(1) G.R. No.

125088

April 14, 2004

LAGRIMAS A. BOY, petitioner,

vs.
COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN
RAMOS, respondents.

last week of August 1988; and that possession of the property would be transferred to
the spouses Ramos only upon full payment of the purchase price.8
Lagrimas admitted that the counsel of the spouses Ramos sent her a letter
demanding that she vacate the premises. Lagrimas alleged that the demand for her to
pay the sum of P6,000 per month has no legal basis. Lagrimas was summoned by
the Punong Barangay for conciliation, but no settlement was reached.9

DECISION
Before us is a petition for review on certiorari of the decision of the Court of Appeals
in an ejectment case, docketed as CA-G.R. SP No. 38716, which reversed and set
aside the decision1 of the Regional Trial Court of Manila, Branch 54,2 and reinstated
the decision3 of the Metropolitan Trial Court of Manila, Branch 14, 4 ordering petitioner
to vacate the disputed premises and to pay rent until the premises are vacated and
possession is turned over to private respondents.
The facts, as stated by the Court of Appeals, are as follows:
On September 24, 1993, the spouses Isagani P. Ramos and Erlinda
Gasingan Ramos, private respondents herein, filed an action for ejectment
against Lagrimas A. Boy (Lagrimas), petitioner herein, with the Metropolitan
Trial Court of Manila. In their Complaint, the spouses Ramos alleged that
they are the owners of a parcel of land with an area of 55.75 square meters,
and the house existing thereon, situated at 1151 Florentino Torres St.,
Singalong, Manila. They acquired the said properties from Lagrimas who
sold the same to them by virtue of a Deed of Absolute Sale, 5 which was
executed on June 4, 1986. However, Lagrimas requested for time to vacate
the premises, and they agreed thereto, because they were not in immediate
need of the premises. Time came when they needed the said house as they
were only renting their own residence. They then demanded that Lagrimas
vacate the subject premises, but she refused to do so. Hence, they initiated
this action for ejectment against Lagrimas.6
In her Answer, Lagrimas alleged that sometime in September 1984, in order to
accommodate her brothers need for a placement fee to work abroad, she
borrowed P15,000 from the spouses Ramos, who asked for the subject property as
collateral. On June 4, 1986, the spouses Ramos caused her to sign a Deed of
Absolute Sale purporting to show that she sold the property in question to them for
the sum of P31,000. The balance of P16,000 was promised to be paid on that date,
but the promise was never fulfilled. Sometime in May 1988, Erlinda Ramos and
Lagrimas executed an agreement (Kasunduan)7 acknowledging that the subject
parcel of land, together with the upper portion of the house thereon, had been sold by
Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum
of P22,500 (representing P15,000 cash loan plus P7,500 as interest from September
1984 to May 1988) had been paid; that the balance of P8,500 would be paid on the

The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale
executed by the spouses Ramos and Lagrimas on June 4, 1986. The Deed was duly
acknowledged before a Notary Public and the parties therein did not deny its due
execution. The MeTC observed that Lagrimas defense that the spouses Ramos still
had to pay the amount of P16,000 to complete the full consideration of P31,000 was
nowhere to be found in the Deed of Absolute Sale.10
The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot
be given binding effect. The MeTC stated that while Erlinda Ramos admitted the
existence of said document, she thought that Lagrimas was only asking for an
additional amount. Erlinda Ramos claimed that after signing and reading the
document, she realized that it did not contain the true facts of the situation since they
had already purchased the subject property and were, therefore, the owners thereof.
Erlinda Ramos, thereafter, refused to give her residence certificate and asked the
notary public not to notarize the document. Said incident was attested to by way of
affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.11
Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property
after the sale, without payment of rent, was by mere tolerance. It held that since the
spouses Ramos, who were staying in a rented place, were asked to vacate the same,
they were in need to take possession of their own property.12
The MeTC thus rendered judgment in favor of private respondents, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein
private respondents] and against the defendant [herein petitioner], ordering
the latter and the persons claiming rights under her to vacate the premises
known as 1151 Florentino [Torres] Street, Singalong, Manila. The defendant
is likewise ordered to pay plaintiffs the sum of P1,000.00 per month as
reasonable compensation for the use and occupation of the premises from
the filing of this complaint until the premises is vacated and possession is
turned over to the plaintiffs; the further sum of P5,000.00 as attorneys fees
plus the costs of the suit.
Defendants counterclaim is hereby dismissed for lack of merit.
SO ORDERED.13

Petitioner appealed said decision to the Regional Trial Court, which rendered
judgment in her favor, thus:
In view of the foregoing, this Court hereby reverses the assailed Decision
and dismisses the complaint. Costs against the appellee.
The order previously issued granting execution pending appeal is
accordingly recalled.
SO ORDERED.14
The Regional Trial Court (RTC) held that the Kasunduan was binding between the
parties and was the true agreement between them. It ruled that pending the
determination of the question of ownership, it cannot deprive the party in actual
possession of the right to continue peacefully with said possession. Since the
question of ownership was inextricably woven with that of possession, the RTC held
that the MeTC should have dismissed the case because jurisdiction pertains to
another tribunal.15
Private respondents filed a petition for review of the decision of the RTC with the
Court of Appeals. They faulted the respondent Judge for giving credence to
the Kasunduan and holding that it prevailed over the Deed of Absolute Sale. The
Court of Appeals ruled in favor of private respondents, thus:
WHEREFORE, the decision of the respondent Judge herein appealed from
is hereby REVERSED and SET ASIDE, and the decision of the Metropolitan
Trial Court is hereby REINSTATED.
SO ORDERED.16
The Court of Appeals found, thus:
A review of the records discloses that the private respondent [herein
petitioner Lagrimas] acquired the subject property from one Marianita C.
Valera by virtue of two instruments. The first one is a Deed of Sale dated
September 27, 1984, in which the vendor Marianita C. Valera sold a house
of light wooden materials and her rights as a bonafide tenant of the land on
which it stands, to the vendee Lagrimas A. Boy forP31,000.00 (Annex 1 to
the Affidavit of Lagrimas A. Boy, p. 67, Record). The second one is a deed of
absolute sale and assignment of rights dated March 18, 1985, in which the
vendor Ma. Nita C. Valera sold a residential house and her rights and
interests over a parcel of land in which it is located, to vendee Lagrimas A.
Boy, for the price of P31,000.00 (Annex 2, Affidavit of Lagrimas A. Boy, pp.
68-69, Record).

It appears from the foregoing that Marianita C. Valera was originally one of
the tenants/residents of 669 square meters of land owned by the PNB. She
constructed a house on a 55.75 square meter portion of the said land. In
1984, she sold the house and only her rights as tenant of the land to private
respondent, because the PNB had not yet sold the land to the residents. In
1985, the sale of the land to the residents had already been accomplished.
Hence, she sold the house and her rights and interests to the land to the
private respondent.
Significantly, these contracts coincide with certain events in the relationship
between the petitioners [herein private respondents spouses Ramos] and
private respondent. According to the Answer of private respondent,
sometime in September, 1984, she borrowed the sum of P15,000.00 from
the petitioners to accommodate her brothers placement fee to work abroad
(par. 7, Answer, p. 19, Record). And on March 19, 1985, the private
respondent executed a deed of real estate mortgage (Annex a to the
Affidavit of Erlinda C. Ramos, pp. 54-55, Record), in which she mortgaged
the properties she has acquired from Marianita C. Valera to the petitioners,
to secure a loan in the amount of P26,200.00, payable within three months.
One year later, on June 4, 1986, the private respondent executed a deed of
absolute sale in which she sold the same property acquired from Marianita
C. Valera to the petitioners, for the price of P31,000.00.17
Considering that petitioner borrowed P26,200 from private respondents, which loan
was covered by a real estate mortgage of the subject house and lot, and the
subsequent sale of the property to private respondents forP31,000 after non-payment
of the loan, the Court of Appeals did not give credence to the statement in
theKasunduan that private respondents paid only P22,500 to petitioner since her
indebtedness already reachedP26,200. The Court of Appeals gave weight to the
argument of private respondents that Erlinda Ramos was merely tricked into signing
the Kasunduan. It gave credence to the version of private respondents on how
theKasunduan came to be executed but not notarized, thus:
x x x Erlinda G. Ramos alleged in her affidavit that sometime in May, 1988,
the exact date of which she cannot recall, Lagrimas Boy went to their
residence and pleaded that even if they have already fully paid the subject
house and lot, she was asking for an additional amount because she needed
the money and there was no one for her to approach (walang ibang
matatakbuhan). She [Erlinda Ramos] claimed she committed a mistake
because she agreed to give an additional amount and went with [Lagrimas]
to Atty. Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of] Atty. Estacio in
company with her friend Lutgarda Bayas. Atty. Estacio told her [Erlinda
Ramos] that she will give an additional amount and she agreed without the
knowledge of her husband. Atty. Estacio handed to her a piece of paper and
she was made to sign and she acceded and signed it without reading. After
[Lagrimas] and her witnesses including her companion Lutgarda Bayas

signed the paper, she [Erlinda Ramos] go[t] it and read it. It was at that point
that she discovered that what were written thereon were not in accordance
with the true and real fact and situation that the subject house and lot
already belongs to them because they have purchased it already and
{Lagrimas} only requested for an addition. She [Erlinda Ramos] told Atty.
Estacio to change (baguhin) the statement because she was not agreeable
and she did not give her residence certificate (Cedula). Notary Public
Estacio said that he cannot notarize the document (purported Kasunduan)
because she [Erlinda Ramos] refused saying she was "Pumapalag." He said
that Erlinda Ramos and [Lagrimas] should talk to each other again. She
[Erlinda Ramos] committed another mistake because she left the place
leaving the piece of paper -- purported "Kasunduan" without knowing that
[Lagrimas] kept it. Erlinda Ramos innocently failed to demand the said piece
of paper which [Lagrimas] is now using. She returned to Atty. Estacio to get
the piece of paper but he answered her saying naibasura na and she trusted
him but this time, it turned out that [Lagrimas] kept it which she is using now
in this case.18
The Court of Appeals stated that the fact that petitioner has remained in possession
of the property sold, and paid its real estate taxes, would have made out a case for
equitable mortgage. However, it noted that petitioner did not raise this defense, but
admitted having sold the property to private respondents, alleging only that they have
not paid the purchase price in full. It, therefore, ruled that the preponderance of
evidence is against petitioner.
Hence, this petition, with the following assigned errors:

TRIAL COURT AND [IN REINSTATING] THE DECISION OF THE COURT A

QUO.19
Petitioner contends that, as ruled by the RTC, since the question of ownership in this
case is interwoven with that of possession, the MeTC should have dismissed the
case because jurisdiction pertains to another tribunal.
The contention is without merit.
The only issue for resolution in an unlawful detainer case is physical or material
possession of the property involved, independent of any claim of ownership by any of
the party litigants.20
Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act
of 1980), the jurisdiction of inferior courts was confined to receiving evidence of
ownership in order to determine only the nature and extent of possession, by reason
of which such jurisdiction was lost the moment it became apparent that the issue of
possession was interwoven with that of ownership.21
With the enactment of Batas Pambansa Blg. 129, inferior courts were granted
jurisdiction to resolve questions of ownership provisionally in order to determine the
issue of possession, thus:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases.Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:

I
xxx
THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS
DISCRETION IN NOT INTERPRETING THAT THE "KASUNDUAN"
EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND
PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF
SALE WHICH HAS NOT BEEN CONSUMMATED.
II
THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS
DISCRETION IN MISINTERPRETING AND DISREGARDING THE
"KASUNDUAN" AS NOT APPLICABLE IN THE CASE AT BAR.
III
THE RESPONDENT COURT ERRED AND ABUSED ITS DISCRETION IN
REVERSING AND DISMISSING THE DECISION OF THE REGIONAL

(2) Exclusive original jurisdiction over cases of forcible entry and

unlawful detainer: Provided, That when in such cases, the
defendant raises the question of ownership in his pleadings and the
question of possession cannot be resolved without deciding the
issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.
Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as
amended, similarly provides:
Sec. 16. Resolving defense of ownership.When the defendant raises the
defense of ownership in his pleadings and the question of possession
cannot be resolved without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of possession.

