inc., G.R. No. 130913, 21 June 2005
7. Santos v. Court of Appeals, G.R. No. 120820, 1 August 2000

G. Sale of Real Property in Installments
1. Republic Act No. 6552, Realty Installment Buyer Protection Act
2. Rillo v. Court of Appeals, G.R. No. 125347, 19 June 1997
3. Levy Hermanos, Inc. v. Gervacio, G.R. No. L-46306, 27 October 1939
4. Lagandaon v. Court of Appeals, G.R. Nos. 102526-31, 21 May 1998
5. Leao v. Court of Appeals, G.R. No. 129018, 15 November 2001
6. Active Realty and Development Corporation v. Daroya, G.R. No. 141205, 9 May 2002
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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 172671 April 16, 2009
MARISSA R. UNCHUAN, Petitioner,
vs.
ANTONIO J.P. LOZADA, ANITA LOZADA and THE REGISTER OF DEEDS OF CEBU CITY, Respondents.
D E C I S I O N
QUISUMBING, J .:
For review are the Decision
1
dated February 23, 2006 and Resolution
2
dated April 12, 2006 of the Court of Appeals in
CA-G.R. CV. No. 73829. The appellate court had affirmed with modification the Order
3
of the Regional Trial Court
(RTC) of Cebu City, Branch 10 reinstating its Decision
4
dated June 9, 1997.
The facts of the case are as follows:
Sisters Anita Lozada Slaughter and Peregrina Lozada Saribay were the registered co-owners of Lot Nos. 898-A-3 and
898-A-4 covered by Transfer Certificates of Title (TCT) Nos. 53258
5
and 53257
6
in Cebu City.
The sisters, who were based in the United States, sold the lots to their nephew Antonio J.P. Lozada (Antonio) under a
Deed of Sale
7
dated March 11, 1994. Armed with a Special Power of Attorney
8
from Anita, Peregrina went to the house of
their brother, Dr. Antonio Lozada (Dr. Lozada), located at 4356 Faculty Avenue, Long Beach California.
9
Dr. Lozada
agreed to advance the purchase price of US$367,000 or P10,000,000 for Antonio, his nephew. The Deed of Sale was later
notarized and authenticated at the Philippine Consuls Office. Dr. Lozada then forwarded the deed, special power of
attorney, and owners copies of the titles to Antonio in the Philippines. Upon receipt of said documents, the latter recorded
the sale with the Register of Deeds of Cebu. Accordingly, TCT Nos. 128322
10
and 128323
11
were issued in the name of
Antonio Lozada.
Pending registration of the deed, petitioner Marissa R. Unchuan caused the annotation of an adverse claim on the lots.
Marissa claimed that Anita donated an undivided share in the lots to her under an unregistered Deed of Donation
12
dated
February 4, 1987.
Antonio and Anita brought a case against Marissa for quieting of title with application for preliminary injunction and
restraining order. Marissa for her part, filed an action to declare the Deed of Sale void and to cancel TCT Nos. 128322 and
128323. On motion, the cases were consolidated and tried jointly.
At the trial, respondents presented a notarized and duly authenticated sworn statement, and a videotape where Anita
denied having donated land in favor of Marissa. Dr. Lozada testified that he agreed to advance payment for Antonio in
preparation for their plan to form a corporation. The lots are to be eventually infused in the capitalization of Damasa
Corporation, where he and Antonio are to have 40% and 60% stake, respectively. Meanwhile, Lourdes G. Vicencio, a
witness for respondents confirmed that she had been renting the ground floor of Anitas house since 1983, and tendering
rentals to Antonio.
For her part, Marissa testified that she accompanied Anita to the office of Atty. Cresencio Tomakin for the signing of the
Deed of Donation. She allegedly kept it in a safety deposit box but continued to funnel monthly rentals to Peregrinas
account.
A witness for petitioner, one Dr. Cecilia Fuentes, testified on Peregrinas medical records. According to her interpretation
of said records, it was physically impossible for Peregrina to have signed the Deed of Sale on March 11, 1994, when she
was reported to be suffering from edema. Peregrina died on April 4, 1994.
In a Decision dated June 9, 1997, RTC Judge Leonardo B. Caares disposed of the consolidated cases as follows:
WHEREFORE, judgment is hereby rendered in Civil Case No. CEB-16145, to wit:
1. Plaintiff Antonio J.P. Lozada is declared the absolute owner of the properties in question;
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2. The Deed of Donation (Exh. "9") is declared null and void, and Defendant Marissa R. Unchuan is directed to
surrender the original thereof to the Court for cancellation;
3. The Register of Deeds of Cebu City is ordered to cancel the annotations of the Affidavit of Adverse Claim of
defendant Marissa R. Unchuan on TCT Nos. 53257 and 53258 and on such all other certificates of title issued in
lieu of the aforementioned certificates of title;
4. Defendant Marissa R. Unchuan is ordered to pay Antonio J.P. Lozada and Anita Lozada Slaughter the sum of
P100,000.00 as moral damages; exemplary damages of P50,000.00; P50,000.00 for litigation expenses and
attorneys fees of P50,000.00; and
5. The counterclaims of defendant Marissa R. Unchuan [are] DISMISSED.
In Civil Case No. CEB-16159, the complaint is hereby DISMISSED.
In both cases, Marissa R. Unchuan is ordered to pay the costs of suit.
SO ORDERED.
13

On motion for reconsideration by petitioner, the RTC of Cebu City, Branch 10, with Hon. Jesus S. dela Pea as Acting
Judge, issued an Order
14
dated April 5, 1999. Said order declared the Deed of Sale void, ordered the cancellation of the
new TCTs in Antonios name, and directed Antonio to pay Marissa P200,000 as moral damages, P100,000 as exemplary
damages, P100,000 attorneys fees and P50,000 for expenses of litigation. The trial court also declared the Deed of
Donation in favor of Marissa valid. The RTC gave credence to the medical records of Peregrina.
Respondents moved for reconsideration. On July 6, 2000, now with Hon. Soliver C. Peras, as Presiding Judge, the RTC of
Cebu City, Branch 10, reinstated the Decision dated June 9, 1997, but with the modification that the award of damages,
litigation expenses and attorneys fees were disallowed.
Petitioner appealed to the Court of Appeals. On February 23, 2006 the appellate court affirmed with modification the July
6, 2000 Order of the RTC. It, however, restored the award of P50,000 attorneys fees and P50,000 litigation expenses to
respondents.
Thus, the instant petition which raises the following issues:
I.
WHETHER THE COURT OF APPEALS ERRED AND VIOLATED PETITIONERS RIGHT TO DUE PROCESS
WHEN IT FAILED TO RESOLVE PETITIONERS THIRD ASSIGNED ERROR.
II.
WHETHER THE HONORABLE SUPREME COURT MAY AND SHOULD REVIEW THE CONFLICTING
FACTUAL FINDINGS OF THE HONORABLE REGIONAL TRIAL COURT IN ITS OWN DECISION AND
RESOLUTIONS ON THE MOTIONS FOR RECONSIDERATION, AND THAT OF THE HONORABLE COURT OF
APPEALS.
III.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CASE IS
BARRED BY LACHES.
IV.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF DONATION
EXECUTED IN FAVOR OF PETITIONER IS VOID.
V.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT ANITA LOZADAS
VIDEOTAPED STATEMENT IS HEARSAY.
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Simply stated, the issues in this appeal are: (1) Whether the Court of Appeals erred in upholding the Decision of the RTC
which declared Antonio J.P. Lozada the absolute owner of the questioned properties; (2) Whether the Court of Appeals
violated petitioners right to due process; and (3) Whether petitioners case is barred by laches.
Petitioner contends that the appellate court violated her right to due process when it did not rule on the validity of the sale
between the sisters Lozada and their nephew, Antonio. Marissa finds it anomalous that Dr. Lozada, an American citizen,
had paid the lots for Antonio. Thus, she accuses the latter of being a mere dummy of the former. Petitioner begs the Court
to review the conflicting factual findings of the trial and appellate courts on Peregrinas medical condition on March 11,
1994 and Dr. Lozadas financial capacity to advance payment for Antonio. Likewise, petitioner assails the ruling of the
Court of Appeals which nullified the donation in her favor and declared her case barred by laches. Petitioner finally
challenges the admissibility of the videotaped statement of Anita who was not presented as a witness.
On their part, respondents pray for the dismissal of the petition for petitioners failure to furnish the Register of Deeds of
Cebu City with a copy thereof in violation of Sections 3
16
and 4,
17
Rule 45 of the Rules. In addition, they aver that
Peregrinas unauthenticated medical records were merely falsified to make it appear that she was confined in the hospital
on the day of the sale. Further, respondents question the credibility of Dr. Fuentes who was neither presented in court as
an expert witness
18
nor professionally involved in Peregrinas medical care.
Further, respondents impugn the validity of the Deed of Donation in favor of Marissa. They assert that the Court of
Appeals did not violate petitioners right to due process inasmuch as it resolved collectively all the factual and legal issues
on the validity of the sale.
Faithful adherence to Section 14,
19
Article VIII of the 1987 Constitution is indisputably a paramount component of due
process and fair play. The parties to a litigation should be informed of how it was decided, with an explanation of the
factual and legal reasons that led to the conclusions of the court.
20

In the assailed Decision, the Court of Appeals reiterates the rule that a notarized and authenticated deed of sale enjoys the
presumption of regularity, and is admissible without further proof of due execution. On the basis thereof, it declared
Antonio a buyer in good faith and for value, despite petitioners contention that the sale violates public policy. While it is
a part of the right of appellant to urge that the decision should directly meet the issues presented for resolution,
21
mere
failure by the appellate court to specify in its decision all contentious issues raised by the appellant and the reasons for
refusing to believe appellants contentions is not sufficient to hold the appellate courts decision contrary to the
requirements of the law
22
and the Constitution.
23
So long as the decision of the Court of Appeals contains the necessary
findings of facts to warrant its conclusions, we cannot declare said court in error if it withheld "any specific findings of
fact with respect to the evidence for the defense."
24
We will abide by the legal presumption that official duty has been
regularly performed,
25
and all matters within an issue in a case were laid down before the court and were passed upon by
it.
26

In this case, we find nothing to show that the sale between the sisters Lozada and their nephew Antonio violated the
public policy prohibiting aliens from owning lands in the Philippines. Even as Dr. Lozada advanced the money for the
payment of Antonios share, at no point were the lots registered in Dr. Lozadas name. Nor was it contemplated that the
lots be under his control for they are actually to be included as capital of Damasa Corporation. According to their
agreement, Antonio and Dr. Lozada are to hold 60% and 40% of the shares in said corporation, respectively. Under
Republic Act No. 7042,
27
particularly Section 3,
28
a corporation organized under the laws of the Philippines of which at
least 60% of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines, is
considered a Philippine National. As such, the corporation may acquire disposable lands in the Philippines. Neither did
petitioner present proof to belie Antonios capacity to pay for the lots subjects of this case.
Petitioner, likewise, calls on the Court to ascertain Peregrinas physical ability to execute the Deed of Sale on March 11,
1994. This essentially necessitates a calibration of facts, which is not the function of this Court.
29
Nevertheless, we have
sifted through the Decisions of the RTC and the Court of Appeals but found no reason to overturn their factual findings.
Both the trial court and appellate court noted the lack of substantial evidence to establish total impossibility for Peregrina
to execute the Deed of Sale.
In support of its contentions, petitioner submits a copy of Peregrinas medical records to show that she was confined at the
Martin Luther Hospital from February 27, 1994 until she died on April 4, 1994. However, a Certification
30
from Randy E.
Rice, Manager for the Health Information Management of the hospital undermines the authenticity of said medical
records. In the certification, Rice denied having certified or having mailed copies of Peregrinas medical records to the
Philippines. As a rule, a document to be admissible in evidence, should be previously authenticated, that is, its due
execution or genuineness should be first shown.
31
Accordingly, the unauthenticated medical records were excluded from
the evidence. Even assuming that Peregrina was confined in the cited hospital, the Deed of Sale was executed on March
11, 1994, a month before Peregrina reportedly succumbed to Hepato Renal Failure caused by Septicemia due to
Myflodysplastic Syndrome.
32
Nothing in the records appears to show that Peregrina was so incapacitated as to prevent her
from executing the Deed of Sale. Quite the contrary, the records reveal that close to the date of the sale, specifically on
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March 9, 1994, Peregrina was even able to issue checks
33
to pay for her attorneys professional fees and her own hospital
bills. At no point in the course of the trial did petitioner dispute this revelation.
Now, as to the validity of the donation, the provision of Article 749 of the Civil Code is in point:
art. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying
therein the property donated and the value of the charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect
unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step
shall be noted in both instruments.
When the law requires that a contract be in some form in order that it may be valid or enforceable, or that a contract be
proved in a certain way, that requirement is absolute and indispensable.
34
Here, the Deed of Donation does not appear to
be duly notarized. In page three of the deed, the stamped name of Cresencio Tomakin appears above the words Notary
Public until December 31, 1983 but below it were the typewritten words Notary Public until December 31, 1987. A closer
examination of the document further reveals that the number 7 in 1987 and Series of 1987 were merely superimposed.
35

This was confirmed by petitioners nephew Richard Unchuan who testified that he saw petitioners husband write 7 over
1983 to make it appear that the deed was notarized in 1987. Moreover, a Certification
36
from Clerk of Court Jeoffrey S.
Joaquino of the Notarial Records Division disclosed that the Deed of Donation purportedly identified in Book No. 4,
Document No. 48, and Page No. 35 Series of 1987 was not reported and filed with said office. Pertinent to this, the Rules
require a party producing a document as genuine which has been altered and appears to have been altered after its
execution, in a part material to the question in dispute, to account for the alteration. He may show that the alteration was
made by another, without his concurrence, or was made with the consent of the parties affected by it, or was otherwise
properly or innocently made, or that the alteration did not change the meaning or language of the instrument. If he fails to
do that, the document shall, as in this case, not be admissible in evidence.
37
1avvphi1
Remarkably, the lands described in the Deed of Donation are covered by TCT Nos. 73645
38
and 73646,
39
both of which
had been previously cancelled by an Order
40
dated April 8, 1981 in LRC Record No. 5988. We find it equally puzzling
that on August 10, 1987, or six months after Anita supposedly donated her undivided share in the lots to petitioner, the
Unchuan Development Corporation, which was represented by petitioners husband, filed suit to compel the Lozada
sisters to surrender their titles by virtue of a sale. The sum of all the circumstances in this case calls for no other
conclusion than that the Deed of Donation allegedly in favor of petitioner is void. Having said that, we deem it
unnecessary to rule on the issue of laches as the execution of the deed created no right from which to reckon delay in
making any claim of rights under the instrument.
Finally, we note that petitioner faults the appellate court for not excluding the videotaped statement of Anita as hearsay
evidence. Evidence is hearsay when its probative force depends, in whole or in part, on the competency and credibility of
some persons other than the witness by whom it is sought to be produced. There are three reasons for excluding hearsay
evidence: (1) absence of cross-examination; (2) absence of demeanor evidence; and (3) absence of oath.
41
It is a hornbook
doctrine that an affidavit is merely hearsay evidence where its maker did not take the witness stand.
42
Verily, the sworn
statement of Anita was of this kind because she did not appear in court to affirm her averments therein. Yet, a more
circumspect examination of our rules of exclusion will show that they do not cover admissions of a party;
43
the videotaped
statement of Anita appears to belong to this class. Section 26 of Rule 130 provides that "the act, declaration or omission of
a party as to a relevant fact may be given in evidence against him. It has long been settled that these admissions are
admissible even if they are hearsay.
44
Indeed, there is a vital distinction between admissions against interest and
declaration against interest. Admissions against interest are those made by a party to a litigation or by one in privity with
or identified in legal interest with such party, and are admissible whether or not the declarant is available as a witness.
Declaration against interest are those made by a person who is neither a party nor in privity with a party to the suit, are
secondary evidence and constitute an exception to the hearsay rule. They are admissible only when the declarant is
unavailable as a witness.
45
Thus, a mans acts, conduct, and declaration, wherever made, if voluntary, are admissible
against him, for the reason that it is fair to presume that they correspond with the truth, and it is his fault if they do not.
46

However, as a further qualification, object evidence, such as the videotape in this case, must be authenticated by a special
testimony showing that it was a faithful reproduction.
47
Lacking this, we are constrained to exclude as evidence the
videotaped statement of Anita. Even so, this does not detract from our conclusion concerning petitioners failure to prove,
by preponderant evidence, any right to the lands subject of this case.
Anent the award of moral damages in favor of respondents, we find no factual and legal basis therefor. Moral damages
cannot be awarded in the absence of a wrongful act or omission or fraud or bad faith. When the action is filed in good
faith there should be no penalty on the right to litigate. One may have erred, but error alone is not a ground for moral
damages.
48
The award of moral damages must be solidly anchored on a definite showing that respondents actually
experienced emotional and mental sufferings. Mere allegations do not suffice; they must be substantiated by clear and
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convincing proof.
49
As exemplary damages can be awarded only after the claimant has shown entitlement to moral
damages,
50
neither can it be granted in this case.
WHEREFORE, the instant petition is DENIED. The Decision dated February 23, 2006, and Resolution dated April 12,
2006 of the Court of Appeals in CA-G.R. CV. No. 73829 are AFFIRMED with MODIFICATION. The awards of moral
damages and exemplary damages in favor of respondents are deleted. No pronouncement as to costs.
SO ORDERED.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
WE CONCUR:
CONCHITA CARPIO MORALES
Republic of the Philippines
Supreme Court
Manila


THIRD DIVISION


JAMES ESTRELLER, EDUARDO G.R. No. 170264
CULIANAN, GREG CARROS,
RAQUEL YEE, JOSELITO
PENILLA, LORNA DOTE,
CRESENCIANA CLEOPAS, Present:
TRINIDAD TEVES, SONIA
PENILLA, ANITA GOMINTONG, YNARES-SANTIAGO, J.,
CHING DIONESIO, MARIBEL Chairperson,
MANALO, DESIRES HUERTO, AUSTRIA-MARTINEZ,
and RAYMUNDO CORTES, CHICO-NAZARIO,
Petitioners, NACHURA, and
PERALTA, JJ.
- versus -

LUIS MIGUEL YSMAEL and
CRISTETA L. SANTOS-ALVAREZ, Promulgated:
Respondents.- March 13, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x





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D E C I S I O N


AUSTRIA-MARTINEZ, J .:

In the present petition, the Court finds occasion to reassert the legal precepts that a co-owner may file an action for recovery of
possession without the necessity of joining all the other co-owners as co-plaintiffs since the suit is deemed to be instituted for the benefit of
all; and that Section 2 of Presidential Decree (P.D.) No. 2016, reinforced by P.D. No. 1517, which prohibits the eviction of qualified
tenants/occupants, extends only to landless urban families who are rightful occupants of the land and its structures, and does not include
those whose presence on the land is merely tolerated and without the benefit of contract, those who enter the land by force or deceit, or
those whose possession is under litigation.

Respondents filed with the Regional Trial Court (RTC), Branch 216, Quezon City, a case for Recovery of Possession against
petitioners, claiming ownership of the property subject of dispute located in E. Rodriguez Avenue and La Filonila Streets in Quezon City,
by virtue of Transfer Certificate of Title (TCT) No. 41698 issued by the Register of Deeds of Quezon City on June 10, 1958.
Respondents alleged that on various dates in 1973, petitioners entered the property through stealth and strategy and had since occupied the
same; and despite demands made in March 1993, petitioners refused to vacate the premises, prompting respondents to file the action.1[1]

Petitioners denied respondents' allegations. According to them, respondent Luis Miguel Ysmael (Ysmael) had no personality to
file the suit since he only owned a small portion of the property, while respondent Cristeta Santos-Alvarez (Alvarez) did not appear to be
a registered owner thereof. Petitioners also contended that their occupation of the property was lawful, having leased the same from the
Magdalena Estate, and later on from Alvarez. Lastly, petitioners asserted that the property has already been proclaimed by the Quezon
City Government as an Area for Priority Development under P. D. Nos. 1517 and 2016, which prohibits the eviction of lawful tenants
and demolition of their homes.2[2]

After trial, the RTC rendered its Decision dated September 15, 2000 in favor of respondents. The dispositive portion of the
Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs Luis Miguel Ysmael and Cristeta
L. Santos-Alvarez and against defendants ordering the latter and all persons claiming rights under them to immediately
vacate the subject property and peacefully surrender the same to the plaintiffs.

Defendants are likewise ordered to pay plaintiffs the following:

1. The amount of P400.00 each per month from the date of extra-judicial demand until
the subject property is surrendered to plaintiffs as reasonable compensation for the use
and possession thereof;
2. The amount of P20,000.00 by way of exemplary damages;
3. The amount of P20,000.00 by way of attorney's fees and litigation expenses;





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4. Cost of suit.

Corollarily, the counter-claims of defendants are hereby DISMISSED for lack of merit.

SO ORDERED.3[3]

Petitioners appealed to the Court of Appeals (CA), which, in a Decision4[4] dated March 14, 2005, dismissed their appeal and
affirmed in toto the RTC Decision.

Hence, the present petition for review under Rule 45 of the Rules of Court, on the following grounds:

I
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENTS YSMAEL
AND ALVAREZ ARE BOTH REAL PARTIES IN INTEREST WHO WOULD BE BENEFITED OR INJURED BY
THE JUDGMENT OR THE PARTY ENTITLED TO THE AVAILS OF THE SUIT.

II
THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER AND DECIDE THE RELEVANT
QUESTIONS AND ISSUES PRESENTED BY THE PETITIONERS IN ROMAN NUMERALS II, III AND IV OF
THEIR DISCUSSIONS AND ARGUMENTS IN THE APPELLANTS BRIEF WHICH ARE HEREUNTO COPIED OR
REPRODUCED.5[5]

The present petition merely reiterates the issues raised and settled by the RTC and the CA. On this score, it is well to emphasize
the rule that the Courts role in a petition under Rule 45 is limited to reviewing or reversing errors of law allegedly committed by the
appellate court. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties. Since such findings
are generally not reviewable, this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the
proceedings below, unless the factual findings complained of are devoid of support from the evidence on record or the assailed judgment
is based on a misapprehension of facts.6[6]

The Court then finds that the petition is without merit.









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Respondents are real parties-in-interest in the suit below and may, therefore, commence the complaint for accion publiciana.
On the part of Ysmael, he is a named co-owner of the subject property under TCT No. 41698, together with Julian Felipe Ysmael, Teresa
Ysmael, and Ramon Ysmael.7[7] For her part, Alvarez was a buyer of a portion of the property, as confirmed in several documents,
namely: (1) Decision dated August 30, 1974 rendered by the Regional Trial Court of Quezon City, Branch 9 (IX), in Civil Case No. Q-
8426, which was based on a Compromise Agreement between Alvarez and the Magdalena Estate;8[8] (2) an unnotarized Deed of
Absolute Sale dated May 1985 executed between the Ysmael Heirs and Alvarez;9[9] and (3) a notarized Memorandum of Agreement
between the Ysmael Heirs and Alvarez executed on May 2, 1991.10[10]

Recently, in Wee v. De Castro,11[11] the Court, citing Article 487 of the Civil Code, reasserted the rule that any one of the co-
owners may bring any kind of action for the recovery of co-owned properties since the suit is presumed to have been filed for the benefit
of all co-owners. The Court also stressed that Article 487 covers all kinds of action for the recovery of possession, i.e., forcible entry and
unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de reivindicacion),
thus:

In the more recent case of Carandang v. Heirs of De Guzman,this Court declared that a co-owner is not even a necessary
party to an action for ejectment, for complete relief can be afforded even in his absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may
bring an action, any kind of action for the recovery of co-owned properties. Therefore, only one
of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a complete relief can be afforded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all co-
owners. (Emphasis supplied)

Petitioners persistently question the validity of the transfer of ownership to Alvarez. They insist that Alvarez failed to establish
any right over the property since the Deed of Absolute Sale was not inscribed on TCT No. 41698. Interestingly, petitioners debunked
their own argument when they themselves claimed in their Answer with Counter-claim that they derived their right to occupy the
property from a lease agreement with, first, the Magdalena Estate, and thereafter, Alvarez herself.12[12] More importantly, the fact that
the sale was not annotated or inscribed on TCT No. 41698 does not make it any less valid. A contract of sale has the force of law
between the contracting parties and they are expected to abide, in good faith, by their respective contractual commitments. Article 1358
of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience; and registration of













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the instrument only adversely affects third parties, and non-compliance therewith does not adversely affect the validity of the contract or
the contractual rights and obligations of the parties thereunder.13[13]

Petitioners further contend that the property subject of the Deed of Absolute Sale Lot 6, Block 4 of Subd. Plan Psd No. 33309
is different from that being claimed in this case, which are Lots 2 and 3. They claim that there exists another title covering the subject
property, i.e., TCT No. 41698 in the names of Victoria M. Panganiban and Teodoro M. Panganiban.

Notably, TCT No. 41698 in the name of the Ysmael Heirs covers several parcels of land under Subd. Plan Psd No. 33309.
These include: Lot 2, Block 4; Lot 3, Block 4; and Lot 6, Block 4, each of which contains 1,000 square meters. In the Decision dated
August 30, 1974 rendered by the RTC of Quezon City, Branch 9, in Civil Case No. Q-8426, the ownership of 200 square meters of Lot 2,
Block 4; 250 square meters of Lot 3, Block 4; and the full 1,000 square meters of Lot 6, Block 4, was conferred on Alvarez. A Deed of
Absolute Sale dated May 1985 was later executed by the Ysmael Heirs in favor of Alvarez, but it covered only Lot 6, Block 4.
Nevertheless, a Memorandum of Agreement dated May 2, 1991 was subsequently entered into by the Ysmael Heirs and Alvarez,
whereby all three apportioned parcels of land allocated to Alvarez under the RTC Decision dated August 30, 1974, were finally sold,
transferred and conveyed to her. Evidently, while the title was yet to be registered in the name of Alvarez, for all intents and purposes,
however, the subject property was already owned by her. The Ysmael Heirs are merely naked owners of the property, while Alvarez is
already the beneficial or equitable owner thereof; and the right to the gains, rewards and advantages generated by the property pertains to
her.

The existence of a title in the same TCT No. 41698, this time in the names of Victoria M. Panganiban and Teodoro M.
Panganiban, was adequately explained by the Certification of the Register of Deeds dated March 1, 1994, and which reads:

At the instance of RUY ALBERTO S. RONDAIN, I, SAMUEL C. CLEOFE, Register of Deeds of Quezon City, do
hereby certify that TCT No. 41698, covering Lot 19, Blk. 8 of the cons.-subd. plan Pos-817, with an area of Three
Hundred Seventy Five (375) Square Meters, registered in the name of VICTORIA M. PANGANIBAN; and TEODORO
M. PANGANIBAN, married to Elizabeth G. Panganiban, issued on February 8, 1991, is existing and on file in this
Registry.

This is to certify further that TCT No. 41698 presented by Ruy Alberto S. Rondain covering Lot 3, Blk. 2 of the subd.
Plan PSD-3309, with an area of Nine Hundred Ninety Six (996) Square Meters, issued on June 10, 1958 and registered in
the name of JUAN FELIPE YSMAEL, TERESA YSMAEL, RAMON YSMAEL, LUIS MIGUEL YSMAEL, which
is also an existing title is different and distinct from each other inasmuch as they cover different Lots and Plans.

That it is further certified that the similarity in the title numbers is due to the fact that after the fire of June 11, 1988,
the Quezon City Registry issued new title numbers beginning with TCT No. 1.14[14] (Emphasis supplied)

Finally, petitioners' claim that they are entitled to the protection against eviction and demolition afforded by P.D. Nos.
2016,15[15] 1517,16[16] and Republic Act (R.A.) No. 7279,17[17] is not plausible.







Page | 11


Section 6 of P.D. No. 1517 grants preferential rights to landless tenants/occupants to acquire land within urban land reform
areas, while Section 2 of P.D. No. 2016 prohibits the eviction of qualified tenants/ occupants.

In Dimaculangan v. Casalla,18[18] the Court was emphatic in ruling that the protective mantle of P.D. No. 1517 and P.D. No.
2016 extends only to landless urban families who meet these qualifications: a) they are tenants as defined under Section 3(f) of P.D. No.
1517; b) they built a home on the land they are leasing or occupying; c) the land they are leasing or occupying is within an Area for
Priority Development and Urban Land Reform Zone; and d) they have resided on the land continuously for the last 10 years or more.

Section 3(f) of P.D. No. No. 1517 defines the term "tenant" covered by the said decree as the rightful occupant of land and its
structures, but does not include those whose presence on the land is merely tolerated and without the benefit of contract, those who enter
the land by force or deceit, or those whose possession is under litigation. It has already been ruled that occupants of the land whose
presence therein is devoid of any legal authority, or those whose contracts of lease were already terminated or had already expired, or
whose possession is under litigation, are not considered "tenants" under the Section 3(f).19[19]

Petitioners claim that they are lawful lessees of the property. However, they failed to prove any lease relationship or, at the very
least, show with whom they entered the lease contract. Respondents, on the other hand, were able to prove their right to enjoy possession
of the property. Thus, petitioners, whose occupation of the subject property by mere tolerance has been terminated by respondents,
clearly do not qualify as tenants covered by these social legislations.

Finally, petitioners failed to demonstrate that they qualify for coverage under R. A. No. 7279 or the Urban Development and
Housing Act of 1992.

R. A. No. 7279 provides for the procedure to be undertaken by the concerned local governments in the urban land development
process, to wit: conduct an inventory of all lands and improvements within their respective localities, and in coordination with the
National Housing Authority, the Housing and Land Use Regulatory Board, the National Mapping Resource Information Authority, and
the Land Management Bureau; identify lands for socialized housing and resettlement areas for the immediate and future needs of the
underprivileged and homeless in the urban areas; acquire the lands; and dispose of said lands to the beneficiaries of the program.20[20]
While there is a Certification that the area bounded by E. Rodriguez, Victoria Avenue, San Juan River and 10
th
Street of Barangay.
Damayang Lagi, Quezon City is included in the list of Areas for Priority Development under Presidential Proclamation No. 1967,21[21]













Page | 12

there is no showing that the property has already been acquired by the local government for this purpose; or that petitioners have duly
qualified as beneficiaries.

All told, the Court finds no reason to grant the present petition.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated March 14, 2005 of the Court of Appeals is
AFFIRMED.

SO ORDERED.
Page | 13

FIRST DIVISION
[G.R. No. 125172. June 26, 1998]
Spouses ANTONIO and LUZVIMINDA GUIANG, petitioners, vs. COURT OF APPEALS and GILDA CORPUZ,
respondents.
D E C I S I O N
PANGANIBAN, J.:
The sale of a conjugal property requires the consent of both the husband and the wife. The absence of the
consent of one renders the sale null and void, while the vitiation thereof makes it merely voidable. Only in the
latter case can ratification cure the defect.
The Case

These were the principles that guided the Court in deciding this petition for review of the Decisioni[1] dated
January 30, 1996 and the Resolutionii[2] dated May 28, 1996, promulgated by the Court of Appeals in CA-GR
CV No. 41758, affirming the Decision of the lower court and denying reconsideration, respectively.
On May 28, 1990, Private Respondent Gilda Corpuz filed an Amended Complaintiii[3] against her husband
Judie Corpuz and Petitioners-Spouses Antonio and Luzviminda Guiang. The said Complaint sought the
declaration of a certain deed of sale, which involved the conjugal property of private respondent and her
husband, null and void. The case was raffled to the Regional Trial Court of Koronadal, South Cotabato,
Branch 25. In due course, the trial court rendered a Decisioniv[4] dated September 9, 1992, disposing as
follows:v[5]
ACCORDINGLY, judgment is rendered for the plaintiff and against the defendants,
1. Declaring both the Deed of Transfer of Rights dated March 1, 1990 (Exh. A) and the amicable
settlement dated March 16, 1990 (Exh. B) as null and void and of no effect;
2. Recognizing as lawful and valid the ownership and possession of plaintiff Gilda Corpuz over the
remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409 which has been the subject of the Deed of
Transfer of Rights (Exh. A);
3. Ordering plaintiff Gilda Corpuz to reimburse defendants Luzviminda and Antonio Guiang the amount of
NINE THOUSAND (P9,000.00) PESOS corresponding to the payment made by defendants Guiangs to Manuel
Callejo for the unpaid balance of the account of plaintiff in favor of Manuel Callejo, and another sum of P379.62
representing one-half of the amount of realty taxes paid by defendants Guiangs on Lot 9, Block 8, (LRC) Psd-
165409, both with legal interests thereon computed from the finality of the decision.
No pronouncement as to costs in view of the factual circumstances of the case.
Dissatisfied, petitioners-spouses filed an appeal with the Court of Appeals. Respondent Court, in its
challenged Decision, ruled as follows:vi[6]
WHEREFORE, the appealed decision of the lower court in Civil Case No. 204 is hereby AFFIRMED
by this Court. No costs considering plaintiff-appellees failure to file her brief, despite notice.
Reconsideration was similarly denied by the same court in its assailed Resolution:vii[7]
Finding that the issues raised in defendants-appellants motion for reconsideration of Our decision in
this case of January 30, 1996, to be a mere rehash of the same issues which We have already passed
upon in the said decision, and there [being] no cogent reason to disturb the same, this Court
RESOLVES to DENY the instant motion for reconsideration for lack of merit.
The Facts

The facts of this case are simple. Over the objection of private respondent and while she was in Manila
seeking employment, her husband sold to the petitioners-spouses one half of their conjugal property,
Page | 14

consisting of their residence and the lot on which it stood. The circumstances of this sale are set forth in the
Decision of Respondent Court, which quoted from the Decision of the trial court, as follows:viii[8]
1. Plaintiff Gilda Corpuz and defendant Judie Corpuz are legally married spouses. They were married
on December 24, 1968 in Bacolod City, before a judge. This is admitted by defendants-spouses
Antonio and Luzviminda Guiang in their answer, and also admitted by defendant Judie Corpuz when
he testified in court (tsn. p..3, June 9, 1992), although the latter says that they were married in 1967.
The couple have three children, namely: Junie 18 years old, Harriet 17 years of age, and Jodie or
Joji, the youngest, who was 15 years of age in August, 1990 when her mother testified in court.
Sometime on February 14, 1983, the couple Gilda and Judie Corpuz, with plaintiff-wife Gilda Corpuz
as vendee, bought a 421 sq. meter lot located in Barangay Gen. Paulino Santos (Bo. 1), Koronadal,
South Cotabato, and particularly known as Lot 9, Block 8, (LRC) Psd-165409 from Manuel Callejo who
signed as vendor through a conditional deed of sale for a total consideration of P14,735.00. The
consideration was payable in installment, with right of cancellation in favor of vendor should vendee fail
to pay three successive installments (Exh. 2, tsn. p. 6, February 14, 1990).
2. Sometime on April 22, 1988, the couple Gilda and Judie Corpuz sold one-half portion of their Lot
No. 9, Block 8, (LRC) Psd-165409 to the defendants-spouses Antonio and Luzviminda Guiang. The
latter have since then occupied the one-half portion [and] built their house thereon (tsn. p. 4, May 22,
1992). They are thus adjoining neighbors of the Corpuzes.
3. Plaintiff Gilda Corpuz left for Manila sometime in June 1989. She was trying to look for work
abroad, in [the] Middle East. Unfortunately, she became a victim of an unscrupulous illegal recruiter.
She was not able to go abroad. She stayed for sometime in Manila however, coming back to
Koronadal, South Cotabato, x x x on March 11, 1990. Plaintiffs departure for Manila to look for work in
the Middle East was with the consent of her husband Judie Corpuz (tsn. p. 16, Aug.12, 1990; p. 10,
Sept. 6, 1991).
After his wifes departure for Manila, defendant Judie Corpuz seldom went home to the conjugal
dwelling. He stayed most of the time at his place of work at Samahang Nayon Building, a hotel,
restaurant, and a cooperative. Daughter Harriet Corpuz went to school at Kings College, Bo. 1,
Koronadal, South Cotabato, but she was at the same time working as household help of, and staying
at, the house of Mr. Panes. Her brother Junie was not working. Her younger sister Jodie (Joji) was
going to school. Her mother sometimes sent them money (tsn. p. 14, Sept. 6, 1991).
Sometime in January 1990, Harriet Corpuz learned that her father intended to sell the remaining one-
half portion including their house, of their homelot to defendants Guiangs. She wrote a letter to her
mother informing her. She [Gilda Corpuz] replied that she was objecting to the sale. Harriet, however,
did not inform her father about this; but instead gave the letter to Mrs. Luzviminda Guiang so that she
[Guiang] would advise her father (tsn. pp. 16-17, Sept. 6, 1991).
4. However, in the absence of his wife Gilda Corpuz, defendant Judie Corpuz pushed through the sale
of the remaining one-half portion of Lot 9, Block 8, (LRC) Psd-165409. On March 1, 1990, he sold to
defendant Luzviminda Guiang thru a document known as Deed of Transfer of Rights (Exh. A) the
remaining one-half portion of their lot and the house standing thereon for a total consideration of
P30,000.00 of which P5,000.00 was to be paid in June , 1990. Transferor Judie Corpuzs children
Junie and Harriet signed the document as witnesses.
Four (4) days after March 1, 1990 or on March 5, 1990, obviously to cure whatever defect in defendant
Judie Corpuzs title over the lot transferred, defendant Luzviminda Guiang as vendee executed
another agreement over Lot 9, Block 8, (LRC) Psd-165408 (Exh. 3), this time with Manuela Jimenez
Callejo, a widow of the original registered owner from whom the couple Judie and Gilda Corpuz
originally bought the lot (Exh. 2), who signed as vendor for a consideration of P9,000.00. Defendant
Judie Corpuz signed as a witness to the sale (Exh. 3-A). The new sale (Exh. 3) describes the lot
sold as Lot 8, Block 9, (LRC) Psd-165408 but it is obvious from the mass of evidence that the correct
lot is Lot 8, Block 9, (LRC) Psd-165409, the very lot earlier sold to the couple Gilda and Judie Corpuz.
5. Sometime on March 11, 1990, plaintiff returned home. She found her children staying with other
households. Only Junie was staying in their house. Harriet and Joji were with Mr. Panes. Gilda
gathered her children together and stayed at their house. Her husband was nowhere to be found.
She was informed by her children that their father had a wife already.
6. For staying in their house sold by her husband, plaintiff was complained against by defendant
Luzviminda Guiang and her husband Antonio Guiang before the Barangay authorities of Barangay
General Paulino Santos (Bo. 1), Koronadal, South Cotabato, for trespassing (tsn. p. 34, Aug. 17,
1990). The case was docketed by the barangay authorities as Barangay Case No. 38 for
trespassing. On March 16, 1990, the parties thereat signed a document known as amicable
settlement. In full, the settlement provides for, to wit:
Page | 15

That respondent, Mrs. Gilda Corpuz and her three children, namely: Junie, Hariet and Judie
to leave voluntarily the house of Mr. and Mrs. Antonio Guiang, where they are presently
boarding without any charge, on or before April 7, 1990.
FAIL NOT UNDER THE PENALTY OF THE LAW.
Believing that she had received the shorter end of the bargain, plaintiff went to the Barangay Captain
of Barangay Paulino Santos to question her signature on the amicable settlement. She was referred
however to the Officer-In-Charge at the time, a certain Mr. de la Cruz. The latter in turn told her that
he could not do anything on the matter (tsn. p. 31, Aug. 17, 1990).
This particular point was not rebutted. The Barangay Captain who testified did not deny that Mrs.
Gilda Corpuz approached him for the annulment of the settlement. He merely said he forgot whether
Mrs. Corpuz had approached him (tsn. p. 13, Sept. 26, 1990). We thus conclude that Mrs. Corpuz
really approached the Barangay Captain for the annulment of the settlement. Annulment not having
been made, plaintiff stayed put in her house and lot.
7. Defendant-spouses Guiang followed thru the amicable settlement with a motion for the execution of
the amicable settlement, filing the same with the Municipal Trial Court of Koronadal, South Cotabato.
The proceedings [are] still pending before the said court, with the filing of the instant suit.
8. As a consequence of the sale, the spouses Guiang spent P600.00 for the preparation of the Deed
of Transfer of Rights, Exh. A; P9,000.00 as the amount they paid to Mrs. Manuela Callejo, having
assumed the remaining obligation of the Corpuzes to Mrs. Callejo (Exh. 3); P100.00 for the
preparation of Exhibit 3; a total of P759.62 basic tax and special educational fund on the lot; P127.50
as the total documentary stamp tax on the various documents; P535.72 for the capital gains tax;
P22.50 as transfer tax; a standard fee of P17.00; certification fee of P5.00. These expenses
particularly the taxes and other expenses towards the transfer of the title to the spouses Guiangs were
incurred for the whole Lot 9, Block 8, (LRC) Psd-165409.
Ruling of Respondent Court

Respondent Court found no reversible error in the trial courts ruling that any alienation or encumbrance by the
husband of the conjugal property without the consent of his wife is null and void as provided under Article 124
of the Family Code. It also rejected petitioners contention that the amicable settlement ratified said sale,
citing Article 1409 of the Code which expressly bars ratification of the contracts specified therein, particularly
those prohibited or declared void by law.
Hence, this petition.ix[9]
The Issues

In their Memorandum, petitioners assign to public respondent the following errors:x[10]
I
Whether or not the assailed Deed of Transfer of Rights was validly executed.
II
Whether or not the Court of Appeals erred in not declaring as voidable contract under Art. 1390 of the
Civil Code the impugned Deed of Transfer of Rights which was validly ratified thru the execution of the
amicable settlement by the contending parties.
III
Whether or not the Court of Appeals erred in not setting aside the findings of the Court a quo which
recognized as lawful and valid the ownership and possession of private respondent over the remaining
one half (1/2) portion of the subject property.
In a nutshell, petitioners-spouses contend that (1) the contract of sale (Deed of Transfer of Rights) was merely
voidable, and (2) such contract was ratified by private respondent when she entered into an amicable
settlement with them.
This Courts Ruling

Page | 16

The petition is bereft of merit.
First Issue: Void or Voidable Contract?

Petitioners insist that the questioned Deed of Transfer of Rights was validly executed by the parties-litigants
in good faith and for valuable consideration. The absence of private respondents consent merely rendered
the Deed voidable under Article 1390 of the Civil Code, which provides:
ART. 1390. The following contracts are voidable or annullable, even though there may have been no
damage to the contracting parties:
x x x x x x x x x
(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.(n)
The error in petitioners contention is evident. Article 1390, par. 2, refers to contracts visited by vices of
consent, i.e., contracts which were entered into by a person whose consent was obtained and vitiated through
mistake, violence, intimidation, undue influence or fraud. In this instance, private respondents consent to the
contract of sale of their conjugal property was totally inexistent or absent. Gilda Corpuz, on direct examination,
testified thus:xi[11]
Q Now, on March 1, 1990, could you still recall where you were?
A I was still in Manila during that time.
x x x x x x x x x
ATTY. FUENTES:
Q When did you come back to Koronadal, South Cotabato?
A That was on March 11, 1990, Maam.
Q Now, when you arrived at Koronadal, was there any problem which arose concerning the ownership of
your residential house at Callejo Subdivision?
A When I arrived here in Koronadal, there was a problem which arose regarding my residential house and
lot because it was sold by my husband without my knowledge.
This being the case, said contract properly falls within the ambit of Article 124 of the Family Code, which was
correctly applied by the two lower courts:
ART. 124. The administration and enjoyment of the conjugal partnership property shall belong to both
spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to
the court by the wife for proper remedy, which must be availed of within five years from the date of the
contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of
the conjugal properties, the other spouse may assume sole powers of administration. These powers
do not include the powers of disposition or encumbrance which must have the authority of the court or
the written consent of the other spouse. In the absence of such authority or consent, the disposition or
encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the
part of the consenting spouse and the third person, and may be perfected as a binding contract upon
the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either
or both offerors.(165a) (Italics supplied)
Comparing said law with its equivalent provision in the Civil Code, the trial court adroitly explained the
amendatory effect of the above provision in this wise:xii[12]
The legal provision is clear. The disposition or encumbrance is void. It becomes still clearer if we
compare the same with the equivalent provision of the Civil Code of the Philippines. Under Article 166
of the Civil Code, the husband cannot generally alienate or encumber any real property of the conjugal
Page | 17

partnership without the wifes consent. The alienation or encumbrance if so made however is not null
and void. It is merely voidable. The offended wife may bring an action to annul the said alienation or
encumbrance. Thus, the provision of Article 173 of the Civil Code of the Philippines, to wit:
Art. 173. The wife may, during the marriage and within ten years from the transaction
questioned, ask the courts for the annulment of any contract of the husband entered into
without her consent, when such consent is required, or any act or contract of the husband
which tends to defraud her or impair her interest in the conjugal partnership property. Should
the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may
demand the value of property fraudulently alienated by the husband.(n)
This particular provision giving the wife ten (10) years x x x during [the] marriage to annul the
alienation or encumbrance was not carried over to the Family Code. It is thus clear that any alienation
or encumbrance made after August 3, 1988 when the Family Code took effect by the husband of the
conjugal partnership property without the consent of the wife is null and void.
Furthermore, it must be noted that the fraud and the intimidation referred to by petitioners were perpetrated in
the execution of the document embodying the amicable settlement. Gilda Corpuz alleged during trial that
barangay authorities made her sign said document through misrepresentation and coercion.xiii[13] In any
event, its execution does not alter the void character of the deed of sale between the husband and the
petitioners-spouses, as will be discussed later. The fact remains that such contract was entered into without
the wifes consent.
In sum, the nullity of the contract of sale is premised on the absence of private respondents consent. To
constitute a valid contract, the Civil Code requires the concurrence of the following elements: (1) cause, (2)
object, and (3) consent,xiv[14] the last element being indubitably absent in the case at bar.
Second Issue: Amicable Settlement

Insisting that the contract of sale was merely voidable, petitioners aver that it was duly ratified by the
contending parties through the amicable settlement they executed on March 16, 1990 in Barangay Case No.
38.
The position is not well taken. The trial and the appellate courts have resolved this issue in favor of the private
respondent. The trial court correctly held:xv[15]
By the specific provision of the law [Art. 1390, Civil Code] therefore, the Deed of Transfer of Rights
(Exh. A) cannot be ratified, even by an amicable settlement. The participation by some barangay
authorities in the amicable settlement cannot otherwise validate an invalid act. Moreover, it cannot be
denied that the amicable settlement (Exh. B) entered into by plaintiff Gilda Corpuz and defendant
spouses Guiang is a contract. It is a direct offshoot of the Deed of Transfer of Rights (Exh. A). By
express provision of law, such a contract is also void. Thus, the legal provision, to wit:
Art. 1422. A contract which is the direct result of a previous illegal contract, is also void and
inexistent. (Civil Code of the Philippines).
In summation therefore, both the Deed of Transfer of Rights (Exh. A) and the amicable settlement
(Exh. 3) are null and void.
Doctrinally and clearly, a void contract cannot be ratified.xvi[16]
Neither can the amicable settlement be considered a continuing offer that was accepted and perfected by the
parties, following the last sentence of Article 124. The order of the pertinent events is clear: after the sale,
petitioners filed a complaint for trespassing against private respondent, after which the barangay authorities
secured an amicable settlement and petitioners filed before the MTC a motion for its execution. The
settlement, however, does not mention a continuing offer to sell the property or an acceptance of such a
continuing offer. Its tenor was to the effect that private respondent would vacate the property. By no stretch of
the imagination, can the Court interpret this document as the acceptance mentioned in Article 124.
WHEREFORE, the Court hereby DENIES the petition and AFFIRMS the challenged Decision and Resolution.
Costs against petitioners.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur.
Page | 18

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

ABAD SANTOS, J .:
Maximo Aldon married Gimena Almosara in 1936. The spouses bought several pieces of land sometime
between 1948 and 1950. In 1960-62, the lands were divided into three lots, 1370, 1371 and 1415 of the San
Jacinto Public Land Subdivision, San Jacinto, Masbate.
In 1951, Gimena Almosara sold the lots to the spouses Eduardo Felipe and Hermogena V. Felipe. The sale
was made without the consent of her husband, Maximo.
On April 26, 1976, the heirs of Maximo Aldon, namely his widow Gimena and their children Sofia and Salvador
Aldon, filed a complaint in the Court of First Instance of Masbate against the Felipes. The complaint which was
docketed as Civil Case No. 2372 alleged that the plaintiffs were the owners of Lots 1370, 1371 and 1415; that
they had orally mortgaged the same to the defendants; and an offer to redeem the mortgage had been refused
so they filed the complaint in order to recover the three parcels of land.
The defendants asserted that they had acquired the lots from the plaintiffs by purchase and subsequent
delivery to them. The trial court sustained the claim of the defendants and rendered the following judgment:
a. declaring the defendants to be the lawful owners of the property subject of the present
litigation;
b. declaring the complaint in the present action to be without merit and is therefore hereby
ordered dismissed;
c. ordering the plaintiffs to pay to the defendants the amount of P2,000.00 as reasonable
attorney's fees and to pay the costs of the suit.
The plaintiffs appealed the decision to the Court of Appeals which rendered the following judgment:
PREMISES CONSIDERED, the decision appealed from is hereby REVERSED and SET ASIDE,
and a new one is hereby RENDERED, ordering the defendants-appellees to surrender the lots
in question as well as the plaintiffs'-appellants' muniments of title thereof to said plaintiffs-
appellants, to make an accounting of the produce derived from the lands including expenses
incurred since 1951, and to solidarity turn over to the plaintiffs-appellants the NET monetary
value of the profits, after deducting the sum of P1,800.00. No attorney's fees nor moral
damages are awarded for lack of any legal justification therefor. No. costs.
The ratio of the judgment is stated in the following paragraphs of the decision penned by Justice Edgardo L.
Paras with the concurrence of Justices Venicio Escolin and Mariano A. Zosa:
One of the principal issues in the case involves the nature of the aforementioned conveyance or
transaction, with appellants claiming the same to be an oral contract of mortgage or antichresis,
the redemption of which could be done anytime upon repayment of the P1,800.00 involved
(incidentally the only thing written about the transaction is the aforementioned receipt re the
Page | 19

P1,800). Upon the other hand, appellees claim that the transaction was one of sale, accordingly,
redemption was improper. The appellees claim that plaintiffs never conveyed the property
because of a loan or mortgage or antichresis and that what really transpired was the execution
of a contract of sale thru a private document designated as a 'Deed of Purchase and Sale'
(Exhibit 1), the execution having been made by Gimena Almosara in favor of appellee
Hermogena V. Felipe.
After a study of this case, we have come to the conclusion that the appellants are entitled to
recover the ownership of the lots in question. We so hold because although Exh. 1 concerning
the sale made in 1951 of the disputed lots is, in Our opinion, not a forgery the fact is that the
sale made by Gimena Almosara is invalid, having been executed without the needed consent of
her husband, the lots being conjugal. Appellees' argument that this was an issue not raised in
the pleadings is baseless, considering the fact that the complaint alleges that the parcels 'were
purchased by plaintiff Gimena Almosara and her late husband Maximo Aldon' (the lots having
been purchased during the existence of the marriage, the same are presumed conjugal) and
inferentially, by force of law, could not, be disposed of by a wife without her husband's consent.
The defendants are now the appellants in this petition for review. They invoke several grounds in seeking the
reversal of the decision of the Court of Appeals. One of the grounds is factual in nature; petitioners claim that
"respondent Court of Appeals has found as a fact that the 'Deed of Purchase and Sale' executed by
respondent Gimena Almosara is not a forgery and therefore its authenticity and due execution is already
beyond question." We cannot consider this ground because as a rule only questions of law are reviewed in
proceedings under Rule 45 of the Rules of Court subject to well-defined exceptions not present in the instant
case.
The legal ground which deserves attention is the legal effect of a sale of lands belonging to the conjugal
partnership made by the wife without the consent of the husband.
It is useful at this point to re-state some elementary rules: The husband is the administrator of the conjugal
partnership. (Art. 165, Civil Code.) Subject to certain exceptions, the husband cannot alienate or encumber any
real property of the conjugal partnership without the wife's consent. (Art. 166, Idem.) And the wife cannot bind
the conjugal partnership without the husband's consent, except in cases provided by law. (Art. 172, Idem.)
In the instant case, Gimena, the wife, sold lands belonging to the conjugal partnership without the consent of
the husband and the sale is not covered by the phrase "except in cases provided by law." The Court of
Appeals described the sale as "invalid" - a term which is imprecise when used in relation to contracts because
the Civil Code uses specific names in designating defective contracts, namely: rescissible (Arts. 1380 et seq.),
voidable (Arts. 1390 et seq.), unenforceable (Arts. 1403, et seq.), and void or inexistent (Arts. 1409 et seq.)
The sale made by Gimena is certainly a defective contract but of what category? The answer: it is a voidable
contract.
According to Art. 1390 of the Civil Code, among the voidable contracts are "[T]hose where one of the parties is
incapable of giving consent to the contract." (Par. 1.) In the instant case-Gimena had no capacity to give
consent to the contract of sale. The capacity to give consent belonged not even to the husband alone but to
both spouses.
The view that the contract made by Gimena is a voidable contract is supported by the legal provision that
contracts entered by the husband without the consent of the wife when such consent is required, are
annullable at her instance during the marriage and within ten years from the transaction questioned. (Art. 173,
Civil Code.)
Gimena's contract is not rescissible for in such contract all the essential elements are untainted but Gimena's
consent was tainted. Neither can the contract be classified as unenforceable because it does not fit any of
those described in Art. 1403 of the Civil Code. And finally, the contract cannot be void or inexistent because it
is not one of those mentioned in Art. 1409 of the Civil Code. By process of elimination, it must perforce be a
voidable contract.
The voidable contract of Gimena was subject to annulment by her husband only during the marriage because
he was the victim who had an interest in the contract. Gimena, who was the party responsible for the defect,
could not ask for its annulment. Their children could not likewise seek the annulment of the contract while the
marriage subsisted because they merely had an inchoate right to the lands sold.
Page | 20

The termination of the marriage and the dissolution of the conjugal partnership by the death of Maximo Aldon
did not improve the situation of Gimena. What she could not do during the marriage, she could not do
thereafter.
The case of Sofia and Salvador Aldon is different. After the death of Maximo they acquired the right to question
the defective contract insofar as it deprived them of their hereditary rights in their father's share in the lands.
The father's share is one-half (1/2) of the lands and their share is two-thirds (2/3) thereof, one-third (1/3)
pertaining to the widow.
The petitioners have been in possession of the lands since 1951. It was only in 1976 when the respondents
filed action to recover the lands. In the meantime, Maximo Aldon died.
Two questions come to mind, namely: (1) Have the petitioners acquired the lands by acquisitive prescription?
(2) Is the right of action of Sofia and Salvador Aldon barred by the statute of limitations?
Anent the first question, We quote with approval the following statement of the Court of Appeals:
We would like to state further that appellees [petitioners herein] could not have acquired
ownership of the lots by prescription in view of what we regard as their bad faith. This bad faith
is revealed by testimony to the effect that defendant-appellee Vicente V. Felipe (son of
appellees Eduardo Felipe and Hermogena V. Felipe) attempted in December 1970 to have
Gimena Almosara sign a ready-made document purporting to self the disputed lots to the
appellees. This actuation clearly indicated that the appellees knew the lots did not still belong to
them, otherwise, why were they interested in a document of sale in their favor? Again why did
Vicente V. Felipe tell Gimena that the purpose of the document was to obtain Gimena's consent
to the construction of an irrigation pump on the lots in question? The only possible reason for
purporting to obtain such consent is that the appellees knew the lots were not theirs. Why was
there an attempted improvement (the irrigation tank) only in 1970? Why was the declaration of
property made only in 1974? Why were no attempts made to obtain the husband's signature,
despite the fact that Gimena and Hermogena were close relatives? An these indicate the bad
faith of the appellees. Now then, even if we were to consider appellees' possession in bad faith
as a possession in the concept of owners, this possession at the earliest started in 1951, hence
the period for extraordinary prescription (30 years) had not yet lapsed when the present action
was instituted on April 26, 1976.
As to the second question, the children's cause of action accrued from the death of their father in 1959 and
they had thirty (30) years to institute it (Art. 1141, Civil Code.) They filed action in 1976 which is well within the
period.
WHEREFORE, the decision of the Court of Appeals is hereby modified. Judgment is entered awarding to Sofia
and Salvador Aldon their shares of the lands as stated in the body of this decision; and the petitioners as
possessors in bad faith shall make an accounting of the fruits corresponding to the share aforementioned from
1959 and solidarity pay their value to Sofia and Salvador Aldon; costs against the petitioners.
SO ORDERED.
Concepcion Jr., Guerrero and De Castro, JJ., concur.
Makasiar, (Chairman), J., In the result.
Escolin J., took no part.
Page | 21

SECOND DIVISION


AYALA LIFE ASSURANCE, INC.,
Petitioner,




- versus -




RAY BURTON DEVELOPMENT
CORPORATION,
Respondent.

G.R. No. 163075

Present:

PUNO, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.


Promulgated:

January 23, 2006
x-----------------------------------------------------------------------------------------x

DECISION


SANDOVAL-GUTIERREZ, J.:


Page | 22

Before us for resolution is the petition for review on certiorari[1] assailing the Decision[2]
dated January 21, 2004 of the Court of Appeals in CA-G.R. CV No. 74635,[3] as well as its Resolution
dated April 2, 2004 denying petitioners motion for reconsideration.
The facts are:
On December 22, 1995, Ayala Life Assurance, Inc., petitioner, and Ray Burton Development
Corporation, respondent, entered into a contract denominated as a Contract to Sell, with a Side
Agreement of even date. In these contracts, petitioner agreed to sell to respondent a parcel of land,
with an area of 1,691 square meters, situated at Madrigal Business Park, Ayala Alabang Village,
Muntinlupa City, covered by Transfer Certificate of Title No. 186485 of the Registry of Deeds of
Makati City. The purchase price of the land is P55,000.00 per square meter or a total of
P93,005,000.00, payable as follows:
(a) On contract date P24,181,300.00 representing 26 percent of the purchase price, inclusive of the
P1,000,000.00 option money;
(b) Not later than January 6, 1996 P3,720,200.00 representing 4 percent of the purchase price to
complete 30 percent down payment; and
(c) In consecutive quarterly installments for a period of 5 years from December 22, 1995
P65,103,500.00 representing the 70 percent balance of the purchase price.

The contract contains a stipulation in paragraphs 3 and 3.1 for an Event of Default. It
provides that in case the purchaser (respondent) fails to pay any installment for any reason not
attributable to the seller (petitioner), the latter has the right to assess the purchaser a late penalty
interest on the unpaid installment at two (2%) percent per month, computed from the date the
amount became due until full payment thereof. And if such default continues for a period of six (6)
months, the seller has the right to cancel the contract without need of court declaration by giving the
purchaser a written notice of cancellation. In case of such cancellation, the seller shall return to the
purchaser the amount he received, less penalties, unpaid charges and dues on the property.
Respondent paid thirty (30%) down payment and the quarterly amortization, including the one
that fell due on June 22, 1998.
However, on August 12, 1998, respondent notified petitioner in writing that it will no longer
continue to pay due to the adverse effects of the economic crisis to its business. Respondent then
Page | 23

asked for the immediate cancellation of the contract and for a refund of its previous payments as
provided in the contract.
Petitioner refused to cancel the contract to sell. Instead, on November 25, 1999, it filed with
the Regional Trial Court, Branch 66, Makati City, a complaint for specific performance against
respondent, docketed as Civil Case No. 99-2014, demanding from the latter the payment of the
remaining unpaid quarterly installments beginning September 21, 1999 in the total sum of
P33,242,382.43, inclusive of interest and penalties.
Respondent, in its answer, denied any further obligation to petitioner, asserting that on August
12, 1998, it (respondent) notified the latter of its inability to pay the remaining
installments. Respondent invoked the provisions of paragraphs 3 and 3.1 of the contract to sell
providing for the refund to it of the amounts paid, less interest and the sum of 25% of all sums paid as
liquidated damages.
After pre-trial, petitioner moved for a summary judgment on the ground that respondents
answer failed to tender any genuine issue as to any material fact, except as to the amount of
damages. The trial court granted the motion and ordered the parties to submit their memoranda.
On December 10, 2001, the trial court rendered a Decision holding that respondent
transgressed the law in obvious bad faith. The dispositive portion reads:
WHEREFORE, defendant (now respondent) is hereby sentenced and ordered to pay plaintiff (now
petitioner) the sum of P33,242,383.43, representing the unpaid balance of the principal amount owing under the
contract, interest agreed upon, and penalties. Defendant is further ordered to pay plaintiff the sum of
P200,000.00 as attorneys fees and the costs of suit.
Upon full payment of the aforementioned amounts by defendant, plaintiff shall, as it is hereby ordered,
execute the appropriate deed of absolute sale conveying and transferring full title and ownership of the parcel of
land subject of the sale to and in favor of defendant.

On appeal, the Court of Appeals rendered a Decision dated January 21, 2004 in CA-G.R.
CV No. 74635, reversing the trial courts Decision, thus:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Ayala Life is hereby
ordered to refund all sums paid under the Contract to Sell, with interest of twelve percent (12%) per annum from
12 August 1998 until fully paid, less the amount equivalent to 25% of the total amount paid as liquidated damages.
SO ORDERED.

Page | 24

The Court of Appeals ruled that the parties transaction in question is in the nature of a
contract to sell, as distinguished from a contract of sale. Under their contract, ownership of the land
is retained by petitioner until respondent shall have fully paid the purchase price. Its failure to pay
the price in full is not a breach of contract but merely an event that prevents petitioner from
conveying the title to respondent. Under such a situation, a cause of action for specific performance
does not arise. What should govern the parties relation are the provisions of their contract on the
Event of Default stated earlier.
Hence, the instant petition for review on certiorari.
Petitioner contends that the Court of Appeals committed a reversible error in holding that: (a)
the remedy of specific performance is not available in a contract to sell, such as the one at bar; and
(b) petitioner is liable to refund respondent all the sums the latter paid under the contract to sell, with
interest at 12% per annum from August 12, 1998 until fully paid, less the amount equivalent to 25% of
the total amount paid as liquidated damages.
Petitioner argues that by virtue of the contract to sell, it has the right to choose between
fulfillment and rescission of the contract, with damages in either case. Thus, it is immaterial to
determine whether the parties subject agreement is a contract to sell or a contract of sale.
In its comment, respondent disputed petitioners allegations and prayed that the petition be
denied for lack of merit.
The issues are:
1. Whether respondents non-payment of the balance of the purchase price
gave rise to a cause of action on the part of petitioner to demand full payment of the
purchase price; and
2. Whether petitioner should refund respondent the amount the latter paid
under the contract to sell.

At the outset, it is significant to note that petitioner does not dispute that its December 22, 1995
transaction with respondent is a contract to sell. It bears stressing that the exact nature of the
parties contract determines whether petitioner has the remedy of specific performance.
It is thus imperative that we first determine the nature of the parties contract.
Page | 25

The real nature of a contract may be determined from the express terms of the written
agreement and from the contemporaneous and subsequent acts of the contracting parties.[4] In the
construction or interpretation of an instrument, the intention of the parties is primordial and is to be
pursued.[5] If the terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.[6] If the words appear to be
contrary to the evident intention of the parties, the latter shall prevail over the former.[7] The
denomination or title given by the parties in their contract is not conclusive of the nature of its
contents.[8]
Here, the questioned agreement clearly indicates that it is a contract to sell, not a contract of
sale. Paragraph 4 of the contract provides:
4. TITLE AND OWNERSHIP OF THE PROPERTY. The title to the property shall transfer to the PURCHASER
upon payment of the balance of the Purchase Price and all expenses, penalties and other costs which shall be due
and payable hereunder or which may have accrued thereto. Thereupon, the SELLER shall execute a Deed of
Absolute Sale in favor of the PURCHASER conveying all the SELLERS rights, title and interest in and to the Property
to the PURCHASER.[9]

As correctly stated by the Court of Appeals in its assailed Decision, The ruling of the Supreme
Court in Lim v. Court of Appeals (182 SCRA 564 [1990]) is most illuminating. In the said case, a
contract to sell and a contract of sale were clearly and thoroughly distinguished from each other, with
the High Tribunal stressing that in a contract of sale, the title passes to the buyer upon the delivery of
the thing sold. In a contract to sell, the ownership is reserved in the seller and is not to pass until the
full payment of the purchase price is made. In the first case, non-payment of the price is a negative
resolutory condition; in the second case, full payment is a positive suspensive condition. In the first
case, the vendor has lost and cannot recover the ownership of the property until and unless the
contract of sale is itself resolved and set aside. In the second case, the title remains in the vendor if
the vendee does not comply with the condition precedent of making payment at the time specified in
the contract.[10]
Considering that the parties transaction is a contract to sell, can petitioner, as seller, demand
specific performance from respondent, as buyer?
Blacks Law Dictionary defined specific performance as (t)he remedy of requiring exact
performance of a contract in the specific form in which it was made, or according to the precise terms
agreed upon. The actual accomplishment of a contract by a party bound to fulfill it.[11]
Page | 26

Evidently, before the remedy of specific performance may be availed of, there must be a
breach of the contract.
Under a contract to sell, the title of the thing to be sold is retained by the seller until the
purchaser makes full payment of the agreed purchase price. Such payment is a positive suspensive
condition, the non-fulfillment of which is not a breach of contract but merely an event that prevents
the seller from conveying title to the purchaser. The non-payment of the purchase price renders the
contract to sell ineffective and without force and effect. Thus, a cause of action for specific
performance does not arise.
In Rayos v. Court of Appeals,[12] we held:
x x x. Under the two contracts, the petitioners bound and obliged themselves to execute a deed of
absolute sale over the property and transfer title thereon to the respondents after the payment of the full
purchase price of the property, inclusive of the quarterly installments due on the petitioners loan with the PSB:
x x x

Construing the contracts together, it is evident that the parties executed a contract to sell and not a
contract of sale. The petitioners retained ownership without further remedies by the respondents until the
payment of the purchase price of the property in full. Such payment is a positive suspensive condition, failure of
which is not really a breach, serious or otherwise, but an event that prevents the obligation of the petitioners to
convey title from arising, in accordance with Article 1184 of the Civil Code (Leano v. Court of Appeals, 369 SCRA
36 [2001]; Lacanilao v. Court of Appeals, 262 SCRA 486 [1996]).
The non-fulfillment by the respondent of his obligation to pay, which is a suspensive condition to the
obligation of the petitioners to sell and deliver the title to the property, rendered the contract to sell ineffective
and without force and effect (Agustin v. Court of Appeals, 186 SCRA 375 [1990]). The parties stand as if the
conditional obligation had never existed. Article 1191[13] of the New Civil Code will not apply because it
presupposes an obligation already extant (Padilla v. Posadas, 328 SCRA 434 [2001]. There can be no rescission of
an obligation that is still non-existing, the suspensive condition not having happened (Rillo v. Court of Appeals, 274
SCRA 461 [1997]). (Underscoring supplied)

Here, the provisions of the contract to sell categorically indicate that respondents default in
the payment of the purchase price is considered merely as an event, the happening of which gives
rise to the respective obligations of the parties mentioned therein, thus:
3. EVENT OF DEFAULT. The following event shall constitute an Event of Default under this contract: the
PURCHASER fails to pay any installment on the balance, for any reason not attributable to the SELLER, on the date
it is due, provided, however, that the SELLER shall have the right to charge the PURCHASER a late penalty interest
on the said unpaid interest at the rate of 2% per month computed from the date the amount became due and
payable until full payment thereof.
3.1. If the Event of Default shall have occurred, then at any time thereafter, if any such event shall then be
continuing for a period of six (6) months, the SELLER shall have the right to cancel this Contract without need of
court declaration to that effect by giving the PURCHASER a written notice of cancellation sent to the address of the
PURCHASER as specified herein by registered mail or personal delivery. Thereafter, the SELLER shall return to the
PURCHASER the aggregate amount that the SELLER shall have received as of the cancellation of this Contract, less:
Page | 27

(i) penalties accrued as of the date of such cancellation, (ii) an amount equivalent to twenty five percent (25%) of
the total amount paid as liquidated damages, and (iii) any unpaid charges and dues on the Property. Any amount
to be refunded to the PURCHASER shall be collected by the PURCHASER at the office of the SELLER. Upon notice to
the PURCHASER of such cancellation, the SELLER shall be free to dispose of the Property covered hereby as if this
Contract had not been executed. Notice to the PURCHASER sent by registered mail or by personal delivery to its
address stated in this Contract shall be considered as sufficient compliance with all requirements of notice for
purposes of this Contract.[14]

Therefore, in the event of respondents default in payment, petitioner, under the above
provisions of the contract, has the right to retain an amount equivalent to 25% of the total
payments. As stated by the Court of Appeals, petitioner having been informed in writing by
respondent of its intention not to proceed with the contract on August 12, 1998, or prior to incurring
delay in payment of succeeding installments,[15] the provisions in the contract relative to penalties
and interest find no application.
The Court of Appeals further held that with respect to the award of interest, petitioner is liable
to pay interest of 12% per annum upon the net refundable amount due from the time respondent
made the extrajudicial demand upon it on August 12, 1998 to refund payment under the Contract to
Sell,[16] pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals.[17]
In sum, we find that the Court of Appeals, in rendering the assailed Decision and Resolution,
did not commit any reversible error.


WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED. Costs against petitioner.
SO ORDERED.


ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
Page | 28

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21438 September 28, 1966
AIR FRANCE, petitioner,
vs.
RAFAEL CARRASCOSO and the HONORABLE COURT OF APPEALS, respondents.
Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.