Thus, in forcible entry and unlawful detainer cases, if the defendant raises the
question of ownership in his pleadings and the question of possession cannot be
resolved without deciding the issue of ownership, the inferior courts have the
undoubted competence provisionally to resolve the issue of ownership for the sole
purpose of determining the issue of possession.22 The MeTC, therefore, did not err in
taking cognizance of the instant case.
Petitioner also contends that the Court of Appeals erred by misinterpreting and
disregarding the Kasunduan, which is binding between the parties and expressed
their true intent. Petitioner asserts that the Kasunduansupersedes the Deed of
Absolute Sale, which is actually a contract to sell. In effect, petitioner is asking this
Court to review the factual finding of Court of Appeals on the true nature of
the Kasunduan.
As a rule, the findings of the fact of the Court of Appeals are final and cannot be
reviewed on appeal by this Court, provided they are borne out by the record or are
based on substantial evidence.23 After reviewing the records herein, this Court finds
no ground to change the factual finding of the Court of Appeals on the Kasunduan,
with the resulting holding that it is not binding on the parties.

by mere tolerance. Private respondents claimed that petitioner requested for time to
vacate the premises and they agreed thereto because they did not need the property
at that time. However, when private respondents were asked to vacate their rented
residence, they demanded that petitioner vacate the subject property, but petitioner
refused to do so. A person who occupies the land of another at the latters tolerance
or permission, without any contract between them, is bound by an implied promise
that he will vacate the same upon demand, failing which a summary action for
ejectment is the proper remedy against him.28
WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No.
38716, which reversed and set aside the decision of the Regional Trial Court, and
reinstated the decision of the Metropolitan Trial Court, is hereby AFFIRMED. No
costs.
SO ORDERED.

The remaining issue is whether the Court of Appeals correctly ruled that private
respondents have a right of material possession over the disputed property.
It has been established that petitioner sold the subject property to private respondents
for the price of P31,000, as evidenced by the Deed of Absolute Sale, 24 the due
execution of which was not controverted by petitioner. The contract is absolute in
nature,
without any provision that title to the property is reserved in the vendor until full
payment of the purchase price.25By the contract of sale,26 petitioner (as vendor),
obligated herself to transfer the ownership of, and to deliver, the subject property to
private respondents (as vendees) after they paid the price of P31,000. Under Article
1477 of the Civil Code, the ownership of the thing sold shall be transferred to the
vendee upon the actual or constructive delivery thereof. In addition, Article 1498 of
the Civil Code provides that when the sale is made through a public instrument, as in
this case, the execution thereof shall be equivalent to the delivery of the thing which is
the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. In this case, the Deed of Absolute Sale does not contain any
stipulation against the constructive delivery of the property to private respondents. In
the absence of stipulation to the contrary, the ownership of the property sold passes
to the vendee upon the actual or constructive delivery thereof.27 The Deed of Absolute
Sale, therefore, supports private respondents right of material possession over the
subject property.
The finding of the MeTC, sustained by the Court of Appeals, is that the continued
occupation by petitioner of said property after the sale, without payment of rent, was

G.R. No. 125088: Lagrimas Boy v. Court of Appeals, Erlinda & Isagani Ramos
14 April 2004, 427 SCRA 196
Constructive Delivery

FACTS: In 1984, Lagrimas Boy needed money for her brothers placement fee to go
abroad. She then borrowed P15k from spouses Isagani and Erlinda Ramos. In 1986,
Lagrimas executed a Deed of Absolute Sale with the Ramoses. Subject of the sale
was Lagrimas 55.75 sq. m. land and the house erected thereon. Price agreed upon

was P31k. Allegedly, Lagrimas debt is to be deducted, so the Ramoses were just
to pay P16k. Lagrimas stayed within the property as the Ramoses were not yet in
immediate need thereof.

private respondents. In the absence of stipulation to the contrary, the ownership of the
property sold passes to the vendee upon the actual or constructive delivery thereof.
The Deed of Absolute Sale, therefore, supports private respondents right of material
possession over the subject property.

In 1988, Lagrimas went to Erlinda asking that they execute a Kasunduan.

TheKasunduan states that the Ramoses still owe P16k to Lagrimas; that interest is to
be deducted in favor of the Ramoses so that would leave a balance of P8.5k. The
Kasunduan was notarized but upon signing, Erlinda changed her mind. She said she
realized that they were actually able to pay P31k to Lagrimas when the Deed of Sale
was executed. She advised the lawyer to change what she just signed. The lawyer
said that the parties need to talk to each other first. Lagrimas promised the lawyer
that she will be scrapping the Kasunduan.

(2) G.R. No. 92989 July 8, 1991

Later, the need for the Ramoses to occupy the land arose. They demanded Lagrimas
to vacate the property. Lagrimas refused to do so. She invoked the Kasunduan.

ISSUE: Whether or not the Kasunduan prevails over the Deed of Absolute Sale.

HELD: No. A review of the Deed of Sale shows no indication that there was a balance
left to be paid to Lagrimas. The contract is absolute. It has been established that
Lagrimas sold the subject property to the spouses Ramos for the price of P31k, as
evidenced by the Deed of Absolute Sale, the due execution of which was not
controverted by Lagrimas.
The contract is absolute in nature, without any
provision that title to the property is reserved in Lagrimas until full payment of the
purchase price. By the contract of sale, Lagrimas (as vendor), obligated herself to
transfer the ownership of, and to deliver, the subject property to the Ramoses (as
vendees) after they paid the price of P31k. Under Article 1477 of the Civil Code, the
ownership of the thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof.

In addition, Article 1498 of the Civil Code provides that when the sale is made through
a public instrument, as in this case, the execution thereof shall be equivalent to the
delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred. In this case, the Deed of Absolute Sale
does not contain any stipulation against the constructive delivery of the property to

PERFECTO DY, JR. petitioner,

vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V.
GONZALES, respondents.
This is a petition for review on certiorari seeking the reversal of the March 23, 1990
decision of the Court of Appeals which ruled that the petitioner's purchase of a farm
tractor was not validly consummated and ordered a complaint for its recovery
dismissed.
The facts as established by the records are as follows:
The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo
Dy purchased a truck and a farm tractor through financing extended by Libra Finance
and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra
as security for the loan.
The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he
wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the
said tractor and assume the mortgage debt of the latter.
In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request.
Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor
of the petitioner over the tractor in question.

At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo
Dy's failure to pay the amortizations.

in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff
by virtue of the alias writ of execution issued in Civil Case No. R-16646.

Despite the offer of full payment by the petitioner to Libra for the tractor, the
immediate release could not be effected because Wilfredo Dy had obtained financing
not only for said tractor but also for a truck and Libra insisted on full payment for both.

The petitioner now comes to the Court raising the following questions:

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck
so that full payment could be made for both. On November 22, 1979, a PNB check
was issued in the amount of P22,000.00 in favor of Libra, thus settling in full the
indebtedness of Wilfredo Dy with the financing firm. Payment having been effected
through an out-of-town check, Libra insisted that it be cleared first before Libra could
release the chattels in question.
Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a
collection case to recover the sum of P12,269.80 was pending in another court in
Cebu.
On the strength of an alias writ of execution issued on December 27, 1979, the
provincial sheriff was able to seize and levy on the tractor which was in the premises
of Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where
Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its
stockholders, Antonio Gonzales.
It was only when the check was cleared on January 17, 1980 that the petitioner
learned about GELAC having already taken custody of the subject tractor.
Consequently, the petitioner filed an action to recover the subject tractor against
GELAC Trading with the Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive
portion of the decision reads as follows:
WHERE
FORE, judgment is hereby rendered in favor of the plaintiff and
against the defendant, pronouncing that the plaintiff is the owner of
the tractor, subject matter of this case, and directing the defendants
Gelac Trading Corporation and Antonio Gonzales to return the
same to the plaintiff herein; directing the defendants jointly and
severally to pay to the plaintiff the amount of P1,541.00 as
expenses for hiring a tractor; P50,000 for moral damages; P50,000
for exemplary damages; and to pay the cost. (Rollo, pp. 35-36)
On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
complaint with costs against the petitioner. The Court of Appeals held that the tractor

A.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
AFFIRMING THE TRIAL COURT'S FINDING THAT OWNERSHIP
OF THE FARM TRACTOR HAD ALREADY PASSED TO HEREIN
PETITIONER WHEN SAID TRACTOR WAS LEVIED ON BY THE
SHERIFF PURSUANT TO AN ALIAS WRIT OF EXECUTION
ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT
GELAC TRADING INC.
B.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
EMBARKED ON MERE CONJECTURE AND SURMISE IN
HOLDING THAT THE SALE OF THE AFORESAID TRACTOR TO
PETITIONER WAS DONE IN FRAUD OF WILFREDO DY'S
CREDITORS, THERE BEING NO EVIDENCE OF SUCH FRAUD
AS FOUND BY THE TRIAL COURT.
C.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
MISAPPREHENDED THE FACTS AND ERRED IN NOT
SUSTAINING THE FINDING OF THE TRIAL COURT THAT THE
SALE OF THE TRACTOR BY RESPONDENT GELAC TRADING
TO ITS CO-RESPONDENT ANTONIO V. GONZALES ON
AUGUST 2, 1980 AT WHICH TIME BOTH RESPONDENTS
ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS
VIOLATIVE OF THE HUMAN RELATIONS PROVISIONS OF THE
CIVIL CODE AND RENDERED THEM LIABLE FOR THE MORAL
AND EXEMPLARY DAMAGES SLAPPED AGAINST THEM BY
THE TRIAL COURT. (Rollo, p. 13)
The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale depended
upon the clearance and encashment of the check which was issued in payment of the
subject tractor.
In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174
SCRA 80 [1989]), we stated that:

The rule is settled that the chattel mortgagor continues to be the

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

Article 1499. The delivery of movable property may likewise be

made by the mere consent or agreement of the contracting parties,
if the thing sold cannot be transferred to the possession of the
vendee at the time of the sale, or if the latter already had it in his
possession for any other reason. (1463a)
In the instant case, actual delivery of the subject tractor could not be made. However,
there was constructive delivery already upon the execution of the public instrument
pursuant to Article 1498 and upon the consent or agreement of the parties when the
thing sold cannot be immediately transferred to the possession of the vendee. (Art.
1499)
The respondent court avers that the vendor must first have control and possession of
the thing before he could transfer ownership by constructive delivery. Here, it was
Libra Finance which was in possession of the subject tractor due to Wilfredo's failure
to pay the amortization as a preliminary step to foreclosure. As mortgagee, he has the
right of foreclosure upon default by the mortgagor in the performance of the
conditions mentioned in the contract of mortgage. The law implies that the mortgagee
is entitled to possess the mortgaged property because possession is necessary in
order to enable him to have the property sold.
While it is true that Wilfredo Dy was not in actual possession and control of the
subject tractor, his right of ownership was not divested from him upon his default.
Neither could it be said that Libra was the owner of the subject tractor because the
mortgagee can not become the owner of or convert and appropriate to himself the
property mortgaged. (Article 2088, Civil Code) Said property continues to belong to
the mortgagor. The only remedy given to the mortgagee is to have said property sold
at public auction and the proceeds of the sale applied to the payment of the obligation
secured by the mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is
no showing that Libra Finance has already foreclosed the mortgage and that it was
the new owner of the subject tractor. Undeniably, Libra gave its consent to the sale of
the subject tractor to the petitioner. It was aware of the transfer of rights to the
petitioner.
Where a third person purchases the mortgaged property, he automatically steps into
the shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177
SCRA 521 [1989]). His right of ownership shall be subject to the mortgage of the thing
sold to him. In the case at bar, the petitioner was fully aware of the existing mortgage
of the subject tractor to Libra. In fact, when he was obtaining Libra's consent to the
sale, he volunteered to assume the remaining balance of the mortgage debt of
Wilfredo Dy which Libra undeniably agreed to.
The payment of the check was actually intended to extinguish the mortgage obligation
so that the tractor could be released to the petitioner. It was never intended nor could
it be considered as payment of the purchase price because the relationship between
Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full