SANCHEZ, J .:
The Court of First Instance of Manila
1
sentenced petitioner to pay respondent Rafael Carrascoso P25,000.00 by way of
moral damages; P10,000.00 as exemplary damages; P393.20 representing the difference in fare between first class and
tourist class for the portion of the trip Bangkok-Rome, these various amounts with interest at the legal rate, from the date
of the filing of the complaint until paid; plus P3,000.00 for attorneys' fees; and the costs of suit.
On appeal,
2
the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket from P393.20 to
P383.10, and voted to affirm the appealed decision "in all other respects", with costs against petitioner.
The case is now before us for review on certiorari.
The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:
Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March
30, 1958.
On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air Lines, Inc., issued to
plaintiff a "first class" round trip airplane ticket from Manila to Rome. From Manila to Bangkok, plaintiff
travelled in "first class", but at Bangkok, the Manager of the defendant airline forced plaintiff to vacate the "first
class" seat that he was occupying because, in the words of the witness Ernesto G. Cuento, there was a "white
man", who, the Manager alleged, had a "better right" to the seat. When asked to vacate his "first class" seat, the
plaintiff, as was to be expected, refused, and told defendant's Manager that his seat would be taken over his dead
body; a commotion ensued, and, according to said Ernesto G. Cuento, "many of the Filipino passengers got
nervous in the tourist class; when they found out that Mr. Carrascoso was having a hot discussion with the white
man [manager], they came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white
man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first class" seat in the
plane.
3

1. The trust of the relief petitioner now seeks is that we review "all the findings"
4
of respondent Court of Appeals.
Petitioner charges that respondent court failed to make complete findings of fact on all the issues properly laid before it.
We are asked to consider facts favorable to petitioner, and then, to overturn the appellate court's decision.
Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of record without
expressing therein clearly and distinctly the facts and the law on which it is based".
5
This is echoed in the statutory
demand that a judgment determining the merits of the case shall state "clearly and distinctly the facts and the law on
which it is based";
6
and that "Every decision of the Court of Appeals shall contain complete findings of fact on all issues
properly raised before it".
7

A decision with absolutely nothing to support it is a nullity. It is open to direct attack.
8
The law, however, solely insists
that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn.
9
A court of justice is not
hidebound to write in its decision every bit and piece of evidence
10
presented by one party and the other upon the issues
raised. Neither is it to be burdened with the obligation "to specify in the sentence the facts" which a party "considered as
proved".
11
This is but a part of the mental process from which the Court draws the essential ultimate facts. A decision is
not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of
Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any
specific finding of facts with respect to the evidence for the defense". Because as this Court well observed, "There is no
Page | 29

law that so requires".
12
Indeed, "the mere failure to specify (in the decision) the contentions of the appellant and the
reasons for refusing to believe them is not sufficient to hold the same contrary to the requirements of the provisions of law
and the Constitution". It is in this setting that in Manigque, it was held that the mere fact that the findings "were based
entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant's side in
the controversy as shown by his own testimony", would not vitiate the judgment.
13
If the court did not recite in the
decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does not mean that
the court has overlooked such testimony or such item of evidence.
14
At any rate, the legal presumptions are that official
duty has been regularly performed, and that all the matters within an issue in a case were laid before the court and passed
upon by it.
15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate
facts as found by the court ... and essential to support the decision and judgment rendered thereon".
16
They consist of the
court's "conclusions" with respect to the determinative facts in issue".
17
A question of law, upon the other hand, has been
declared as "one which does not call for an examination of the probative value of the evidence presented by the parties."
18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the Court of Appeals.
19

That judgment is conclusive as to the facts. It is not appropriately the business of this Court to alter the facts or to review
the questions of fact.
20

With these guideposts, we now face the problem of whether the findings of fact of the Court of Appeals support its
judgment.
3. Was Carrascoso entitled to the first class seat he claims?
It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first class ticket. But
petitioner asserts that said ticket did not represent the true and complete intent and agreement of the parties; that said
respondent knew that he did not have confirmed reservations for first class on any specific flight, although he had tourist
class protection; that, accordingly, the issuance of a first class ticket was no guarantee that he would have a first class ride,
but that such would depend upon the availability of first class seats.
These are matters which petitioner has thoroughly presented and discussed in its brief before the Court of Appeals under
its third assignment of error, which reads: "The trial court erred in finding that plaintiff had confirmed reservations for,
and a right to, first class seats on the "definite" segments of his journey, particularly that from Saigon to Beirut".
21

And, the Court of Appeals disposed of this contention thus:
Defendant seems to capitalize on the argument that the issuance of a first-class ticket was no guarantee that the
passenger to whom the same had been issued, would be accommodated in the first-class compartment, for as in
the case of plaintiff he had yet to make arrangements upon arrival at every station for the necessary first-class
reservation. We are not impressed by such a reasoning. We cannot understand how a reputable firm like defendant
airplane company could have the indiscretion to give out tickets it never meant to honor at all. It received the
corresponding amount in payment of first-class tickets and yet it allowed the passenger to be at the mercy of its
employees. It is more in keeping with the ordinary course of business that the company should know whether or
riot the tickets it issues are to be honored or not.
22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention, thus:
On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question. Apart from his testimony,
see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and defendant's own witness, Rafael Altonaga,
confirmed plaintiff's testimony and testified as follows:
Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?
A. That the space is confirmed.
Q. Confirmed for first class?
A. Yes, "first class". (Transcript, p. 169)
x x x x x x x x x
Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that although plaintiff paid
for, and was issued a "first class" airplane ticket, the ticket was subject to confirmation in Hongkong. The court cannot
give credit to the testimony of said witnesses. Oral evidence cannot prevail over written evidence, and plaintiff's Exhibits
Page | 30

"A", "A-l", "B", "B-l", "C" and "C-1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued,
and paid for, a first class ticket without any reservation whatever.
Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the reservation for a "first
class" accommodation for the plaintiff was confirmed. The court cannot believe that after such confirmation defendant
had a verbal understanding with plaintiff that the "first class" ticket issued to him by defendant would be subject to
confirmation in Hongkong.
23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the amount refunded on
Carrascoso's ticket, the decision of the Court of First Instance was affirmed by the Court of Appeals in all other respects.
We hold the view that such a judgment of affirmance has merged the judgment of the lower court.
24
Implicit in that
affirmance is a determination by the Court of Appeals that the proceeding in the Court of First Instance was free from
prejudicial error and "all questions raised by the assignments of error and all questions that might have been raised are to
be regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be regarded as free from
all error".
25
We reached this policy construction because nothing in the decision of the Court of Appeals on this point
would suggest that its findings of fact are in any way at war with those of the trial court. Nor was said affirmance by the
Court of Appeals upon a ground or grounds different from those which were made the basis of the conclusions of the trial
court.
26

If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat, notwithstanding the fact that seat
availability in specific flights is therein confirmed, then an air passenger is placed in the hollow of the hands of an airline.
What security then can a passenger have? It will always be an easy matter for an airline aided by its employees, to strike
out the very stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the passenger had
a schedule to fulfill? We have long learned that, as a rule, a written document speaks a uniform language; that spoken
word could be notoriously unreliable. If only to achieve stability in the relations between passenger and air carrier,
adherence to the ticket so issued is desirable. Such is the case here. The lower courts refused to believe the oral evidence
intended to defeat the covenants in the ticket.
The foregoing are the considerations which point to the conclusion that there are facts upon which the Court of Appeals
predicated the finding that respondent Carrascoso had a first class ticket and was entitled to a first class seat at Bangkok,
which is a stopover in the Saigon to Beirut leg of the flight.
27
We perceive no "welter of distortions by the Court of
Appeals of petitioner's statement of its position", as charged by petitioner.
28
Nor do we subscribe to petitioner's
accusation that respondent Carrascoso "surreptitiously took a first class seat to provoke an issue".
29
And this because, as
petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat and because from
Saigon I was told again to see the Manager".
30
Why, then, was he allowed to take a first class seat in the plane at
Bangkok, if he had no seat? Or, if another had a better right to the seat?
4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that Carrascoso's action is
planted upon breach of contract; that to authorize an award for moral damages there must be an averment of fraud or bad
faith;
31
and that the decision of the Court of Appeals fails to make a finding of bad faith. The pivotal allegations in the
complaint bearing on this issue are:
3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a valuable
consideration, the latter acting as general agents for and in behalf of the defendant, under which said contract,
plaintiff was entitled to, as defendant agreed to furnish plaintiff, First Class passage on defendant's plane during
the entire duration of plaintiff's tour of Europe with Hongkong as starting point up to and until plaintiff's return
trip to Manila, ... .
4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to Bangkok, defendant
furnished to the plaintiff First Class accommodation but only after protestations, arguments and/or insistence were
made by the plaintiff with defendant's employees.
5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff only Tourist Class
accommodations from Bangkok to Teheran and/or Casablanca, ... the plaintiff has been compelled by defendant's
employees to leave the First Class accommodation berths at Bangkok after he was already seated.
6. That consequently, the plaintiff, desiring no repetition of the inconvenience and embarrassments brought by
defendant's breach of contract was forced to take a Pan American World Airways plane on his return trip from
Madrid to Manila.
32

x x x x x x x x x
2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid, plaintiff suffered
inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental anguish, serious anxiety, wounded
feelings, social humiliation, and the like injury, resulting in moral damages in the amount of P30,000.00.
33

Page | 31

x x x x x x x x x
The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a first class passage
covering, amongst others, the Bangkok-Teheran leg; Second, That said contract was breached when petitioner failed to
furnish first class transportation at Bangkok; and Third, that there was bad faith when petitioner's employee compelled
Carrascoso to leave his first class accommodation berth "after he was already, seated" and to take a seat in the tourist
class, by reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him mental
anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral damages. It is true that there is no
specific mention of the term bad faith in the complaint. But, the inference of bad faith is there, it may be drawn from the
facts and circumstances set forth therein.
34
The contract was averred to establish the relation between the parties. But the
stress of the action is put on wrongful expulsion.
Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed petitioner on guard on
what Carrascoso intended to prove: That while sitting in the plane in Bangkok, Carrascoso was ousted by petitioner's
manager who gave his seat to a white man;
35
and (b) evidence of bad faith in the fulfillment of the contract was presented
without objection on the part of the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is
sufficient averment in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured
by the evidence. An amendment thereof to conform to the evidence is not even required.
36
On the question of bad faith,
the Court of Appeals declared:
That the plaintiff was forced out of his seat in the first class compartment of the plane belonging to the defendant
Air France while at Bangkok, and was transferred to the tourist class not only without his consent but against his
will, has been sufficiently established by plaintiff in his testimony before the court, corroborated by the
corresponding entry made by the purser of the plane in his notebook which notation reads as follows:
"First-class passenger was forced to go to the tourist class against his will, and that the captain refused to
intervene",
and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The captain of the plane
who was asked by the manager of defendant company at Bangkok to intervene even refused to do so. It is
noteworthy that no one on behalf of defendant ever contradicted or denied this evidence for the plaintiff. It could
have been easy for defendant to present its manager at Bangkok to testify at the trial of the case, or yet to secure
his disposition; but defendant did neither.
37

The Court of appeals further stated
Neither is there evidence as to whether or not a prior reservation was made by the white man. Hence, if the
employees of the defendant at Bangkok sold a first-class ticket to him when all the seats had already been taken,
surely the plaintiff should not have been picked out as the one to suffer the consequences and to be subjected to
the humiliation and indignity of being ejected from his seat in the presence of others. Instead of explaining to the
white man the improvidence committed by defendant's employees, the manager adopted the more drastic step of
ousting the plaintiff who was then safely ensconsced in his rightful seat. We are strengthened in our belief that
this probably was what happened there, by the testimony of defendant's witness Rafael Altonaga who, when asked
to explain the meaning of the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed
for first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of the Reservation
Office of defendant, testified as follows:
"Q How does the person in the ticket-issuing office know what reservation the passenger has arranged
with you?
A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19, 1959)
In this connection, we quote with approval what the trial Judge has said on this point:
Why did the, using the words of witness Ernesto G. Cuento, "white man" have a "better right" to the seat
occupied by Mr. Carrascoso? The record is silent. The defendant airline did not prove "any better", nay,
any right on the part of the "white man" to the "First class" seat that the plaintiff was occupying and for
which he paid and was issued a corresponding "first class" ticket.
If there was a justified reason for the action of the defendant's Manager in Bangkok, the defendant could
have easily proven it by having taken the testimony of the said Manager by deposition, but defendant did
not do so; the presumption is that evidence willfully suppressed would be adverse if produced [Sec. 69,
par (e), Rules of Court]; and, under the circumstances, the Court is constrained to find, as it does find, that
the Manager of the defendant airline in Bangkok not merely asked but threatened the plaintiff to throw
Page | 32

him out of the plane if he did not give up his "first class" seat because the said Manager wanted to
accommodate, using the words of the witness Ernesto G. Cuento, the "white man".
38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did not use the term "bad
faith". But can it be doubted that the recital of facts therein points to bad faith? The manager not only prevented
Carrascoso from enjoying his right to a first class seat; worse, he imposed his arbitrary will; he forcibly ejected
him from his seat, made him suffer the humiliation of having to go to the tourist class compartment - just to give
way to another passenger whose right thereto has not been established. Certainly, this is bad faith. Unless, of
course, bad faith has assumed a meaning different from what is understood in law. For, "bad faith" contemplates a
"state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for
ulterior purpose."
39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the judgment of the Court
of First Instance, thus:
The evidence shows that the defendant violated its contract of transportation with plaintiff in bad faith,
with the aggravating circumstances that defendant's Manager in Bangkok went to the extent of
threatening the plaintiff in the presence of many passengers to have him thrown out of the airplane to give
the "first class" seat that he was occupying to, again using the words of the witness Ernesto G. Cuento, a
"white man" whom he (defendant's Manager) wished to accommodate, and the defendant has not proven
that this "white man" had any "better right" to occupy the "first class" seat that the plaintiff was
occupying, duly paid for, and for which the corresponding "first class" ticket was issued by the defendant
to him.
40

5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is well settled in law.
41
For the willful malevolent act of petitioner's manager, petitioner, his employer, must answer. Article 21 of the Civil Code
says:
ART. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.
In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the provisions of Article 2219
(10), Civil Code, moral damages are recoverable.
42

6. A contract to transport passengers is quite different in kind and degree from any other contractual relation.
43
And this,
because of the relation which an air-carrier sustains with the public. Its business is mainly with the travelling public. It
invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation
attended with a public duty. Neglect or malfeasance of the carrier's employees, naturally, could give ground for an action
for damages.
Passengers do not contract merely for transportation. They have a right to be treated by the carrier's employees with
kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct, injurious
language, indignities and abuses from such employees. So it is, that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages against the carrier.
44

Thus, "Where a steamship company
45
had accepted a passenger's check, it was a breach of contract and a tort, giving a
right of action for its agent in the presence of third persons to falsely notify her that the check was worthless and demand
payment under threat of ejection, though the language used was not insulting and she was not ejected."
46
And this,
because, although the relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that
breaks the contract may be also a tort".
47
And in another case, "Where a passenger on a railroad train, when the conductor
came to collect his fare tendered him the cash fare to a point where the train was scheduled not to stop, and told him that
as soon as the train reached such point he would pay the cash fare from that point to destination, there was nothing in the
conduct of the passenger which justified the conductor in using insulting language to him, as by calling him a lunatic,"
48

and the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said
passenger.1awphl.nt
Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's action as we have said, is
placed upon his wrongful expulsion. This is a violation of public duty by the petitioner air carrier a case of quasi-delict.
Damages are proper.
7. Petitioner draws our attention to respondent Carrascoso's testimony, thus
Q You mentioned about an attendant. Who is that attendant and purser?
Page | 33

A When we left already that was already in the trip I could not help it. So one of the flight attendants
approached me and requested from me my ticket and I said, What for? and she said, "We will note that you
transferred to the tourist class". I said, "Nothing of that kind. That is tantamount to accepting my transfer." And I
also said, "You are not going to note anything there because I am protesting to this transfer".
Q Was she able to note it?
A No, because I did not give my ticket.
Q About that purser?
A Well, the seats there are so close that you feel uncomfortable and you don't have enough leg room, I stood up
and I went to the pantry that was next to me and the purser was there. He told me, "I have recorded the incident in
my notebook." He read it and translated it to me because it was recorded in French "First class passenger
was forced to go to the tourist class against his will, and that the captain refused to intervene."
Mr. VALTE
I move to strike out the last part of the testimony of the witness because the best evidence would be the notes.
Your Honor.
COURT
I will allow that as part of his testimony.
49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his notebook reading "First
class passenger was forced to go to the tourist class against his will, and that the captain refused to intervene" is predicated
upon evidence [Carrascoso's testimony above] which is incompetent. We do not think so. The subject of inquiry is not the
entry, but the ouster incident. Testimony on the entry does not come within the proscription of the best evidence rule.
Such testimony is admissible.
49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the startling occurrence
was still fresh and continued to be felt. The excitement had not as yet died down. Statements then, in this environment, are
admissible as part of the res gestae.
50
For, they grow "out of the nervous excitement and mental and physical condition of
the declarant".
51
The utterance of the purser regarding his entry in the notebook was spontaneous, and related to the
circumstances of the ouster incident. Its trustworthiness has been guaranteed.
52
It thus escapes the operation of the
hearsay rule. It forms part of the res gestae.
At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would have been an easy
matter for petitioner to have contradicted Carrascoso's testimony. If it were really true that no such entry was made, the
deposition of the purser could have cleared up the matter.
We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.
8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant exemplary damages in
contracts and quasi- contracts. The only condition is that defendant should have "acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner."
53
The manner of ejectment of respondent Carrascoso from his first class seat fits into
this legal precept. And this, in addition to moral damages.
54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar judgment for
attorneys' fees. The least that can be said is that the courts below felt that it is but just and equitable that attorneys' fees be
given.
55
We do not intend to break faith with the tradition that discretion well exercised as it was here should not be
disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the Court of Appeals, thus: P25,000.00 as
moral damages; P10,000.00, by way of exemplary damages, and P3,000.00 as attorneys' fees. The task of fixing these
amounts is primarily with the trial court.
56
The Court of Appeals did not interfere with the same. The dictates of good
sense suggest that we give our imprimatur thereto. Because, the facts and circumstances point to the reasonableness
thereof.
57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote
to affirm the same. Costs against petitioner. So ordered.
Page | 34

Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Zaldivar and Castro, JJ., concur.
Bengzon, J.P., J., took no part.
Page | 35

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON, Petitioner,
vs.
BENITA T. ONG.
1
Respondent.
D E C I S I O N
CORONA, J .:
On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land
2
with improvements situated in Antipolo,
Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association,
Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage
3

stating:
x x x x x x x x x
That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million),
Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of
[PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable,
unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other
improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:
1. That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE
HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of
[respondent] without any further cost whatsoever;
2. That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR
THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN,
4
Cainta, Rizal
(emphasis supplied)
x x x x x x x x x
Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the
keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from
respondent and release the certificates of title.
Thereafter, respondent undertook repairs and made improvements on the properties.
5
Respondent likewise informed
RSLAI of her agreement with petitioner for her to assume petitioners outstanding loan. RSLAI required her to undergo
credit investigation.
Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993
and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the
credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the
certificates of title.
Respondent persistently contacted petitioner but her efforts proved futile.
On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and
damages
6
against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that
since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to
Viloria. Thus, petitioner fraudulently deprived her of the properties.
Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed
for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI
approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a
loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the
Page | 36

properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and
evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was
subject to a condition. The perfection of a contract of sale depended on RSLAIs approval of the assumption of mortgage.
Since RSLAI did not allow respondent to assume petitioners obligation, the RTC held that the sale was never perfected.
In a decision dated August 27, 1999,
7
the RTC dismissed the complaint for lack of cause of action and ordered respondent
to pay petitioner P100,000 moral damages, P20,000 attorneys fees and the cost of suit.
Aggrieved, respondent appealed to the Court of Appeals (CA),
8
asserting that the court a quo erred in dismissing the
complaint.
The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held
that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he
sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary
damages for fraudulently depriving respondent of the properties.
In a decision dated July 22, 2005,
9
the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise
ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was
ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000 exemplary
damages.
Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005.
10
Hence, this petition,
11

with the sole issue being whether the parties entered into a contract of sale or a contract to sell.
Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive
condition, that is, the approval by RSLAI of respondents assumption of mortgage. Because RSLAI did not allow
respondent to assume his (petitioners) obligation, the condition never materialized. Consequently, there was no sale.
Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full
ownership of the subject properties upon the execution of the deed.
We modify the decision of the CA.
Contract of Sale or Contract to Sell?
The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to
sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should
the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the
contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition.
12

On the other hand, a 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. For this reason, if the buyer defaults in the payment thereof, the seller
can only sue for damages.
13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a
manner absolute and irrevocable" for a sum of P1.1 million.
14
With regard to the manner of payment, it required
respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance
15
payable directly to
RSLAI (on behalf of petitioner) within a reasonable time.
16
Nothing in said instrument implied that petitioner reserved
ownership of the properties until the full payment of the purchase price.
17
On the contrary, the terms and conditions of the
deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized
contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the
performance of the contract, not the perfection thereof nor the transfer of ownership.
Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer.
18
In this
regard, Article 1498 of the Civil Code
19
provides that, as a rule, the execution of a notarized deed of sale is equivalent to
the delivery of a thing sold.
In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did
petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from
respondent and release his certificates of title to her. The totality of petitioners acts clearly indicates that he had
Page | 37

unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the
parties entered into.
Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to
approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by
paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this
connection, Article 1186 of the Civil Code provides:
Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Void Sale Or Double Sale?
Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions.
20

However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to
respondent. On this account, the CA erred.
This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller
to the two different buyers in good faith.
Article 1544 of the Civil Code provides:
Article 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith.
(emphasis supplied)
This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to
say, it disqualifies any purchaser in bad faith.
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or
an 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 some other persons claim or interest in the property.
21
The law requires, on the part of the buyer, lack of notice of a
defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any
defect in the sellers title.
Was respondent a purchaser in good faith? Yes.
Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her
agreement with petitioner, respondent had the obligation to assume the balance of petitioners outstanding obligation to
RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioners obligation. However,
because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself
rendered respondents obligation to assume petitioners indebtedness to RSLAI impossible to perform.
Article 1266 of the Civil Code provides:
Article 1266. The debtor in obligations to do shall be released when the prestation become legally or physically
impossible without the fault of the obligor.
Since respondents obligation to assume petitioners outstanding balance with RSLAI became impossible without her
fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition
vis--vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article
1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is
deemed to have fully complied with the condition of the payment of the remainder of the purchase price.
Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she
undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent.
Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.
Page | 38

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of
deeds, the one who took prior possession of the properties shall be the lawful owner thereof.
In this instance, petitioner delivered the properties to respondent when he executed the notarized deed
22
and handed over
to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof
by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus,
respondent became the lawful owner of the properties.
Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled,
respondents obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.
Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms
and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the
assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the
certificates of title to respondent. We likewise affirm the award of damages.
WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV
No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay
petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10,
1993 agreement.
Costs against petitioner.
SO ORDERED.RENATO C. CORONA
Page | 39

SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S. BABASANTA,
SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-
39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, (hereinafter,
Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand
pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor
so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having
received information that the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at
fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro,
Laguna, a Complaint for Specific Performance and Damages[1] against his co-respondents herein, the Spouses
Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his
favor, respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of
Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel
Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the
fifty thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or
before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta
amounted to only two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two
hundred sixty thousand pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a
reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the original loan transaction
just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the amount of
two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that it raised new matters which seriously
affect their substantive rights under the original complaint. However, the trial court in its Order dated 17 January 1990[5]
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention[6]
before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989,
the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with
Mortgage.[7] It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in
litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta demurred and argued that the latter had no
legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the Spouses
Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Page | 40

Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990.[9] Respondent Babasantas motion for the issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January 1991[10] conditioned upon his filing of a bond in the amount of fifty
thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor an Option
to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen
thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989 a
Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged
that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the
motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to
look beyond the titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus
the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial
court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the
property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC
and consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial court
erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses
Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing
to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal
contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and
Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that the
trial court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to
grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute
the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with
Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu
were further ordered to return all payments made by SLDC with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.[12] However, in a
Manifestation dated 20 December 1995,[13] the Spouses Lu informed the appellate court that they are no longer contesting
the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as withdrawn the motion for reconsideration filed
by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification
or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH
BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF
P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
Page | 41

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE
ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED
PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON
THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE
TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the
property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita
Lu upon the latters representation that she needed the money to pay her obligation to Babasanta. It argued that it had no
reason to suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta.
At any rate, SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it and should not be construed as notice of the
prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously
sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property
and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles
bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on
the correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of
the property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was
aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis pendens was annotated
only on 2 June 1989 long after the sale of the property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the
decision of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because it
failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC
registered the sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident from the fact that it failed
to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over
the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.[17] While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989[18] wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance absolute.[20]
Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) 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.
Page | 42

Babasantas 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.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price.[22] In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not
a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the
price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment.[24] Consignation of the amounts due in court is
essential in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly absent from the
records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas
claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from that moment, the parties may reciprocally
demand performance.[26] The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to
transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established.[27]
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition
and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by
which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect
dominion or ownership.[28] Under Article 712 of the Civil Code, ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts,
by tradition. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.[29] Therefore, sale by itself does not transfer or affect ownership; the
most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered
to him in any of the ways specified in Article 1497 to 1501.[30] The word delivered should not be taken restrictively to
mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit:
(1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.[31] Legal or constructive
delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument
evidencing the sale;[32] symbolical tradition such as the delivery of the keys of the place where the movable sold is being
kept;[33] traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;[34] traditio brevi manu if the buyer already had possession of the object
even before the sale;[35] and traditio constitutum possessorium, where the seller remains in possession of the property in a
different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt by
Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the
Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could
have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the
sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the
lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer
ownership of the property. Thus, even on the assumption that the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is
transferred to the vendee only upon the delivery of the thing sold.[37]
Page | 43

However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between the two purchasers of the same property. It 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.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of 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.[38] 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.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas
claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the
latter any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time
SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds,
the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of
Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase
price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC.
At the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at
all on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys 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.[40] Following the foregoing definition, we rule that SLDC
qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered
owners of the property and were in fact in possession of the lands. Time and again, this Court has ruled that a person
dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of
burdens on the property which are noted on the face of the register or on the certificate of title.[41] In assailing knowledge
of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of Section 52from the time of the
registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in
favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of
lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as
a purchaser. A notice of lis pendens, as the Court held in Natao v. Esteban,[42] serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same,
Page | 44

unless he intends to gamble on the results of the litigation. Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts
present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in its Complaint-in-Intervention[44] that at the instance of
Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on
cross-examination.[45] However, there is nothing in the said pleading and the testimony which explicitly relates the amount
to the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay
off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already
executed the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no
effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis pendens and
assuming further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail over that
of SLDCs. In Abarquez v. Court of Appeals,[46] this Court had the occasion to rule 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 taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts
in the instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the basis
of its prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately
effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction
by the Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of
the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good
faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs right is definitely
superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. In
Dichoso v. Roxas,[47] we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is
REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is
REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Page | 45

SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, PABLO S. BABASANTA,
SPS. MIGUEL LU and PACITA ZAVALLA LU, respondents.
D E C I S I O N
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-
39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta, (hereinafter,
Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a downpayment of fifty thousand
pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor
so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the spouses about having
received information that the spouses sold the same property to another without his knowledge and consent. He
demanded that the second sale be cancelled and that a final deed of sale be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property to him at
fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance of the purchase price
became due, he requested for a reduction of the price and when she refused, Babasanta backed out of the sale. Pacita
added that she returned the sum of fifty thousand pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of San Pedro,
Laguna, a Complaint for Specific Performance and Damages[1] against his co-respondents herein, the Spouses
Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated demands for the execution of a final deed of sale in his
favor, respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total advances of
Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge and consent of Miguel
Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels of land to Babasanta with the
fifty thousand pesos (P50,000.00) to be considered as the downpayment for the property and the balance to be paid on or
before 31 December 1987. Respondents Lu added that as of November 1987, total payments made by Babasanta
amounted to only two hundred thousand pesos (P200,000.00) and the latter allegedly failed to pay the balance of two
hundred sixty thousand pesos (P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a
reduction of the price from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu
refused to grant Babasantas request, the latter rescinded the contract to sell and declared that the original loan transaction
just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the amount of
two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 1990[3] wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a preliminary injunction was necessary to restrain the transfer or
conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition[4] to the amended complaint contending that it raised new matters which seriously
affect their substantive rights under the original complaint. However, the trial court in its Order dated 17 January 1990[5]
admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for Intervention[6]
before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation because on 3 May 1989,
the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute Sale with
Mortgage.[7] It alleged that it was a buyer in good faith and for value and therefore it had a better right over the property in
litigation.
In his Opposition to SLDCs motion for intervention,[8] respondent Babasanta demurred and argued that the latter had no
legal interest in the case because the two parcels of land involved herein had already been conveyed to him by the Spouses
Lu and hence, the vendors were without legal capacity to transfer or dispose of the two parcels of land to the intervenor.
Page | 46

Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-in-
Intervention on 19 April 1990.[9] Respondent Babasantas motion for the issuance of a preliminary injunction was likewise
granted by the trial court in its Order dated 11 January 1991[10] conditioned upon his filing of a bond in the amount of fifty
thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor an Option
to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three hundred sixteen
thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred twenty pesos (P632,320.00) they executed on 3 May 1989 a
Deed of Absolute Sale with Mortgage in its favor. SLDC added that the certificates of title over the property were
delivered to it by the spouses clean and free from any adverse claims and/or notice of lis pendens. SLDC further alleged
that it only learned of the filing of the complaint sometime in the early part of January 1990 which prompted it to file the
motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to
look beyond the titles submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the
certificates of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00) with legal interest plus
the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the complaint-in-intervention, the trial
court ordered the Register of Deeds of Laguna, Calamba Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property should pertain to the buyer who first acquired possession of the
property. The trial court equated the execution of a public instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession could be considered to have been first transferred to SLDC
and consequently ownership of the property pertained to SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the trial court
erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale made by the Spouses
Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred in failing
to consider that the contract to sell between them and Babasanta had been novated when the latter abandoned the verbal
contract of sale and declared that the original loan transaction just be carried out. The Spouses Lu argued that since the
properties involved were conjugal, the trial court should have declared the verbal contract to sell between Pacita Lu and
Pablo Babasanta null and void ab initio for lack of knowledge and consent of Miguel Lu. They further averred that the
trial court erred in not dismissing the complaint filed by Babasanta; in awarding damages in his favor and in refusing to
grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision[11] which set aside the judgment of the trial court. It
declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the spouses to execute
the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance of the purchase price in the
amount of two hundred sixty thousand pesos (P260,000.00). The appellate court ruled that the Absolute Deed of Sale with
Mortgage in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad faith. The Spouses Lu
were further ordered to return all payments made by SLDC with legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court.[12] However, in a
Manifestation dated 20 December 1995,[13] the Spouses Lu informed the appellate court that they are no longer contesting
the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,[14] the appellate court considered as withdrawn the motion for reconsideration filed
by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court denied SLDCs motion for
reconsideration on the ground that no new or substantial arguments were raised therein which would warrant modification
or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD FAITH
BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE OF
P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
Page | 47

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE
ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED
PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE ON
THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF THE
TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. [15]
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over the
property merely on the basis of its having advanced the amount of two hundred thousand pesos (P200,000.00) to Pacita
Lu upon the latters representation that she needed the money to pay her obligation to Babasanta. It argued that it had no
reason to suspect that Pacita was not telling the truth that the money would be used to pay her indebtedness to Babasanta.
At any rate, SLDC averred that the amount of two hundred thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still due from it and should not be construed as notice of the
prior sale of the land to Babasanta. It added that at no instance did Pacita Lu inform it that the lands had been previously
sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the property
and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of ownership. Since the titles
bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every reason to rely on
the correctness of the certificate of title and it was not obliged to go beyond the certificate to determine the condition of
the property. Invoking the presumption of good faith, it added that the burden rests on Babasanta to prove that it was
aware of the prior sale to him but the latter failed to do so. SLDC pointed out that the notice of lis pendens was annotated
only on 2 June 1989 long after the sale of the property to it was consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue their rights in the instant case and submit themselves to the
decision of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property because it
failed to comply with the requirement of registration of the sale in good faith. He emphasized that at the time SLDC
registered the sale in its favor on 30 June 1990, there was already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the acquisition of the property is evident from the fact that it failed
to make necessary inquiry regarding the purpose of the issuance of the two hundred thousand pesos (P200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better right over
the two parcels of land subject of the instant case in view of the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.[17] While the receipt signed by Pacita did not mention the price
for which the property was being sold, this deficiency was supplied by Pacita Lus letter dated 29 May 1989[18] wherein
she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19] which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance absolute.[20]
Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided all the essential
requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00) 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.
Page | 48

Babasantas 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.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the
vendor and is not to pass until the full payment of the price.[22] In a contract of sale, the vendor has lost and cannot recover
ownership until and unless the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not
a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have made the proper tender of payment and consignation of the
price in court as required by law. Mere sending of a letter by the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of payment.[24] Consignation of the amounts due in court is
essential in order to extinguish Babasantas obligation to pay the balance of the purchase price. Glaringly absent from the
records is any indication that Babasanta even attempted to make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell, Babasantas
claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent[25] and from that moment, the parties may reciprocally
demand performance.[26] The essential elements of a contract of sale, to wit: (1) consent or meeting of the minds, that is, to
transfer ownership in exchange for the price; (2) object certain which is the subject matter of the contract; (3) cause of the
obligation which is established.[27]
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the acquisition
and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is the legal means by
which dominion or ownership is created, transferred or destroyed, but title is only the legal basis by which to affect
dominion or ownership.[28] Under Article 712 of the Civil Code, ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts,
by tradition. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or
tradition is the mode of accomplishing the same.[29] Therefore, sale by itself does not transfer or affect ownership; the
most that sale does is to create the obligation to transfer ownership. It is tradition or delivery, as a consequence of sale,
that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is delivered
to him in any of the ways specified in Article 1497 to 1501.[30] The word delivered should not be taken restrictively to
mean transfer of actual physical possession of the property. The law recognizes two principal modes of delivery, to wit:
(1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee.[31] Legal or constructive
delivery, on the other hand, may be had through any of the following ways: the execution of a public instrument
evidencing the sale;[32] symbolical tradition such as the delivery of the keys of the place where the movable sold is being
kept;[33] traditio longa manu or by mere consent or agreement if the movable sold cannot yet be transferred to the
possession of the buyer at the time of the sale;[34] traditio brevi manu if the buyer already had possession of the object
even before the sale;[35] and traditio constitutum possessorium, where the seller remains in possession of the property in a
different capacity.[36]
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of the receipt by
Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement between Babasanta and the
Spouses Lu, though valid, was not embodied in a public instrument. Hence, no constructive delivery of the lands could
have been effected. For another, Babasanta had not taken possession of the property at any time after the perfection of the
sale in his favor or exercised acts of dominion over it despite his assertions that he was the rightful owner of the
lands. Simply stated, there was no delivery to Babasanta, whether actual or constructive, which is essential to transfer
ownership of the property. Thus, even on the assumption that the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence of delivery, since in a contract of sale ownership is
transferred to the vendee only upon the delivery of the thing sold.[37]
Page | 49

However, it must be stressed that the juridical relationship between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between the two purchasers of the same property. It 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.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of 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.[38] 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.[39]
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas
claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer upon the
latter any title to the property since the registration was attended by bad faith. Specifically, he points out that at the time
SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the file with the Register of Deeds,
the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in favor of
Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of the agreed purchase
price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of Absolute Sale in favor or SLDC.
At the time both deeds were executed, SLDC had no knowledge of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution of the first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at
all on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys 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.[40] Following the foregoing definition, we rule that SLDC
qualifies as a buyer in good faith since there is no evidence extant in the records that it had knowledge of the prior
transaction in favor of Babasanta. At the time of the sale of the property to SLDC, the vendors were still the registered
owners of the property and were in fact in possession of the lands. Time and again, this Court has ruled that a person
dealing with the owner of registered land is not bound to go beyond the certificate of title as he is charged with notice of
burdens on the property which are noted on the face of the register or on the certificate of title.[41] In assailing knowledge
of the transaction between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for
the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such
registering, filing, or entering.
However, the constructive notice operates as suchby the express wording of Section 52from the time of the
registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the sale in
favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the notice of
lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith characterization of SLDC as
a purchaser. A notice of lis pendens, as the Court held in Natao v. Esteban,[42] serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in litigation; and that he should keep his hands off the same,
Page | 50

unless he intends to gamble on the results of the litigation. Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the merit of its cause has been vindicated with the Courts
present decision which is the ultimate denouement on the controversy.
The Court of Appeals has made capital[43] of SLDCs averment in its Complaint-in-Intervention[44] that at the instance of
Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony of Pacita Lu herself on
cross-examination.[45] However, there is nothing in the said pleading and the testimony which explicitly relates the amount
to the transaction between the Spouses Lu and Babasanta for what they attest to is that the amount was supposed to pay
off the advances made by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu had already
executed the Deed of Absolute Sale with Mortgage in favor of SLDC and therefore, as previously explained, it has no
effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis pendens and
assuming further for the same nonce that this is a case of double sale, still Babasantas claim could not prevail over that
of SLDCs. In Abarquez v. Court of Appeals,[46] this Court had the occasion to rule 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 taken possession first of the property in good faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by Abarquez lacked the element of good faith. While the facts
in the instant case substantially differ from that in Abarquez, we would not hesitate to rule in favor of SLDC on the basis
of its prior possession of the property in good faith. Be it noted that delivery of the property to SLDC was immediately
effected after the execution of the deed in its favor, at which time SLDC had no knowledge at all of the prior transaction
by the Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the third priority is of
the date of title, with good faith as the common critical element. Since SLDC acquired possession of the property in good
faith in contrast to Babasanta, who neither registered nor possessed the property at any time, SLDCs right is definitely
superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in this
decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract to sell. In
Dichoso v. Roxas,[47] we had the occasion to rule that Article 1544 does not apply to a case where there was a sale to one
party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the
right to repurchase the same land. Accordingly, there was no double sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from is
REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna is
REINSTATED. No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Page | 51


SECOND DIVISION

CARMELITA FUDOT, G.R. No. 171008
Petitioner,
Present:

QUISUMBING, J.,
- versus - Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
CATTLEYA LAND, INC., VELASCO, JR., JJ.
Respondent.