payment of the money obligation and the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The transaction between the brothers
is distinct and apart from the transaction between Libra and the petitioner. The
contention, therefore, that the consummation of the sale depended upon the
encashment of the check is untenable.
The sale of the subject tractor was consummated upon the execution of the public
instrument on September 4, 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December, 1979. Well settled is the rule that only
properties unquestionably owned by the judgment debtor and which are not exempt
by law from execution should be levied upon or sought to be levied upon. For the
power of the court in the execution of its judgment extends only over properties
belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v. Court of
Appeals, G.R. No. 78771, January 23, 1991).
The respondents further claim that at that time the sheriff levied on the tractor and
took legal custody thereof no one ever protested or filed a third party claim.
It is inconsequential whether a third party claim has been filed or not by the petitioner
during the time the sheriff levied on the subject tractor. A person other than the
judgment debtor who claims ownership or right over levied properties is not
precluded, however, from taking other legal remedies to prosecute his claim.
(Consolidated Bank and Trust Corp. v. Court of Appeals, supra) This is precisely what
the petitioner did when he filed the action for replevin with the RTC.
Anent the second and third issues raised, the Court accords great respect and weight
to the findings of fact of the trial court. There is no sufficient evidence to show that the
sale of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo
and Perfecto are brothers, this fact alone does not give rise to the presumption that
the sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9
SCRA 663 [1963]). Moreover, fraud can not be presumed; it must be established by
clear convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were
indeed violative of the provisions on human relations. As found by the trial court,
GELAC knew very well of the transfer of the property to the petitioners on July 14,
1980 when it received summons based on the complaint for replevin filed with the
RTC by the petitioner. Notwithstanding said summons, it continued to sell the subject
tractor to one of its stockholders on August 2, 1980.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of
Appeals promulgated on March 23, 1990 is SET ASIDE and the decision of the
Regional Trial Court dated April 8, 1988 is REINSTATED.
SO ORDERED.

DY V. CA (July 08, 1991)

FACTS:
Wilfredo Dy bought a truck and tractor from Libra Finance Corporation. Both truck and
tractor was also mortgage to Libra as security for a loan and as such, they took
possession of it. Brother of Wilfredo, Perfecto Dy and sister Carol Dy-Seno requested
Libra that they be allowed to buy the property and assume the mortgage debt. Libra
agreed to the request.
Meanwhile, a collection suit was filed against Wilfredo Dy by Gelac Trading Inc. On
the strength of a writ of execution, the sheriff was able to obtain the tractor on the
premises of Libra. It was sold in a public auction in which Gelac Trading was the lone
bidder. Gelac subsequently sold it to one of their stockholders.

The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale depended
upon the clearance and encashment of the check which was issued in payment of the
subject tractor
ISSUE:
WON the William Dy is still the owner of the tractor when it was obtained through the
writ of execution.
HELD:
The tractor was not anymore in possession of William Dy when it was obtained by the
sheriff because he already sold it to his brother.
William Dy has the right to sell his property even though it was mortgage because in a
mortgage, the mortgagor doesnt part with the ownership over the property. He is
allowed to sell the property as long as there is consent from the mortgagee such as in
this case. But even if there is no consent given, the sale would still be valid without
prejudice to the criminal action against the mortgagor.
When William Dy sold the tractor, he already transferred the ownership of it because
NCC states that the ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him or in any other manner signing an agreement that the
possession is transferred from the vendor to the vendee. In the instant case, actual
delivery of the subject tractor could not be made but there was constructive delivery
already upon the execution of a public instrument which in this case is a deed of sale.
The payment of the check was actually intended to extinguish the mortgage
obligation.

petitioner, the tractor and truck were in the possession of LIBRA for his failure to pay
the amortization.
When petitioner finally fulfilled its obligation to pay the tractor, LIBRA would only
release the same only if he would also pay for the truck. In order to fulfill LIBRAs
condition, petitioner convinced his sister to pay for the remaining truck, to which she
released a check amounting to P22,000. LIBRA however, insisted that the check must
be first cleared before it delivers the truck and tractor.
Meanwhile, another case penned Gelac Trading Inc vs. Wilfredo Dy was pending in
Cebu as a case to recover for a sum of money (P12,269.80). By a writ of execution
the court in Cebu ordered to seize and levy the tractor which was in the premise of
LIBRA, it was sold in a public auction to which it was purchased by GELAC. The latter
then sold the tractor to Antonio Gonzales.
RTC rendered in favor of petitioner.
CA dismissed the case, alleging that it still belongs to Wilfredo Dy.
ISSUE:
Whether or not there was a consummated sale between Petitioner and LIBRA?
HELD:
NO.
The payment of the check was actually intended to extinguish the mortgage obligation
so that the tractor could be released to the petitioner. It was never intended nor could
it be considered as payment of the purchase price because the relationship between
Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full
payment of the money obligation and the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The transaction between the brothers
is distinct and apart from the transaction between Libra and the petitioner. The
contention, therefore, that the consummation of the sale depended upon the
encashment of the check is untenable.

PERFECTO DY, JR. petitioner, vs. COURT OF APPEALS, GELAC TRADING INC.,
and ANTONIO V. GONZALES, Respondents.

G.R. No. 92989 July 8, 1991

G.R. No. 92989 July 8, 1991

FACTS:
Wilfredo Dy purchased a truck and a farm tractor through LIBRA which was also
mortgaged with the latter, as a security to the loan.
Petitioner, expresses his desire to purchased his brothers tractor in a letter to LIBRA
which also includes his intention to shoulder its mortgaged. LIBRA approved the
request. At the time that Wilfredo Dy executed a deed of absolute sale in favor of

PERFECTO DY, JR.

vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES

1.

FACTS
The petitioner, Perfecto Dy and Wilfredo Dy are brothers.

2.
3.
4.
5.
6.
7.
8.

9.

10.
11.
12.
13.
14.

15.

16.

Wilfredo Dy purchased a truck and a farm tractor through financing

extended by Libra Finance and Investment Corporation (Libra).
Both truck and tractor were mortgaged to Libra as security for the loan.
The petitioner wanted to buy the tractor from his brother so he wrote a
letter to Libra requesting that he be allowed to purchase from Wilfredo Dy
the said tractor and assume the mortgage debt of the latter.
Libra thru its manager, Cipriano Ares approved the petitioner's request.
Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over
the tractor in question.
The subject tractor was in the possession of Libra Finance due to Wilfredo
Dy's failure to pay the amortizations.
Despite the offer of full payment by the petitioner to Libra for the tractor, the
immediate release could not be effected because Wilfredo Dy had obtained
financing not only for said tractor but also for a truck and Libra insisted on
full payment for both.
The petitioner was able to convince his sister, Carol Dy-Seno, to purchase
the truck so that full payment could be made for both. A PNB check was
issued in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy
with the financing firm.
Payment having been effected through an out-of-town check, Libra insisted
that it be cleared first before Libra could release the chattels in question.
Meanwhile, Civil Case entitled "Gelac Trading, Inc. v. Wilfredo Dy", a
collection case to recover the sum of P12,269.80 was pending in another
court in Cebu.
On the strength of an alias writ of execution issued, the provincial sheriff was
able to seize and levy on the tractor which was in the premises of Libra in
Carmen, Cebu.
The tractor was subsequently sold at public auction where Gelac Trading
was the lone bidder. Later, Gelac sold the tractor to one of its stockholders,
Antonio Gonzales.
It was only when the check was cleared that the petitioner learned about
GELAC having already taken custody of the subject tractor. Consequently,
the petitioner filed an action to recover the subject tractor against GELAC
Trading.
The RTC rendered judgment in favor of the petitioner. It ruled that the
plaintiff is the owner of the tractor, subject matter of this case, and directing
the defendants Gelac Trading Corporation and Antonio Gonzales to return
the same to the plaintiff herein.
On appeal, the Court of Appeals reversed the decision of the RTC and
dismissed the complaint with costs against the petitioner. The Court of
Appeals held that the tractor in question still belonged to Wilfredo Dy when it
was seized and levied by the sheriff by virtue of the alias writ of execution.

ISSUE
WHETHER THE OWNERSHIP OF THE FARM TRACTOR HAD ALREADY PASSED
TO HEREIN PETITIONER WHEN SAID TRACTOR WAS LEVIED ON BY THE
SHERIFF PURSUANT TO AN ALIAS WRIT OF EXECUTION ISSUED IN ANOTHER
CASE IN FAVOR OF RESPONDENT GELAC TRADING INC.
1.

RULING
Yes, the ownership of said tractor had already passed to herein
petitioner.

2.

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

we stated that:

The rule is settled that the chattel mortgagor continues to be the owner of the
property, and therefore, has the power to alienate the same; however, he is
obliged under pain of penal liability, to secure the written consent of the
mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines,
(1972), Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage are binding,
while they subsist, not only upon the parties executing them but also upon those who
later, by purchase or otherwise, acquire the properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged
property in favor of a third person, therefore, affects not the validity of the sale but
only the penal liability of the mortgagor under the Revised Penal Code and the
binding effect of such sale on the mortgagee under the Deed of Chattel Mortgage.
3.

The mortgagor who gave the property as security under a chattel

mortgage did not part with the ownership over the same. He had the
right to sell it although he was under the obligation to secure the
written consent of the mortgagee or he lays himself open to criminal
prosecution under the provision of Article 319 par. 2 of the Revised Penal
Code. And even if no consent was obtained from the mortgagee, the
validity of the sale would still not be affected.

4.

Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor cannot
sell the subject tractor. There is no dispute that the consent of Libra Finance
was obtained in the instant case.

5.

The sale between the brothers was therefore valid and binding as
between them and to the mortgagee, as well.

6.

While it is true that Wilfredo Dy was not in actual possession and control of
the subject tractor, his right of ownership was not divested from him upon his
default. Neither could it be said that Libra was the owner of the subject
tractor because the mortgagee cannot become the owner of or convert and
appropriate to himself the property mortgaged. (Article 2088, Civil Code)
Said property continues to belong to the mortgagor. The only remedy given
to the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by the
mortgagee. (See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no
showing that Libra Finance has already foreclosed the mortgage and that it
was the new owner of the subject tractor. Undeniably, Libra gave its consent
to the sale of the subject tractor to the petitioner. It was aware of the transfer
of rights to the petitioner.

7.

Where a third person purchases the mortgaged property, he

automatically steps into the shoes of the original mortgagor. (See
Industrial Finance Corp. v. Apostol, 177 SCRA 521 [1989]). His right of
ownership shall be subject to the mortgage of the thing sold to him. In the
case at bar, the petitioner was fully aware of the existing mortgage of the
subject tractor to Libra. In fact, when he was obtaining Libra's consent to the
sale, he volunteered to assume the remaining balance of the mortgage debt
of Wilfredo Dy which Libra undeniably agreed to.

8.

The payment of the check was actually intended to extinguish the

mortgage obligation so that the tractor could be released to the
petitioner. It was never intended nor could it be considered as payment of
the purchase price because the relationship between Libra and the petitioner
is not one of sale but still a mortgage. The clearing or encashment of the
check which produced the effect of payment determined the full
payment of the money obligation and the release of the chattel
mortgage. It was not determinative of the consummation of the sale. The
transaction between the brothers is distinct and apart from the transaction
between Libra and the petitioner. The contention, therefore, that the
consummation of the sale depended upon the encashment of the
check is untenable.

9.

The sale of the subject tractor was consummated upon the execution
of the public instrument on September 4, 1979. At this time constructive
delivery was already effected. Hence, the subject tractor was no longer
owned by Wilfredo Dy when it was levied upon by the sheriff in
December, 1979. Well settled is the rule that only properties unquestionably
owned by the judgment debtor and which are not exempt by law from
execution should be levied upon or sought to be levied upon. For the power
of the court in the execution of its judgment extends only over properties
belonging to the judgment debtor. (Consolidated Bank and Trust Corp. v.
Court of Appeals, G.R. No. 78771, January 23, 1991).

and the building constructed thereon peacefully, publicly, adversely and continuously.
Apart from being the first registrants, they are buyers in good faith.
On July 17, 1995, the RTC rendered a Decision declaring petitioners the rightful and
legal owners of the property, thus:

(3) G.R. No. 135900

August 17, 2007

SPOUSES AVELINO and EXALTACION SALERA, Petitioners,

vs.
SPOUSES CELEDONIO and POLICRONIA RODAJE, Respondents.
DECISION
Challenged in this Petition for Review on Certiorari is the Decision 1 dated October 9,
1998 of the Court of Appeals (Seventeenth Division) in CA-G.R. CV No. 51480,
entitled Spouses Avelino Salera and Exaltacion Salera, plaintiffs-appellees, v.
Spouses Celedonio Rodaje and Policronia Rodaje, defendants-appellants.
On May 7, 1993, spouses Avelino and Exaltacion Salera, now petitioners, filed with
the Regional Trial Court (RTC), Branch 11, Calubian, Leyte, a complaint for quieting
of title, docketed as Civil Case No. CN-27, against spouses Celedonio and Policronia
Rodaje, herein respondents. Petitioners alleged that they are the absolute owners of
a parcel of land situated at Basud, San Isidro, Leyte with an area of 448.98 square
meters, more or less. They acquired the property from the heirs of Brigido Tonacao as
shown by a Deed of Absolute Sale executed on June 23, 1986. They had the
document registered in the Registry of Deeds of Iloilo on July 1, 1986. When they
asked the Provincial Assessor to declare the property under their names for taxation
purposes, they found that Tax Declaration No. 2994 (R-5) in the name of Brigido was
already cancelled and another one, Tax Declaration No. 2408, was issued in the
names of respondents. Petitioners further alleged that they have been in possession
of the property and the house they built thereon because they had paid the purchase
price even before the execution of the deed of sale.
In their answer to the complaint, respondents claimed that they are the absolute
owners of the same property. They acquired it from Catalino Tonacao, the father of
Brigido, in a Deed of Absolute Sale dated June 6, 1986. The sale was registered in
the Registry of Deeds of Leyte on June 10, 1986 and Tax Declaration No. 2408 was
issued in their names. Prior thereto, or on January 11, 1984, they had a verbal
contract of sale with Catalino. They paid him P1,000.00 as downpayment. They
agreed that the balance of P4,000.00 shall be paid upon execution of the deed of
sale. Since then, they have been exercising their right of ownership over the property

In view of all the foregoing, judgment is hereby rendered in favor of the plaintiffs and
against the defendants, declaring the plaintiffs the rightful and legal owners of the
property described in paragraph 3 of the complaint; declaring as null and void the sale
(Exhibits "1" and "2") made by Catalino Tonacao to herein defendants for lack of
capacity to sell; and ordering the cancellation of Tax Declaration No. 2408 issued in
favor of Sps. Celedonio Rodaje and Policronia Rodaje by the Provincial Assessor of
Leyte and directing defendants to pay the costs.
In declaring null and void the Deed of Absolute Sale between Catalino and herein
respondents and ordering the cancellation of Tax Declaration No. 2408 issued in the
latters names, the RTC ratiocinated as follows:
Assessing the validity of the sale in favor of plaintiffs by the heirs of Brigido Tonacao
vis--vis the sale by Catalino Tonacao, father of Brigido Tonacao, to the defendants of
the property, the Court believes that the former must survive over the latter.
To begin with, defendants admit that Brigido Tonacao was the declared owner of the
land in question before defendants purchased such land from Catalino Tonacao.
Defendants also admit that the wife and children of Brigido Tonacao indeed
partitioned the land in question extrajudicially among themselves and that such wife
and children of Brigido Tonacao sold the land to plaintiffs although defendants
question the capacity of some children to sell the property for being minors.
These admissions tend to establish ownership of the land in question by Brigido
Tonacao. Upon his death, therefore, the property subject of the case at bar would by
operation of law on succession, pass to the heirs of Brigido Tonacao, namely: to the
surviving spouse and his children.
Catalino Tonacao, the father of the deceased Brigido Tonacao, is excluded by
operation of law by the presence of the compulsory heirs who are the children of
Brigido Tonacao. Whatever sale Catalino Tonacao may have executed in favor of the
defendants is a sale by one who has no legal personality or authority to do so. Thus,
the sale by Catalino Tonacao to defendants is invalidated by his lack of personality to
execute such sale, which conferred no rights to the defendants nor did it impair the
right of Brigido Tonacaos heirs to dispose of their inheritance in favor of the plaintiffs.
On appeal, the Court of Appeals, in a Decision dated October 9, 1998, reversed and
set aside the trial courts Decision, declaring respondents the true and lawful owners
of the property in dispute, thus:
WHEREFORE, the decision, dated July 17, 1995, of the Regional Trial Court (Branch
11) in Calubian, Leyte is hereby REVERSED AND SET ASIDE. Therewithal, another
judgment is rendered declaring the order of the trial court null and void, hereby:

declaring the defendants-appellants to have the superior right to the property in

question and to be the true and lawful owners thereof; directing the Register of Deeds
of Leyte to cancel the Deed of Absolute Sale, dated June 23, 1986, in favor of the
plaintiffs-appellees and to reinstate the Deed of Absolute Sale in favor of the
defendants-appellants and Tax Declaration No. 2408 be issued in favor of spouses
Celedonio Rodaje and Policronia Rodaje; and directing the plaintiffs-appellees and
other persons claiming rights under them, and residing in the premises of the land in
question, to immediately vacate the same and to remove whatever improvements
they had placed in the premises. No pronouncement as to costs.

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.

Hence, this petition.

The Court of Appeals is wrong. Article 1544 of the Civil Code contemplates a case of
double sale or multiple sales by a single vendor. More specifically, it covers a situation
where a single vendor sold one and the same immovable property to two or more
buyers.2 It cannot be invoked where the two different contracts of sale are made by
two different persons, one of them not being the owner of the property sold. 3 In the
instant case, the property was sold by two different vendors to different purchasers.
The first sale was between Catalino and herein respondents, while the second was
between Brigidos heirs and herein petitioners.

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

Petitioners contend that the sale between Catalino and respondents is void because
the former was not the owner of the lot, hence "had no legal capacity to sue." The
true owner was Brigido as shown by Tax Declaration No. 2994 (R-5) in his name.
Thus, his spouse and children, being his successors-in-interest, could validly sell the
property to them (petitioners).
On the other hand, respondents insist that they are buyers in good faith. They bought
the property, had the deed of sale registered, and took possession thereof ahead of
petitioners. They also constructed a house thereon which they used as a store. They
paid the real estate taxes corresponding to the period from 1974 up to 1993.

Since the controversy involves two deeds of sale over the same property, Article 1544
properly applies thereto (Vda. De Alcantara v. Court of Appeals, 252 SCRA 457).
Following the above-quoted provision, the court a quo was not justified in according
preferential rights to the plaintiffs-appellees, who had registered the sale in their favor
later, as against the defendants-appellants.

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

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

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

As between two purchasers, the one who registered the sale in his favor has a
preferred right over the other who has not registered his title, even if the latter is in
actual possession of the immovable property (Taedo v. Court of Appeals, 252 SCRA
80). A fortiori the defendants-appellants have a superior right over the contested
property inasmuch as they have both actual possession and prior registration of the
conveyance (Exhibit "2"; page 6, TSN, August 9, 1994; page 5, TSN, August 23,
1994). Dominium a possessione cepisse dicitur. Right is said to have its beginning
from possession.

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

The applicable provision of the New Civil Code provides:

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

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

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

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.

Good faith is something internal. Actually, it is a question of intention. In ascertaining

ones intention, this Court must rely on the evidence of ones conduct and outward
acts.5 Good faith, or want of it, is capable of being ascertained only from the acts of
one claiming its presence, for it is a condition of the mind which can be judged by
actual or fancied tokens or signs.6 Good faith consists in the possessors belief that
the person from whom he received the thing was the owner of the same and could
convey his title. Good faith, while it is always to be presumed in the absence of proof
to the contrary, requires a well founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There is good
faith where there is an honest intention to abstain from taking any unconscientious
advantage of another.7
Contrastingly, in Magat, Jr. v. Court of Appeals, 8 the Court explained that "[b]ad faith
does not simply connote bad judgment or negligence. It imports a dishonest purpose
or some moral obliquity and conscious doing of wrong. It means a breach of a known
duty through some motive or interest or ill will that partakes of the nature of fraud." In
Arenas v. Court of Appeals,9 the Court held that the determination of whether one
acted in bad faith is evidentiary in nature. Thus, "[s]uch acts (of bad faith) must be
substantiated by evidence." Indeed, the unbroken jurisprudence is that "[b]ad faith
under the law cannot be presumed; it must be established by clear and convincing
evidence."
Evidence submitted to the court, oral and documentary, established that respondents
knew beforehand that the property was declared in the name of Brigido Tonacao for
taxation purposes. Respondent Celedonio Rodaje testified as follows:

A: The Tax Declaration of his son Brigido Tonacao signed by Catalino Tonacao.
Q: It was presented to you, the Tax Declaration declared in the name of Brigido
Tonacao?
A: It was presented to me.10
Respondents claim that they have been in possession of the lot even before the
execution of the Deed of Absolute Sale on June 6, 1986. Catalino allowed them to
take possession after they made an initial payment on January 11, 1984. They
constructed a house thereon which they use as a store. They are the ones paying the
electric bills and realty taxes.
However, a perusal of the records of the case shows that petitioners are the ones in
prior possession of the property. After they purchased it from the heirs of Brigido in
1981, they started building a house thereon. The construction was completed in 1984.
The house was declared in the name of their daughter Aida Salera 11 under Tax
Declaration No. 4403 issued on October 11, 1984.12 She occupied the house and
used it as a sari-sari store until 1985 when she had to close it because business was
bad.13 Even the electrical connection of the house was registered in her name. 14 In
fact, respondent Celedonio Rodaje testified that the electric bills are in the name of
Aida Salera,15 thus:
Q: Aida Salera testified that she is the owner of the house, plaintiffs daughter in this
case. She presented the electric bills in her name, what can you say to that?

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

A: The electric bills are in her name, but I was the one paying.

A: It was from Catalino Tonacao.

Q: How did it come that the electric bills are in her name?

Q: And the Deed of Absolute Sale was executed in the year 1986?

A: It was a time when the house was newly constructed where she lived for a while.

A: Yes.

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

Q: It was likewise Catalino Tonacao who signed and executed the Deed of Absolute
Sale?

A: I have.

A: Yes, including his wife.

Q: What is your proof?

Q: Before you purchased this property, did you find for yourself the ownership of the
property you were supposed to buy?

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

A: Yes, I did.

The certification referred to by respondent Celedonio states that "Mr. Celedonio C.

Rodaje, Jr. is the one paying the electric bills of Aida Salera whose dwelling unit is
situated in barangay Basud, San Isidro, Leyte since 1986." The certification clearly
shows that the house is owned by Aida Salera and that respondents started paying
the electric bills only in 1986.16

Q: Did Catalino Tonacao presented to you a document showing that he really owns
the property?