Promulgated:

September 13, 2007

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


D E C I S I O N

TINGA, J.:

Page | 52

For resolution is a petition that seeks to nullify the Decision22[1] and Resolution23[2] of the
Court of Appeals dated 28 April 2005 and 11 January 2006, respectively, in C.A.G.R. CV No. 73025
which declared respondent as having a better right over a parcel of land located in Doljo, Panglao,
Bohol.


The facts, as culled from the records, follow.

Sometime in July 1992, Cattleya Land, Inc. (hereinafter referred to as respondent) asked
someone to check, on its behalf, the titles of nine (9) lots, the subject land included, which it intended
to buy from the spouses Troadio and Asuncion Tecson. Finding no defect on the titles, respondent
purchased the nine lots through a Deed of Conditional Sale on 6 November 1992. Subsequently, on
30 August 1993, respondent and the Tecsons executed a Deed of Absolute Sale over the same
properties. The Deed of Conditional Sale and the Deed of Absolute Sale were registered with the
Register of Deeds on 06 November 1992 and 04 October 1993, respectively.24[3] The Register of
Deeds, Atty. Narciso dela Serna, refused to actually annotate the deed of sale on the titles because of
the existing notice of attachment in connection with Civil Case No. 3399 pending before the Regional
Trial Court of Bohol.25[4] The attachment was eventually cancelled by virtue of a compromise
agreement between the Tecsons and their attaching creditor which was brokered by respondent.
Titles to six (6) of the nine (9) lots were issued, but the Register of Deeds refused to issue titles to the
remaining three (3) lots , because the titles covering the same were still unaccounted for.










Page | 53

On 23 January 1995, petitioner presented for registration before the Register of Deeds the
owners copy of the title of the subject property, together with the deed of sale purportedly executed
by the Tecsons in favor of petitioner on 19 December 1986. On the following day, respondent sent a
letter of protest/opposition to petitioners application. Much to its surprise, respondent learned that
the Register of Deeds had already registered the deed of sale in favor of petitioner and issued a new
title in her name.26[5]

On 5 May 1995, respondent filed its Complaint27[6] for Quieting Of Title &/Or Recovery Of
Ownership, Cancellation Of Title With Damages before the Regional Trial Court of Tagbilaran
City.28[7] On 26 June 1995, Asuncion filed a complaint-in-intervention, claiming that she never
signed any deed of sale covering any part of their conjugal property in favor of petitioner. She
averred that her signature in petitioners deed of sale was forged thus, said deed should be declared
null and void.29[8] She also claimed that she has discovered only recently that there was an amorous
relationship between her husband and petitioner.30[9]

Petitioner, for her part, alleged in her answer31[10] that the spouses Tecson had sold to her
the subject property for P20,000.00 and delivered to her the owners copy of the title on 26
December 1986. She claims that she subsequently presented the said title to the Register of Deeds
but the latter refused to register the same because the property was still under attachment.














Page | 54

On 31 October 2001, the trial court rendered its decision:32[11] (i) quieting the title or
ownership of the subject land in favor of respondent; (ii) declaring the deed of sale between
petitioner and spouses Tecson invalid; (iii) ordering the registration of the subject land in favor of
respondent; (iv) dismissing respondents claim for damages against the Register of Deeds for
insufficiency of evidence; (v) dismissing Asuncions claim for damages against petitioner for lack of
factual basis; and (vi) dismissing petitioners counterclaim for lack of the required preponderance of
evidence.33[12]

According to the trial court, respondent had recorded in good faith the deed of sale in its favor
ahead of petitioner. Moreover, based on Asuncions convincing and unrebutted testimony, the trial
court concluded that the purported signature of Asuncion in the deed of sale in favor of petitioner
was forged, thereby rendering the sale void.34[13]

Petitioner sought recourse to the Court of Appeals, arguing in the main that the rule on double
sale was applicable to the case. The appellate court, however, dismissed her appeal, holding that
there was no double sale because the alleged sale to petitioner was null and void in view of the
forgery of Asuncions purported signature in the deed. The appellate court noted that petitioner
failed to rebut Asuncions testimony despite opportunities to do so.35[14] Moreover, even if there
was double sale, according to the appellate court, respondents claim would still prevail since it was
able to register the second sale in its favor in good faith, had made inquiries before it purchased the
lots, and was informed that the titles were free from encumbrance except the attachment on the
property due to Civil Case No. 3399.36[15]












Page | 55

Petitioner sought reconsideration of the decision but the Court of Appeals denied her motion
for reconsideration for lack of merit.37[16]

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

I.

BETWEEN 2 BUYERS OF REGISTERED LAND, WHO HAS THE BETTER RIGHT-IS IT THE FIRST BUYER WHO WAS
GIVEN THE OWNERS DUPLICATE TCT TOGETHER WITH A DEED OF SALE IN 1986, OR THE SECOND BUYER IN
1992 WITH ONLY A DEED OF SALE.

II.
IS A BUYER OF REGISTERED LAND WHO DID NOT DEMAND OR REQUIRE THE DELIVERY OF THE OWNERS
DUPLICATE TCT A BUYER IN GOOD FAITH.

III.

II. IN SUBSEQUENT REGISTRATION OF REGISTERED LANDS, AS BY SALE, WHICH LAW SHALL GOVERN, ARTICLE
1455 OF CIVIL CODE OR P.D. 1529 OR TORRENS SYSTEM.38[17]


Petitioner avers that she was the first buyer in good faith and even had in her possession the
owners copy of the title so much so that she was able to register the deed of sale in her favor and
caused the issuance of a new title in her name. She argues that the presentation and surrender of the
deed of sale and the owners copy carried with it the conclusive authority of Asuncion Tecson which
cannot be overturned by the latters oral deposition.39[18]








Page | 56

Petitioner claims that respondent did not demand nor require delivery of the owners duplicate
title from the spouses Tecson, neither did it investigate the circumstances surrounding the absence of
the title. These indicate respondents knowledge of a defect in the title of the spouses and, thus,
petitioner concludes that respondent was not a buyer in good faith.40[19]

Finally, petitioner insists that the applicable law in this case is P.D. No. 1529, a special law
dealing precisely with the registration of registered lands or any subsequent sale thereof, and not
Article 1544 of the Civil Code which deals with immovable property not covered by the Torrens
System.41[20]

Respondent points out, on one hand, that petitioners first two issues which present an inquiry
on who has a better right or which one is a buyer in good faith, are questions of fact not proper in a
petition for review. The third issue, on the other hand, is ostensibly a question of law which had been
unsuccessfully raised below.42[21]

Respondent maintains that there is no room to speak of petitioner as a buyer in good faith
since she was never a buyer in the first place, as her claim is based on a null and void deed of sale, so
the court a quo found. Respondent also asserts that its status as a buyer in good faith was
established and confirmed in the proceedings before the two courts below.43[22]

Lastly, respondent argues that P.D. No. 1529 finds no application in the instant case. The
production of the owners duplicate certificate x x x being conclusive authority from the registered









Page | 57

owner is only true as between the registration applicant and the register of deeds concerned, but
never to third parties. Such conclusive authority, respondent adds, is only for the Register of Deeds
to enter a new certificate or to make a memorandum of registration in accordance with such
instrument. It cannot cure the fatal defect that the instrument from which such registration was
effected is null and void ab initio, respondent concludes.44[23]

The petition is bereft of merit.

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

In the first place, there is no double sale to speak of. Art. 1544 of the Civil Code,45[24] which
provides the rule on double sale, applies only to a situation where the same property is validly sold to
different vendees. In this case, there is only one sale to advert to, that between the spouses Tecson
and respondent.

In Remalante v. Tibe,46[25] this Court ruled that the Civil Law provision on double sale is not
applicable where there is only one valid sale, the previous sale having been found to be fraudulent.
Likewise, in Espiritu and Apostol v. Valerio,47[26] where the same parcel of land was purportedly sold
to two different parties, the Court held that despite the fact that one deed of sale was registered
ahead of the other, Art. 1544 of the Civil Code will not apply where said deed is found to be a forgery,
the result of this being that the right of the other vendee should prevail.










Page | 58

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

The congruence of the wills of the spouses is essential for the valid disposition of conjugal
property.48[27] Thus, under Article 166 of the Civil Code49[28] which was still in effect on 19
December 1986 when the deed of sale was purportedly executed, the husband cannot generally
alienate or encumber any real property of the conjugal partnership without the wifes consent.

In this case, following Article 17350[29] of the Civil Code, on 26 June 1995, or eight and a half
years (8 ) after the purported sale to petitioner, Asuncion filed her Complaint-in-Intervention
seeking the nullification thereof, and while her marriage with Troadio was still subsisting. Both the
Court of Appeals and the trial court found Asuncions signature in the deed of sale to have been
forged, and consequently, the deed of sale void for lack of marital consent. We find no reason to
disturb the findings of the trial court and the Court of Appeals. Findings of fact of lower courts are
deemed conclusive and binding upon the Supreme Court subject to certain exceptions,51[30] none of
which are present in this case. Besides, it has long been recognized in our jurisprudence that a forged
deed is a nullity and conveys no title.52[31]










Page | 59


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

The act of registration does not validate petitioners otherwise void contract. Registration is a
mere ministerial act by which a deed, contract, or instrument is sought to be inscribed in the records
of the Office of the Register of Deeds and annotated at the back of the certificate of title covering the
land subject of the deed, contract, or instrument. While it operates as a notice of the deed, contract,
or instrument to others, it does not add to its validity nor converts an invalid instrument into a valid
one as between the parties,53[32] nor amounts to a declaration by the state that the instrument is a
valid and subsisting interest in the land.54[33] The registration of petitioners void deed is not an
impediment to a declaration by the courts of its invalidity.

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

Art. 1544. x x x.

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

x x x x.








Page | 60

In interpreting this provision, the Court declared that the governing principle is primus
tempore, potior jure (first in time, stronger in right). Knowledge gained by the first buyer of the
second sale cannot defeat the first buyers rights, except where the second buyer registers in good
faith the second sale ahead of the first as provided by the aforequoted provision of the Civil Code.
Such knowledge of the first buyer does not bar him from availing of his rights under the law, among
them to register first his purchase as against the second buyer. However, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith.55[34] It is thus essential, to merit the
protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale.56[35]

We agree with the trial court and the Court of Appeals that respondent was a buyer in good
faith, having purchased the nine (9) lots, including the subject lot, without any notice of a previous
sale, but only a notice of attachment relative to a pending civil case. In fact, in its desire to finally
have the title to the properties transferred in its name, it persuaded the parties in the said case to
settle the same so that the notice of attachment could be cancelled.

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

Sec. 51. Conveyance and other dealings by registered owner. An owner of registered land may convey,
mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms
of deeds, mortgages, lease or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease
or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a
conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of
authority to the Register of Deeds to make Registration.

The act of registration shall be the operative act to convey or affect the land insofar as third persons
are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of
Deeds for the province or city where the land lies. (Emphasis supplied)








Page | 61



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


It has been held that between two transactions concerning the same parcel of land, the
registered transaction prevails over the earlier unregistered right. The act of registration operates to
convey and affect the registered land so that a bona fide purchaser of such land acquires good title as
against a prior transferee, if such prior transfer was unrecorded.57[36] As found by the courts a quo,
respondent was able to register its purchase ahead of petitioner. It will be recalled that respondent
was able to register its Deed of Conditional Sale with the Register of Deeds as early as 6 November
1992, and its Deed of Absolute Sale on 14 October 1993. On the other hand, petitioner was able to
present for registration her deed of sale and owners copy of the title only on 23 January 1995, or
almost nine years after the purported sale. Why it took petitioner nine (9) years to present the deed
and the owners copy, she had no credible explanation; but it is clear that when she finally did, she
already had constructive notice of the deed of sale in respondents favor. Without a doubt,
respondent had acquired a better title to the property.

Finally, anent petitioners claim that P.D. No. 1529 applies to registered lands or any
subsequent sale thereof, while Art. 1544 of the Civil Code applies only to immovable property not
covered by the Torrens System, suffice it to say that this quandary has already been answered by an
eminent former member of this Court, Justice Jose Vitug, who explained that the registration
contemplated under Art. 1544 has been held to refer to registration under P.D. No. 1529, thus:

The registration contemplated under Art. 1544 has been held to refer to registration under Act 496 Land
Registration Act (now PD 1529) which considers the act of registration as the operative act that binds the land (see
Mediante v. Rosabal, 1 O.G. [12] 900, Garcia v. Rosabal, 73 Phil 694). On lands covered by the Torrens System, the
purchaser acquires such rights and interest as they appear in the certificate of title, unaffected by any prior lien or
encumbrance not noted therein. The purchaser is not required to explore farther than what the Torrens title, upon
its face, indicates. The only exception is where the purchaser has actual knowledge of a flaw or defect in the title of
the seller or of such liens or encumbrances which, as to him, is equivalent to registration (see Sec. 39, Act 496;



Page | 62

Bernales v. IAC, G.R. 75336, 18 October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera s. Court of Appeals, L-
26677, 27 March 1981) (Emphasis supplied)58[37]


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


SO ORDERED.




DANTE O. TINGA
Associate Justice



Page | 63


FIRST DIVISION
[G.R. Nos. 102961-62. January 27, 2000]
JESUS P. LIAO, petitioner, vs. HON. COURT OF APPEALS I. C. CRUZ CONSTRUCTION, INC.
and ARLE DEVELOPMENT CORPORATION, respondents.AAE
[G.R. No. 107625. January 27, 2000]
JESUS P. LIAO, petitioner, vs. HON. COURT OF APPEALS, PRESIDING JUDGE, REGIONAL
TRIAL COURT, QUEZON CITY, BRANCH 85, SUSAN A. FORONDA, ILUMINADA R.
DIONISIO, AZUCENA Q. PUA AND LUCIA PUA LIOK BIN, respondents.AAE
[G.R. No. 108759. January 27, 2000]
JESUS P. LIAO, petitioner, vs. HON. COURT OF APPEALS, EDMUND M. RUIZ, ROMEO
GOMEZ AND ROSALINDA VILLAPA (represented by her attorney-in-fact Eleazar M. Villapa),
respondents.AAE
D E C I S I O N
PARDO, J .:
Petitioner Jesus P. Liao seeks to annul the decisions of the Court of Appeals59[1] which annulled an order of the Regional
Trial Court,60[2] Quezon City, Branch 99 directing the Register of Deeds to issue transfer titles to Estrella Mapa over
certain lots in Piedad Estate, Quezon City.61[3] Xqic|
The cases before us involve the issuance to different persons of several torrens titles covering the same property.
The facts may be summarized as follows:
On March 5, 1986, Estrella Mapa filed with the Regional Trial Court, Quezon City, Branch 99 a petition for reconstitution
of documents and issuance of certificates of title over certain parcels of land covered by OCT 614, Decree No. 6667,
GLRO Rec. No. 5975.62[4] 0ko
Estrella Mapa claimed that on June 16, 1913, the Director of Lands issued certificates of sales63[5] to Vicente Salgado over
the parcels of land covered by OCT 614, Decree No. 6667, GLRO Rec. No. 5975 in accordance with Act. No. 1120,
otherwise known as the Friar Lands Act. The sale involves four (4) parcels of land (Lot Nos. 755, 777, 778 and 783)
located at Bgy. Payatas, Quezon City. Lot No. 755 has an area of 3.691 hectares, Lot No. 777 has 25.0155 hectares, Lot
No. 778 has 24.5091 hectares, and Lot No. 783 has 25.0363 hectares. The four lots form part of the Piedad Estate.64[6]












Page | 64

On April 12, 1930, Vicente Salgado assigned the property to Estrella Mapa.
After hearing, on June 30, 1986, the trial court issued an order which provides:
"WHEREFORE, finding the Assignment of Sales Certificate Nos. 781 and 783 covering lots 778 and 777
respectively, to be genuine, valid and registrable titles, and the existence of approved technical
descriptions of said lots, the Court hereby orders the Registry of Deeds of Quezon City, after payment of
the required fees therefore, to issue a transfer Certificate of Title in the name of petitioner Estrella Mapa
for Lot No. 778 as per technical description approved and certified by, and on file with the Bureau of
Lands, and as earlier ordered reconstituted in the Office of the Land Registration Commission; and
portions of Lot 777 as per amended technical description submitted by petitioner and based on duly-
approved technical description on file with the Bureau of Lands. Eo
"SO ORDERED.
"Quezon City, Philippines, June 30, 1986.
"GODOFREDO Q. ASUNCION
J u d g e"65[7]
Pursuant to this order, the Register of Deeds of Quezon City issued T.C.T. No. 348156 dated August 5, 1986 covering Lot
No. 778 and a portion of Lot No. 777. On August 12, 1986, the Register of Deeds cancelled this title and issued T.C.T.
No. 348291 and T.C.T. No. 348292 covering Lot No. 778 and a portion of Lot No. 777 respectively.66[8] Eoo_
Unfortunately, the above titles were in conflict with several existing certificates of title, resulting in the filing of several
actions with the Regional Trial Court, Quezon City for quieting, and an investigation into the matter by the National
Bureau of Investigation.67[9] Meantime, Estrella Mapa assigned the parcels of land covered by T.C.T. No. 348291 and
T.C.T. No. 348292 in favor of Palmera Agricultural Realty Development Corporation, which is a family corporation
headed by Lourdes Angeles, Estrella Mapas daughter. Eoio
Re: G. R. Nos. 102961-62
On March 28, 1990, I.C. Cruz Construction, Inc. (ICC) filed with the Court of Appeals68[10] a petition for the annulment of
the Order dated June 30, 1986 of the Regional Trial Court, Quezon City.69[11] I.C. Cruz alleged that the title issued by the
Register of Deeds of Quezon City pursuant to said order encompassed property which had been registered and titled in its
name under TCT No. 836975.
On July 3, 1990, Arle Realty Development Corporation (hereafter Arle) filed a similar petition with the Court of
Appeals70[12] praying for the annulment of the same order of the Regional Trial Court. Arle claimed ownership of six (6)
lots covered by TCT No. 263984 to 263989, which had overlapped TCT No. 348292 covering Lot No. 777. Eooo













Page | 65

After consolidation of the two cases, the Court of Appeals set the cases for preliminary conference on March 21, 1991. At
this conference, Jesus P. Liao appeared with his counsel and claimed that he purchased the parcels of land from Palmera
by virtue of a Deed of Omnibus Assignment dated August 23, 1990.
On August 29, 1991, the Court of Appeals rendered decision as follows:
"WHEREFORE, the Order dated June 30, 1986 of the respondent Regional Trial Court of Quezon City
(Br. 99) in LRC Case No. Q-3369 (86) is declared null and void. Consequently, the Register of Deeds of
Quezon City is ordered to cancel T.C.T. No. 348156, T.C.T. No. 348291 and T.C.T No. 348292 of the
Registry of Deeds of Quezon City, all of which were issued pursuant to the aforesaid Order, as well as all
the subsequent titles derived therefrom.
"SO ORDERED.
"SALOME A. MONTOYAMoco
"Associate Justice
"WE CONCUR:
"FIDEL P. PURISIMA BONIFACIO CACDAC, JR.
"Associate Justice Associate Justice"71[13]
By resolution issued on November 28, 1991, the Court of Appeals denied Jesus Liaos motion for reconsideration.72[14]
On January 17, 1992, petitioner filed the present recourse.73[15] Eo
Re: G. R. No. 107625
On February 17, 1988, respondents Susan A. Foronda, Iluminada R. Dionisio, Azucena Q. Pua, and Lucia Pua Liok Bin
filed with the Regional Trial Court, Quezon City, Branch 85 a complaint74[16] for "Annulment of Title, Reconveyance of
Property, Damages and Injunction with Restraining Order" against Estrella Mapa, Lourdes Angeles, Serafin B. Riosa,
Ernie M. Palmos, Palmera Agricultural Realty Corporation and Maristel Y. Angeles, involving lots titled in the names of
the complainants but also covered by TCT No. 348292 (Lot No. 777). Kc
Respondents alleged that Lot 777 ceased to be part of Friar Land as early as May 1922 when the Director of Lands
executed Deed of Sale No. 10570 conveying ownership of Lot 777 to one Carlos Sarmiento, not to Vicente Salgado. The
lot could not have been validly assigned to defendant Estrella Mapa on April 12, 1930 by Vicente Salgado, who was not
the rightful owner of the property. TCT 348292 was procured only in 1986 while the titles of plaintiffs were issued in
1967 and one was issued in 1958.
Sometime in October 1986, respondents went to the Office of the City Assessor of Quezon City in response to a letter of
the City Assessor informing them that Estrella Mapa was applying for the issuance of tax clearance for Lot 777 covering
respondents property. The basis of the application was TCT No. 348292 of the Registry of Deeds for Quezon City dated
August 12, 1986. The title contained an encumbrance, which stated that the title was under investigation by the










Page | 66

Verification Committee of the Land Registration Commission (LRC), later known as National Land Titles and Deeds
Registration Administration (NALTDRA).75[17]
On November 4, 1987, the Verification Committee submitted a report stating that TCT No. 348292 was fraudulently and
irregularly issued, being a duplication of previously issued titles and recommending the filing of an action for the
annulment of TCT Nos. 348156, 348291 and 348292 all in the name of Estrella Mapa. K_o
The committee recommended that:
"1. A complaint be filed in court through the Office of the Solicitor General for the annulment of TCT
Nos. 348156, 348291 and 348292 all in the name of ESTRELLA MAPA, for having been fraudulently
and/or illegally issued they being a duplication of several previously issued regular titles;
"2. The matter be endorsed to the National Bureau of Investigation to pinpoint the person or persons
responsible therefor, for possible criminal and/or administrative prosecution; AAE
"3. To conduct fact finding investigation relative to the issuance of said Transfer Certificate of Title Nos.
348156, 348291 and 348292, by the Register of Deeds of Quezon City, notwithstanding the existence of
other titles covering the same lots, for possible administrative prosecution;
"4. The Register of Deeds of Quezon City, be informed of these findings for his information and
guidance; and
"5. The return of the original copies of TCT Nos. 348291 and 348292 to the Register of Deeds of Quezon
City, after filing of the complaint of annulment and annotation of the notice of lis pendens thereof.
"Respectfully submitted:
"THE VERIFICATION COMMITTEEXok
"By:
"EDILBERTO R. FELICIANO
"Chairman"76[18]
On May 25, 1988, NBI agent Samuel B. Ong submitted a report recommending the prosecution of Estrella Mapa and
Lourdes Angeles for violation of Article 172 of the Revised Penal Code.
On April 22, 1988, Azucena O. Pua and Lucia Pua Liok Bin filed with the Regional Trial Court, Quezon City, Branch 85
a motion for intervention and a complaint in intervention, alleging that they had a legal interest in the property in litigation
inasmuch as they acquired a portion of the lot from Purita Mapua, who in turn acquired it from plaintiff Iluminada
Dionisio and that they were presently owners of the property under TCT 254620. Mco
On July 24, 1990, the trial court rendered decision ruling, citing de Villa vs. Trinidad, 22 SCRA 1167, 1174 [1968], that
"where two certificates of title are issued to different persons covering the same land in whole or in part, the earlier in date
must prevail as between the original parties and in case of successive registrations where more than one certificate is
issued over the land, the person holding under prior certificate is entitled to the land as against the persons who rely on the
second certificate." The dispositive portion of the decision reads:
"Wherefore, judgment is hereby rendered as follows:
"1. Declaring null and void, and ordering the Register of Deeds of Quezon City to cancel TCT No.
348292 in the name of Estrella Mapa, as well as TCT No. 373356 and all titles emanating from TCT No.
348292. E





Page | 67

"2. Ordering defendants to reconvey to plaintiff Susan A. Foronda her parcel of land under TCT No.
363045; and to plaintiff Iluminada R. Dionisio, her parcel of land under TCT Nos. 44738, 117939,
117940, 117941 and 117943;
"3. Ordering defendants to refrain and desist from advertising and selling any of the lots within the
property of herein plaintiffs and from building and constructing roads and other structures thereon;
"4. Ordering defendants to pay plaintiffs and plaintiffs-intervenors, jointly and severally, the sum of P
20,000 as attorneys fees;
"5. Dismissing the counterclaim and crossclaim, with costs against defendants.
"SO ORDERED. E_o
"Quezon City, Philippines, July 24, 1990.
"BERNARDO P. ABESAMIS
"J u d g e"77[19]
On appeal by petitioner to the Court of Appeals, on October 23, 1992, the Court of Appeals dismissed the appeal on two
grounds. First, the decision of the trial court which authorized the issuance to Estrella Mapa of TCT No. 348292 had lost
its force when the Court of Appeals declared it null and void in its decision promulgated on August 29, 1991.78[20] Second,
the July 24, 1990 decision of the trial court was a valid decision, which the Court of Appeals found no reason to
disturb.79[21]
On December 16, 1992, Jesus P. Liao filed this petition. Eo_
Re: G. R. No. 108759
Following the same facts above where the Register of Deeds, Quezon City issued TCT No. 348292 in the name of Estrella
Mapa, the third case developed as follows:
On February 9, 1988, Edmund Ruiz, Romeo Gomez, and Rosalinda Villapa filed with the Regional Trial Court, Quezon
City, Branch 105 a complaint for annulment of title, reconveyance of real property, damages, and injunction against
Estrella Mapa, Lourdes Angeles, Serafin Riosa and Ernie Palmos.80[22]
On September 22, 1989, the trial court rendered decision against the defendants therein. The dispositive portion reads:
"WHEREFORE, premises considered, judgment is hereby rendered: oio
"1. Declaring Transfer Certificate of Title No. 191487 in the name of plaintiff Edmond M. Ruiz covering
Lot 777-B-7-B-4, Transfer Certificate No. 27265 in the name of plaintiff Romeo Gomez covering Lot
777-B-23, and Transfer Certificate of Title No. 238282 covering Lot 777-B-5-A in the name of plaintiff
Rosalinda N. Villapa, all valid and to be given full force and effect;
"2. Declaring defendant Estrella Mapas Transfer Certificate of Title No. 348292 as null and void in so far
as the Lot 777 which it covers overlaps the aforementioned lots of plaintiffs;









Page | 68

"3. Making permanent the writ of preliminary injunction issued and ordering all the defendants to pay
costs;
"4. Ordering defendants Estrella Mapa and Lourdes Angeles jointly and severally to pay the three the
three plaintiffs Edmond M. Ruiz, Romeo Gomez, and Rosalinda Villapa, P10,000.00 each, as moral
damages; P 5,000.00 each, as exemplary damages; and P 10,000.00 each, as and by way of attorneys
fees. Miooooo
"As recommended by the Verification Committee of the new Land Registration Authority, and
considering numerous other titles and lot owners affected by the issuance of Transfer Certificate of Title
No. 348292 of Estrella Mapa, the Office of the Solicitor general is hereby directed (if other private parties
have not yet done so) to file action to annul said TCT No. 348292.
"Likewise, the Land Registration Authority is hereby directed to immediately communicate with the
Housing and Land Use Regulatory Board for the purpose of investigating the Riosa City Subdivision
owned and/or operated by defendants Serafin B. Riosa and Ernie B. Palmos, the owners-developers of Lot
777 with the view of cancelling whatever authority or permit granted by said HLURB to sell and/or offer
to sell subdivision lots of said subdivision which are within TCT 348292, TCT 348291, and TCT 348156,
all in the names of defendant Estrella Mapa, this for the protection of lot buyers.
"SO ORDERED. Eooooo_
"Quezon City, Metro Manila, this 22nd day of September, 1989.
"(Sgd.) TOMAS V. TADEO, JR.
"Judge"81[23]
On July 13, 1992, petitioner Jesus P. Liao, as successor-in-interest of Palmera Agricultural Realty Development, which
was in turn the successor-in-interest of Estrella Mapa to lot 778 and a portion of lot 777, Piedad Estate, filed a petition for
annulment of judgment with the Court of Appeals.82[24]
On February 4, 1993, the Court of Appeals rendered decision denying due course to the petition, thus: Pt_ottco
"Nevertheless, let it be stated that it is within the prerogative and in the exercise of its judicial discretion
pursuant to Section 1, Rule 18 of the Revised Rules of Court for respondent court to declare defendant as
in default for their failure to appear during the pre-trial. Likewise, it is within the judicial discretion of
respondent court to base its decision on the report and recommendation of the Verification Committee.
The fact that defendants were not able to cross-examine the members of the committee is a natural and
legal consequence of defendants having been declared as in default.
"WHEREFORE, finding herein petition for annulment of judgment not to be sufficient in substance, We
hereby DENY DUE COURSE to said petition which is accordingly dismissed pursuant to section 1(c),
Rule 6 of the Revised Internal Rules of the Court of Appeals.
"SO ORDERED."83[25] Kotc
Hence, this petition.84[26]









Page | 69

The Issue
The basic issue in these consolidated cases is whether or not the Court of Appeals erred in upholding the annulment of the
order of the trial court in LRC Case No. 3369 (86) authorizing issuance of titles on the basis of sales certificates and
technical descriptions as reconstituted by the Land Registration Commission.
We deny the petitions.
The subject lots are part of the Piedad Estate, Quezon City, a Friar Land acquired by the Philippine Government from the
Philippine Sugar Estates Development Company, Ltd., La Sociedad Agricola de Ultramar, the British-Manila Estate
Company, Ltd., and the Recoleto Order of the Philippine Islands on December 23, 1903, as indicated in Public Act No.
1120 (Friar Lands Act) enacted on April 26, 1904.85[27] The Piedad Estate has been titled in the name of the Government
under Original Certificate of Title No. 614. E_oe
By virtue of Act No. 1120, the Piedad Estate was placed under the administration of the Director of Lands.
a. Petitioner not owner of land
Petitioner Liao claims that his predecessor in interest acquired the property through sale certificates Nos. 780, 781, 783,
issued by the Director of Lands in 1913. It is shown, however, that the sale certificates were signed by the Director of
Lands and approved by the Secretary of the Interior. These sales were void. This is because the sales were not approved
by the Secretary of Agriculture and Natural Resources. In Solid State Multi-Products Corp. vs. Court of Appeals,86[28] we
said that approval by the Secretary of Agriculture and Commerce is indispensable for the validity of the sale of friar lands.
In the absence of such approval, the sales were void.87[29] In view of the invalidity of the sales, there can be no valid titles
issued on the basis of such sales.
In any event, the certificates of sale,88[30] assuming their validity, became stale after ten (10) years from its issuance.89[31]
They can not be the source documents for issuance of title more than seventy (70) years later.90[32] E_c
The rule entrenched on public policy denies relief to a claimant whose right has become "stale" by reason of negligence or
inattention for a long period of time.91[33] In these cases, Estrella Mapas inaction for a period of about fifty-six (56) years,
counted from the time of the sale to her in 1930 up to the filing of the petition for the issuance of title in 1986, bars
petitioner from whatever rights he could have acquired thereunder. If petitioners predecessor was indeed the owner, she
should have taken steps to have the land properly titled long ago.
b. Double Sale
These cases involve a classic issue of double sale. oe















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Faced with a situation where both parties claim to have acquired the subject property, the law provides that as between
two purchasers, the one who registered the sale in his favor has a preferred right over the other who has not registered his
title, even if the latter is in actual possession of the immovable property.92[34]
We have consistently ruled that "when two certificates of title are issued to different persons covering the same land in
whole or in part, the earlier in date must prevail, and, in case of successive registrations where more than one certificate is
issued over the same land, the person holding a prior certificate is entitled to the land as against a person who relies on a
subsequent certificate."93[35] A certificate is not conclusive evidence of title if the same land had been registered and an
earlier certificate for the same is in existence.94[36] o_
c. Title not tantamount to ownership
Consequently, private respondents title must be respected. They have in their favor the law that protects holders of title
under the torrens system of land registration.95[37] Although title does not vest ownership, time and again we have ruled
that a torrens certificate is evidence of an indefeasible title to property in favor of the person whose name appears
thereon.96[38] Thus, the Court of Appeals correctly annulled the trial courts order allowing registration of the subject
property in the name of Estrella Mapa and her successors in interest. E_
WHEREFORE, the petitions are DISMISSED, for lack of merit. The decisions of the Court of Appeals in CA-G. R. SP
Nos. 20381 & 22098 promulgated on August 29, 1991, CA-G. R. SP No. 28422 promulgated on October 23, 1992, and
CA-G. R. SP No. 28368 promulgated on February 4, 1993 are AFFIRMED.
No costs.
SO ORDERED. E_io
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.