Respondent Celedonio Rodaje likewise testified that he paid the realty taxes for the
lot "from 1974 to 1984 up to the present."17 However, it appears from his Realty Tax
Clearance that he paid only in 1984 and that the payment was in lump sum.18
As stated earlier, respondents knew, prior to the sale to them, that the lot was
declared for taxation purposes under the name of Brigido. Thus, respondents should
have been wary in buying the property. Any lot buyer is expected to be vigilant,
exercising utmost care in determining whether the seller is the true owner of the
property and whether there are other claimants. There is no indication from the record
that respondents first determined the status of the lot.
While tax declarations are not conclusive proofs of ownership, however, they are
good indicia of possession in the concept of owner, for no one in his right mind would
be paying taxes for a property that is not in his actual or at least constructive
possession.19 Hence, as between Brigido and Catalino, the former had better right to
the property. In other words, Catalino, not being the owner or possessor, could not
validly sell the lot to respondents.
The Court is convinced that respondents had knowledge that the disputed property
was previously sold to petitioners by Brigidos heirs. Obviously, aware that the sale to
petitioners was not registered, they purchased the property and have the sale
registered ahead of petitioners, who although in possession, failed to have their
contract of sale registered immediately in the Registry of Deeds.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals in CA-G.R. CV No. 51480 is REVERSED and the Decision of the trial court is
REINSTATED.

In their answer to the complaint, respondents Rodajes claimed that they are the
absolute owners of the same property. They acquired it from Catalino Tonacao, the
father of Brigido, in a Deed of Absolute Sale and the sale was registered in the RD
and a Tax Declaration was issued in their names. Since then, they have been
exercising their right of ownership over the property and the building constructed
thereon peacefully, publicly, adversely and continuously. Apart from being the first
registrants, they are buyers in good faith.
The RTC rendered a Decision declaring petitioners the rightful and legal owners of
the property.
On appeal, the CA reversed and set aside the trial courts Decision. Hence, this
petition for Review on Certiorari
ISSUE: Which of the two contracts of sale is valid.
HELD: THE ONE IN FAVOR OF PETITIONERS SPOUSES SALERA
The petition is GRANTED. The assailed Decision of the CA is REVERSED and the
Decision of the trial court is REINSTATED.
The Court of Appeals, in upholding the validity of the sale in favor of respondents,
relied on Article 1544 of the Civil Code on double sale, thus:
As between two purchasers, the one who registered the sale in his favor has a
preferred right over the other who has not registered his title, even if the latter is in
actual possession of the immovable property A fortiori the defendants-appellants
have a superior right over the contested property inasmuch as they have both actual
possession and prior registration of the conveyance. Dominium a possessione
cepisse dicitur. Right is said to have its beginning from possession.
Since the controversy involves two deeds of sale over the same property, Article 1544
properly applies thereto.Following the above-quoted provision, the court a quo was
not justified in according preferential rights to the plaintiffs-appellees, who had
registered the sale in their favor later, as against the defendants-appellants.

SO ORDERED.

SPOUSES SALERA, VS. SPOUSES RODAJE

G.R. No. 135900
August 17, 2007
FACTS: The Petitioner spouses Salera filed with the RTC of Leyte, a complaint for
quieting of title against spouses Rodaje, The Saleras alleged that they are the
absolute owners of a parcel of land situated in Leyte. They acquired the property
from the heirs of Brigido Tonacao as shown by a Deed of Absolute Sale; they had the
document registered in the RD.
When they asked the Provincial Assessor to declare the property under their names
for taxation purposes, they found that the Tax Declaration in the name of Brigido was
already cancelled and another one was issued in the names of the Rodajes.
Petitioners further alleged that they have been in possession of the property and the
house they built thereon because they had paid the purchase price even before the
execution of the deed of sale.

The Court of Appeals is wrong. Article 1544 of the Civil Code contemplates a case of
double sale or multiple sales by a single vendor. More specifically, it covers a
situation where a single vendor sold one and the same immovable property to two or
more buyers. It cannot be invoked where the two different contracts of sale are made
by two different persons, one of them not being the owner of the property sold. In the
instant case, the property was sold by two different vendors to different purchasers.
The first sale was between Catalino and herein respondents, while the second was
between Brigidos heirs and herein petitioners.
Respondents claim that they have been in possession of the lot even before the
execution of the Deed of Absolute Sale on June 6, 1986. However, a perusal of the
records of the case shows that petitioners are the ones in prior possession of the
property.
Evidence submitted to the court, oral and documentary, established that respondents
knew beforehand that the property was declared in the name of Brigido Tonacao for
taxation purposes.Thus, respondents should have been wary in buying the property.
Any lot buyer is expected to be vigilant, exercising utmost care in determining

whether the seller is the true owner of the property and whether there are other
claimants. There is no indication from the record that respondents first determined
the status of the lot.
While tax declarations are not conclusive proofs of ownership, however, they are
good indicia of possession in the concept of owner, for no one in his right mind would
be paying taxes for a property that is not in his actual or at least constructive
possession. Hence, as between Brigido and Catalino, the former had better right to
the property. In other words, Catalino, not being the owner or possessor, could not
validly sell the lot to respondents.
The Court is convinced that respondents had knowledge that the disputed property
was previously sold to petitioners by Brigidos heirs. Obviously, aware that the sale to
petitioners was not registered, they purchased the property and have the sale
registered ahead of petitioners, who although in possession, failed to have their
contract of sale registered immediately in the Registry of Deeds.

NOTES:
1. Settled is the principle that this Court is not a trier of facts. In Gabriel v.
Mabanta we said that (t)his rule, however, is not an iron-clad rule. One of the
recognized exceptions is when the findings of fact of the Court of Appeals are
contrary to those of the trial court, as in this case.
2. Good faith is something internal. Actually, it is a question of intention. In
ascertaining ones intention, this Court must rely on the evidence of ones conduct
and outward acts. Good faith, or want of it, is capable of being ascertained only from
the acts of one claiming its presence, for it is a condition of the mind which can be
judged by actual or fancied tokens or signs.
Good faith consists in the possessors belief that the person from whom he received
the thing was the owner of the same and could convey his title. Good faith, while it is
always to be presumed in the absence of proof to the contrary, requires a well
founded belief that the person from whom title was received was himself the owner of
the land, with the right to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage of another.
Contrastingly, in Magat, Jr. v. Court of Appeals, the Court explained that [b]ad faith
does not simply connote bad judgment or negligence. It imports a dishonest purpose
or some moral obliquity and conscious doing of wrong. It means a breach of a
known duty through some motive or interest or ill will that partakes of the nature of
fraud. In Arenas v. Court of Appeals, the Court held that the determination of
whether one acted in bad faith is evidentiary in nature. Thus, [s]uch acts (of bad
faith) must be substantiated by evidence. Indeed, the unbroken jurisprudence is
that [b]ad faith under the law cannot be presumed; it must be established by clear
and convincing evidence.

SPOUSES SALERA vs SPOUSES RODAJE

G.R. No. 135900 17 August 2007
Facts: Spouses Salera filed an action for quieting of title regarding a parcel of land in
Brgy. Basud, San Isidro, Leyte. The land was bought from the heirs of Brigido Tonacio
as evidenced by the Deed of Absolute Sale executed on June 23, 1986. They allege
that they have been in possession of the property and the house they built thereon
because they had paid the purchase price even before the execution of the deed of
sale. When they asked the Provincial Assessor to declare the property under their
names for taxation purposes, they found that Tax Declaration No. 2994 (R-5) in the
name of Brigido was already cancelled and another one, Tax Declaration No. 2408,
was issued in the names of Spouses Rodaje.
Spouses Rodaje claimed that they bought the land from Catalino Tonacio, father of
Brigido on June 6, 1986 and that the sale was registered with the Register of Deeds
and the Tax Declaration No. 2408 was issued in their name.
They also claimed that they had a verbal contract with Catalino even before the
execution of the sale since January 1984. They paid a down payment of P1,000 and
paid the balance of P4,000 when the sale was executed. They allege that they been
in exercising their right of ownership over the property and the building constructed
thereon peacefully, publicly, adversely and continuously. Apart from being the first
registrants, they are buyers in good faith.
RTC of Calubian, Leyte declared Spouses Salera as the rightful and legal owners
while declaring null and void the Deed of Absolute Sale between Catalino and herein
respondents and ordering the cancellation of Tax Declaration No. 2408 issued. The
court cited that the real owners of the land, by operation of the law on succession
would be the heirs of Brigido and not his father. Catalino had no legal personality to
sell the parcel of land.
The Court of Appeals reversed and set aside the decision of the RTC. It based its
decision on the Civil Code provision on double sale.
Issue: Which of the two contracts of sale is valid?
Held: Sale made by the heirs of Brigido Tonacao to the spouses Salera is valid. Sale
made by Catalino to spouses Rodaje is invalid.
The Court of Appeals is wrong. Article 1544 of the Civil Code contemplates a case of
double sale or multiple sales by a single vendor.
More specifically, it covers a situation where a single vendor sold one and the same
immovable property to two or more buyers. Art. 1544 does not apply in this case since
the sale was made by Catalino and the heirs of Brigido.
Bad faith was established in the RTC. The evidence submitted to the court,
established that Spouses Rodaje knew beforehand that the property was declared in
the name of Brigido Tonacao for taxation purposes. Any lot buyer is expected to be
vigilant, exercising utmost care in determining whether the seller is the true owner of

the property and whether there are other claimants. There is no indication from the
record that Rodaje first determined the status of the lot.

properties in question for P1,400,000.00, which sum must be delivered by the

plaintiffs to the Velezes immediately after the execution of said contract;

While tax declarations are not conclusive proofs of ownership, however, they are
good indicia of possession in the concept of owner, for no one in his right mind would
be paying taxes for a property that is not in his actual or at least constructive
possession.

3) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to reimburse Felix C.
Ting, Manuel C. Ting and Alfredo Go whatever amount the latter had paid to
the former;

Hence, Catalino, not being the owner or possessor, could not validly sell the lot to
respondents. The certification presented by respondents clearly shows that the house
is owned by Aida Salera and that respondents started paying the electric bills (in the
name of Aida Salera) only in 1986. The respondents proof of payment of realty tax
from the period of 1974 to 1984 was paid in lump sum.

4) ordering Felix C. Ting, Manuel C. Ting and Alfredo Go to deliver the

properties in question to the plaintiffs within fifteen (15) days from receipt of a
copy of this decision;

(Petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED

and the Decision of the trial court is REINSTATED.)

5) ordering all the defendants to pay, jointly and severally, the plaintiffs the sum
of P20,000.00 as attorney's fees.
SO ORDERED.
The Antecedent Facts
The facts narrated by the Court of Appeals are as follows: 4

(4) G.R. No. 115158 September 5, 1997

EMILLA M. URACA, CONCORDIA D. CHING and ONG SENG, represented by
ENEDINO H. FERRER,petitioners,
vs.
COURT OF APPEALS, JACINTO VELEZ, JR., CARMEN VELEZ TING, AVENUE
MERCHANDISING, INC., FELIX TING AND ALFREDO GO, respondents.
Novation is never presumed; it must be sufficiently established that a valid new
agreement or obligation has extinguished or changed an existing one. The
registration of a later sale must be done in good faith to entitle the registrant to priority
in ownership over the vendee in an earlier sale.
Statement of the Case

The Velezes (herein private respondents) were the owners of the lot and
commercial building in question located at Progreso and M.C. Briones Streets
in Cebu City.
Herein (petitioners) were the lessees of said commercial building. 5
On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to
herein (petitioners) offering to sell the subject property for P1,050,000.00 and
at the same time requesting (herein petitioners) to reply in three days.
On July 10, 1985, (herein petitioners) through Atty. Escolastico Daitol sent a
reply-letter to the Velezes accepting the aforesaid offer to sell.

WHEREFORE, judgment is hereby rendered:

On July 11, 1985, (herein petitioner) Emilia Uraca went to see Carmen Ting
about the offer to sell but she was told by the latter that the price was
P1,400,000.00 in cash or manager's check and not P1,050,000.00 as
erroneously stated in their letter-offer after some haggling. Emilia Uraca
agreed to the price of P1,400,000.00 but counter-proposed that payment be
paid in installments with a down payment of P1,000,000.00 and the balance of
P400,000 to be paid in 30 days. Carmen Velez Ting did not accept the said
counter-offer of Emilia Uraca although this fact is disputed by Uraca.

1) declaring as null and void the three (3) deeds of sale executed by the
Velezes to Felix C. Ting, Manuel Ting and Alfredo Go;

No payment was made by (herein petitioners) to the Velezes on July 12, 1985
and July 13, 1985.

These doctrines are stressed by this Court as it resolves the instant petition
challenging the December 28, 1993 Decision 1 of Respondent Court of Appeals 2 in
CA-G.R. SP No. 33307, which reversed and set aside the judgment of the Regional
Trial Court of Cebu City, Branch 19, and entered a new one dismissing the petitioners'
complaint. The dispositive portion of the RTC decision reads: 3

2) ordering Carmen Velez Ting and Jacinto M. Velez, Jr. to execute a deed of
absolute sale in favor of Concordia D. Ching and Emilia M. Uraca for the

On July 13, 1985, the Velezes sold the subject lot and commercial building to
the Avenue Group (Private Respondent Avenue Merchandising Inc.) for
P1,050,000.00 net of taxes, registration fees, and expenses of the sale.

mere promise to sell which was not binding for lack of acceptance or a separate
consideration. 11
The Issues

At the time the Avenue Group purchased subject property on July 13, 1985
from the Velezes, the certificate of title of the said property was clean and free
of any annotation of adverse claims or lis pendens.
On July 31, 1985 as aforestated, herein (petitioners) filed the instant complaint
against the Velezes.
On August 1, 1985, (herein petitioners) registered a notice of lis pendens over
the property in question with the Office of the Register of Deeds. 6
On October 30, 1985, the Avenue Group filed an ejectment case against
(herein petitioners) ordering the latter to vacate the commercial building
standing on the lot in question.
Thereafter, herein (petitioners) filed an amended complaint impleading the
Avenue Group as new defendants (after about 4 years after the filing of the
original complaint).
The trial court found two perfected contracts of sale between the Velezes and the
petitioners involving the real property in question. The first sale was for
P1,050,000.00 and the second was for P1,400,000.00. In respect to the first sale, the
trial court held that "[d]ue to the unqualified acceptance by the plaintiffs within the
period set by the Velezes, there consequently came about a meeting of the minds of
the parties not only as to the object certain but also as to the definite consideration or
cause of the contract." 7 And even assuming arguendo that the second sale was not
perfected, the trial court ruled that the same still constituted a mere modificatory
novation which did not extinguish the first sale. Hence, the trial court held that "the
Velezes were not free to sell the properties to the Avenue Group." 8 It also found that
the Avenue Group purchased the property in bad faith. 9
Private respondents appealed to the Court of Appeals. As noted earlier, the CA found
the appeal meritorious. Like the trial court, the public respondent held that there was
a perfected contract of sale of the property for P1,050,000.00 between the Velezes
and herein petitioners. It added, however, that such perfected contract of sale was
subsequently novated. Thus, it ruled: "Evidence shows that that was the original
contract. However, the same was mutually withdrawn, cancelled and rescinded by
novation, and was therefore abandoned by the parties when Carmen Velez Ting
raised the consideration of the contract [by] P350,000.00, thus making the price
P1,400,000.00 instead of the original price of P1,050,000.00. Since there was no
agreement as to the 'second' price offered, there was likewise no meeting of minds
between the parties, hence, no contract of sale was perfected." 10 The Court of
Appeals added that, assuming there was agreement as to the price and a second
contract was perfected, the later contract would be unenforceable under the Statute
of Frauds. It further held that such second agreement, if there was one, constituted a

Petitioners allege the following "errors" in the Decision of Respondent Court:

I
Since it ruled in its decision that there was no meeting of the minds on the
"second" price offered (P1,400,000.00), hence no contract of sale was
perfected, the Court of Appeals erred in not holding that the original written
contract to buy and sell for P1,050,000.00 the Velezes property continued to
be valid and enforceable pursuant to Art. 1279 in relation with Art. 1479, first
paragraph, and Art. 1403, subparagraph 2 (e) of the Civil Code.
II
The Court of Appeals erred in not ruling that petitioners have better rights to
buy and own the Velezes' property for registering their notice of lis
pendens ahead of the Avenue Group's registration of their deeds of sale
taking into account Art. 1544, 2nd paragraph, of the Civil Code. 12

The Court's Ruling

The petition is meritorious.
First Issue: No Extinctive Novation
The lynchpin of the assailed Decision is the public respondent's conclusion that the
sale of the real property in controversy, by the Velezes to petitioners for
P1,050,000.00, was extinguished by novation after the said parties negotiated to
increase the price to P1,400,000.00. Since there was no agreement on the sale at the
increased price, then there was no perfected contract to enforce. We disagree.
The Court notes that the petitioners accepted in writing and without qualification the
Velezes' written offer to sell at P1,050,000.00 within the three-day period stipulated
therein. Hence, from the moment of acceptance on July 10, 1985, a contract of sale
was perfected since undisputedly the contractual elements of consent, object certain
and cause concurred. 13 Thus, this question is posed for our resolution: Was there a
novation of this perfected contract?
Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same
causes as all other obligations, . . . ." Article 1231 of the same Code states that
novation is one of the ways to wipe out an obligation. Extinctive novation requires: (1)

the existence of a previous valid obligation; (2) the agreement of all the parties to the
new contract; (3) the extinguishment of the old obligation or contract; and (4) the
validity of the new one. 14 The foregoing clearly show that novation is effected only
when a new contract has extinguished an earlier contract between the same parties.
In this light, novation is never presumed; it must be proven as a fact either by express
stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts. 15 After a thorough
review of the records, we find this element lacking in the case at bar.
As aptly found by the Court of Appeals, the petitioners and the Velezes did not reach
an agreement on the new price of P1,400,000.00 demanded by the latter. In this
case, the petitioners and the Velezes clearly did not perfect a new contract because
the essential requisite of consent was absent, the parties having failed to agree on
the terms of the payment. True, petitioners made a qualified acceptance of this offer
by proposing that the payment of this higher sale price be made by installment, with
P1,000,000.00 as down payment and the balance of P400,000.00 payable thirty days
thereafter. Under Article 1319 of the Civil Code, 16 such qualified acceptance
constitutes a counter-offer and has the ineludible effect of rejecting the Velezes'
offer. 17 Indeed, petitioners' counter-offer was not accepted by the Velezes. It is wellsettled that "(a)n offer must be clear and definite, while an acceptance must be
unconditional and unbounded, in order that their concurrence can give rise to a
perfected contract." 18 In line with this basic postulate of contract law, "a definite
agreement on the manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale." 19 Since the parties failed to
enter into a new contract that could have extinguished their previously perfected
contract of sale, there can be no novation of the latter. Consequently, the first sale of
the property in controversy, by the Velezes to petitioners for P1,050,000.00, remained
valid and existing.
In view of the validity and subsistence of their original contract of sale as previously
discussed, it is unnecessary to discuss public respondent's theses that the second
agreement is unenforceable under the Statute of Frauds and that the agreement
constitutes a mere promise to sell.
Second Issue: Double Sale of an Immovable
The foregoing holding would have been simple and straightforward. But Respondent
Velezes complicated the matter by selling the same property to the other private
respondents who were referred to in the assailed Decision as the Avenue Group.
Before us therefore is a classic case of a double sale first, to the petitioner;
second, to the Avenue Group. Thus, the Court is now called upon to determine which
of the two groups of buyers has a better right to said property.
Article 1544 of the Civil Code provides the statutory solution:
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.
Under the foregoing, the prior registration of the disputed property by the second
buyer does not by itself confer ownership or a better right over the property. Article
1544 requires that such registration must be coupled with good faith. Jurisprudence
teaches us that "(t)he governing principle is primus tempore, potior jure (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale cannot
defeat the first buyer's rights except where the second buyer registers in good
faith the second sale ahead of the first, as provided by the Civil Code. Such
knowledge of the first buyer does not bar her from availing of her rights under the law,
among them, to register first her purchase as against the second buyer. But in
converso, knowledge gained by the second buyer of the first sale defeats his rights
even if he is first to register the second sale, since such knowledge taints his prior
registration with bad faith. This is the price exacted by Article 1544 of the Civil Code
for the second buyer being able to displace the first buyer; that before the second
buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e, in ignorance of the first sale and of the first buyer's rights) from the
time of acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession." 20 (Emphasis supplied)
After a thorough scrutiny of the records of the instant case, the Court finds that bad
faith tainted the Avenue Group's purchase on July 13, 1985 of the Velezes' real
property subject of this case, and the subsequent registration thereof on August 1,
1995. The Avenue Group had actual knowledge of the Velezes' prior sale of the same
property to the petitioners, a fact antithetical to good faith. For a second buyer like the
Avenue Group to successfully invoke the second paragraph, Article 1544 of the Civil
Code, it must possess good faith from the time of the sale in its favor until the
registration of the same. This requirement of good faith the Avenue Group sorely
failed to meet. That it had knowledge of the prior sale, a fact undisputed by the Court
of Appeals, is explained by the trial court thus:
The Avenue Group, whose store is close to the properties in question, had
known the plaintiffs to be the lessee-occupants thereof for quite a time. Felix
Ting admitted to have a talk with Ong Seng in 1983 or 1984 about the
properties. In the cross-examination, Manuel Ting also admitted that about a
month after Ester Borromeo allegedly offered the sale of the properties Felix
Ting went to see Ong Seng again. If these were so, it can be safely assumed
that Ong Seng had consequently told Felix about plaintiffs' offer on January
11, 1985 to buy the properties for P1,000,000.00 and of their timely
acceptance on July 10, 1985 to buy the same at P1,050,000.00.
The two aforesaid admissions by the Tings, considered together with Uraca's
positive assertion that Felix Ting met with her on July 11th and who was told
by her that the plaintiffs had transmitted already to the Velezes their decision
to buy the properties at P1,050,000.00, clinches the proof that the Avenue
Group had prior knowledge of plaintiffs' interest. Hence, the Avenue Group
defendants, earlier forewarned of the plaintiffs' prior contract with the

Velezes, were guilty of bad faith when they proceeded to buy the properties
to the prejudice of the plaintiffs. 21
The testimony of Petitioner Emilia Uraca supports this finding of the trial court. The
salient portions of her testimony follow:
BY ATTY. BORROMEO: (To witness)
Q According to Manuel Ting in his testimony, even if they know, referring to
the Avenue Group, that you were tenants of the property in question and
they were neighbors to you, he did not inquire from you whether you were
interested in buying the property, what can you say about that?
A It was Felix Ting who approached me and asked whether I will buy the
property, both the house and the land and that was on July 10, 1985.
ATTY BORROMEO: (To witness)
Q What was your reply, if any?
A Yes, sir, I said we are going to buy this property because we have stayed
for a long time there already and we have a letter from Carmen Ting asking
us whether we are going to buy the property and we have already given our
answer that we are willing to buy.
COURT: (To witness)
Q What do you mean by that, you mean you told Felix Ting and you showed
him that letter of Carmen Ting?
WITNESS:
A We have a letter of Carmen Ting where she offered to us for sale the
house and lot and I told him that I have already agreed with Concordia
Ching, Ong Seng and my self that we buy the land. We want to buy the land
and the building. 22
We see no reason to disturb the factual finding of the trial court that the Avenue
Group, prior to the registration of the property in the Registry of Property, already
knew of the first sale to petitioners. It is hornbook doctrine that "findings of facts of the
trial court, particularly when affirmed by the Court of Appeals, are binding upon this
Court"23 save
for
exceptional
circumstances 24 which we do not find in the factual milieu of the present case. True,
this doctrine does not apply where there is a variance in the factual findings of the trial
court and the Court of Appeals. In the present case, the Court of Appeals did not
explicitly sustain this particular holding of the trial court, but neither did it controvert
the same. Therefore, because the registration by the Avenue Group was in bad faith,

it amounted to no "inscription" at all. Hence, the third and not the second paragraph of
Article 1544 should be applied to this case. Under this provision, petitioners are
entitled to the ownership of the property because they were first in actual possession,
having been the property's lessees and possessors for decades prior to the sale.
Having already ruled that petitioners' actual knowledge of the first sale tainted their
registration, we find no more reason to pass upon the issue of whether the annotation
of lis pendens automatically negated good faith in such registration.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of
Appeals is hereby SET ASIDE and the dispositive portion of the trial court's decision
dated October 19, 1990 is REVIVED with the following MODIFICATION the
consideration to be paid under par. 2 of the disposition is P1,050,000.00 and not
P1,400,000.00. No Costs.
SO ORDERED.