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THIRD DIVISION
[G.R. No. 128573. January 13, 2003]
NAAWAN COMMUNITY RURAL BANK INC., petitioner, vs. THE COURT OF APPEALS and SPOUSES ALFREDO
AND ANNABELLE LUMO, respondents.
D E C I S I O N
CORONA, J.:
Under the established principles of land registration, a person dealing with registered land may generally rely on the
correctness of a certificate of title and the law will in no way oblige him to go beyond it to determine the legal status of
the property.
Before us is a Petition for Review on Certiorari challenging the February 7, 1997 Decision97[1] of the Court of Appeals in
CA-G.R. CV No. 55149, which in turn affirmed the decision98[2] of the Regional Trial Court of Misamis Oriental, Branch
18 as follows:
WHEREFORE, the plaintiffs-spouses are adjudged the absolute owners and possessors of the properties in question (Lot
18583, under TCT No. T-50134, and all improvements thereon) and quieting title thereto as against any and all adverse
claims of the defendant. Further, the sheriffs certificate of sale, Exhibit 4; 4-A; Sheriffs deed of final conveyance,
Exhibit 5, 5-A; Tax Declarations No. 71211, Exhibit 7, and any and all instrument, record, claim, encumbrance or
proceeding in favor of the defendant, as against the plaintiffs, and their predecessor-in-interest, which may be extant in the
office of the Register of Deeds of Province of Misamis Oriental, and of Cagayan de Oro City, and in the City Assessors
Office of Cagayan de Oro City, are declared as invalid and ineffective as against the plaintiffs title.
The counterclaim is dismissed for lack of merit.
SO ORDERED.99[3]
The facts of the case, as culled from the records, are as follows:
On April 30, 1988, a certain Guillermo Comayas offered to sell to private respondent-spouses Alfredo and Annabelle
Lumo, a house and lot measuring 340 square meters located at Pinikitan, Camaman-an, Cagayan de Oro City.
Wanting to buy said house and lot, private respondents made inquiries at the Office of the Register of Deeds of Cagayan
de Oro City where the property is located and the Bureau of Lands on the legal status of the vendors title. They found
out that the property was mortgaged for P8,000 to a certain Mrs. Galupo and that the owners copy of the Certificate of
Title to said property was in her possession.
Private respondents directed Guillermo Comayas to redeem the property from Galupo at their expense, giving the amount
of P10,000 to Comayas for that purpose.
On May 30, 1988, a release of the adverse claim of Galupo was annotated on TCT No. T-41499 which covered the subject
property.
In the meantime, on May 17, 1988, even before the release of Galupos adverse claim, private respondents and Guillermo
Comayas, executed a deed of absolute sale. The subject property was allegedly sold for P125,000 but the deed of sale
reflected the amount of only P30,000 which was the amount private respondents were ready to pay at the time of the
execution of said deed, the balance payable by installment.







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On June 9, 1988, the deed of absolute sale was registered and inscribed on TCT No. T-41499 and, on even date, TCT No.
T-50134 was issued in favor of private respondents.
After obtaining their TCT, private respondents requested the issuance of a new tax declaration certificate in their names.
However, they were surprised to learn from the City Assessors Office that the property was also declared for tax
purposes in the name of petitioner Naawan Community Rural Bank Inc. Records in the City Assessors Office revealed
that, for the lot covered by TCT No. T-50134, Alfredo Lumos T/D # 83324 bore the note: This lot is also declared in
the name of Naawan Community Rural Bank Inc. under T/D # 71210.
Apparently, on February 7, 1983, Guillermo Comayas obtained a P15,000 loan from petitioner Bank using the subject
property as security. At the time said contract of mortgage was entered into, the subject property was then an
unregistered parcel of residential land, tax-declared in the name of a certain Sergio A. Balibay while the residential one-
storey house was tax-declared in the name of Comayas.
Balibay executed a special power of attorney authorizing Comayas to borrow money and use the subject lot as security.
But the Deed of Real Estate Mortgage and the Special Power of Attorney were recorded in the registration book of the
Province of Misamis Oriental, not in the registration book of Cagayan de Oro City. It appears that, when the registration
was made, there was only one Register of Deeds for the entire province of Misamis Oriental, including Cagayan de Oro
City. It was only in 1985 when the Office of the Register of Deeds for Cagayan de Oro City was established separately
from the Office of the Register of Deeds for the Province of Misamis Oriental.
For failure of Comayas to pay, the real estate mortgage was foreclosed and the subject property sold at a public auction to
the mortgagee Naawan Community Rural Bank as the highest bidder in the amount of P16,031.35. Thereafter, the
sheriffs certificate of sale was issued and registered under Act 3344 in the Register of Deeds of the Province of Misamis
Oriental.
On April 17, 1984, the subject property was registered in original proceedings under the Land Registration Act. Title was
entered in the registration book of the Register of Deeds of Cagayan de Oro City as Original Certificate of Title No. 0-
820, pursuant to Decree No. N-189413.
On July 23, 1984, Transfer Certificate of Title No. T-41499 in the name of Guillermo P. Comayas was entered in the
Register of Deeds of Cagayan de Oro City.
Meanwhile, on September 5, 1986, the period for redemption of the foreclosed subject property lapsed and the MTCC
Deputy Sheriff of Cagayan de Oro City issued and delivered to petitioner bank the sheriffs deed of final conveyance.
This time, the deed was registered under Act 3344 and recorded in the registration book of the Register of Deeds of
Cagayan de Oro City.
By virtue of said deed, petitioner Bank obtained a tax declaration for the subject house and lot.
Thereafter, petitioner Bank instituted an action for ejectment against Comayas before the MTCC which decided in its
favor. On appeal, the Regional Trial Court affirmed the decision of the MTCC in a decision dated April 13, 1988.
On January 27, 1989, the Regional Trial Court issued an order for the issuance of a writ of execution of its judgment. The
MTCC, being the court of origin, promptly issued said writ.
However, when the writ was served, the property was no longer occupied by Comayas but herein private respondents, the
spouses Lumo who had, as earlier mentioned, bought it from Comayas on May 17, 1988
Alarmed by the prospect of being ejected from their home, private respondents filed an action for quieting of title which
was docketed as Civil Case No. 89-138. After trial, the Regional Trial Court rendered a decision declaring private
respondents as purchasers for value and in good faith, and consequently declaring them as the absolute owners and
possessors of the subject house and lot.
Petitioner appealed to the Court of Appeals which in turn affirmed the trial courts decision.
Hence, this petition.
Petitioner raises the following issues:
I. WHETHER OR NOT THE SHERIFFS DEED OF FINAL CONVEYANCE WAS DULY EXECUTED AND
REGISTERED IN THE REGISTER OF DEEDS OF CAGAYAN DE ORO CITY ON DECEMBER 2, 1986;
Page | 73

II. WHETHER OR NOT REGISTRATION OF SHERIFFS DEED OF FINAL CONVEYANCE IN THE PROPER
REGISTRY OF DEEDS COULD BE EFFECTIVE AS AGAINST SPOUSES LUMO.
Both parties cite Article 1544 of the Civil Code which governs the double sale of immovable property.
Article 1544 provides:
x x x. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Petitioner bank contends that the earlier registration of the sheriffs deed of final conveyance in the day book under Act
3344 should prevail over the later registration of private respondents deed of absolute sale under Act 496,100[4] as
amended by the Property Registration Decree, PD 1529.
This contention has no leg to stand on. It has been held that, where a person claims to have superior proprietary rights
over another on the ground that he derived his title from a sheriffs sale registered in the Registry of Property, Article
1473 (now Article 1544) of the Civil Code will apply only if said execution sale of real estate is registered under Act
496.101[5]
Unfortunately, the subject property was still untitled when it was acquired by petitioner bank by virtue of a final deed of
conveyance. On the other hand, when private respondents purchased the same property, it was already covered by the
Torrens System.
Petitioner also relies on the case of Bautista vs. Fule102[6] where the Court ruled that the registration of an instrument
involving unregistered land in the Registry of Deeds creates constructive notice and binds third person who may
subsequently deal with the same property.
However, a close scrutiny of the records reveals that, at the time of the execution and delivery of the sheriffs deed of final
conveyance on September 5, 1986, the disputed property was already covered by the Land Registration Act and Original
Certificate of Title No. 0-820 pursuant to Decree No. N189413 was likewise already entered in the registration book of
the Register of Deeds of Cagayan De Oro City as of April 17, 1984.
Thus, from April 17, 1984, the subject property was already under the operation of the Torrens System. Under the said
system, registration is the operative act that gives validity to the transfer or creates a lien upon the land.
Moreover, the issuance of a certificate of title had the effect of relieving the land of all claims except those noted thereon.
Accordingly, private respondents, in dealing with the subject registered land, were not required by law to go beyond the
register to determine the legal condition of the property. They were only charged with notice of such burdens on the
property as were noted on the register or the certificate of title. To have required them to do more would have been to
defeat the primary object of the Torrens System which is to make the Torrens Title indefeasible and valid against the
whole world.
Private respondents posit that, even assuming that the sheriffs deed of final conveyance in favor of petitioner bank was
duly recorded in the day book of the Register of Deeds under Act 3344, ownership of the subject real property would still
be theirs as purchasers in good faith because they registered the sale first under the Property Registration Decree.
The rights created by the above-stated statute of course do not and cannot accrue under an inscription in bad faith. Mere
registration of title in case of double sale is not enough; good faith must concur with the registration.103[7]









Page | 74

Petitioner contends that the due and proper registration of the sheriffs deed of final conveyance on December 2, 1986
amounted to constructive notice to private respondents. Thus, when private respondents bought the subject property on
May 17, 1988, they were deemed to have purchased the said property with the knowledge that it was already registered in
the name of petitioner bank.
Thus, the only issue left to be resolved is whether or not private respondents could be considered as buyers in good faith.
The priority in time principle being invoked by petitioner bank is misplaced because its registration referred to land not
within the Torrens System but under Act 3344. On the other hand, when private respondents bought the subject property,
the same was already registered under the Torrens System. It is a well-known rule in this jurisdiction that persons dealing
with registered land have the legal right to rely on the face of the Torrens Certificate of Title and to dispense with the need
to inquire further, except when the party concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry.104[8]
Did private respondents exercise the required diligence in ascertaining the legal condition of the title to the subject
property so as to be considered as innocent purchasers for value and in good faith?
We answer in the affirmative.
Before private respondents bought the subject property from Guillermo Comayas, inquiries were made with the Registry
of Deeds and the Bureau of Lands regarding the status of the vendors title. No liens or encumbrances were found to have
been annotated on the certificate of title. Neither were private respondents aware of any adverse claim or lien on the
property other than the adverse claim of a certain Geneva Galupo to whom Guillermo Comayas had mortgaged the subject
property. But, as already mentioned, the claim of Galupo was eventually settled and the adverse claim previously
annotated on the title cancelled. Thus, having made the necessary inquiries, private respondents did not have to go
beyond the certificate of title. Otherwise, the efficacy and conclusiveness of the Torrens Certificate of Title would be
rendered futile and nugatory.
Considering therefore that private respondents exercised the diligence required by law in ascertaining the legal status of
the Torrens title of Guillermo Comayas over the subject property and found no flaws therein, they should be considered as
innocent purchasers for value and in good faith.
Accordingly, the appealed judgment of the appellate court upholding private respondents Alfredo and Annabelle Lumo as
the true and rightful owners of the disputed property is affirmed.
WHEREFORE, petition is hereby DENIED.
SO ORDERED.
Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Morales, JJ., concur.



Page | 75

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21953 March 28, 1969
ENCARNACION GATIOAN, plaintiff-appellee,
vs.
SIXTO GAFFUD ET AL., defendants,
PHILIPPINE NATIONAL BANK, defendant-appellant.
Felix Fernandez for plaintiff-appellee.
Tomas Besa and Jose B. Galang for defendant-appellant.
BARREDO, J .:
Appeal from the Court of First Instance of Isabela.
The facts as found by the said court are as follows:
The land in question was originally registered in the name of Rufina Permison under Original Certificate of Title No. L-
3432, dated December 18, 1935 on the basis of a free patent. In the year 1948, Permison sold it to Sibreno Novesteras,
who in turn, conveyed it to appellee Encarnacion Gatioan on April 1, 1949. Through the initiative of appellee, the said
Original Certificate of Title No. L-3432 in the name of Rufina Permison was cancelled on June 3, 1949 and in lieu thereof
Transfer Certificate of Title No. T-1212 was issued in favor of appellee.
On June 12, 1950, appellee obtained a loan in the amount of P900.00 from the appellant, Philippine National, Bank, and
as security therefor, mortgaged the land described in TCT No. T-1212. Said mortgage was duly inscribed at the back of
the title but was cancelled when it was fully paid on June 3, 1953. Using the same land and title as collateral, appellee
acquired another loan in the sum of P1,100.00 from the same bank on May 3, 1954. The annotated incumbrance covering
this second loan was upon its being paid released on June 28, 1956. On July 18, 1957, appellee secured, a third loan from
the same bank, this time for a bigger amount P2,800,00. Again, she remortgaged the same land and title. This third
loan appears as Entry No. 8511 at the back of TCT No. T-1212. The third loan not yet paid, she secured an additional loan
of P3,170.00 from the same bank on July 30, 1957, for which she, however, gave as collateral, another parcel of land
covered by TCT No. T-4807. The deed of mortgage covering the last amount was jointly and severally execution by
appellee and the other registered co-owners appearing in the last mentioned title.
On August 12, 1960, appellee paid P2,800.00, plus interest, in full payment of the last loan secured by mortgage on the
land covered by TCT No. T-1212, as per receipt No. 402272-B. Partial payment was also given for the other joint
obligation secured with the joint deed of mortgage on the other land. Despite these payments, appellant executed no
instrument releasing or discharging the incumbrance on TCT No. T-1212.
In the meantime, on January 23, 1956, the defendant spouses Sixto Gaffud and Villamora Logan procured a free patent
covering the identical parcel of land described in TCT No. T-1212 of appellee, on the basis of which Original Certificate
of Title No. P-6038 was issued in their favor. On May 15, 1956 and January 8, 1957, they also obtained two loans from
appellant Bank in the sum of P1,400.00 and P300.00, respectively, and as collateral for both, they mortgaged the said land
covered by OCT No. P-6038. Without paying these two obligations, a consolidated mortgage in the sum of P2,300.00 was
executed by them on June 17, 1957, for which they gave as security in addition to the land described in OCT No. P-6038,
another parcel of land described in Original Certificate of Title No. 3137, also in their names.
Subsequently, the Secretary of Agriculture and Natural Resources compared the technical descriptions, areas, lot
numbers and cadastral numbers of the land described in TCT No. T-1212 with that covered by OCT No. P-6088, and
convinced that both titles covered the same identical land, he recommended the cancellation of the latter.lwphi1.et
On May 16, 1962, because of the existence of OCT No. P-6038 in the name of the defendant spouses Gaffud and Logan,
containing an annotation of the aforementioned consolidated mortgage in favor of the appellant Bank, and the annotation
on TCT No. T-1212 of the mortgage incumbrance covering the already paid loan of P2,800.00 to the appellee, which
appellant Bank refused to have cancelled, appellee filed the complaint for quieting of title in this case.
The above facts were found by the lower court from the stipulations submitted by the parties, except defendant spouses
Gaffud and Logan who were declared in default. No oral evidence was presented by any of the parties.
Page | 76

From a judgment favorable to the plaintiff thus:
WHEREFORE, the Court renders judgment:
(a) Declaring null and void ab initio the patent and certificate of title No. P-6038 issued in the name of the
defendant spouses Sixto Gaffud and Villamora Logan;
(b) Ordering the Register of Deeds of Isabela to cancel, upon payment of the fees, original certificate of title No.
P-6038 in the name of said spouses and ordering the Philippine National Bank to surrender to the Register of
Deeds of Isabela the owner's duplicate certificate of said title for its cancellation;
(c) Declaring the real estate mortgage executed by the defendant spouses Sixto Gaffud and Villamora Logan in
favor of the Bank, recorded on OCT P-6038 null and void and unenforceable as against the herein plaintiff, and
ordering its cancellation, without prejudice of the Bank's right to collect from the said spouses;
(d) Dismissing the complaint and its prayer, to order the defendant bank to immediately cancel or release the
mortgage recorded on Transfer Certificate of Title No. T-1212 in the name of the plaintiff, unless the other joint
obligation secured with the joint deed of mortgage executed by the herein plaintiff together with her co-debtors
has been full paid; and
(e) The court hereby sentences the defendant spouses Sixto Gaffud and Villamora Logan to pay to the plaintiff as
actual or compensatory and exemplary or corrective damages, and attorney's fees, the total amount of ONE
THOUSAND FIVE HUNDRED PESOS (P1,500.00), and to pay the costs.
only the appellant Bank has come to Us on appeal on a sole question of law related to paragraphs (a), (b) and (c) thereof.
(See Notice of Appeal, p. 90, Record on Appeal.)
Appellant does not, however, impugn the lower court's ruling in declaring null and void and cancelling OCT No. P-6038
in favor of the defendant spouses Gaffud and Logan; it only insists that the lower court should have declared it an
innocent mortgagee in good faith and for value as regards the mortgages executed in its favor by said defendant spouses
and duly annotated on their abovementioned OCT P-6038 and that consequently, the said mortgage annotations should be
carried over to and considered as incumbrances on the land covered by TCT No. T-1212 of appellee which, as already
stated, is the identical land covered by OCT P-6038 of the Gaffuds. We find no merit, whatsoever, in this contention,
because the point raised was already passed upon by this Court in no uncertain terms in Legarda v. Saleeby, 31 Phil. 590,
way back on October 2, 1915 and in subsequent cases of similar nature.
1
We unhesitatingly affirm the judgment of the
lower court.
Indeed, upon the facts found by the trial court as above stated, there can be no question that the decision of this Court in
Legarda v. Saleeby, supra, is controlling herein. Therein this Court held:
We find statutory provisions which, upon first reading, seem to cast some doubt upon the rule that the vendee
acquires the interest of the vendor only. Sections 38, 56, and 112 of Act No. 496 indicate that the vendee may
acquire rights and be protected against the defenses which the vendor would not. Said sections speak of available
rights in favor of third parties which are cut off by virtue of the sale of the land to an "innocent purchaser". That is
to say, persons who had had a right or interest in land wrongfully included in an original certificate would be
unable to enforce such rights against an "innocent purchaser", by virtue of the provisions of said sections. In the
present case Teus had his land, including the wall, registered in his name. He subsequently sold the same to
appellee an "innocent purchaser", as the phrase is used in said sections? May those who have been deprived of
their land by reason of a mistake in the original certificate in favor of Teus be deprived of their right to the same,
by virtue of the sale by him to the appellee? Suppose the appellants had sold their lot, including the wall, to an
"innocent purchaser", would such purchaser be included in the phrase "innocent purchaser", as the same is used in
said sections? Under these examples there would be two innocent purchasers of the same land, if said sections are
to be applied. Which of the two innocent purchasers, if they are both to be regarded as innocent purchasers,
should be protected under the provisions of said sections? These questions indicate to difficulty with which we are
met in giving meaning and effect to the phrase "innocent purchaser", in said sections.
May the purchaser of the land which has been included in a "second original certificate" ever be regarded as an
"innocent purchaser", as against the rights or interest of the owner of the first original certificate, his heirs, assigns
or vendee? The first original certificate is recorded in the public registry. It is never issued until it is recorded. The
record is notice to all the world. All persons are charged with the knowledge of what it contains. All persons
dealing with the land so recorded or any portion of it, must be charged with notice of whatever it contains. The
purchaser is charged with notice of every fact shown by the record and is presumed to know every fact which the
record discloses. This rule is so well established that it is scarcely necessary to cite authorities in its support
(Northwestern National Bank v. Freeman, 171 U.S. 620, 629; Delvin on Real Estate, sections 710, 710-[a]).
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When a conveyance has been properly recorded such record is constructive notice of its contents and all
interests, legal and equitable, included therein. (Grandin v. Anderson, 15 Ohio State, 286, 289; Orvis v. Newell 17
Conn. 97; Buchanan v. International Bank, 78 111. 500; Youngs v. Wilson, 27 N.Y. 351; McCabe v. Grey, 20
Cal. 509; Montefiore v. Browne, 7 House of Lords Cases, 341.)
Under the rule of notice, it is presumed that the purchaser has examined every instrument of record affecting the
title. Such presumption is irrebutable. He is charged with notice of every fact shown by the record and is
presumed to know every fact which an examination of the record would have disclosed. This presumption cannot
be overcome by proof of innocence or good faith. Otherwise the very purpose and object of the law requiring a
record would be destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the
record contains any more than one may be permitted to show that he was ignorant of the provisions of the law.
The rule that all persons must take notice of the facts which the public record contains is a rule of law. The rule
must be absolute. Any variation would lead to endless confusion and useless litigation.
While there is no statutory provision in force here requiring that original deeds of conveyance of real property,
be recorded, yet there is a rule requiring mortgages to be recorded. (Arts. 1875 and 606 of the Civil Code.) The
record of a mortgage is indispensable to its validity. (Art. 1875.) In the face of that statute, would the courts allow
a mortgage to be valid which had not been recorded, upon the plea of ignorance of the statutory provision, when
third parties were interested? May a purchaser of land, subsequent to the recorded mortgage, plead ignorance of
its existence, and by reason of such ignorance have the land released from such lien? Could a purchaser of land,
after the recorded mortgage, be relieved from the mortgage lien by the plea that he was a bona fide purchaser?
May there be a bona fide purchaser of said land, bona fide in the sense that he had no knowledge of the existence
of the mortgage? We believe the rule that all persons must take notice of what the public record contains is just as
obligatory upon all persons as the rule that all men must know the law: that no one can plead ignorance of the law.
The fact that all men know the law is contrary to the presumption. The conduct of men, at times, shows clearly
that they do not know the law. The rule, however, is mandatory and obligatory, notwithstanding. It would be just
as logical to allow the plea of ignorance of the law of affecting a contract as to allow the defense of ignorance of
the existence and contents of a public record.
In view, therefore, of the foregoing rules of law, may the purchaser of land from the owner of the second original
certificate be an "innocent purchaser" when a part or all of such land had theretofore been registered in the name
of another, not the vendor? We are of the opinion that said sections 38, 55, and 112 should not be applied to such
purchasers. We do not believe that the phrase "innocent purchaser" should be applied to such a purchaser. He
cannot be regarded as an "innocent purchaser" because of the facts contained in the record of the first original
certificate. The rule should not be applied to the purchaser of a parcel of land the vendor of which is not the owner
of the original certificate, or his successors. He, in no sense, can be an "innocent purchaser" of the portion of the
land included in another earlier original certificate. The rule of notice of what the record contains precludes the
idea of innocence. By reason of the prior registry there cannot be an innocent purchaser of land included in a prior
original certificate and in a name other than that of the vendor, or his successors. In order to minimize the
difficulties we think this is the safer rule to establish. We believe the phrase "innocent purchaser", used in said
sections, should be limited only to cases where unregistered land has been wrongfully included in a certificate
under the torrens system. When land is once brought under the torrens system, the record of the original
certificate and all subsequent transfers thereof is notice to all the world. That being the rule, could Teus even be
regarded as the holder in good faith of that part of the land included in his certificate which had theretofore been
included in the original certificate of the appellants? We think not. Suppose, for example, that Teus had never had
his lot registered under the torrens system. Suppose he had sold his lot to the appellee and included in his deed of
transfer the very strip of land now in question. Could his vendee be regarded as an "innocent purchaser" of said
strip? Certainly not. The record of the original certificate of the appellants precludes the possibility. Has the
appellee gained any right by reason of the registration of the strip of land in the name of his vendor? Applying the
rule of notice resulting from the record of the title of the appellants, the question must be answered in the
negative. We are of the opinion that the rules are more in harmony with the purpose of Act No. 496 than the rule
contended for by the appellee. We believe that the purchaser from the owner of the later certificate, and his
successors, should be required to resort to his vendor for damages, in case of a mistake like the present, rather
than to molest the holder of the first certificate who has been guilty of no negligence. The holder of the first
original certificate and his successors should be permitted to secure in their title against one who had acquired
rights in conflict therewith and who had full and complete knowledge of their rights. The purchaser of land
included in the second original certificate, by reason of the facts contained in the public record and the knowledge
with which he is charged and by reason of his negligence should suffer the loss, if any, resulting from such
purchaser case rather than he who has obtained the first certificate and who was innocent of any act of negligence.
(31 Phil. 590, 599-603)
Moreover, it is a matter of judicial notice that before a bank grants a loan on the security of land, it first undertakes a
careful examination of the title of the applicant as well as a physical and on-the-spot investigation of the land itself offered
as security. Undoubtedly, had herein appellant Bank taken such a step which is demanded by the most ordinary prudence,
it would have easily discovered the flaw in the title of the defendant spouses; and if it did not conduct such examination
Page | 78

and investigation, it must be held to be guilty of gross negligence in granting them the loans in question. In either case,
appellant Bank cannot be considered as a mortgagee in good faith within the contemplation of the law.
2

A more factual approach would lead to the same result. From the stipulated facts, it can be seen that prior to the
execution of the mortgage between appellant and the defendant spouses, the appellee had been mortgaging the land
described in TCT No. T-1212 to it. She did this first in the year 1950 for a loan of P900.00, and again in 1954 for a loan of
P1,100.00. In both instances, the appellant Bank had possession of, or at least, must have examined appellee's title, TCT
No. T-1212, wherein appear clearly the technical description, exact area, lot number and cadastral number of the land
covered by said title. In other words, by the time the defendant spouses offered OCT P-6038, in their names, for scrutiny
in connection with their own application for loan with appellant, the latter was charged with the notice of the identity of
the technical descriptions, areas, lot numbers and cadastral numbers of the lands purportedly covered by the two titles and
was in a position to know, if it did not have such knowledge actually, that they referred to one and the same lot. Under the
circumstances, appellant had absolutely no excuse for approving the application of the defendant spouses and giving the
loans in question. To appellant, therefore, fittingly applies the following pronouncement of this Court:
One who purchases real estate with knowledge of a defect or lack of, title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule
must be applied to one who has knowledge of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot
close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect
exists or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title will not
make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it
appears that he had such notice of the defect as would have led to its discovery had be acted with that measure of
precaution which may reasonably be required of a prudent man in a like situation..... (Dayao v. Diez, supra; citing
the case of Leung Yee v. Strong Machinery. Co., 37 Phil; 644.)
Anyway, appellant Bank is not without any remedy. It appears that, defendant spouses have another land covered by
OCT 3137 which is also mortgaged to it and which perhaps may yet be sufficient to cover the loans in question. In any
event, again, the following ruling of this Court in the recent case of De Villa v. Trinidad, G.R. No. L-24918, March 20,
1968, applies to appellant:
We have laid the rule that where two certificates of title around issued to different persons covering the same
land in whole or in part, the earlier in date must prevail as between original parties and in case of successive
registrations where more than one certificate is issued over the land, the person holding under the prior certificate
is entitled to the land as against the person who rely on the second certificate. The purchaser from the owner of
the later certificate and his successors, should resort to his vendor for redress, rather than molest the holder of
the first certificate and his successors, who should be permitted to resort secure in their title. (Citing Legarda v.
Saleeby, 31 Phil. 590) [Emphasis supplied]
The recourse to the cases of Blanco, et al. v. Esquierdo, G.R. No. L-15182, December 28, 1960 and Director of Lands v.
Abache, 73 Phil. 606, made by appellant in its brief is obviously unavailing. The factual settings of those cases are entirely
different from the one before Us now. In the case of Abache, what happened was that the land which one Santiago
Imperial and his mother claimed during the cadastral proceedings was adjudicated by the cadastral court in its decision to
other parties, the Adornados, who had never made any claim thereto, and when the Imperials asked later on, after the
decree and title had been issued, for the annulment of such title in the name of said non-claimants, it appeared that the
latter had already mortgaged the land to one Luis Meneses. This Court decreed that although the title of the Adornados
was void and the Imperials were entitled to the issuance of the title in their favor, the mortgage in favor of Meneses
constituted a valid lien over the land; the remedy of the Imperials was to go against the Assurance Fund. Thus, in that
case, there was nothing in the title itself which could indicate to Meneses that there was a flaw in the title of the
Adornados, because the error was committed by the court in the proceedings and not in the issuance of the title, hence it
contained on its face no circumstances of suspicion at all, from any point of view, unlike in the present case wherein an
examination of the title of the defendant spouses was sufficient to put appellant on notice that the land described therein
was identical with the land it had previously dealt with under another title in the name of somebody else.
The same is true with the other cited case of Blanco, et al. v. Esquierdo, supra. The pertinent portions of said decision
are as follows:
That the certificate of title issued in the name of Fructuosa Esquierdo is a nullity, the same having been secured
thru fraud, is not here in question. The only question for determine nation is whether the defendant bank is
entitled to the protection accorded to "innocent purchasers for value", which phrase, according to sec. 38 of the
Land Registration Law, includes an innocent mortgagee for value. The question, in our opinion, must be answered
in the affirmative.
Page | 79

The trial court, in the decision complained of, made no finding that the defendant mortgagee bank was a party to
the fraudulent transfer of the land to Fructuosa Esquierdo. Indeed, there is nothing alleged in the complaint which
may implicate said defendant mortgagee in the fraud, or justify a finding that it acted in bad faith. On the other
hand, the certificate of title was in the name of the mortgagor Fructuosa Esquierdo when the land was mortgaged
by her to the defendant bank. Such being the case, the said defendant bank, as mortgagee, had the right to rely on
what appeared in the certificate and, in the absence of anything to excite suspicion, was under no obligation to
look beyond the certificate and investigate the title of the mortgagor appearing on the face of said certificate. (De
Lara, et al., vs. Ayroso, 50 Off. Gaz. 4838; Joaquin vs. Madrid, et al., G.R. No. L-13551, January 30, 1960.)
Being thus an innocent mortgagee for value, its right or lien upon the land mortgaged must be respected and
protected, even if the mortgagor obtained her title thereto thru fraud. The remedy of the persons prejudiced is to
bring an action for damages against those causing the fraud, and if the latter are insolvent, an action against the
Treasurer of the Philippines may be filed for the recovery of damages against the Assurance Fund. (De la Cruz vs.
Fabie, 35 Phil. 144; Blondeau vs. Nena, 61 Phil. 625; Sumira, et al. vs. Vistan, et al., 74 Phil. 138; Raymundo et
al., vs. Mayon Realty Corp., et al., 54 Off. Gaz. 4954; Avecilla vs. Yatco, et al., 54 Off. Gaz. 6415.)
In this connection, it will be noted that the deceased Maximiano Blanco died way back in 1930 and the
certificate of title pursuant to his homestead application was issued in the name of his heirs sometime in 1934.
Plaintiffs, however, took no steps for the settlement of their late brother's estate and instead merely took
possession of the land in question jointly with Fructuosa Esquierdo. They also appear to have entrusted the
owner's certificate to said Fructuosa Esquierdo thus making it possible for her to fraudulently secure a transfer
certificate of title in her name. This should be emphasized, for in several cases it is what impelled this Court to
apply the principle of equity that "as between two innocent persons, one of whom must suffer the consequences of
a breach of trust, the one who. made it possible by his act of confidence must bear the loss". (De Lara, et al. vs.
Ayroso supra.)
Again, it is clear that in that case, the title examined by the bank had no indication, whatsoever, of any, defect in it,
unlike, as already stated, in this case.
By no means of reasoning, therefore, can anyone ever say that the case cited and relied upon by appellant could have
modified the doctrine in Legarda v. Saleeby, supra, and the other cases wherein it was reiterated. In fact, no mention at all
is made by appellant of the Legarda v. Saleeby case in its brief by way of explaining way said appellant had to bring this
case on appeal to Us in the face of the said decision which explained clearly and in detail the law on the point appellant
now urges before Us. We are thus persuaded that appellant paid little heed to the merit or lack of merit of this appeal
which We find to be frivolous.
WHEREFORE, as appellant has not appealed from the judgment of the lower court insofar as paragraphs (d) and (e)
thereof are concerned, said paragraphs stand, and the rest of said judgment is hereby affirmed. Double costs against
appellant in this instance.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Fernando, Capistrano and Teehankee, JJ., concur.
Castro, J., concurs in the result.
Page | 80

THIRD DIVISION
[G.R. Nos. 145156-57. July 29, 2005]
SOLID HOMES, INC., petitioner, vs. SPOUSES ANCHETA K. TAN and CORAZON DE JESUS TAN, respondents.
D E C I S I O N
GARCIA, J.:
In this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Solid Homes,
Inc. urges us to nullify and set aside the following issuances of the Court of Appeals in CA-G.R. SP No. 53443 and
55324, to wit:
1. Decision dated May 23, 2000,[1] setting aside an earlier decision of the Office of the President in a complaint
for breach of obligation filed by the herein respondents against the petitioner in connection with the sale of a
subdivision lot; and
2. Resolution dated September 12, 2000,[2] denying petitioners motion for reconsideration.
The material facts, undisputed by the parties, may be briefly stated, as follows:
On April 7, 1980, petitioner Solid Homes, Inc., sold to the spouses Joe Uy and Myrna Uy a subdivision lot with an area of
1,069 square meters, more particularly identified as Lot 18, Block 2, located at petitioners Loyola Grand Villas
Subdivision, Quezon City. Thereafter, the lot was registered in the name of the Uys under Transfer Certificate of Title
(TCT) No. 280963/T-1409 of the Register of Deeds of Quezon City.
Sometime in February, 1985, the spouses Uy sold the same lot to herein respondents, the spouses Ancheta K. Tan and
Corazon de Jesus-Tan, by reason of which the former title covering the lot was cancelled and replaced by TCT No. RT-
14465 (327754) in respondents name.
From then on, respondents visited their property a number of times, only to find out the sad state of development thereat.
There was no infrastructure and utility systems for water, sewerage, electricity and telephone, as announced in the
approved plans and advertisements of the subdivision. Worse, squatters occupy their lot and its surrounding areas. In
short, there has been no development at all.
Accordingly, in a letter dated December 18, 1995, respondents demanded on petitioner to provide the needed utility
systems and clear the area of squatters and other obstructions by the end of January, 1996 to enable them to start the
construction of their house thereon and to allow other lot owners in the area a full access to and peaceful possession of
their respective lots, conformably with P.D. No. 957 which requires an owner or developer of a subdivision project to
develop the same within one year from the issuance of its license.
Having received no reply from petitioner, respondents filed with the Field Office of the Housing and Land Use Regulatory
Board (HLURB), NCR a complaint for specific performance and damages therein praying, inter alia, that petitioner be
ordered to provide the needed facilities in the premises and rid the same of squatters; or, in the alternative, for petitioner to
replace respondents property with another lot in the same subdivision where there are facilities and sans squatters.
After due proceedings, the Housing and Land Use Arbiter, in a decision dated September 17, 1996,[3] rendered judgment
for the respondents by directing petitioner:
a. to perform its obligation to provide subdivision facilities in the subject premises and to rid the premises of
squatters. In the alternative, at the option of complainants xxx to replace subject lot with a lot of similar size
and with available facilities, located in the subject subdivision.
b. to pay complainants P20,000.00 as and by way of attorneys fees.
In the same decision, the Arbiter dismissed the complaint against petitioners co-defendant, Purita Soliven.
Dissatisfied, petitioner went on appeal to the HLURB Board of Commissioners, which, in a decision dated April 16,
1997,[4] affirmed that of the Arbiter.
From there, petitioner elevated the case to the Office of the President (O.P.).
Page | 81

In a decision[5] dated June 3, 1999, the O.P., thru then Executive Secretary Ronaldo B. Zamora, affirmed with
modification the appealed decision of the HLURB Board of Commissioners, thus:
WHEREFORE, premises considered, the first paragraph of the decision appealed from is hereby AFFIRMED with the
modification that in case Solid Homes, Inc. fails to replace subject lot with a lot of similar size and with available
facilities located in the subdivision, because it had already sold or transferred all of its properties in the subdivision, it
shall pay spouses Ancheta Tan and Corazon Tan the total amount received from them as purchase price, with legal rate of
interest from February 1985, until fully paid. Save for this modification, the decision appealed from is hereby
AFFI RMED.
SO ORDERED (Italics, ours).
On June 25, 1999, respondents filed a motion for partial reconsideration of the aforementioned decision, praying for the
deletion of that portion thereof giving petitioner the option of merely paying them the purchase price with interest in the
event petitioner fails to replace subject lot with a lot of similar size and with available facilities located in the
subdivision, because it had already sold or transferred all of its properties in the subdivision. Respondents argued that it
would be more in accord with equity and fair play if they will be paid the fair market value of the lot in question and not
merely its purchase price, should there be no available lot with facilities in the area.
However, in a resolution dated September 22, 1999,[6] O.P. denied respondents motion.
Both parties then went to the Court of Appeals via their respective petitions for review, thereat separately docketed as
CA- G.R. SP No. 53443 (for petitioners) and CA-G.R. SP No. 55324 (for respondent). Pursuant to Section 1, Rule 31 of
the Rules of the Court, the appellate court ordered the consolidation of the two (2) petitions.
As stated at the threshold hereof, the Court of Appeals, in its consolidated decision dated May 23, 2000,[7] set aside that
of the O.P. and affirmed the earlier decision dated April 16, 1997 of the HLURB Board of Commissioners, but subject to
the modification that petitioner shall pay respondents the current market value of the lot, not merely its purchase price,
should there be no more available lots with facilities in petitioners Loyola Grand Villas Subdivision. We quote the
decretal portion of the appellate courts decision:
WHEREFORE, Premises Considered, the assailed Decision dated 03 June 1999 is hereby SET ASIDE and the Decision
of the HLURB dated 16 April 1997 is hereby AFFIRMED subject to the modification that if there is no more available
lot in Loyola Grand Villas to replace subject lot, Solid Homes, Inc. should pay the spouses Tan the current market value
of their lot.
SO ORDERED.
This time, petitioner moved for reconsideration but its motion was denied by the same court in its resolution of
September 12, 2000.[8]
Hence, petitioners present recourse, contending that the Court of Appeals erred
1. XXX IN RULING THAT PRESCRIPTION HAS NOT SET-IN;
2. XXX IN APPLYING THE PRINCIPLE ON EQUITY AS AGAINST POSITIVE LAW TO THE
PREJUDICE OF HEREIN PETITIONER; AND
3. XXX IN RULING THAT PETITIONER SHOULD PAY RESPONDENTS THE CURRENT MARKET
VALUE OF THE LOT IN QUESTION.
We DENY.
The errors assigned actually simmered down to only two (2) issues, namely: (1) whether or not respondents right to bring
the instant case against petitioner has already prescribed; and (2) in the event respondents opt to rescind the contract,
should petitioner pay them merely the price they paid for the lot plus interest or the current market value thereof.
In the matter of prescription, it is petitioners posture that respondents right to bring the action against it has already
prescribed, arguing that the 10-year prescriptive period therefor should be reckoned from April 7, 1980 when petitioner
originally sold the lot in question to the spouses Joe Uy and Myrna Uy, or, at the latest from February, 1985, when
respondents acquired the same lot from the Uy spouses. Hence, and as respondents action was filed with the HLURB
Field Office only on April 1, 1996 or after more than ten (10) years, it follows that the same was filed out of time and,
therefore, ought to have been dismissed.
Page | 82

We disagree.
There can be no debate at all on the legal postulate that the prescriptive period for bringing action for specific
performance, as here, prescribes in ten (10) years. This is so provided in Article 1144 of the Civil Code. What we cannot
agree on with the petitioner, and about which petitioner is in serious error, is its submission that the 10-year prescriptive
period should commence either on April 7, 1980, when petitioner originally sold the lot to spouses Uy; or in February,
1985, when the respondents thereafter bought the same lot from the Uy couple. Obviously, petitioner misread Article
1144 which specifically provides that the 10-year period therein referred to commences to run only from the time the right
of action accrues. We quote in full the codal provision relied upon by petitioner:
Article 1144. The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment (Emphasis supplied).
If not on a written contract, petitioners obligation to introduce improvements on the area in question arises from law,
more specifically P.D. 957, as amended by P.D. 1216, Section 31 of which pertinently reads:
SECTION 31. Roads, Alleys, Sidewalks and Open Spaces. The owner as developer of a subdivision shall provide
adequate roads, alleys and sidewalks. For subdivision projects one (1) hectare or more, the owner or developer shall
reserve thirty percent (30%) of the gross area for open space.
The next inquiry, then, is when the respondents cause of action accrued. Our earlier ruling in Banco Filipino Savings and
Mortgage Bank vs. CA[9] provides the answer:
Thus, the period of prescription of any action is reckoned only from the date the cause of action accrued. And a cause of
action arises when that which should have been done is not done, or that which should not have been done is
done. The period should not be made to retroact to the date of execution of the contract on January 15, 1975 as claimed
by the petitioner for at that time, there would be no way for the respondents to know of the violation of their rights. The
Court of Appeals therefore correctly found that respondents cause of action accrued on October 30, 1978, the date they
received the statement of account showing the increased rate of interest, for it was only from that moment that they
discovered the petitioners unilateral increase thereof. We quote with approval the pertinent portions of the Court of
Appeals decision as follows:
It is the legal possibility of bringing the action that determines the starting point for the computation of the period of
prescription.[10] In fine, the ten-year prescriptive period is to be reckoned from the accrual of the Appellees right of
action, not necessarily on the very date of the execution of the contracts subject of the action[11] (Emphasis supplied)
In law, a cause of action exists when the following requisites concur, to wit: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation on the part on the defendant to respect
such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff.[12]
Time and again, we have emphasized that it is only upon the happening of the last element when it can be said that a cause
of action has arisen. In short, it is from the time an act is performed or an omission incurred which is violative of the
plaintiffs right, that signals the accrual of a cause of action. And it is from that time that the 10-year prescriptive period
commences to run.
Here, it was only on December 18, 1995 when respondents made a written demand upon petitioner to construct
subdivision roads, put up utility facilities and rid the premises of squatters, obligations which are unquestionably in the
nature of an obligation to do. And under Article 1169[13] of the Code, a party who is under obligation to do something
incurs delay only from the time that the obligee demands, either judicially or extrajudicially, for the fulfillment of the
obligation.
Parenthetically, and as we have said in Social Security System vs. Moonwalk Development and Housing Corporation, et
al.,[14] an obligor violates his obligation to the obligee from the time the latter made a demand for performance, which
demand also marks the point of time when the former incurs mora or delay:
The debtor, therefore, violates the obligation in point of time if there is mora or delay. Now, there is no mora or delay
unless there is a demand. It is noteworthy that in the present case during all the period when the principal obligation was
still subsisting, although there were late amortizations there was no demand made by the creditor, plaintiff-appellant for
Page | 83

the payment of the penalty. Therefore up to the time of the letter of plaintiff-appellant there was no demand for the
payment of the penalty, hence the debtor was not in mora in the payment of the penalty.
Hence, absent any demand from the obligee, the obligor does not incur delay. And so long as the obligor does not incur in
delay, he cannot be said to be guilty of some omission violative of the obligees rights. Consequently, as long as the
obligor is not guilty of some omission violative of the obligees rights, the latter has no cause of action against the
former. As a result, the prescriptive period within which the obligee may bring an action against the obligor does not
commence to run until a demand is made.
With the reality that in this case, respondents made their written demand upon petitioner to perform what is incumbent
upon it only on December 18, 1995, it was only from that date when the 10-year prescriptive period under Article 1144
commenced to run. And since respondents complaint for specific performance was filed with the Field Office of the
HLURB only on April 1, 1996, or less than four (4) months after the date of their demand, petitioners reliance on
prescription of action is simply without any leg to stand on.
This brings us to the second question.
Petitioner submits as erroneous the appellate courts ruling that [e]quity and justice dictate that the injured party should
be paid the market value of the lot, otherwise, respondents Solid Homes, Inc. & Purita Soliven would enrich themselves at
the expense of herein lot owners when they sell the same lot at the present market value. To petitioner, equity may be
availed of only in the absence of and never against statutory law or judicial rules of procedure. It then invokes Article
1385 of the New Civil Code, which provides:
Article 1385. Rescission creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interests; consequently, it can be carried out only when he who demands rescission can
return whatever he may be obliged to restore.
On surface, petitioners argument appears infallible. However, a closer look at our laws and the reason and spirit behind
their enactment, as well as established jurisprudence, negates petitioners thesis.
It is true that this Court have, in the past, applied the provision of Article 1385 to cases of rescission due to breach of
obligation under Article 1191.[15] But this notwithstanding, the Court finds no reason to alter the ruling of the Court of
Appeals.
In many instances, this Court has refused to apply the literal import of a particular provision of law when to do so would
lead to unjust, unfair and absurd results. After all, it is the function of courts to see to it that justice is dispensed, fairness is
observed and absurdity prevented. So it is that in Commissioner of Internal Revenue vs. Solidbank Corporation,[16] we
made the following pronouncement:
A literal application of any part of a statute is to be rejected if it will operate unjustly, lead to absurd results, or
contradict the evident meaning of the statute taken as a whole. Unlike the CA, we find that the literal application of
the aforesaid sections of the Tax Code and its implementing regulations does not operate unjustly or contradict the evident
meaning of the statute taken as a whole. Neither does it lead to absurd results. Indeed, our courts are not to give words
meanings that would lead to absurd or unreasonable consequences. We have repeatedly held thus:
xxx [Statutes should receive a sensible construction, such as will give effect to the legislative intention and so as to
avoid an unjust or an absurd conclusion. (Emphasis supplied.)
Were we to follow the letter of Article 1385, we will in effect be paving the way to an absurd situation whereby
subdivision developers who have reneged on their contractual and legal obligation to provide utility systems and facilities
for the use of subdivision lot owners may themselves profit from their very own wrongs and shortcomings. In the curt
language of the Court of Appeals, to which we are in full accord:
Indeed, there would be unjust enrichment if respondents Solid Homes, Inc. & Purita Soliven are made to pay only the
purchase price plus interest. It is definite that the value of the subject property already escalated after almost two decades
from the time the petitioner paid for it. Equity and justice dictate that the injured party should be paid the market value of
the lot, otherwise, respondents Solid Homes, Inc. & Purita Soliven would enrich themselves at the expense of herein lot
owners when they sell the same lot at the present market value. Surely, such a situation should not be countenanced for to
do so would be contrary to reason and therefore, unconscionable. Over time, courts have recognized with almost pedantic
adherence that what is inconvenient or contrary to reason is not allowed in law.
The foregoing scenario becomes even more intolerable when it is considered that P.D. 959 was issued precisely as a
measure against subdivision owners, developers, operators and/or sellers who reneged on their obligation to provide the
needed utility systems and facilities in their subdivisions. As expressed in one of the decrees whereas clauses:
Page | 84

WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators and/or sellers have
reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage,
water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and
lot buyers.
WHEREFORE, the instant petition is DENIED and the assailed decision and resolution of the Court of Appeals
AFFIRMED.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.
Corona, J., on official leave.
Page | 85

THIRD DIVISION
[G.R. No. 130913. June 21, 2005]
OLIVERIO LAPERAL and FILIPINAS GOLF & COUNTRY CLUB INC., petitioners, vs. SOLID HOMES, INC.,
respondent.
SOUTHRIDGE VILLAGE HOMEOWNERS ASSOCIATION, intervenor.
D E C I S I O N
GARCIA, J.:
Before us is this petition for review on certriorari under Rule 45 of the Rules of Court to nullify and set aside the
following issuances of the Court of Appeals in CA-G.R. CV No. 37853, to wit:
1. Decision dated September 18, 1996,[1] affirming with modification an earlier decision of the Regional Trial Court at
Laguna, Br. XXV, in an action for reformation of document thereat commenced by herein respondent Solid Homes, Inc.
against the petitioners; and
2. Resolution dated September 23, 1997,[2] denying the parties respective motions for reconsideration.
As found by the Court of Appeals in the decision under review, the material facts may be briefly stated, as follows:
On June 6, 1981, Filipinas Golf Sales and Development Corporation (FGSDC), predecessor-in-interest of petitioner
Filipinas Golf and Country Club, Inc. (FGCCI), represented by its then President, the other petitioner herein, Oliverio
Laperal, entered into a Development and Management Agreement[3] (Agreement, for short) with herein respondent Solid
Homes, Inc., a registered subdivision developer, involving several parcels of land owned by Laperal and FGSDC with an
aggregate area of approximately 42 hectares and located at Bo. San Antonio, San Pedro, Laguna.
Under the terms and conditions of the aforementioned Agreement and the Supplement[4] thereto dated January 19, 1982,
respondent Solid Homes, Inc., undertook to convert at its own expense the land subject of the agreement into a first-class
residential subdivision, in consideration of which respondent will get 45% of the lot titles of the saleable area in the entire
project.
On different dates, or more specifically on June 8, 1983, June 22, 1983 and July 29, 1983, Victorio V. Soliven, President
and General Manager of respondent Solid Homes, Inc., wrote Oliverio Laperal, President of FGSDC, requesting Laperal
to furnish Solid Homes, Inc., with the owners duplicate copies of the Torrens titles covering the subject land in order to
facilitate the processing of respondents application with the Human Settlements Regulatory Commission (HSRC) for a
license to sell subdivision lots, as required under Presidential Decree No. 957.
Despite repeated requests, however, Laperal did not comply.
On October 7, 1983, the aforementioned Agreement was cancelled by the parties, and, in lieu thereof, two (2) contracts
identically denominated Revised Development and Management Agreement[5] (Revised Agreements, for short) were
entered into by respondent with the two (2) successors-in-interest of FGSDC, to wit: (1) one, with petitioner Oliverio
Laperal as owner of the 181,075-square meter area of the subject land; and (2) another, with petitioner FGCCI as owner
of the 399,075-square meter area thereof.
Unlike the original agreement, both Revised Agreements omitted the obligation of herein petitioners Laperal and FGCCI
to make available to respondent Solid Homes, Inc. the owners duplicate copies of the titles covering the subject parcels of
land.
And, because there were still other matters which were inadvertently omitted in the said Revised Agreements, the parties
executed an Addendum[6] thereto dated November 11, 1983.
In addition to the provision on the automatic rescission of the Revised Agreements in case of breach of the terms and
conditions thereof under paragraph 10 of the same, the parties further agreed in the Addendum that upon a showing that
respondent deliberately abandoned or discontinued work in the subject project, all improvements of whatever nature and
kind it may have introduced in the property and existing as of the date of the violation shall be forfeited in favor of the
petitioners without any obligation on their part to pay respondent therefor. Likewise, the parties agreed in the same
Addendum to a forfeiture of all advances made and remittances of proceeds from reservations and sales upon occurrence
of the aforesaid default or violation of any of the terms and conditions of the Revised Agreements and the Addendum.
Page | 86

Under the Addendum, abandonment is deemed to have occurred upon failure or absence of any work for development for
any ten (10) days.
It appears, however, that even as the Revised Agreements already provided for the non-surrender of the owners duplicate
copies of the titles, respondent persisted in its request for the delivery thereof, explaining that said owners duplicate
copies were necessary for: (1) the issuance by the HSRC of the license to sell; (2) the segregation of the golf course
portion from the rest of the subdivision area; (3) the segregation of the individual titles for portions which are supposed to
be made available for PAG-IBIG take-outs; and (4) the preparation of the technical description of nine (9) blocks already
approved by the Bureau of Lands.
Then, in a letter dated December 7, 1983 addressed to herein petitioners, respondent, through its Executive Vice-President
and Treasurer, Purita R. Soliven, explained that it was unable to meet the November 30, 1983 deadline for the payment of
P1 Million as provided for in the Revised Agreements because there was delay in the processing of its license to sell,
which, in turn, is due to petitioners continued refusal to deliver the owners duplicate copies of the titles, contrary to what
was allegedly agreed upon by the parties. Respondent reiterated in the same letter that in the absence of such license from
HSRC, it would not be able to comply with the rest of its undertakings within the allotted periods since the projected
collection of amounts from sales and reservations of the subdivision lots did not materialize. Nonetheless, in order to
demonstrate that it was not reneging on its commitments under the Revised Agreements despite its difficulties to generate
more funds, respondent proposed that it be allowed to assign to petitioners P1Million out of its receivables worth
P1,209,000.00 from loan proceeds due in its favor under the PAG-IBIG housing program, which it expected to receive for
some of the completed housing units.
In separate letters both dated December 9, 1983, however, petitioners rejected respondents proposal and instead insisted
on the payment of P1Million to each of them.
It was only at this point, as alleged in respondents reply letter dated December 13, 1983, that respondent supposedly
realized that instead of providing for the payment of only P500,000.00 in each contract, or a total of P1Million for both
Revised Agreements, the total amount of P1Million was erroneously carried over in each of the Revised Agreements, with
the consequence that under said two (2) Revised Agreements, it was bound to pay a total of P2Million to the petitioners.
Meanwhile, in subsequent letters dated January 6, 1984, January 17, 1984 and February 6, 1984, respondent continued to
press petitioners for the delivery of the owners duplicate copies of their titles covering the subject parcel of land.
Then, on March 9, 1984, petitioners served on respondent notices of rescission of the Revised Agreements with a demand
to vacate the subject properties and yield possession thereof to them. In the same letter, petitioners made it clear that they
are enforcing the rescission clause of the Revised Agreements on account of respondents failure to: (1) pay them
P1Million each on November 30, 1983; (2) complete the development of Phase I-A of the project not later than February
15, 1984; and (3) obtain from the HSRC the license to sell subdivision lots.
In its response-letter dated March 14, 1984, respondent, through counsel, objected to the announced rescission, arguing
that the proximate cause of its inability to meet its contractual obligations was petitioners own failure and refusal to
deliver their owners duplicate copies of the titles for processing by the HSRC, PAG-IBIG, accredited banks, and other
government agencies, adding that on account of petitioners failure to do so, it was not issued the necessary license to sell,
thus resulting in the slowdown in the development works in the project due to its inability to generate additional funds and
to the slackening of its sales campaign.
Such was the state of things when, on April 2, 1984, in the Regional Trial Court (RTC) at Bian, Laguna
respondent Solid Homes, Inc. instituted the complaint in this case praying for the reformation of the Revised Agreements
and the Addendum on the ground that these contracts failed to express the true intent of the parties. In the same
complaint, respondent prayed for the issuance of a temporary restraining order (TRO) and a writ of preliminary injunction
to prevent petitioners from exercising their rights as owners of the subject properties. Docketed with the same court as
Civil Case No. B-2069, the complaint was raffled to Branch XXV thereof.
On the very day that the complaint was filed, the trial court issued a TRO to prevent petitioners from implementing the
unilateral rescission of the Revised Agreements and the Addendum.
Later, in an order dated May 23, 1984,[7] the same court granted respondents application for a writ of preliminary
injunction upon its posting of a bond in the amount of P1Million.
On April 18, 1985,[8] the Southridge Village Homeowners Association filed a complaint-in-intervention praying that
the rights and preferential status of its members who have been occupying some of the completed units in the subdivision
project be respected by whoever between the principal litigants may later be adjudged as the prevailing party.
Page | 87

Both the petitioners and respondent filed their respective answers to the aforesaid complaint-in-intervention, commonly
alleging intervenors lack of capacity to sue. Petitioners added in their answer that it should be respondent which must be
made solely liable to the intervenor for whatever claims its members may be entitled to. For its part, respondent prayed
for the cancellation, in whole or in part, of its contracts with the members of the intervenor Association to the extent
compatible with prevailing economic conditions.
Upon petitioners motion, the trial court issued an order on May 20, 1985 lifting the writ of preliminary injunction over
the entire property except as to Phase I-A thereof, and reducing respondents injunction bond from P1Million to only
P200,000.00.
Petitioners then filed a motion for reconsideration. Finding merit in the motion, the trial court, in its order of August 15,
1985,[9] as clarified in its order of September 27, 1985,[10] completely lifted the writ of preliminary injunction so as to
include the area covered by Phase I-A, and cancelled the bond of P200,000.00 earlier posted by respondent.
To these orders, both parties filed their respective motions for reconsideration. In its subsequent order dated November 8,
1985,[11] the trial court modified its August 15, 1985 order by maintaining the complete lifting of the writ of preliminary
injunction but ordering the restoration of respondents P1Million bond or its substitution with another if the same had
already been cancelled, to answer for whatever damages that may be proven by the petitioners during the trial of the case.
The above-mentioned orders, namely, orders dated May 20, 1985, August 15, 1985, September 27, 1985 and November 8,
1985 involving the dissolution of the writ of preliminary injunction over the entire property and the maintenance of the
P1Million bond against respondent, became the subject of a petition for certiorari filed by respondent before the Court of
Appeals docketed therein as CA-G.R. SP No. 47885.
In a decision dated October 9, 1987, the Court of Appeals dismissed the petition.
Therefrom, respondent went to this Court in G.R, No. 80290 but later abandoned the same, prompting this Court, in its
Resolution dated February 22, 1988, to consider the Court of Appeals dismissal of respondents petition final and
executory.
Meanwhile, upon respondents application, a notice of lis pendens was annotated on the Torrens titles covering the
properties in litigation. Said notice, however, was lifted by the trial court in its orders of April 12, 1988 and May 21,
1991.
Eventually, after due proceedings in the main case, the trial court, in a decision dated December 19, 1991,[12] rendered
judgment dismissing respondents complaint for reformation. We quote the dispositive portion of the same decision:
IN THE LIGHT OF THE FOREGOING, judgment is hereby rendered in favor of the defendants and against the plaintiff
dismissing the complaint with costs:
On defendants recovery upon the bond posted by the plaintiff to answer to whatever damages that the party enjoined may
suffer by reason of the injunction, resolution as to the propriety of its award is hereby held in abeyance until after proper
application by the defendants and hearing thereon, as reserved by the defendants in their memorandum.
As regards the Intervenors, the defendants are directed to respect and acknowledge their preferential rights over said
Intervenors occupied houses and lots.
SO ORDERED.
Therefrom, respondent went to the Court of Appeals via ordinary appeal in CA-G.R. CV No. 37853.
As stated at the threshold hereof, the Court of Appeals, in a decision dated September 18, 1996,[13] affirmed with
modification the appealed decision of the trial court, thus:
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision appealed from is AFFIRMED with the
modification that [petitioners] are ordered to reimburse [respondent], jointly and severally, the amount of Five Million
Two Hundred Thousand Eight Hundred Thirty Three Pesos and Twenty Seven Centavos (P5,200,833.27) representing the
actual cost of the development and the completed improvements on the project. In all other respects, the judgment of the
trial court is AFFIRMED.
SO ORDERED.
Both parties separately moved for reconsideration, but their respective motions were denied by the appellate court in its
resolution of September 23, 1997.[14]
Page | 88

And, as they did not agree with the judgment, petitioners are now appealing to this Court for relief via the present
recourse, it being their submission that the Court of Appeals erred-
I.
xxx IN HOLDING THAT PETITIONERS TERMINATION OF THE REVISED AGREEMENT AND ADDENDUM,
BECAUSE OF THE CONTRACTUAL BREACH COMMITTED BY RESPONDENT SOLID HOMES, CARRIED
WITH IT THE EFFECT PROVIDED UNDER ARTICLE 1385 OF THE NEW CIVIL CODE.
II.
xxx IN VOIDING THE FORFEITURE CLAUSES OF THE ADDENDUM, AND IN ORDERING THE REFUND OF
THE SUM OF P5,200,833.27 TO RESPONDENT SOLID HOMES.
III.
xxx IN HOLDING, IN EFFECT, THAT PETITIONERS ARE NOT ENTITLED TO DAMAGES.
The Court finds merit in the petition.
While this Court does not agree with petitioners that the right to rescind under Article 1191 of the Civil Code does not
carry with it the corresponding obligation for restitution, we do not subscribe to the Court of Appeals conclusion that: (1)
the forfeiture/penalty clause under paragraphs Nos. 2 and 3 of the Addendum to the Revised Development and
Management Agreements is, under the factual milieu of this case, unreasonable and unconscionable and, therefore, void
for being contrary to morals and good customs[15]; and (2) petitioners must reimburse respondent the actual cost of
development and completed improvements on the project in the total amount of P5,200,833.27.[16]
It is petitioners thesis that inasmuch as the rescission of the Revised Agreements and its Addendum was made pursuant to
Article 1191 of the Civil Code, the provision of Article 1385[17] of the same Code, which requires mutual restitution
should not apply because Article 1385 applies only if the rescission is made under the instances enumerated in Article
1381[18] of the Code.
We do not agree.
Mutual restitution is required in cases involving rescission under Article 1191. In Velarde vs. Court of Appeals,[19] this
Court, in no uncertain terms, squarely ruled on this matter:
Considering that the rescission of the contract is based on Article 1191 of the Civil Code, mutual restitution is
required to bring back the parties to their original situation prior to the inception of the contract. Accordingly, the initial
payment of P800,000 and the corresponding mortgage payments in the amounts of P27,225, P23,000 and P23,925
(totaling P874,150.00) advanced by petitioners should be returned by private respondents, lest the latter unjustly enrich
themselves at the expense of the former.
Rescission creates the obligation to return the object of the contract. It can be carried out only when the one who demands
rescission can return whatever he may be obliged to restore (citing Co v. Court of Appeals, 312 SCRA 528, August 17,
1999; and Vitug, Compendium of Civil Law and Jurisprudence, 1993 revised ed., p. 556). To rescind is to declare a
contract void at its inception and to put an end to it as though it never was. It is not merely to terminate it and release the
parties from further obligations to each other, but to abrogate it from the beginning and restore the parties to their relative
positions as if no contract has been made (citing Ocampo v. Court of Appeals, 233 SCRA 551, June 30, 1994).
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 the 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 the period.
This is understood without prejudice to the rights of third persons who have acquired the thing, in accordance with articles
1385 and 1388 and the Mortgage Law. (1124)
Page | 89

Despite the fact that Article 1124 of the old Civil Code from whence Article 1191 was taken, used the term resolution,
the amendment thereto (presently, Article 1191) explicitly and clearly used the term rescission. Unless Article 1191 is
subsequently amended to revert back to the term resolution, this Court has no alternative but to apply the law, as it is
written.
Again, since Article 1385 of the Civil Code expressly and clearly states that rescission creates the obligation to return the
things which were the object of the contract, together with their fruits, and the price with its interest, the Court finds no
justification to sustain petitioners position that said Article 1385 does not apply to rescission under Article 1191.
In Palay, Inc. vs. Clave,[20] this Court applied Article 1385 in a case involving resolution under Article 1191, thus:
Regarding the second issue on refund of the installment payments made by private respondent. Article 1385 of the Civil
Code provides:
ART. 1385. Rescission creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest; consequently, it can be carried out only when he who demands rescission can
return whatever he may be obliged to restore.
Neither shall rescission take place when the things which are the object of the contract are legally in the possession of
third persons who did not act in bad faith.
In this case, indemnity for damages may be demanded from the person causing the loss.
As a consequence of the resolution by petitioners, rights to the lot should be restored to private respondent or the
same should be replaced by another acceptable lot. However, considering that the property had already been sold to a
third person and there is no evidence on record that other lots are still available, private respondent is entitled to the refund
of installments paid plus interest at the legal rate of 12% computed from the date of the institution of the action. It would
be most inequitable if petitioners were to be allowed to retain private respondent's payments and at the same time
appropriate the proceeds of the second sale to another.
Applying the clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that
rescission under Article 1191 in the present case, carries with it the corresponding obligation of restitution.
This notwithstanding, the Court does not agree with the Court of Appeals that, as a consequence of the obligation of
mutual restitution in this case, petitioners should return the amount of P5,200,833.27 to respondent.
Article 1191 states that the injured party may choose between fulfillment and rescission of the obligation, with the
payment of damages in either case. In other words, while petitioners are indeed obliged to return the said amount to
respondent under Article 1385, assuming said figure is correct, respondent is at the same time liable to petitioners in the
same amount as liquidated damages by virtue of the forfeiture/penalty clause as freely stipulated upon by the parties in the
Addendum, paragraphs 1 and 2[21] of which respectively read:
WHEREAS, included as part of said agreement are the following:
1. Further to the stipulations on paragraph 10, upon default of performances, violations and/or non-compliance with
the terms and conditions herein agreed upon by the DEVELOPER wherein it appears that the DEVELOPER deliberately
abandoned or discontinued the work on the project, said party shall lose any entitlement, if any, to any refund and/or
advances it may have incurred in connection with or relative to previous development works in the subdivision; likewise,
all improvements of whatever nature and kind introduced by the DEVELOPER on the property, existing as of the date of
default or violation, shall automatically belong to the OWNER without obligation on his part to pay for the costs thereof.
2. Similarly with the same condition of default or violation obtaining, as stated in paragraph 10 of said agreement, all
advances made and remittances of proceeds from reservations and sales given by the DEVELOPER to the OWNER as
provided for in this agreement shall be deemed absolutely forfeited in favor of the OWNER, resulting to waiver of
DEVELOPERs rights, if any, with respect to said amount(s).
If this Court recognized the right of the parties to stipulate on an extrajudicial rescission[22] under Article 1191, there is no
reason why this Court will not allow the parties to stipulate on the matter of damages in case of such rescission under
Book IV, Title VIII, Chapter 3, Section 2 of the Civil Code governing liquidated damages.[23]
For sure, we find no factual and legal justification to sustain the appellate courts conclusion that the agreed
forfeiture/penalty clause is unreasonable and unconscionable unless respondent had sufficiently shown that it had
completely accounted for the proceeds of the sale of subdivision lots it made during the effectivity of the agreement. It
Page | 90

must be stressed that the lots sold by respondent were owned by petitioners Laperal and FGCCI. How then could there be
unjust enrichment in favor of petitioners in such a case?
Furthermore, a substantial part of the funds spent by respondent in the construction works which by the Court of Appeals
required to be reimbursed by petitioners admittedly came from the proceeds of the sale of the real property still owned by
petitioners. This may be gleaned from the fact that one of the main reasons respondent raised in its complaint for
reformation before the trial court was that it was unable to proceed with the construction works due to lack of funds on
account of the slackening of its sales campaign resulting from the alleged refusal, which is after all justified, of the
petitioners to surrender their titles to respondent.
Finally, even assuming that the foregoing forfeiture/penalty clause in the Addendum would result in considerable losses
on the part of respondent, it is not for this Court to release said party from its obligation. Our pronouncement in Esguerra
vs. Court of Appeals[24] is apt and pertinent:
xxx. It is a long established doctrine that the law does not relieve a party from the effects of an unwise, foolish, or
disastrous contract, entered into with all the required formalities and with full awareness of what he was doing. Courts
have no power to relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be
disastrous deals or unwise investments. xxx.
WHEREFORE, the petition is hereby GRANTED. Accordingly, the assailed decision and resolution of the Court of
appeals are REVERSED and SET ASIDE and the decision dated December 19, 1991 of the Regional Trial Court in Civil
Case No. B-2069 REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.
Page | 91

SECOND DIVISION
[G.R. No. 120820. August 1, 2000]
SPS. FORTUNATO SANTOS and ROSALINDA R. SANTOS, petitioners, vs. COURT OF APPEALS, SPS.
MARIANO R. CASEDA and CARMEN CASEDA, respondents.
D E C I S I O N
QUISUMBING, J.:
For review on certiorari is the decision of the Court of Appeals, dated March 28, 1995, in CA-G.R. CV No.
30955, which reversed and set aside the judgment of the Regional Trial Court of Makati, Branch 133, in Civil
Case No. 89-4759. Petitioners (the Santoses) were the owners of a house and lot informally sold, with
conditions, to herein private respondents (the Casedas). In the trial court, the Casedas had complained that
the Santoses refused to deliver said house and lot despite repeated demands. The trial court dismissed the
complaint for specific performance and damages, but in the Court of Appeals, the dismissal was reversed, as
follows:
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET ASIDE
and a new one entered:
1. GRANTING plaintiffs-appellants a period of NINETY (90) DAYS from the date of the finality of judgment
within which to pay the balance of the obligation in accordance with their agreement;
2. Ordering appellees to restore possession of the subject house and lot to the appellants upon receipt of the
full amount of the balance due on the purchase price; and
3. No pronouncement as to costs.
SO ORDERED.xvii[1]
The undisputed facts of this case are as follows:
The spouses Fortunato and Rosalinda Santos owned the house and lot consisting of 350 square meters
located at Lot 7, Block 8, Better Living Subdivision, Paranaque, Metro Manila, as evidenced by TCT (S-11029)
28005 of the Register of Deeds of Paranaque. The land together with the house, was mortgaged with the
Rural Bank of Salinas, Inc., to secure a loan of P150,000.00 maturing on June 16, 1987.
Sometime in 1984, Rosalinda Santos met Carmen Caseda, a fellow market vendor of hers in Pasay City and
soon became very good friends with her. The duo even became kumadres when Carmen stood as a wedding
sponsor of Rosalinda's nephew.
On June 16, 1984, the bank sent Rosalinda Santos a letter demanding payment of P16,915.84 in unpaid
interest and other charges. Since the Santos couple had no funds, Rosalinda offered to sell the house and lot
to Carmen. After inspecting the real property, Carmen and her husband agreed.
Sometime that month of June, Carmen and Rosalinda signed a document, which reads:
Received the amount of P54,100.00 as a partial payment of Mrs. Carmen Caseda to the (total) amount of
350,000.00 (house and lot) that is own (sic) by Mrs. Rosalinda R. Santos.
(Mrs.) (Sgd.) Carmen Caseda
direct buyer
Mrs. Carmen Caseda
(Sgd.) Rosalinda Del R. Santos
Owner
Mrs. Rosalinda R. Santos
House and Lot
Better Living Subd. Paraaque, Metro Manila
Section V Don Bosco St."xviii[2]
Page | 92