On July 31, 1985, petitioners filed the instant complaint against the Velezes. On
August 1, 1985, they also registered a notice of lis pendens over the property in
question with the Office of the Register of Deeds.
On October 30, 1985, the Avenue Group filed an ejectment case against petitioners
ordering the latter to vacate the commercial building standing on the lot in question.
Petitioners filed an amended complaint impleading the Avenue Group as new
defendants after about 4 years after the filing of the original complaint.
RTC found two perfected contracts of sale between the Velezes and the petitioners
involving the real property in question. The first sale was for P1,050,000.00 and the
second was for P1,400,000.00. In respect to the first sale, the trial court held that
"[d]ue to the unqualified acceptance by the plaintiffs within the period set by the
Velezes, there consequently came about a meeting of the minds of the parties not
only as to the object certain but also as to the definite consideration or cause of the
contract. The second sale merely constituted a mere modificatory novation which did
not extinguish the first sale. It also held that the Avenue Group were buyers in bad
faith.
The Court of Appeals held that there was a perfected contract of sale of the property
for P1,050,000.00 between the Velezes and herein petitioners. It added, however,
that such perfected contract of sale was subsequently novated. However, it was
mutually withdrawn, cancelled and rescinded by novation, and was therefore
abandoned by the parties when
Carmen Velez Ting raised the consideration of the contract by P350,000.00, thus
making the price P1.4M instead of the original price of P1,050,000.00. Since there
was no agreement as to the 'second' price offered, there was no meeting of minds
between the parties, hence, no contract of sale was perfected.
URACA, et al. vs CA and VELEZ, JR., et al.
G.R. No. 115158 September 5, 1997
Facts: The Velezes were the owners of the lot and commercial building in question
located at Progreso and M.C. Briones Streets in Cebu City. The petitioners were its
lessees.
On July 8, 1985, the Velezes through Carmen Velez Ting wrote a letter to petitioners
offering to sell the subject property for P1,050,000.00 and to reply within three days.
Petitioners, through counsel, accepted the offer. When Uraca went to Ting, Ting told
her that there was a mistake in the price. It should have been P1.4M, Uraca agreed to
the new price to be payable in installments with a down payment of P1M and the
balance of P400,000 to be paid in 30 days. Carmen Velez Ting did not accept the said
counter-offer of Emilia Uraca although this fact is disputed by Uraca.
No payment was made by to the Velezes on July 12 and 13, 1985. On July 13, 1985,
the Velezes sold property to Avenue Merchandising Inc. for P1,050,000.00. The
certificate of title of the said property was clean and free of any annotation of adverse
claims or lis pendens.

CA added that, even if there was agreement as to the price and a second contract
was perfected, the later contract would be unenforceable under the Statute of Frauds.
It further held that such second agreement, if there was one, constituted a mere
promise to sell which was not binding for lack of acceptance or a separate
consideration.
Issues:
1.) Was there novation of the first contract?
2.) Was there a double sale of the real property involved?
Held:
On Novation
Novation is never presumed; it must be sufficiently established that a valid new
agreement or obligation has extinguished or changed an existing one. The
registration of a later sale must be done in good faith to entitle the registrant to priority
in ownership over the vendee in an earlier sale.
Article 1600 of the Civil Code provides that "(s)ales are extinguished by the same
causes as all other obligations, . . . ." Article 1231 of the same Code states that
novation is one of the ways to wipe out an obligation. Extinctive novation requires: (1)

the existence of a previous valid obligation; (2) the agreement of all the parties to the
new contract; (3) the extinguishment of the old obligation or contract; and (4) the
validity of the new one.
Novation is effected only when a new contract has extinguished an earlier contract
between the same parties. It must be proven as a fact either implication derived from
an irreconcilable incompatibility between old and new obligations or contracts.
The petitioners and the Velezes clearly did not perfect a new contract because the
essential requisite of consent was absent, the parties having failed to agree on the
terms of the payment. Since the parties failed to enter into a new contract that could
have extinguished their previously perfected contract of sale, there can be no
novation of the latter. Consequently, the first sale of the property in controversy, by the
Velezes to petitioners for P1,050,000.00, remained valid and existing.
On Double Sale
Prior registration of the disputed property by the second buyer does not by itself
confer ownership or a better right over the property.
Article 1544 requires that such registration must be coupled with good faith.
Knowledge gained by the first buyer of the second sale cannot defeat the first buyer's
rights except where the second buyer registers in good faith the second sale ahead of
the first, as provided by the Civil Code.
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 (Art. 1544).
The Avenue Group was a buyer and registrants in bad faith. They had actual
knowledge of the Velezes' prior sale of the same property to the petitioners.
Hence, the third and not the second paragraph of Article 1544 should be applied to
this case. Under this provision, petitioners are entitled to the ownership of the
property because they were first in actual possession, having been the property's
lessees and possessors for decades prior to the sale.
(The petition is GRANTED. The assailed Decision of the Court of Appeals is hereby
SET ASIDE and the dispositive portion of the trial court's decision dated October 19,
1990 is REVIVED with the following MODIFICATION the consideration to be paid
under par. 2 of the disposition is P1,050,000.00 and not P1,400,000.00.)

On the other hand, private respondents are the owners of an iceplant and cold
storage located at 1879 E. Rodriguez Sr. Avenue, Quezon City doing business under
the name "Espaa Extension Iceplant and Cold Storage."
In July 1972, two letter-quotations were submitted by Delta to Hector Genuino offering
to sell black iron pipes. T
The letter dated July 3, 1972 quoted Delta's selling price for 1,200 length of black iron
pipes schedule 40, 2" x 20' including delivery at P66,000.00 with the following terms
of payment:
a. 20% of the net contract price or P13,200.00 will be due and payable upon
signing of the contract papers.
b. 20% of the net contract price or P13,200.00 will be due and payable
before commencement of delivery.
c. The balance of 60% of the net contract price or P39,600.00 with 8%
financing charge per annum will be covered by a Promissory Note bearing
interest at the rate of 14% per annum and payable in TWELVE (12) equal
monthly installment (sic), the first of which will become due thirty (30) days
after the completion of delivery. Additional 14% will be charged for all
delayed payments. [Exh. "A"; Exh. 1.]
The second letter-quotation dated July 18, 1972 provides for the selling price
of 150 lengths of black iron pipes schedule 40, 1 1/4" x 20' including delivery
at P5,400.00 with the following terms of payment:
a. 50% of the net contract price or P 2,700.00 will be due and payable upon
signing of the contract papers.
(5) G.R. No. L-55665 February 8, 1989
DELTA MOTOR CORPORATION, petitioner,
vs.
EDUARDA SAMSON GENUINO, JACINTO S. GENUINO, Jr., VICTOR S.
GENUINO, HECTOR S. GENUINO, EVELYN S. GENUINO, and The COURT OF
APPEALS, respondents.

b. 50% of the net contract price or P 2,700.00 will be due and payable before
commencement of delivery. [Exh. "C"; Exh. "2".]
Both letter-quotations also contain the following stipulations as to delivery and price
offer:
DELIVERY

Petitioner, through this petition for review by certiorari, appeals from the decision of
respondent appellate court in CA-G.R. No. 59848-R entitled "Eduarda Samson
Genuino, et al. v. Delta Motor Corporation" promulgated on October 27, 1980.

Ex-stock subject to prior sales.

The facts are as follows:

Our price offer indicated herein shall remain firm within a period of thirty (30)
days from the date hereof. Any order placed after said period will be subject
to our review and confirmation. [Exh. "A" and "C"; Exhs. "l" and "2".]

Petitioner Delta Motor Corporation (hereinafter referred to as Delta) is a corporation

duly organized and existing under Philippine laws.

xxx xxx xxx

Hector Genuino was agreeable to the offers of Delta hence, he manifested his
conformity thereto by signing his name in the space provided on July 17, 1972 and
July 24, 1972 for the first and second letter-quotations, respectively.
It is undisputed that private respondents made initial payments on both contracts
for the first contract, P13,200.00 and, for the second, P2,700.00 for a total sum of
P15,900.00 on July 28, 1972 (Exhs. "B" and "D"].
Likewise unquestionable are the following. the non-delivery of the iron pipes by Delta;
the non-payment of the subsequent installments by the Genuinos; and the nonexecution by the Genuinos of the promissory note called for by the first contract.
The evidence presented in the trial court also showed that sometime in July 1972
Delta offered to deliver the iron pipes but the Genuinos did not accept the offer
because the construction of the ice plant building where the pipes were to be installed
was not yet finished.
Almost three years later, on April 15, 1975, Hector Genuino, in behalf of Espaa
Extension Ice Plant and Cold Storage, asked Delta to deliver the iron pipes within
thirty (30) days from its receipt of the request. At the same time private respondents
manifested their preparedness to pay the second installment on both contracts upon
notice of Delta's readiness to deliver.
Delta countered that the black iron pipes cannot be delivered on the prices quoted as
of July 1972. The company called the attention of the Genuinos to the stipulation in
their two (2) contracts that the quoted prices were good only within thirty (30) days
from date of offer. Whereupon Delta sent new price quotations to the Genuinos based
on its current price of black iron pipes, as follows:
P241,800.00 for 1,200 lengths of black iron pjpes schedule 40, 2" x 20' [Exh.
"G-1".]
P17,550.00 for 150 lengths of black iron pipes schedule 40, 1 1/4" x 20'
[Exh. "G-2".]
The Genuinos rejected the new quoted prices and instead filed a complaint for
specific performance with damages seeking to compel Delta to deliver the pipes.
Delta, in its answer prayed for rescission of the contracts pursuant to Art. 1191 of the
New Civil Code. The case was docketed as Civil Case No. Q-20120 of the then Court
of First Instance of Rizal, Branch XVIII, Quezon City.
After trial the Court of First Instance ruled in favor of Delta,the dispositive portion of its
decision reading as follows:
WHEREFORE, premises considered, judgment is rendered:
1. Declaring the contracts, Annexes "A" and "C" of the complaint rescinded;

2. Ordering defendant to refund to plaintiffs the sum of P15,900.00 delivered

by the latter as downpayments on the aforesaid contracts;
3. Ordering plaintiffs to pay defendant the sum of P10,000.00 as attorney's
fees; and,
4. To pay the costs of suit. [CFI Decision, pp. 13-14; Rollo, pp. 53-54.]
On appeal, the Court of Appeals reversed and ordered private respondents to make
the payments specified in "Terms of Payment (b)" of the contracts and to execute
the promissory note required in the first contract and thereafter, Delta should
immediately commence delivery of the black iron pipes.* [CA Decision, p. 20; Rollo, p.
75.]
The Court of Appeals cited two main reasons why it reversed the trial court, namely:
1. As Delta was the one who prepared the contracts and admittedly, it had
knowledge of the fact that the black iron pipes would be used by the
Genuinos in their cold storage plant which was then undergoing
construction and therefore, would require sometime before the Genuinos
would require delivery, Delta should have included in said contracts a
deadline for delivery but it did not. As a matter of fact neither did it insist on
delivery when the Genuinos refused to accept its offer of delivery. [CA
Decision, pp. 16-17; Rollo, pp. 71-72.]
2. Delta's refusal to make delivery in 1975 unless the Genuinos pay a price
very much higher than the prices it previously quoted would mean an
amendment of the contracts. It would be too unfair for the plaintiffs if they
will be made to bear the increase in prices of the black iron pipes when
they had already paid quite an amount for said items and defendant had
made use of the advance payments. That would be unjust enrichment on
the part of the defendant at the expense of the plaintiffs and is considered
an abominable business practice. [CA Decision, pp. 18-19; Rollo, pp. 7374.]
Respondent court denied Delta's motion for reconsideration hence this
petition for review praying for the reversal of the Court of Appeals decision
and affirmance of that of the trial court.
Petitioner argues that its obligation to deliver the goods under both
contracts is subject to conditions required of private respondents as
vendees. These conditions are: payment of 20% of the net contract price or
P13,200.00 and execution of a promissory note called for by the first
contract; and payment of 50% of the net contract price or P2,700.00 under
the second contract. These, Delta posits, are suspensive conditions and
only upon their performance or compliance would its obligation to deliver
the pipes arise [Petition, pp. 9-12; Rollo, pp. 1720.] Thus, when private
respondents did not perform their obligations; when they refused to accept
petitioner's offer to deliver the goods; and, when it took them three (3) long

years before they demanded delivery of the iron pipes that in the meantime,
great and sudden fluctuation in market prices have occurred; Delta is
entitled to rescind the two (2) contracts.

said that Mr. Evangelista reported (sic) to you that plaintiff would not accept
delivery, is that correct, as a summary of your statement?
A A Yes, sir.