The other terms and conditions that the parties agreed upon were for the Caseda spouses to pay: (1) the
balance of the mortgage loan with the Rural bank amounting to P135,385.18; (2) the real estate taxes; (3) the
electric and water bills; and (4) the balance of the cash price to be paid not later than June 16, 1987, which
was the maturity date of the loan.xix[3]
The Casedas gave an initial payment of P54,100.00 and immediately took possession of the property, which
they then leased out. They also paid in installments, P81,696.84 of the mortgage loan. The Casedas,
however, in 1987. Notwithstanding the state of their finances, Carmen nonetheless paid in March 1990, the
real estate taxes on the property for 1981-1984. She also settled the electric bills from December 12, 1988 to
July 12, 1989. All these payments were made in the name of Rosalinda Santos.
In January 1989, the Santoses, seeing that the Casedas lacked the means to pay the remaining installments
and/or amortization of the loan, repossessed the property. The Santoses then collected the rentals from the
tenants.
In February 1989, Carmen Caseda sold her fishpond in Batangas. She then approached petitioners and
offered to pay the balance of the purchase price for the house and lot. The parties, however, could not agree,
and the deal could not push through because the Santoses wanted a higher price. For understandably, the
real estate boom in Metro Manila at this time, had considerably jacked up realty values.
On August 11, 1989, the Casedas filed Civil Case No. 89-4759, with the RTC of Makati, to have the Santoses
execute the final deed of conveyance over the property, or in default thereof, to reimburse the amount of
P180,000.00 paid in cash and P249,900.00 paid to the rural bank, plus interest; as well as rentals for eight
months amounting to P32,000.00, plus damages and costs of suit.
After trial on the merits, the lower court disposed of the case as follows:
WHEREFORE, judgment is hereby ordered:
(a) dismissing plaintiff's (Casedas') complaint; and
(b) declaring the agreement marked as Annex "C" of the complaint rescinded. Costs against plaintiffs.
SO ORDERED.xx[4]
Said judgment of dismissal is mainly based on the trial court's finding that:
Admittedly, the purchase price of the house and lot was P485,385.18, i.e. P350,000.00 as cash payment and
P135,385.18, assumption of mortgage. Of it plaintiffs [Casedas] paid the following: (1) P54,100.00 down
payment; and (2) P81,694.64 installment payments to the bank on the loan (Exhs. E to E-19) or a total of
P135,794.64. Thus, plaintiffs were short of the purchase price. They cannot, therefore, demand specific
performance.xxi[5]
The trial court further held that the Casedas were not entitled to reimbursement of payments already made,
reasoning that:
As, earlier mentioned, plaintiffs made a total payment of P135,794.64 out of the purchase price of
P485,385.18. The property was in plaintiffs' possession from June 1984 to January 1989 or a period of fifty-
five months. During that time, plaintiffs leased the property. Carmen said the property was rented for P25.00 a
day or P750.00 a month at the start and in 1987 it was increased to P2,000.00 and P4,000.00 a month. But
the evidence is not precise when the different amounts of rental took place. Be that as it may, fairness
demands that plaintiffs must pay defendants for their exercise of dominical rights over the property by renting it
to others. The amount of P2,000.00 a month would be reasonable based on the average of P750.00,
P2,000.00, P4,000.00 lease-rentals charged. Multiply P2,000.00 by 55 months, the plaintiffs must pay
defendants P110,000.00 for the use of the property. Deducting this amount from the P135,794.64 payment of
the plaintiffs on the property, the difference is P25,794.64. Should the plaintiffs be entitled to a reimbursement
of this amount? The answer is in the negative. Because of failure of plaintiffs to liquidated the mortgage loan
on time, it had ballooned from its original figure of P135,384.18 as of June 1984 to P337,280.78 as of
December 31, 1988. Defendants [Santoses] had to pay the last amount to the bank to save the property from
foreclosure. Logically, plaintiffs must share in the burden arising from their failure to liquidate the loan per their
contractual commitment. Hence, the amount of P25,794.64 as their share in the defendants' damages in the
form of increased loan-amount, is reasonable.xxii[6]
Page | 93

On appeal, the appellate court, as earlier noted, reversed the lower court. The appellate court held that
rescission was not justified under the circumstances and allowed the Caseda spouses a period of ninety days
within which to pay the balance of the agreed purchase price.
Hence, this instant petition for review on certiorari filed by the Santoses.
Petitioners now submit the following issues for our consideration:
WHETHER OR NOT THE COURT OF APPEALS HAS JURISDICTION TO DECIDE PRIVATE
RESPONDENT'S APPEAL INTERPOSING PURELY QUESTIONS OF LAW.
WHETHER THE SUBJECT TRANSACTION IS NOT A CONTRACT OF ABSOLUTE SALE BUT A MERE
ORAL CONTRACT TO SELL IN WHICH CASE JUDICIAL DEMAND FOR RESCISSION (ART. 1592,xxiii[7]
CIVIL CODE) IS NOT APPLICABLE.
ASSUMING ARGUENDO THAT A JUDICIAL DEMAND FOR RESCISSION IS REQUIRED, WHETHER
PETITIONERS' DEMAND AND PRAYER FOR RESCISSION CONTAINED IN THEIR ANSWER FILED
BEFORE THE TRIAL SATISFIED THE SAID REQUIREMENT.
WHETHER OR NOT THE NON-PAYMENT OF MORE THAN HALF OF THE ENTIRE PURCHASE PRICE
INCLUDING THE NON-COMPLIANCE WITH THE STIPULATION TO LIQUIDATE THE MORTGAGE LOAN
ON TIME WHICH CAUSED GRAVE DAMAGE AND PREJUDICE TO PETITIONERS, CONSTITUTE
SUBSTANTIAL BREACH TO JUSTIFY RESCISSION OF A CONTRACT TO SELL UNDER ARTICLE
1191xxiv[8] (CIVIL CODE).
On the first issue, petitioners argue that, since both the parties and the appellate court adopted the findings of
trial court,xxv[9] no questions of fact were raised before the Court of Appeals. According to petitioners, CA-
G.R. CV No. 30955, involved only pure questions of law. They aver that the court a quo had no jurisdiction to
hear, much less decide, CA-G.R. CV No. 30955, without running afoul of Supreme Court Circular No. 2-90 (4)
[c].xxvi[10]
There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain
set of facts, and there is a question of fact when the doubt or difference arises as to the truth or falsehood of
the alleged facts.xxvii[11] But we note that the first assignment of error submitted by respondents for
consideration by the appellate court dealt with the trial court's finding that herein petitioners got back the
property in question because respondents did not have the means to pay the installments and/or amortization
of the loan.xxviii[12] The resolution of this question involved an evaluation of proof, and not only a
consideration of the applicable statutory and case laws. Clearly, CA-G.R. CV No. 30955 did not involve pure
questions of law, hence the Court of Appeals had jurisdiction and there was no violation of our Circular No. 2-
90.
Moreover, we find that petitioners took an active part in the proceedings before the Court of Appeals, yet they
did not raise there the issue of jurisdiction. They should have raised this issue at the earliest opportunity
before the Court of Appeals. A party taking part in the proceedings before the appellate court and submitting
his case for as decision ought not to later on attack the court's decision for want of jurisdiction because the
decision turns out to be adverse to him.xxix[13]
The second and third issues deal with the question: Did the Court of Appeals err in holding that a judicial
rescission of the agreement was necessary? In resolving both issues, we must first make a preliminary
determination of the nature of the contract in question: Was it a contract of sale, as insisted by respondents or
a mere contract to sell, as contended by petitioners?
Petitioners argue that the transaction between them and respondents was a mere contract to sell, and not a
contract of sale, since the sole documentary evidence (Exh. D, receipt) referring to their agreement clearly
showed that they did not transfer ownership of the property in question simultaneous with its delivery and
hence remained its owners, pending fulfillment of the other suspensive conditions, i.e., full payment of the
balance of the purchase price and the loan amortizations. Petitioners point to Manuel v. Rodriguez, 109 Phil. 1
(1960) and Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 93 (1972), where we held that
Article 1592 of the Civil Code is inapplicable to a contract to sell. They charge the court a quo with reversible
error in holding that petitioners should have judicially rescinded the agreement with respondents when the
latter failed to pay the amortizations on the bank loan.
Respondents insist that there was a perfected contract of sale, since upon their partial payment of the
purchase price, they immediately took possession of the property as vendees, and subsequently leased it, thus
Page | 94

exercising all the rights of ownership over the property. This showed that transfer of ownership was
simultaneous with the delivery of the realty sold, according to respondents.
It must be emphasized from the outset that a contract is what the law defines it to be, taking into consideration
its essential elements, and not what the contracting parties call it.xxx[14] Article 1458xxxi[15] of the Civil Code
defines a contract of sale. Note that the said article expressly obliges the vendor to transfer ownership of the
thing sold as an essential element of a contract of sale. This is because the transfer of ownership in exchange
for a price paid or promised is the very essence of a contract of sale.xxxii[16] We have carefully examined the
contents of the unofficial receipt, Exh. D, with the terms and conditions informally agreed upon by the parties,
as well as the proofs submitted to support their respective contentions. We are far from persuaded that there
was a transfer of ownership simultaneously with the delivery of the property purportedly sold. The records
clearly show that, notwithstanding the fact that the Casedas first took then lost possession of the disputed
house and lot, the title to the property, TCT No. 28005 (S-11029) issued by the Register of Deeds of
Paraaque, has remained always in the name of Rosalinda Santos.xxxiii[17] Note further that although the
parties had agreed that the Casedas would assume the mortgage, all amortization payments made by Carmen
Caseda to the bank were in the name of Rosalinda Santos.xxxiv[18] We likewise find that the bank's
cancellation and discharge of mortgage dated January 20, 1990, was made in favor of Rosalinda
Santos.xxxv[19] The foregoing circumstances categorically and clearly show that no valid transfer of ownership
was made by the Santoses to the Casedas. Absent this essential element, their agreement cannot be deemed
a contract of sale. We agree with petitioners' averment that the agreement between Rosalinda Santos and
Carmen Caseda is a contract to sell. In contracts to sell, ownership is reserved by the vendor and is not to
pass until full payment of the purchase price. This we find fully applicable and understandable in this case,
given that the property involved is a titled realty under mortgage to a bank and would require notarial and other
formalities of law before transfer thereof could be validly effected.
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.xxxvi[20] 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.xxxvii[21] 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.xxxviii[22] As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of
immovable property.xxxix[23] Neither provision is applicable in the present case.
As to the last issue, we need not tarry to make a determination of whether the breach of contract by private
respondents is so substantial as to defeat the purpose of the parties in entering into the agreement and thus
entitle petitioners to rescission. Having ruled that there is no rescission to speak of in this case, the question is
moot.
WHEREFORE, the instant petition is GRANTED and the assailed decision of the Court of Appeals in CA-G.R.
CV No. 30955 is REVERSED and SET ASIDE. The judgment of the Regional Trial Court of Makati, Branch
133, with respect to the DISMISSAL of the complaint in Civil Case No. 89-4759, is hereby REINSTATED. No
pronouncement as to costs.
SO ORDERED.
Mendoza, Buena, and De Leon, Jr., JJ., concur.
Bellosillo, J. (Chairman), on official leave.



Page | 95


REPUBLIC ACT No. 6552
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS.
(Rep. Act No. 6552)
Section 1. This Act shall be known as the "Realty Installment Buyer Act."
Section 2. It is hereby declared a public policy to protect buyers of real estate on installment payments against onerous
and oppressive conditions.
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.lawphi1
Section 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.
Section 5. Under Section 3 and 4, the buyer shall have the right to sell his rights or assign the same to another person or to
reinstate the contract by updating the account during the grace period and before actual cancellation of the contract. The
deed of sale or assignment shall be done by notarial act.
Section 6. The buyer shall have the right to pay in advance any installment or the full unpaid balance of the purchase price
any time without interest and to have such full payment of the purchase price annotated in the certificate of title covering
the property.
Section 7. Any stipulation in any contract hereafter entered into contrary to the provisions of Sections 3, 4, 5 and 6, shall
be null and void.
Section 8. If any provision of this Act is held invalid or unconstitutional, no other provision shall be affected
thereby.lawphi1
Section 9. This Act shall take effect upon its approval.
Approved: August 26, 1972.
Page | 96

SECOND DIVISION
[G.R. No. 125347. June 19, 1997]
EMILIANO RILLO, petitioner, vs. COURT OF APPEALS and CORB REALTY INVESTMENT, CORP., respondents.
D E C I S I O N
PUNO, J.:
This is an appeal under Rule 45 of the Rules of Court to set aside the decisionxl[1] of the Court of Appeals in CA G.R. CV
No. 39108 cancelling the "Contract to Sell" between petitioner Emiliano Rillo and private respondent Corb Realty
Investment Corporation. It also ordered Rillo to vacate the premises subject of the contract and Corb Realty to return 50%
of P158,184.00 or P79,092.00 to Rillo.
The facts of the case are the following:
On June 18, 1985, petitioner Rillo signed a "Contract To Sell of Condominium Unit" with private respondent Corb Realty
Investment Corporation. Under the contract, CORB REALTY agreed to sell to RILLO a 61.5 square meter condominium
unit located in Mandaluyong, Metro Manila. The contract price was P150,000.00, one half of which was paid upon its
execution, while the balance of P75,000.00 was to be paid in twelve (12) equal monthly installments of P7,092.00
beginning July 18, 1985. It was also stipulated that all outstanding balance would bear an interest of 24% per annum; the
installment in arrears would be subject to liquidated penalty of 1.5% for every month of default from due date. It was
further agreed that should petitioner default in the payment of three (3) or four (4) monthly installments, forfeiture
proceedings would be governed by existing laws, particularly the Condominium Act.xli[2]
On July 18, 1985, RILLO failed to pay the initial monthly amortization. On August 18, 1985, he again defaulted in his
payment. On September 20, 1985, he paid the first monthly installment of P7,092.00. On October 2, 1985, he paid the
second monthly installment of P7,092.00. His third payment was on February 2, 1986 but he paid only P5,000.00 instead
of the stipulated P7,092.00.xlii[3]
On July 20, 1987 or seventeen (17) months after RILLO's last payment, CORB REALTY informed him by letter that it
is cancelling their contract due to his failure to settle his accounts on time. CORB REALTY also expressed its
willingness to refund RILLO's money.xliii[4]
CORB REALTY, however, did not cancel the contract for on September 28, 1987, it received P60,000.00 from
petitioner.xliv[5]
RILLO defaulted again in his monthly installment payment. Consequently, CORB REALTY informed RILLO through
letter that it was proceeding to rescind their contract.xlv[6] In a letter dated August 29, 1988, it requested RILLO to come to
its office and withdraw P102,459.35 less the rentals of the unit from July 1, 1985 to February 28, 1989.xlvi[7] Again the
threatened rescission did not materialize. A "compromise" was entered into by the parties on March 12, 1989, which
stipulated the following:
"1. Restructure Outstanding Balance Down to P50,000.00
"2. Payment @ P2,000.00/Month @ 18% (Eighteen Percent)-Monthly- To Compute No. of Installments
"3. To Pay Titling Plus Any Real Estate Tax Due
"4. Installments to start April 15, 1989."xlvii[8]
Rillo once more failed to honor their agreement. RILLO was able to pay P2,000.00 on April 25, 1989 and P2,000.00 on
May 15, 1989.xlviii[9]
On April 3, 1990, CORB REALTY sent RILLO a statement of accounts which fixed his total arrears, including interests
and penalties, to P155,129.00. When RILLO failed to pay this amount, CORB REALTY filed a complaintxlix[10] for
cancellation of the contract to sell with the Regional Trial Court of Pasig.
In his answer to the complaint, RILLO averred, among others, that while he had already paid a total of P149,000.00,
CORB REALTY could not deliver to him his individual title to the subject property; that CORB REALTY could not
claim any right under their previous agreement as the same was already novated by their new agreement for him to pay
P50,000.00 representing interest charges and other penalties spread through twenty-five (25) months beginning April
1989; and that CORB REALTY's claim of P155,129.99 over and above the amount he already paid has no legal basis.l[11]
Page | 97

At the pre-trial, the parties stipulated that RILLO's principal outstanding obligation as of March 12, 1989 was P50,000.00
and he has paid only P4,000.00 thereof and that the monthly amortization of P2,000.00 was to bear 18% interest per
annum based on the unpaid balance. The issues were defined as: (1) whether or not CORB REALTY was entitled to a
rescission of the contract; and (2) if not, whether or not RILLO's current obligation to CORB REALTY amounts to
P62,000.00 only inclusive of accrued interests.li[12]
The Regional Trial Court held that CORB REALTY cannot rescind the "Contract to Sell" because petitioner did not
commit a substantial breach of its terms. It found that RILLO substantially complied with the "Contract to Sell" by
paying a total of P154,184.00. It ruled that the remedy of CORB REALTY is to file a case for specific performance to
collect the outstanding balance of the purchase price.
CORB REALTY appealed the aforesaid decision to public respondent Court of Appeals assigning the following errors, to
wit:
"THE TRIAL COURT ERRED IN DISREGARDING OTHER FACTS OF THE CASE, INCLUDING THE FACT
THAT THE CONTRACT TO SELL, AS NOVATED, CREATED RECIPROCAL OBLIGATIONS ON BOTH
PARTIES;
"THE TRIAL COURT ERRED IN DISREGARDING ARTICLE 1191 OF THE CIVIL CODE;
"THE TRIAL COURT ERRED IN RENDERING JUDGMENT BY SIMPLY DISREGARDING THE CASE OF
ROQUE V. LAPUZ, 96 SCRA 744, AND WITHOUT INDICATING THE APPLICABLE LAW ON THE CASE.
"THE TRIAL COURT ERRED IN RENDERING A DECISION WHICH DID NOT COMPLETELY DISPOSE OF THE
CASE."
The respondent Court of Appeals reversed the decision. It ruled: (1) that rescission does not apply as the contract between
the parties is not an absolute conveyance of real property but is a contract to sell; (2) that the Condominium Act (Republic
Act No. 4726, as amended by R.A. 7899) does not provide anything on forfeiture proceedings in cases involving
installment sales of condominium units, hence, it is Presidential Decree No. 957 (Subdivision and Condominium Buyers
Protective Decree) which should be applied to the case at bar. Under Presidential Decree No. 957, the rights of a buyer in
the event of failure to pay installment due, other than the failure of the owner or developer to develop the project, shall be
governed by Republic Act No. 6552 or the REALTY INSTALLMENT BUYER PROTECTION ACT also known as the
Maceda Law (enacted on September 14, 1972). The dispositive portion of its Decision states:
"WHEREFORE, the decision appealed from is hereby SET ASIDE. The Contract to Sell is hereby declared cancelled and
rendered ineffective. Plaintiff-Appellant is hereby ordered to return 50% of P158,184.00 or P79,092.00 to appellee who is
hereby ordered to vacate the subject premises.
"SO ORDERED."lii[13]
Hence, this appeal with the following assignment of errors:
"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN HOLDING AND DECIDING
THAT RESCISSION IS THE PROPER REMEDY ON A PERFECTED AND CONSUMMATED CONTRACT;
"THE HONORABLE COURT OF APPEALS SERIOUSLY AND GRAVELY ERRED IN NOT HOLDING AND
DECIDING THAT THE OLD CONSUMMATED CONTRACT HAS BEEN SUPERSEDED BY A NEW, SEPARATE,
INDEPENDENT AND SUBSEQUENT CONTRACT BY NOVATION."
The petition is without merit.
The respondent court did not err when it did not apply Articles 1191 and 1592 of the Civil Code on rescission to the case
at bar. The contract between the parties is not an absolute conveyance of real property but a contract to sell. In a contract
to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure
of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to
convey title from acquiring any obligatory force."liii[14] The transfer of ownership and title would occur after full payment
of the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc.liv[15] that there can be no
rescission of an obligation that is still non-existent, the suspensive condition not having happened.
Given the nature of the contract of the parties, the respondent court correctly applied Republic Act No. 6552. 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
Page | 98

an event that prevents the obligation of the vendor to convey title from acquiring binding force.lv[16] It also provides the
right of the buyer on installments in case he defaults in the payment of succeeding installments, viz:
(1) Where he has paid at least two years of 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 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."
(2) Where he has paid less than two years in installments,
"Sec. 4. x x x 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."
Petitioner RILLO paid less than two years in installment payments, hence, he is only entitled to a grace period of not less
than sixty (60) days from the due date within which to make his installment payment. CORB REALTY, on the otherhand,
has the right to cancel the contract after thirty (30) days from receipt by RILLO of the notice of cancellation. Hence, the
respondent court did not err when it upheld CORB REALTY's right to cancel the subject contract upon repeated defaults
in payment by RILLO.
Petitioner further contends that the contract to sell has been novated by the parties agreement of March 12, 1989. The
contention cannot be sustained. Article 1292 of the Civil Code provides that "In order that an obligation may be
extinguished by another which substitutes the same, it is imperative that it be so declared in unequivocal terms, or that the
old and the new obligations be on every point incompatible with each other." Novation is never presumed.lvi[17] Parties to
a contract must expressly agree that they are abrogating their old contract in favor of a new one.lvii[18] In the absence of an
express agreement, novation takes place only when the old and the new obligations are incompatible on every point.lviii[19]
In the case at bar, the parties executed their May 12, 1989 "compromise agreement" precisely to give life to their
"Contract to Sell". It merely clarified the total sum owed by petitioner RILLO to private respondent CORB REALTY
with the view that the former would find it easier to comply with his obligations under the Contract to Sell. In fine, the
"compromise agreement" can stand together with the Contract to Sell.
Nevertheless, we do not agree with the respondent Court so far as it ordered private respondent CORB REALTY to
refund 50% of P158,184.00 or P79,092.00 to petitioner RILLO. Under Republic Act No. 6552, the right of the buyer to a
refund accrues only when he has paid at least two (2) years of installments. In the case at bar, RILLO has paid less than
two (2) years in installments, hence, he is not entitled to a refund.
IN VIEW WHEREOF, the decision appealed from is AFFIRMED with the MODIFICATION that the refund of 50%
P158,184.00 or P79,092.00 made in favor of petitioner Emiliano Rillo is deleted. No costs.
SO ORDERED.
Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.
Page | 99

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-46306 October 27, 1939
LEVY HERMANOS, INC., plaintiff-appellant,
vs.
LAZARO BLAS GERVACIO, defendant-appellee.
Felipe Caniblas for appellant.
Abreu, Lichaucco and Picazo for appellee.

MORAN, J .:
On February 9-4, 1938, plaintiff filed a complaint in the Court of First Instance of Manila, which substantially recites the
following facts:
On March 10, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packard car. Defendant,
after making the initial payment, executed a promissory note for the balance of P2,400, payable on or before June 15,
1937, with interest at 12 per cent per annum, to secure the payment of the note, he mortgaged the car to the plaintiff.
Defendant failed to pay the note it its maturity. Wherefore, plaintiff foreclosed the mortgage and the car was sold at public
auction, at which plaintiff was the highest bidder for P1,800. The present action is for the collection of the balance of
P1,600 and interest.
Defendant admitted the allegations of the complaint, and with this admission, the parties submitted the case for decision.
The lower court applied, the provisions of Act No. 4122, inserted as articles 1454-A of the Civil Code, and rendered
judgment in favor of the defendant. Plaintiff appealed.
Article 1454-A of the Civil Code reads as follows:
In a contract for the sale of personal property payable in installments shall confer upon the vendor the right to
cancel the sale or foreclose the mortgage if one has been given on the property, without reimbursement to the
purchaser of the installments already paid, if there be an agreement to this effect.
However, if the vendor has chosen to foreclose the mortgage he shall have no further action against the purchaser
for the recovery of any unpaid balance owing by the same and any agreement to the contrary shall be null and
void.
In Macondray and Co. vs. De Santos (33 Off. Gaz., 2170), we held that "in order to apply the provisions of article 1454-A
of the Civil Code it must appear that there was a contract for the sale of personal property payable in installments and that
there has been a failure to pay two or more installments." The contract, in the instant case, while a sale of personal
property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum,
should be paid in its totality at the time specified in the promissory note. The transaction is not is not, therefore, the one
contemplated in Act No. 4122 and accordingly the mortgagee is not bound by the prohibition therein contained as to the
right to the recovery of the unpaid balance.
Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for, generally, it is in these
cases that partial payments consist in relatively small amounts, constituting thus a great temptation for improvident
purchasers to buy beyond their means. There is no such temptation where the price is to be paid in cash, or, as in the
instant case, partly in cash and partly in one term, for, in the latter case, the partial payments are not so small as to place
purchasers off their guard and delude them to a miscalculation of their ability to pay. The oretically, perhaps, there is no
difference between paying the price in tow installments, in so far as the size of each partial payment is concerned; but in
actual practice the difference exists, for, according to the regular course of business, in contracts providing for payment of
the price in two installments, there is generally a provision for initial payment. But all these considerations are immaterial,
the language of the law being so clear as to require no construction at all.lwphi1.nt
The suggestion that the cash payment made in this case should be considered as an installment in order to bring the
contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be considered as a
Page | 100

payment by installment, and even if it can be so considered, still the law does not apply, for it requires non-payment of
two or more installments in order that its provisions may be invoked. Here, only one installment was unpaid.
Judgment is reversed, and the defendant-appellee is hereby sentenced to pay plaintiff-appellant the sum of P1,600 with
interest at the rate of 12 per cent per annum from June 15, 1937, and the sum of P52.08 with interest at the rate of 6 per
cent from the date of the filing of the complaint, with costs in both instances against the appellee.
Avancea, C.J., Villa-Real, Imperial, Diaz and Concepcion, JJ., concur.
Page | 101

FIRST DIVISION
[G.R. Nos. 102526-31. May 21, 1998]
Sps. LORENZO V. LAGANDAON and CECILIA T. LAGANDAON and OVERSEAS AGRICULTURAL
DEVELOPMENT CORPORATION, petitioners, vs. COURT OF APPEALS, Sps. MELITON BANOYO and
ASUNCION P. BANOYO, Sps. DEMETRIO B. BATAYOLA and ANITA A. BATAYOLA, BONIFACIO
VASQUEZ, Sps. ROMEO M. GOMEZ and ESTER M. GOMEZ, AURORA GOMEZ, Sps. CARLOS V. DAVID
and MANUELA C. DAVID, Sps. LEONIDO D. BONGCO and FE V. BONGCO, Sps. RAFAEL S. SOLIDUM and
LUCENDA M. SOLIDUM, Sps. RAYMUNDO SITJAR and LUCIA SITJAR AND Sps. BENJAMIN V. VIVA and
GILDA VIVA, respondents.
D E C I S I O N
PANGANIBAN, J.:
Questions of fact, as a general rule, may not be raised in a petition for review under Rule 45. This is especially
true where - as in this case - such questions have already been disposed of by the trial court and affirmed by
the appellate court. The failure of the petitioner to justify a departure from this rule warrants the dismissal of
the petition.
The Case
This doctrine is used by the Court in denying this petition for review on certiorari under Rule 45 of the Rules of
Court assailing the Decisionlix[1] of the Court of Appealslx[2] promulgated on August 30, 1991 in CA-G.R. Nos.
26671-26676, which disposed as follows:
PREMISES CONSIDERED, the decision appealed from is hereby modified by deleting the award of
attorneys fees in favor of the defendant[s]-appellees.
The Court of Appeals actually affirmed, with the slight modification of deleting the award of attorneys fees, the
decision of the Regional Trial Court of Valenzuela, Metro Manila, Branch 172,lxi[3] in Civil Case Nos. 3188-V-
89 to 3192-V-89, the dispositive portion of which reads:lxii[4]
WHEREFORE, in view of the foregoing the Complaints have to be as they are hereby ordered
DISMISSED, including their claims for attorneys fees and costs of litigation.
On defendants/purchasers counterclaims, defendant Spouses Demetrio Batayola et al. in Civil Case
No. 3188-V-89 are awarded P10,000.00 attorneys fees in resisting this case; and all defendants in the
rest of the cases are awarded P10,000.00 in each case as attorneys fees, likewise for resisting these
claims.
Hence, this petition for review.lxiii[5]
The Facts
The uncontested factslxiv[6] are narrated by Respondent Court of Appeals, as follows:lxv[7]
On different dates specified herein below, Pacweld Steel Corporation (Pacweld) a now defunct
domestic corporation executed in favor of present defendants herein a Contract to Sell pieces of lots
payable in installment [for] which payments started to be made. For a better perspective, the following
are herein reflected:
Defendants/Purchasers Dates of Contracts
Meliton Banoyo Feb. 6, 1967
Batayola Spouses Nov. 25, 1967
Romeo M. Gomez Feb. 27, 1968
Carlos V. David March 4, 1968
Leonido Bongco March 15, 1968
Bonifacio Vasquez May 31, 1967
Purchasers/ Total Total Payments Last
Defendants Consideration Payments
Dates
Page | 102

Banoyo P10,000.00 P4,303.43 Nov. 23, 1971
Batayola 7,271.92 7,232.24
Romeo Gomez 6,945.68 8,669.55 April 24, 1972
David 11,430.00 7,221.13 Nov. 22, 1972
Bongco 11,700.00 8,855.18 Jan. 22, 1974
+ 303.20
Vasquez 8,730.00 7,505.37 Aug. 9, 1972
On or about the year 1972[,] the above-mentioned defendant[s]-purchasers deferred/refused further
payments on their amortization to Pacweld because of [the] refusal of Lorenzo V. Lagandaon, then
President of Pacweld officials [sic] to undertake the development of the areas bought.
Defendants/Purchasers, together with other lot buyers filed an action for Specific Performance with
the then Court of First Instance of Manila, Branch XXVII, docketed as Civil Case No. 87763 entitled
Rolando Fadul et al., Plaintiffs vs. Pacweld Steel Corporation et al.
On October 12, 1976 the said Court promulgated its decision stating therein the following.
From all the foregoing evidence introduced by the plaintiffs, as well as the stipulation of facts
entered into by the defendants with the former, the Court is fully convinced that defendants
indeed have not lived up to the conditions of its [sic] contract particularly paragraph 6-A
thereof. The roads which were supposed to be cemented in fact, had been constructed as
clearly shown in Exhibits B, B-1, B-2 and B-3. So also, with the big holes existing on the
roads. For this reason, the Court further concludes that plaintiffs have adequately proven
their cause of action by clear preponderance of evidence.
The dispositive portion of the said decision reads as follows:
Wherefore, judgment is hereby rendered in favor of the plaintiffs and against the defendants,
as follows:
1. Ordering the defendants to strictly comply with their obligations under the contract to sell (par. 6-a)
within sixty (60) days from receipt hereof, in the event of defendants failure to comply with said undertakings,
the plaintiffs are authorized to avail of the services of a contractor to undertake the cementing of the roads,
gutters and concrete curbs including the drainage system, all at the expense of the defendants;
2. Ordering the defendants jointly and severally to pay plaintiffs the sum of P35,000.00 as and by way of
moral damages, which amount is considered just and reasonable considering the sufferings of the plaintiffs;
3. Ordering the defendants jointly and severally to pay plaintiffs the sum of P10,000.00 as and by way of
exemplary damages;
4. Ordering the plaintiffs who have not up-dated their accounts and/or have not complied with their
undertakings in the contract to sell to comply with same also within sixty days from receipt of this decision;
5. Ordering the defendants jointly and severally to pay plaintiffs attorneys fees in the sum of P4,000.00
with costs against the defendants.
SO ORDERED.
To be mentioned in connection with this case are the following separate facts and incidents.
Pursuant to real estate mortgages constituted on the entire Pacweld [s]ubdivision lots by Pacweld
Steel Corporation (Pacweld) in favor of the Development Bank of the Philippines to secure a loan of
P1.5 million, the said DBP foreclosed the mortgaged properties including the properties sold to
defendants/purchasers at public auction on June 2, 1975 due to the failure of Pacweld to pay its loan
at maturity. As there were no bidders, the DBP as creditor participated in the bidding and thereafter,
owing to the non-redemption of the properties, titles to the Pacweld Subdivision lots were consolidated
in the name of DBP.
On May 12, 1980, a Deed of Absolute Sale was executed by DBP in favor of herein plaintiffs [now
petitioners] covering 69 parcels of land known as Pacweld Village located at Marulas. Plaintiffs
became the registered owners by virtue of said Deed of Absolute Sale, under TCT No. B-42988.
Although no copy of the said Deed of Absolute Sale was furnished this Court, it appears in one of the
pleadings submitted to Court that in said Deed of Absolute Sale is a typewritten condition to which
plaintiffs are now bound and which is below quoted:
Page | 103

It is hereby understood that any and all claims, liens, assessments, liabilities and/or damages
whatsoever arising from any case or litigation involving the above, properties shall wholly be
assumed and borne by the vendees to the exclusion of the vendor.
In the similarly worded complaints in all these civil cases, plaintiffs allege that by virtue of the
acquisition of ownership by DBP over the entire Pacweld [s]ubdivision lots including the lots in
question and under the authority of the above-mentioned Deed of Absolute Sale executed by DBP in
favor of plaintiffs, the unregistered Contract to Sell executed by Pacweld and herein defendants were
rendered stale and/or inoperative and consequently, defendants lost their rights and interests over the
parcels of land agreed to be sold to them by Pacweld under their respective Contract to Sell; that
without necessarily recognizing the defendants rights under the Contract to Sell, but out of pure
liberality and Christian compassion, the plaintiffs agreed to continue with the sale on installment of the
above-mentioned parcels of land, pursuant to the Contract to Sell in favor of the defendants provided
that they would update their account consistent with the provisions of the said Contract to Sell and
provided further that plaintiffs have the right of forfeiture and would not be bound or liable to comply
with the obligation of the developer under the Contract to Sell.
In all these civil cases, plaintiffs have one common prayer, which is, that defendants be declared to
have unjustifiably failed to comply with their obligations under the Modified Contract to Sell, and
pronouncing that said Contract to Sell over the said parcels of land and the rights and obligations
arising therefrom as rescinded and/or cancelled; that plaintiffs be declared as legally entitled to the
possession of the above-described parcels of land, ordering defendants and all persons acting under
them to vacate the said parcels of land and surrender them to plaintiffs; that defendants be ordered to
pay damages and attorneys fees which amount they specified in each of the cases. (Decision, pp. 1-
5)
For the sake of clarity, we stress that there were three undisputed transactions involving the property subject of
this controversy:
1. The contract to sell executed by Pacweld, then headed by Petitioner Lorenzo Lagandaon,
in favor of herein private respondents;
2. The foreclosure sale by which DBP acquired ownership of the property from Pacweld; and
3. The contract of sale executed by DBP in favor of herein petitioners, the Lagandaon
spouses.
This case began when petitioners filed several identical complaints before the CFI to rescind the first item, i.e.,
the contracts to sell executed by Pacweld in favor of private respondents. In their aforesaid complaint,
petitioners alleged that the contract to sell had become stale and/or inoperative by virtue of the
acquisition of ownership by the DBP over the entire Pacweld Subdivision x x x.lxvi[8] Petitioners also averred
that the relationship of petitioners and private respondents was governed by an alleged modified agreement to
sell, which provided that private respondents would update their account consistent with the provisions of
said [original] Contract to Sell; while petitioners have the right of forfeiture and would not be bound nor liable
to comply with the obligation of the developer under the [original] Contract to Sell.lxvii[9] Petitioners justified
the filing of the complaints for rescission on the ground that private respondents failed to pay their outstanding
account.
In their answer, private respondents denied the existence of a modified contract to sell.lxviii[10] They also
argued that petitioners, as successors-in-interest of Pacweld, had no right to demand rescission or payment of
the unpaid balance, until such time that they have completed the development of the subdivision pursuant
to the provisions of the x x x Contract to Sell and the Decision of the CFI of Manila.lxix[11]
In its decision, the trial court held that petitioners cannot base their acts on [an] alleged modified contract to
sell, which this Court believes to be non-existent not only physically but also legally.lxx[12]
Respondent Courts Ruling
Although the petitioners cause of action was premised on the existence of an alleged modified contract to sell,
the Court of Appealslxxi[13] (CA) observed that petitioners did not challenge the trial courts finding that no
such contract existed. The CA further ruled that petitioners could no longer raise on appeal their alleged
ownership rights over the lots in litigation arising from the May 12, 1980 sale by the Development Bank of the
Philippines (DBP) and from the execution sale. To do so would change their theory before the trial court that
herein private respondents defaulted their obligation under the alleged modified contract to sell.
Page | 104