Delta relies on the following provision of law on rescission:

Q Now, what did you do in the premises (sic)?
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 a period.
This is understood to be without prejudice to the rights of third persons who
have acquired the thing, in accordance with articles 1385 and 1388 and the
Mortgage Law.
In construing Art. 1191, the Supreme Court has stated that, "[r]escission will be
ordered only where the breach complained of is substantial as to defeat the object of
the parties in entering into the agreement. It will not be granted where the breach is
slight or casual." [Phil. Amusement Enterprises, Inc. v. Natividad, G.R. No. L-21876,
September 29, 1967, 21 SCRA 284, 290.] Further, "[t]he question of whether a breach
of a contract is substantial depends upon the attendant circumstances." [Universal
Food Corporation v. Court of Appeals, G. R. No. L-29155, May 13,1970,33 SCRA 1,
18].
In the case at bar, the conduct of Delta indicates that the Genuinos' non-performance
of its obligations was not a substantial breach, let alone a breach of contract, as
would warrant rescission.
Firstly, it is undisputed that a month after the execution of the two (2) contracts,
Delta's offer to deliver the black iron pipes was rejected by the Genuinos who were
"not ready to accept delivery because the cold storage rooms have not been
constructed yet. Plaintiffs (private respondents herein) were short-funded, and did not
have the space to accommodate the pipes they ordered" [CFI Decision, p. 9; Rollo, p.
49].
Given this answer to its offer, Delta did not do anything. As testified by Crispin
Villanueva, manager of the Technical Service department of petitioner:
Q You stated that you sent a certain Evangelista to the Espaa Extension and
Cold Storage to offer the delivery subject matter of the contract and then you

A Yes, well, we take the word of Mr. Evangelista. We could not deliver the
said black iron pipes, because as per information the Ice Plant is not yet
finished.
Q Did you not report that fact to ... any other defendant-officials of the Delta
Motor Corporation?
A No.
Q And you did not do anything after that?
A Because taking the word of my Engineer we did not do anything. [TSN,
December 8, 1975, pp. 18-19.]
xxx xxx xxx
And secondly, three (3) years later when the Genuinos offered to make
payment Delta did not raise any argument but merely demanded that the
quoted prices be increased. Thus, in its answer to private respondents'
request for delivery of the pipes, Delta countered:
Thank you for your letter dated April 15, 1975, requesting for delivery of Black
Iron pipes;.
We regret to say, however, that we cannot base our price on our proposals
dated July 3 and July 18, 1972 as per the following paragraph quoted on said
proposal:
Our price offer indicated herein shall remain firm within a period of thirty (30)
days from the date hereof. Any order placed after said period will be subject
to our review and confirmation.
We are, therefore, enclosing our re-quoted proposal based on our current
price. [Exh. "G".]
Moreover, the power to rescind under Art. 1191 is not absolute. "[T]he act of a party in
treating a contract as cancelled or resolved on account of infractions by the other
contracting party must be made known to the otherand is always provisional, being
ever subject to scrutiny and review by the proper court." [University of the Phils. v. De

los Angeles, G. R. No. L-28602, September 29, 1970, 35 SCRA 102, 107; Emphasis
supplied.]
In the instant case, Delta made no manifestation whatsoever that it had opted to
rescind its contracts with f-he Genuinos. It only raised rescission as a defense when it
was sued for specific performance by private respondents.
Further, it would be highly inequitable for petitioner Delta to rescind the two (2)
contracts considering the fact that not only does it have in its possession and
ownership the black iron pipes, but also the P15,900.00 down payments private
respondents have paid. And if petitioner Delta claims the right to rescission, at the
very least, it should have offered to return the P15,900.00 down payments [See Art.
1385, Civil Code and Hodges v. Granada, 59 Phil. 429 (1934)].
It is for these same reasons that while there is merit in Delta's claim that the sale is
subject to suspensive conditions, the Court finds that it has, nevertheless, waived
performance of these conditions and opted to go on with the contracts although at a
much higher price. Art. 1545 of the Civil Code provides:

Neither could petitioner Delta rely on the fluctuation in the market price of goods to
support its claim for rescission. As testified to by petitioner's Vice-President of
Marketing for the Electronics, Airconditioning and Refrigeration division, Marcelino
Caja, the stipulation in the two (2) contracts as to delivery, ex-stock subject to prior
sales,means that "the goods have not been delivered and that there are no
prior commitments other than the sale covered by the contracts.. . once the offer is
accepted, the company has no more option to change the price." [CFI Decision, p. 5;
Rollo, p. 45; Emphasis supplied.] Thus, petitioner cannot claim for higher prices for
the black iron pipes due to the increase in the cost of goods. Based on the foregoing,
petitioner Delta and private respondents Genuinos should comply with the original
terms of their contracts.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.

Art. 1545. Where the obligation of either party to a contract of sale is subject to
any condition which is not performed, such party may refuse to proceed with
the contract or he may waived performance of the condition. . . . [Emphasis
supplied.]
Finally, Delta cannot ask for increased prices based on the price offer stipulation in
the contracts and in the increase in the cost of goods. Reliance by Delta on the price
offer stipulation is misplaced. Said stipulation makes reference to Delta's price offer
as remaining firm for thirty (30) days and thereafter, will be subject to its review and
confirmation. The offers of Delta, however, were accepted by the private respondents
within the thirty (30)-day period. And as stipulated in the two (2) letter-quotations,
acceptance of the offer gives rise to a contract between the parties:
In the event that this proposal is acceptable to you, please indicate your
conformity by signing the space provided herein below which also serves as a
contract of this proposal. [Exhs. "A" and "C"; Exhs. "1" and "2".]
And as further provided by the Civil Code:
Art. 1319. Consent is manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the contract.
Art. 1475. The contract of sale is perfected at the moment there is a meeting
of minds upon thing which is the object of the contract and upon the price.
Thus, the moment private respondents accepted the offer of Delta, the contract of
sale between them was perfected and neither party could change the terms thereof.

Delta Motors vs. Genuino

G.R. No. 55665, February 8, 1989
Facts:
Private Respondents are owners of an iceplant and cold storage who ordered black
iron pipes to Delta Motors (herein petitioner) for which the latter provided two letter
quotations indicating the selling price and delivery of said pipes. The terms of
payment are also included in the letter quotations which must be complied with by the
respondents. Private respondents made initial payments on both contracts but
delivery of the pipes was not made by Delta Motors so that the Genuinos are not

willing to give subsequent payments notwithstanding the agreed terms of payment

requiring them of such. In July 1972 Delta offered to deliver the iron pipes but the
Genuinos did not accept the offer because the construction of the ice plant building
where the pipes were to be installed was not yet finished. Three years later, on April
15, 1975, Hector Genuino, in behalf of Espaa Extension Ice Plant and Cold Storage,
asked Delta to deliver the iron pipes within thirty (30) days from its receipt of the
request. But petitioner Delta is unwilling to deliver said iron pipes unless the Genuinos
agree to a new quotation price set by the former.
Private Respondents rejected the new quoted prices and instead filed a complaint for
specific performance with damages seeking to compel Delta to deliver the pipes.
Meanwhile, Delta, in its answer prayed for rescission of the contracts pursuant to Art.
1191 of the New Civil Code.
Issue: Whether or not Delta is entitled for rescission of contract as the latter is subject
to suspensive conditions and only upon their performance or compliance would its
obligation to deliver the pipes arise?
Held: No. While there is merit in Delta's claim that the sale is subject to suspensive
conditions, the Court finds that it has, nevertheless, waived performance of these
conditions and opted to go on with the contracts although at a much higher price. Art.
1545 of the Civil Code provides:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any
condition which is not performed, such party may refuse to proceed with the contract
or he may waived performance of the condition. . . it would be highly inequitable for
petitioner Delta to rescind the two (2) contracts considering the fact that not only does
it have in its possession and ownership the black iron pipes, but also the down
payments private respondents have paid. Delta cannot ask for increased prices
based on the price offer stipulation in the contracts and in the increase in the cost of
goods. Reliance by Delta on the price offer stipulation is misplaced. The moment
private respondents accepted the offer of Delta, the contract of sale between them
was perfected and neither party could change the terms thereof. Neither could
petitioner Delta rely on the fluctuation in the market price of goods to support its claim
for rescission.

Delta Motors V Genuino

GR No 5565 Feb 8 1989
Facts: In July 1972, two letters were sent by Delta to Genuino offering to sell black
iron pipes. The first letter quoted 1,200 length of black iron pipes schedule 40, 2"x20'
including delivery at 66000php with certain terms of payment. The second letter
quoted 150 lengths of black iron pipes schedule 40 1 1/4" x 20' including delivery at
5,400 also with terms of payment. Both letter quotations contain the following
stipulation, "Our price offer indicated therein shall remain firm within a period of 30
days from the date thereof.
Any order placed after said period will be subject to our review and confirmation."
Hector agreed and signed both letter quotations. He made initial payments on both
contracts - 13,200 and 2,700 respectively. Delta did not deliver the iron pipes.
Genuino did not make subsequent payments and the non-execution of promissory
note as conditioned on the 1st contract. Sometime in July 1972, Delta offered to
deliver but was not accepted by Genuino since construction on his ice plant building
was not yet finished. Almost 3 years later, Genuino asked from Delta the delivery of
the pipes and manifested his preparedness to pay. Delta countered that it cannot
anymore deliver on the original quoted price because of the 30day limit proviso.
Genuino fileda complaint for a specific performance with damages seeking to compel
Delta to deliver while Delta asked for a rescission of contract. RTC ruled in favor of
Delta. CA reversed the ruling. CA reasons 1) Delta should have included a deadline of
delivery having knowldege of the fact that the iceplant was only being constructed, 2)
the black iron pipes had already been paid and Delta had made use of the payments.
(unjust enrichment)
Issue: WON delta can ask for increased prices based on the price offer stipulation in
the contracts.
Held: No, Delta cannot change the price of an accepted offer. Reliance by Delta on
the price offer stipulation is misplaced. Said stipulation makes referene to Delta's
price offer as remaining firm for 30 days and thereafter will be subject to its review
and confirmation. The offers of Delta, however were accepted by the private
respondents within the 30day period. And as stipulated in the two letter quotations,
acceptance of the offer gives rise to a contract betweenn the parties. Art 1475, the
contract of sale is perfected at the moment there is meeting of minds upon thing
which is the object of the contract and upon the price. Thus, the moment Genuino
accepted the offer of Delta, the contract of sale between them was perfected and
neither party could change the terms thereof.