Thus, the CA held that petitioners had no right to demand the rescission of the various contracts to sell on the
basis of the alleged modified contracts to sell which were inexistent. Hence, it affirmed the trial courts decision
dismissing the complaint, but deleted the award of attorneys fees.
The Issues
In their Memorandum, petitioners present the following issues:lxxii[14]
1. Whether the Honorable Court of Appeals erred in finding that there was no modified Contract
(verbal) to Sell between petitioners and respondents;
2. Whether the Honorable Court of Appeals erred in finding that there was a change of theory on
appeal of petitioners;
3. Whether the Honorable Court of Appeals erred in finding that petitioners have no right to ask for
rescission of the various contracts to sell on the basis of the modified contract (verbal) to sell; and
consequently, in dismissing to [sic] complaints.
In the main, two principal issues are raised: (1) whether there were modified contracts to sell and (2) whether
petitioners assumed the obligations of Pacweld.
The Courts Ruling
The appeal has no merit.
First Issue: No Modified Contracts to Sell
Petitioners contend that there were modified contracts to sell between them and private respondents.
Maintaining that the original contract to sell between Pacweld and private respondents became stale or
inoperative when DBP acquired the disputed parcels of land, petitioners argue that they and the private
respondents subsequently entered into oral modified contracts to sell. In their complaint before the RTC, they
aver:lxxiii[15]
7. By virtue of the acquisition of ownership by the DBP over the entire Pacweld Subdivision lots
including the lot in question and under the authority of the above-mentioned Deed of Absolute Sale
executed by DBP in favor of the plaintiffs, the unregistered Contract to Sell (Annex A) executed by
and between Pacweld and the herein defendants, was rendered stale and/or inoperative; that
consequently, defendants lost their rights and interests over the parcel of land agreed to be sold them
by Pacweld under the Contract to Sell (Annex A).
8. Without necessarily recognizing defendants rights under their respective Contracts to Sell (Annex
A, Complaint), but out of pure liberality and Christian compassion, the herein plaintiffs agreed to
continue with the sales on installment in favor of the defendants, provided they would update their
accounts consistent with the provisions of the Contract to Sell and provided further that plaintiffs have
the right of forfeiture and would not be bound nor be liable to comply with the obligation of the
previous owner-developer (Pacweld) under their respective Contract to Sell. (Underscoring supplied.)
Petitioners theory rests on the existence of modified contracts to sell. Taking the place of Pacweld, petitioners
seek to collect the unpaid accounts of private respondents under the original contracts to sell, but they want
exemption from the concomitant obligations of Pacweld under the same contracts. Hence, they insist on a
modification of these contracts.
We cannot sustain petitioners. That the contracts to sell had indeed been rendered stale because of the
foreclosure sale does not necessarily imply that orally modified contracts to sell were subsequently entered
into between petitioners as buyers of the foreclosed property, on the one hand, and private respondents as
purchasers from Pacweld Corporation, on the other.
Furthermore the trial court, as observed earlier, found that the modified contracts to sell were non-existent
physically and legally. It also stated that plaintiff spouses did not execute a contract with defendants different
from the existing Contract to Sell between Pacweld Steel Corporation and defendant purchasers
herein.lxxiv[16] The Court of Appeals also held that the trial court had not erred in dismissing the complaints
filed by plaintiffs-appellants.lxxv[17]
Well-settled is the rule that the factual findings of the trial court, especially when affirmed by the Court of
Appeals, are binding and conclusive on the Supreme Court.lxxvi[18] Moreover, the existence of modified
contracts to sell is a question of fact which may not be raised in a petition for review under Rule 45.lxxvii[19]
Page | 105

Verily, petitioners have not given us a valid reason to depart from this rule. Indeed, the self-serving and
unsubstantiated allegation in the petitioners complaint that there was an oral modification of the contracts to
sell does not justify a reversal of the factual findings of the trial and appellate courts. As held in Engineering &
Machinery Corporation vs. Court of Appeals:lxxviii[20]
The Supreme Court reviews only errors of law in petitions for review on certiorari under Rule 45. It is
not the function of this Court to re-examine the findings of fact of the appellate court unless said
findings are not supported by the evidence on record or the judgment is based on a misapprehension
of facts.
The Court has consistently held that the factual findings of the trial court, as well as the Court
of Appeals, are final and conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts found by the lower courts is
allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the findings went beyond
the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds
present to justify the re-evaluation of the findings of fact made by the courts below.
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is
not the function of this Court to assess and evaluate all over again the evidence, testimonial
and documentary, adduced by the parties, particularly where, such as here, the findings of
both the trial court and the appellate court on the matter coincide. (italics supplied).
Second Issue: Petitioners Assumed Pacwelds Obligations
Petitioners contend that they could not have assumed the obligations of Pacweld because they were buyers in
good faith and for value. When the deed of absolute sale in favor of DBP was signed, the title to the foreclosed
property was clean; i.e., the subject contracts to sell were not duly annotated at the back of Pacwelds
certificate of title.lxxix[21] Hence, petitioners insist that they likewise acquired from DBP a clean title free from
any encumbrance. Petitioners liability, if at all, is limited to their unpaid subscriptions to Pacweld Steel
Corporation as stockholders thereof. Petitioners add that Republic Act No. 6652, otherwise known as the
Maceda Law, should have been applied by Respondent Court.
As a general rule, every buyer of a registered land who takes a certificate of title for value and in good faith
shall hold the same free of all encumbrances except those noted on said certificate.lxxx[22] It has been held,
however, that where the party has knowledge of a prior existing interest which is unregistered at the time he
acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration
as to him. The torrens system cannot be used as a shield for the commission of fraud.lxxxi[23] In this case,
Petitioner Lorenzo Lagandaon had actual knowledge of the contracts to sell made by Pacweld in favor of
herein private respondents. He was not only the president of Pacweld at the time, he himself signed those
contracts.lxxxii[24] Hence, when he acquired the title of DBP, he was aware of the preexisting contracts to sell
between Pacweld and private respondents. More significantly, petitioners also assumed all liens and liabilities
arising from any case involving the said properties.
Even assuming arguendo that petitioners were buyers in good faith and for value, their subsequent actions
indisputably show that they assumed the obligations of Pacweld under the original contracts to sell. When they
acquired title over the property on May 12, 1980, they sought to collect payment from private respondents
under the said contracts. In their demand letter dated April 28, 1989, petitioners through counsel required
Private Respondents Rafael Solidum and Leonido Bongco to settle with them the latters unpaid accounts
under the original contracts to sell.lxxxiii[25] Likewise, the subsequent letter of Lagandaons counsel to Private
Respondent Raymundo Sitjar unequivocally declared that the demand was made pursuant to the original
contract to sell between Pacweld and private respondents.lxxxiv[26] In these demand letters, petitioners made
no mention of any alleged modified contracts to sell; rather, they referred to the original contracts to sell without
invoking any qualification or modification of the terms and conditions thereof. In fact, the notion of a modified
contract to sell was a mere afterthought which surfaced for the first time in the petitioners complaint before
the RTC.
Because petitioners assumed the obligations of Pacweld when they purchased the disputed properties on May
12, 1980, they should be liable for all the undertakings of Pacweld with respect to private respondents under
the contracts to sell, as clearly provided under such deed.
The Maceda Law has no application to the present case. The policy of that law, as embodied in its title, is to
provide protection to buyers of real estate on installment payments. As clearly specified in Section 3, the
declared public policy espoused by Republic Act No. 6552 is to protect buyers of real estate on installment
Page | 106

payments against onerous and oppressive conditions. In this case, petitioners did not buy the property on
installment; private respondents did. And thus, if the Maceda Law has any relevance at all, it is to protect the
said respondents, not the petitioners. Furthermore, Section 3(b)lxxxv[27] of the same law does not grant
petitioners any legal ground to cancel the contracts to sell; rather, it prescribes the responsibility of the seller in
case the contract[s are] cancelled. Clearly, Respondent Court was correct in refusing to apply the Maceda
Law and in not cancelling the contracts to sell.
As held by the trial court:
Plaintiffs prayer that defendant/purchasers be made to vacate the lots and surrender to plaintiffs
cannot be granted, not only because of the foregoing reasons but also because to do so would be
contrary to other existing laws, specifically Republic Act 6552 (Maceda Law) which is an Act To
Provide Protect[ion] to Buyers of Real Estate on Installment Payments, which took effect on August 6,
1972. By virtue thereof, considering that all defendants/purchasers appear to have complied with
Section 3 thereof, this second remedy applied for by plaintiff is not legally feasible. Neither can
plaintiff exercise the right under said law because it is not the subdivision owner or developer
envisioned in said law.
The Alleged Dormant Judgment:
Petitioners as Developers
Petitioners argue that they cannot be compelled to assume the obligations of [Pacweld] corporation as x x x
real estate developers, because the CFIs decision dated October 12, 1976 was already dormant, more than
ten (10) years having elapsed after the finality of judgment.lxxxvi[28] Further, petitioners are not licensed and
qualified real estate developers. Hence, petitioners could not have assumed the obligations of Pacweld to
develop the subject subdivision.lxxxvii[29]
These arguments are bereft of merit. It is irrelevant whether the CFI Decision -- which ordered Pacweld to
perform its obligations under the contracts to sell -- has become dormant. As discussed above, petitioners
themselves assumed the said obligations of Pacweld.
That petitioners were not qualified or licensed as developers does not justify their failure to comply with the
obligations under the contracts to sell which they assumed. Whether a license is necessary is likewise
irrelevant. In any event, their obligations were personal to them and were not undertaken in pursuance of any
real estate business.
We also hold that the express condition in the deed of absolute sale, which petitioners as buyers accepted
as part of the consideration of the sale, cannot be considered mere surplusage with no legal
significance.lxxxviii[30] Petitioners themselves contradicted this by their admission that it was placed there,
as a safety valve, to protect DBP from legitimate third party claims.lxxxix[31]
Attorneys Fees Deleted
Private respondents pray that the trial courts award of attorneys fees, which the Court of Appeals deleted, be
restored. They contend that, to resist petitioners claims, they had to retain a lawyer and pay for his fees. In
any event, they plead that the amount of P10,000 as attorneys fees was only minimal or nominal,xc[32] and
should thus be restored.
We are not persuaded. Parties who have not appealed cannot obtain from the appellate court any affirmative
reliefs other than those granted, if any, in the decision of the lower court. Appellees can advance only such
arguments as may be necessary to defeat the appellants claims or to uphold the appealed decision. They can
assign errors on appeal if such are required to strengthen the views expressed by the court a quo. Such
assigned errors, in turn, may be considered by the appellate court solely to maintain the appealed decision.
But appellees cannot ask for modification of the judgment in their favor in order to obtain other affirmative
reliefs.xci[33] Since herein private respondents did not appeal from the assailed Decision, they are not entitled
to any award of affirmative relief. Besides, the award is addressed to the sound discretion of courts.xcii[34]
And absent any showing of abuse or palpable error, as in this instance, such discretion will not be disturbed on
appeal.
Epilogue
In the main, the Lagandaon Spouses have consistently maintained in their various pleadings that they agreed
to continue with the sale on installment of the disputed parcels of land under a modified contract without
necessarily recognizing defendants rights under the [original] Contract to Sell, but out of pure liberality and
Page | 107

Christian compassion. The difficulty with this contention is that it has no factual leg to stand on. The
Lagandaon Spouses did not even inform the private respondents of this alleged modification when they
attempted to collect the installment payments. Instead, they merely insisted on collecting under the original
contracts. It was only after they filed their complaint in the RTC that they alleged modifications in the
contracts, the modifications being that they were not bound by Pacwelds obligations to develop the subdivision
over which they wanted to collect installments from the buyers (private respondents). They insist only on
exercising Pacwelds rights to collect installments due but deny the obligations to build roads, water system,
etc. Aside from the basic unfairness of this stance, it is not supported by any evidence as found by both lower
courts.
To reiterate, the petition of the Lagandaon Spouses assails the findings of the trial and the appellate courts on
the aforesaid two principal issues. The Lagandaon Spouses, however, presented no substantial argument or
evidence to warrant a reversal or modification of these factual findings. In this light, the remand of this case,
as prayed for by the petitioners, is unnecessary. After all, a re-trial is needed only where some factual issues
are unresolved. And there are none in this case.
WHEREFORE, the petition is hereby DENIED and the assailed Decision is AFFIRMED. Costs against
petitioners.
SO ORDERED.
Davide, Jr., (Chairman), Bellosillo, and Quisumbing, JJ., concur.
Vitug, J., see separate opinion.
Page | 108

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 129018 November 15, 2001
CARMELITA LEAO, assisted by her husband GREGORIO CUACHON, petitioner,
vs.
COURT OF APPEALS and HERMOGENES FERNANDO, respondents.
PARDO, J .:
The Case
The case is a petition for review on certiorari of the decision
1
of the Court of Appeals affirming that of the Regional Trial
Court, Malolos, Branch 7
2
ordering petitioner Leao to pay respondent Hermogenes Fernando the sum of P183,687.70
corresponding to her outstanding obligations under the contract to sell, with interest and surcharges due thereon, attorney's
fees and costs.1wphi1.nt
The Facts
On November 13, 1985, Hermogenes Fernando, as vendor and Carmelita Leao, as vendee executed a contract to sell
involving a piece of land, Lot No. 876-B, with an area of 431 square meters, located at Sto. Cristo, Baliuag, Bulacan.
3

In the contract, Carmelita Leao bound herself to pay Hermogenes Fernando the sum of one hundred seven thousand and
seven hundred and fifty pesos (P107,750.00) as the total purchase price of the lot. The manner of paying the total purchase
price was as follows:
"The sum of TEN THOUSAND SEVEN HUNDRED SEVENTY FIVE (P10,775.00) PESOS, shall be paid at the
signing of this contract as DOWN PAYMENT, the balance of NINETY SIX THOUSAND NINE HUNDRED
SEVENTY FIVE PESOS (P96,975.00) shall be paid within a period of TEN (10) years at a monthly amortization
of P1,747.30 to begin from December 7, 1985 with interest at eighteen per cent (18%) per annum based on
balances."
4

The contract also provided for a grace period of one month within which to make payments, together with the one
corresponding to the month of grace. Should the month of grace expire without the installments for both months having
been satisfied, an interest of 18% per annum will be charged on the unpaid installments.
5

Should a period of ninety (90) days elapse from the expiration of the grace period without the overdue and unpaid
installments having been paid with the corresponding interests up to that date, respondent Fernando, as vendor, was
authorized to declare the contract cancelled and to dispose of the parcel of land, as if the contract had not been entered
into. The payments made, together with all the improvements made on the premises, shall be considered as rents paid for
the use and occupation of the premises and as liquidated damages.
6

After the execution of the contract, Carmelita Leao made several payments in lump sum.
7
Thereafter, she constructed a
house on the lot valued at P800,000.00.
8
The last payment that she made was on April 1, 1989.
On September 16, 1991, the trial court rendered a decision in an ejectment case
9
earlier filed by respondent Fernando
ordering petitioner Leao to vacate the premises and to pay P250.00 per month by way of compensation for the use and
occupation of the property from May 27, 1991 until she vacated the premises, attorney's fees and costs of the suit.
10
On
August 24, 1993, the trial court issued a writ of execution which was duly served on petitioner Leao.
On September 27, 1993, petitioner Leao filed with the Regional Trial Court of Malolos, Bulacan a complaint for specific
performance with preliminary injunction.
11
Petitioner Leao assailed the validity of the judgment of the municipal trial
court
12
for being violative of her right to due process and for being contrary to the avowed intentions of Republic Act No.
6552 regarding protection to buyers of lots on installments. Petitioner Leao deposited P18,000.00 with the clerk of court,
Regional Trial Court, Bulacan, to cover the balance of the total cost of Lot 876-B.
13

On November 4, 1993, after petitioner Leao posted a cash bond of P50,000.00,
14
the trial court issued a writ of
preliminary injunction
15
to stay the enforcement of the decision of the municipal trial court.
16

On February 6, 1995, the trial court rendered a decision, the dispositive portion of which reads:
Page | 109

"WHEREFORE, judgment is hereby rendered as follows:
"1. The preliminary injunction issued by this court per its order dated November 4, 1993 is hereby made
permanent;
"2. Ordering the plaintiff to pay to the defendant the sum of P103,090.70 corresponding to her outstanding
obligations under the contract to sell (Exhibit "A" Exhibit "B") consisting of the principal of said obligation
together with the interest and surcharges due thereon as of February 28, 1994, plus interest thereon at the rate of
18% per annum in accordance with the provision of said contract to be computed from March 1, 1994, until the
same becomes fully paid;
"3. Ordering the defendant to pay to plaintiff the amount of P10,000 as and by way of attorney's fees;
"4. Ordering the defendant to pay to plaintiff the costs of the suit in Civil Case No. 1680 aforementioned.
"SO ORDERED.
"Malolos, Bulacan, February 6, 1995.

"(sgd.) DANILO A. MANALASTAS
Judge"
17

On February 21, 1995, respondent Fernando filed a motion for reconsideration
18
and the supplement
19
thereto. The trial
court increased the amount of P103,090.70 to P183,687.00 and ordered petitioner Leao ordered to pay attorney's fees.
20

According to the trial court, the transaction between the parties was an absolute sale, making petitioner Leao the owner
of the lot upon actual and constructive delivery thereof. Respondent Fernando, the seller, was divested of ownership and
cannot recover the same unless the contract is rescinded pursuant to Article 1592 of the Civil Code which requires a
judicial or notarial demand. Since there had been no rescission, petitioner Leao, as the owner in possession of the
property, cannot be evicted.
On the issue of delay, the trial court held:
"While the said contract provides that the whole purchase price is payable within a ten-year period, yet the same
contract clearly specifies that the purchase price shall be payable in monthly installments for which the
corresponding penalty shall be imposed in case of default. The plaintiff certainly cannot ignore the binding effect
of such stipulation by merely asserting that the ten-year period for payment of the whole purchase price has not
yet lapsed. In other words, the plaintiff has clearly defaulted in the payment of the amortizations due under the
contract as recited in the statement of account (Exhibit "2") and she should be liable for the payment of interest
and penalties in accordance with the stipulations in the contract pertaining thereto."
21

The trial court disregarded petitioner Leaos claim that she made a downpayment of P10,000.00, at the time of the
execution of the contract.
The trial court relied on the statement of account
22
and the summary
23
prepared by respondent Fernando to determine
petitioner Leao's liability for the payment of interests and penalties.
The trial court held that the consignation made by petitioner Leao in the amount of P18,000.00 did not produce any legal
effect as the same was not done in accordance with Articles 1176, 1177 and 1178 of the Civil Code.
In time, petitioner Leao appealed the decision to the Court of Appeals.
24
On January 22, 1997, Court of Appeals
promulgated a decision affirming that of the Regional Trial Court in toto.
25
On February 11, 1997, petitioner Leao filed a
motion for reconsideration.
26
On April 18, 1997, the Court of Appeals denied the motion.
27

Hence, this petition.
28

The Issues
The issues to be resolved in this petition for review are (1) whether the transaction between the parties in an absolute sale
or a conditional sale; (2) whether there was a proper cancellation of the contract to sell; and (3) whether petitioner was in
delay in the payment of the monthly amortizations.
Page | 110

The Court's Ruling
Contrary to the findings of the trial court, the transaction between the parties was a conditional sale not an absolute sale.
The intention of the parties was to reserve the ownership of the land in the seller until the buyer has paid the total purchase
price.
Consider the following:
First, the contract to sell makes the sale, cession and conveyance "subject to conditions" set forth in the contract to sell.
29

Second, what was transferred was the possession of the property, not ownership. The possession is even limited by the
following: (1) that the vendee may continue therewith "as long as the VENDEE complies with all the terms and conditions
mentioned, and (2) that the buyer may not sell, cede, assign, transfer or mortgage or in any way encumber any right,
interest or equity that she may have or acquire in and to the said parcel of land nor to lease or to sublease it or give
possession to another person without the written consent of the seller.
30

Finally, the ownership of the lot was not transferred to Carmelita Leao. As the land is covered by a torrens title, the act
of registration of the deed of sale was the operative act that could transfer ownership over the lot.
31
There is not even a
deed that could be registered since the contract provides that the seller will execute such a deed "upon complete payment
by the VENDEE of the total purchase price of the property" with the stipulated interest.
32

In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition,
the failure of which is not considered a breach, casual or serious, but simply an event that prevented the obligation of the
vendor to convey title from acquiring any obligatory force.
33
The transfer of ownership and title would occur after full
payment of the price.
34

In the case at bar, petitioner Leao's non-payment of the installments after April 1, 1989, prevented the obligation of
respondent Fernando to convey the property from arising. In fact, it brought into effect the provision of the contract on
cancellation.
Contrary to the findings of the trial court, Article 1592 of the Civil Code is inapplicable to the case at bar.
35
However, any
attempt to cancel the contract to sell would have to comply with the provisions of Republic Act No. 6552, the "Realty
Installment Buyer Protection Act."
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.
36
The law also provides for the rights of the
buyer in case of cancellation. Thus, Sec. 3 (b) of the law provides that:
"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 percent of the total payments made and, after five years of installments, an additional
five percent every year but not to exceed ninety percent of the total payment 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." [Emphasis supplied]
The decision in the ejectment case
37
operated as the notice of cancellation required by Sec. 3(b). As petitioner Leao was
not given then cash surrender value of the payments that she made, there was still no actual cancellation of the contract.
Consequently, petitioner Leao may still reinstate the contract by updating the account during the grace period and before
actual cancellation.
38

Should petitioner Leao wish to reinstate the contract, she would have to update her accounts with respondent Fernando in
accordance with the statement of account
39
which amount was P183,687.00.
40

On the issue of whether petitioner Leao was in delay in paying the amortizations, we rule that while the contract
provided that the total purchase price was payable within a ten-year period, the same contract specified that the purchase
price shall be paid in monthly installments for which the corresponding penalty shall be imposed in case of default.
Petitioner Leao cannot ignore the provision on the payment of monthly installments by claiming that the ten-year period
within which to pay has not elapsed.
Article 1169 of the 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.1wphi1.nt
Page | 111

In the case at bar, respondent Fernando performed his part of the obligation by allowing petitioner Leao to continue in
possession and use of the property. Clearly, when petitioner Leao did not pay the monthly amortizations in accordance
with the terms of the contract, she was in delay and liable for damages.
41
However, we agree with the trial court that the
default committed by petitioner Leao in respect of the obligation could be compensated by the interest and surcharges
imposed upon her under the contract in question.
42

It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no doubt upon the
intention of the contracting parties, the literal meaning of its stipulation shall control.
43
Thus, as there is no ambiguity in
the language of the contract, there is no room for construction, only compliance.
The Fallo
IN VIEW WHEREOF, we DENY the petition and AFFIRM the decision of the Court of Appeals
44
in toto.
No costs.
SO ORDERED.
Davide, Jr., Puno, Kapunan, and Ynares-Santiago, JJ., concur.
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FIRST DIVISION
[G.R. No. 141205. May 9, 2002]
ACTIVE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. NECITA G. DAROYA, represented by
Attorney-In-Fact Shirley Daroya-Quinones, respondents.
D E C I S I O N
PUNO, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court which seeks to reverse and set
aside the Resolution of the Court of Appeals, dated August 3, 1999, denying due course to petitioners appeal for
insufficiency of form and substance.
Petitioner ACTIVE REALTY & DEVELOPMENT CORPORATION is the owner and developer of Town & Country
Hills Executive Village in Antipolo, Rizal. On January 2, 1985, it entered into a Contract to Sellxciii[1] with respondent
NECITA DAROYA, a contract worker in the Middle East, whereby the latter agreed to buy a 515 sq. m. lot for
P224,025.00 in petitioners subdivision.
The contract to sell stipulated that the respondent shall pay the initial amount of P53,766.00 upon execution of the
contract and the balance of P170,259.00 in sixty (60) monthly installments of P4,893.35. Adding the down payment and
installment payments, it would appear that the total amount is P346,367.00, a figure higher than that stated as the contract
price.
On May 5, 1989, petitioner accepted respondents amortization in the amount of P40,000.00. By August 8, 1989,
respondent was in default of P15,282.85 representing three (3) monthly amortizations. Petitioner sent respondent a
notice of cancellationxciv[2] of their contract to sell, to take effect thirty (30) days from receipt of the letter. It does not
appear from the records, however, when respondent received the letter. Nonetheless, when respondent offered to pay for
the balance of the contract price, petitioner refused as it has allegedly sold the lot to another buyer.
On August 26, 1991, respondent filed a complaint for specific performance and damagesxcv[3] against petitioner before
the Arbitration Branch of the Housing and Land Use Regulatory Board (HLURB). It sought to compel the petitioner to
execute a final Deed of Absolute Sale in respondents favor after she pays any balance that may still be due from her.
Respondent claimed that she is entitled to the final deed of sale after she offered to pay the balance of P24,048.47,
considering that she has already paid the total sum of P314,816.76, which amount is P90,835.76 more than the total
contract price of P224,025.00.
On June 14, 1993, HLURB Arbiter Alfredo M. Tan II found for the respondent. He ruled that the cancellation of the
contract to sell was void as petitioner failed to pay the cash surrender value to respondent as mandated by law. However,
as the subject lot was already sold to a third party and the respondent had agreed to a full refund of her installment
payments, petitioner was ordered to refund to respondent all her payments in the amount of P314,816.70, with 12%
interest per annum from August 26, 1991 (the date of the filing of the complaint) until fully paid and to pay
P10,000.00 as attorneys fees.xcvi[4]
On appeal, the HLURB Board of Commissioners set aside the Arbiters Decision. The Board refused to apply the
remedies provided under the Maceda Law and instead deemed it fit to formulate an equitable solution to the case. It
ruled that, as both parties were at fault, i.e., respondent incurred in delay in her installment payments and respondent
failed to send a notarized notice of cancellation, petitioner was ordered to refund to the respondent one half of the
total amount she has paid or P157,408.35, which was allegedly akin to the remedy provided under the Maceda
Law.xcvii[5]
Respondent appealed to the Office of the President. On June 2, 1998, then Chief Presidential Counsel Renato C.
Corona, acting by authority of the President, modified the Decision of the HLURB as he found that it was not in accord
with the provisions of the Maceda Law. He held that as petitioner did not comply with the legal requisites for a valid
cancellation of the contract, the contract to sell between the parties subsisted and concluded that respondent was entitled
to the lot after payment of her outstanding balance. However, as the petitioner disclosed that the lot was already sold to
another person and that the actual value of the lot as of the date of the contract was P1,700.00 per square meter, petitioner
was ordered to refund to the respondent the amount of P875,000.00, the true and actual value of the lot as of the
date of the contract, with interest at 12% per annum computed from August 26, 1991 until fully paid, or to deliver
a substitute lot at the choice of respondent.xcviii[6]
Upon denial of its motion for reconsideration, petitioner assailed the Decision in the Court of Appeals. However, its
petition for reviewxcix[7] was denied due course for insufficiency in form and substance,c[8] because: 1) no affidavit of
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service was attached to the petition; 2) except for certified true copies of the decision and resolution of the Office of the
President, no other material portions of the record, as would support the allegations in the petition, were attached; and, 3)
the certification of forum-shopping was signed by the head counsel and vice-president of the petitioner corporation who
was not authorized by a Board Resolution to represent petitioner.
Petitioner moved for reconsideration. The Court of Appeals denied it on an entirely new ground, i.e., for untimely filing
of the petition for review.ci[9]
Petitioner now impugns the decision of the Court of Appeals and raises the following procedural issues:
I
THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN RELYING TOO MUCH ON FORM RATHER
THAN ON THE MERITS OF THE PETITION THEREBY DENYING PETITIONER OF ITS RIGHT TO DUE
PROCESS.
II
THE HONORABLE COURT OF APPEALS ANCHORED THE DENIAL OF PETITIONERS MOTION FOR
RECONSIDERATION ON INCONSISTENT AND CONFLICTING RULINGS NOT BORNE BY THE FACTS AND
THE RECORDS OF THE CASE.
On the procedural points raised, we find for the petitioner.
Our perusal of the record reveals that petitioner substantially complied with the formal requirements of Rule 43 of the
Rules of Court.cii[10] First, as to the non-attachment of the affidavit of service, the records bear that the petition was
accompanied by the original registry receipts issued by the post office, showing that the petition and its annexes were
served upon the parties. Moreover, respondents counsel of record, Atty. Sergio Guadiz, actually received a copy of the
petition.ciii[11] Second, petitioner likewise complied with Section 6 (c) of Rule 43 requiring the submission of copies of
the award, judgment, final order and resolution appealed from. Its petition was accompanied by the duplicate original of
the appealed Decision of the Chief Presidential Legal Counsel and his Resolution denying petitioners motion for
reconsideration, the Decision of the HLURB Board of Commissioners and that of the HLURB arbiter. A perusal of these
documents will reveal that they contained all the relevant facts of the case from which the appellate body can form its own
decision. Its failure to submit the other documents, like the Complaint, Answer, Position Papers and Appeal Memoranda
of the parties before the HLURB, was due to the refusal of the Office of the President to give them a certified true copy of
these documents which were submitted with said Office. Third, as to the lack of Board Resolution by petitioner
corporation authorizing Atty. Rene Katigbak, its Chief Legal Counsel and Vice-President for Legal Affairs, to represent it
in the filing of the appeal, petitioner admits that this was due to its honest belief that such authority is not required as it
was not mentioned in Section 6(c) of Rule 43.civ[12] To make up for such omission, petitioner submitted a Secretarys
Certificatecv[13] confirming and ratifying the authority of Atty. Katigbak to represent petitioner. Finally, we find that the
Court of Appeals erred in denying petitioners motion for reconsideration due to untimely filing as the records clearly
show that it was filed on June 25, 1999, a day before the expiration of the period to appeal granted by the Court of
Appeals.cvi[14]
In denying due course to the petition, the appellate court gave premium to form and failed to consider the important rights
of the parties in the case at bar.cvii[15] At the very least, petitioner substantially complied with the procedural
requirements for appeal, hence, it is best to give due course to the petition at bar to clarify the rights and duties of a buyer
in contracts to sell real estate on installment basis.
The issue to be resolved is whether or not the petitioner can be compelled to refund to the respondent the value of the lot
or to deliver a substitute lot at respondents option.
We find for the respondent and rule in the affirmative.
The contract to sell in the case at bar is governed by Republic Act No. 6552 -- The Realty Installment Buyer Protection
Act, or more popularly known as the Maceda Law -- which came into effect in September 1972. Its declared public
policy is to protect buyers of real estate on installment basis against onerous and oppressive conditions.cviii[16] The law
seeks to address the acute housing shortage problem in our country that has prompted thousands of middle and lower class
buyers of houses, lots and condominium units to enter into all sorts of contracts with private housing developers involving
installment schemes. Lot buyers, mostly low income earners eager to acquire a lot upon which to build their homes,
readily affix their signatures on these contracts, without an opportunity to question the onerous provisions therein as the
contract is offered to them on a take it or leave it basis.cix[17] Most of these contracts of adhesion, drawn exclusively by
the developers, entrap innocent buyers by requiring cash deposits for reservation agreements which oftentimes include, in
fine print, onerous default clauses where all the installment payments made will be forfeited upon failure to pay any
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installment due even if the buyers had made payments for several years.cx[18] Real estate developers thus enjoy an
unnecessary advantage over lot buyers who they often exploit with iniquitous results. They get to forfeit all the installment
payments of defaulting buyers and resell the same lot to another buyer with the same exigent conditions. To help
especially the low income lot buyers, the legislature enacted R.A. No. 6552 delineating the rights and remedies of lot
buyers and protect them from one-sided and pernicious contract stipulations.
More specifically, Section 3 of R.A. No. 6552 provided for the rights of the buyer in case of default in the payment of
succeeding installments, where he has already paid at least two (2) years of installments, thus:
(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; x x x
(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; 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.
In this case, respondent has already paid in four (4) years a total of P314,860.76 or P90,835.76 more than the
contract price of P224,035.00. In April 1989, petitioner decided to cancel the contract when the respondent incurred in
delay in the payment of P15,282.85, representing three (3) monthly amortizations. Petitioner refused to accept
respondents subsequent tender of payment of the outstanding balance alleging that it has already cancelled the contract
and sold the subject lot to another buyer. However, the records clearly show that the petitioner failed to comply with the
mandatory twin requirements for a valid and effective cancellation under the law,cxi[19] i.e., he failed to send a
notarized notice of cancellation and refund the cash surrender value. At no time, from the date it gave a notice of
cancellation up to the time immediately before the respondent filed the case against petitioner, did the latter exert effort to
pay the cash surrender value. In fact, the records disclose that it was only during the preliminary hearing of the case
before the HLURB arbiter when petitioner offered to pay the cash surrender value. Petitioner justifies its inaction on the
ground that the respondent was always out of the country. Even then, the records are bereft of evidence to show that
petitioner attempted to pay the cash surrender value to respondent through her last known address. The omission is
surprising considering that even during the times respondent was out of the country, petitioner has been sending her
written notices to remind her to pay her installment arrears through her last known address. Clearly, had respondent not
filed a case demanding a final deed of sale in her favor, petitioner would not have lifted a finger to give respondent what
was due her actual payment of the cash surrender value, among others. In disregard of basic equitable principles,
petitioners stance would enable it to resell the property, keep respondents installment payments, not to mention the cash
surrender value which it was obligated to return. The Layugcxii[20] case cited by petitioner is inapropos. In Layug, the lot
buyer did not pay for the outstanding balance of his account and the Court found that notarial rescission or cancellation
was no longer necessary as the seller has already filed in court a case for rescission of the contract to sell. In the case at
bar, respondent offered to pay for her outstanding balance of the contract price but respondent refused to accept it.
Neither did petitioner adduce proof that the respondents offer to pay was made after the effectivity date stated in its
notice of cancellation. Moreover, there was no formal notice of cancellation or court action to rescind the contract. Given
the circumstances, we find it illegal and iniquitous that petitioner, without complying with the mandatory legal
requirements for canceling the contract, forfeited both respondents land and hard-earned money after she has paid for, not
just the contract price, but more than the consideration stated in the contract to sell.
Thus, for failure to cancel the contract in accordance with the procedure provided by law, we hold that the
contract to sell between the parties remains valid and subsisting. Following Section 3(a) of R.A. No. 6552,
respondent has the right to offer to pay for the balance of the purchase price, without interest, which she did in this
case. Ordinarily, petitioner would have had no other recourse but to accept payment. However, respondent can no longer
exercise this right as the subject lot was already sold by the petitioner to another buyer which lot, as admitted by the
petitioner, was valued at P1,700.00 per square meter. As respondent lost her chance to pay for the balance of the
P875,000.00 lot, it is only just and equitable that the petitioner be ordered to refund to respondent the actual value of the
lot resold, i.e., P875,000.00, with 12% interest per annum computed from August 26, 1991 until fully paid or to deliver a
substitute lot at the option of the respondent.
On a final note, it would not be amiss to stress that the HLURB Board Decision ordering petitioner to refund to
respondent one half of her total payments is not an equitable solution as it punished the respondent for her delinquent
payments but totally disregarded petitioners failure to comply with the mandatory requisites for a valid cancellation of
the contract to sell. The Board failed to consider that the Maceda law was enacted to remedy the plight of low and
middle-income lot buyers, save them from the exacting default clauses in real estate sales and assure them of a home they
can call their own. Neither would the Decision of the HLURB Arbiter ordering a full refund of the installment payments
of respondent in the amount of P314,816.70 be justified as, under the law, respondent is entitled to the lot she purchased
after payment of her outstanding balance which she was ready and willing to do. Thus, to penalize the petitioner for
failing in its obligation to deliver the subject lot and to give the respondent what is rightly hers, the petitioner was
correctly ordered to refund to the respondent the actual value of the land (P875,000.00) she lost to another buyer, plus
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interest at the rate of 12% per annum from August 26, 1991 until fully paid or to deliver a substitute lot at the choice of
the respondent.
IN VIEW WHEREOF, the Decision of then Chief Presidential Legal Assistant Renato Corona, Office of the President,
dated June 2, 1998, is AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur.
































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