13. SUBIC BAY LEGEND RESORTS AND CASINOS, INC. VS. BERNARD C.

FERNANDEZ (Presumption
of ownership, Casino chips as mode of payment, valid)

FACTS: Petitioner operates a casino (Legenda) where the brothers of the Respondent. Ludwin and Deoven Fernandez were
held in custody by the Legenda’s internal security officers for anomalous transactions i.e. Ludwin changed $5,000 worth of
chips into smaller denominations and after winning $200, he redeemed the value of chips worth $7,200. The ultimatum was
simple: they confess that the chips were given by a certain employee, Michael Cabrera, or they would not be released from
questioning. Finally, the brothers succumbed to Legenda's instruction to execute a joint statement implicating Cabrera as
the illegal source of the chips. Due to hunger pangs and fatigue, they did not disown the statement even when they subscribed
the same before the prosecutor in whose office they were brought. Respondent filed for recovery of sum of money with
damages against petitioner, on the premise that he went to Legenda with his brothers Ludwin and Deoven; that he handed
over Legenda casino chips worth US$6,000.00, which belonged to him, to his brothers for the latter to use at the casino;
that petitioner accosted his brothers and unduly and illegally confiscated his casino chips equivalent to US$5,900.00.
Respondent contended that the chips are from his Chinese client. RTC ruled in favor of the Respondent, affirmed by CA
applying Article 559 of the Civil Code, respondent had the legal presumption of title to or ownership of the casino chips.

ISSUE: WON, The presumption of ownership applies

HELD: Yes. If it cannot be proved, in the first place, that Cabrera stole these chips, then there is no more reason to suppose
that Ludwin and Deoven were dealing in or possessed stolen goods. Though casino chips do not constitute legal tender,
there is no law which prohibits their use or trade outside of the casino which issues them. In any case, it is not unusual —
nor is it unlikely — that respondent could be paid by his Chinese client at the former's car shop with the casino chips in
question; said transaction, if not common, is nonetheless notunlawful. These chips are paid for anyway; petitioner would
not have parted with the same if their corresponding representative equivalent — in legal tender, goodwill, or otherwise —
was not received by it in return or exchange. Given this premise — that casino chips are considered to have been exchanged
with their corresponding representative value — it is with more reason that this Court should require petitioner to prove
convincingly and persuasively that the chips it confiscated from Ludwin and Deoven were indeed stolen from it; if so, any
Tom, Dick or Harry in possession of genuine casino chips is presumed to have paid for their representative value in exchange
therefor. If petitioner cannot prove its loss, then Article 559 cannot apply; the presumption that the chips were exchanged
for value remains.

14. PCI BANK VS. FRANCO (Proof of payment)

FACTS: Franco secured from defendant PCIB the following Trust Indenture Certificates that despite demands, defendants
refused and still refuses to return to plaintiff the trust amounts, plus the stipulated interest. After his funds were exhausted
due to the treatment of his child’s Leukemia, Franco then turned to his Trust Indenture Certificates. To plaintiff's surprise,
he received a letter signed by defendant's counsel denying plaintiff's request for payment by stating that due to the conversion
of all outstanding PCIBank trust indenture accounts into common trust certificates, all such PCIBank trust indenture
certificates have been rendered "null and void”. Franco then filed a complaint before the RTC. In their Answer, defendants
admit the issuance by defendant PCIB of the Trust Indenture Certificates subject matter of the complaint but deny the
allegation that the investments subject of the Trust Indenture Certificates are automatically rolled-over as such certificates
have their own fixed term and maturity date, and that the present action had already prescribed. RTC ruled in favor of
Franco, affirmed by the CA. Hence, the Petition.

ISSUE: WON, Franco is deemed to have been paid

HELD: No. A quick point, however, on the issue of alleged payment by petitioner Bank on the subject trust certificate
indentures. Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it. Even where
the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove payment, rather
than on the plaintiff to prove nonpayment. When the creditor is in possession of the document of credit, he need not prove
non-payment for it is presumed. The creditor's possession of the evidence of debt is proof that the debt has not been
discharged by payment. The TICs in the hands of respondent is a proof of indebtedness and a prima facie evidence that they
have not been paid. Petitioner Bank could have easily presented documentary evidence to dispute the claim, but it did not.
In its omission, it may be reasonably deduced that no evidence to that effect really exist. Worse, the testimonies of petitioner
Bank's own witnesses, reinforce, rather than belie, respondent's allegations of non-payment.
 15. PNB VS. DEE (Principal Contract prevails over Accessory Contract)

FACTS: Respondent Dee bought from respondent Prime East Properties Inc. (PEPI) on an installment basis a residential
lot. Subsequently, PEPI assigned its rights over a 213,093–sq. m. property on to respondent Armed Forces of the
Philippines–Retirement and Separation Benefits System, Inc. (AFP–RSBS), which included the property purchased by Dee.
Thereafter, or on September 10, 1996, PEPI obtained a P205,000,000.00 loan from petitioner Philippine National Bank,
secured by a mortgage over several properties, including Dee’s property. The mortgage was cleared by the Housing and
Land Use Regulatory Board (HLURB). After Dee’s full payment of the purchase price, a deed of sale was executed by
respondents PEPI and AFP–RSBS on July 1998 in Dee’s favor. Consequently, Dee sought from the petitioner the delivery
of the owner’s duplicate title over the property, to no avail. Thus, she filed with the HLURB a complaint for specific
performance to compel delivery of TCT No. 619608 by the petitioner, PEPI and AFP–RSBS, among others. HLURB ruled
in favor of Dee, affirmed by CA. On appeal, Petitioner argued that the mortgage on the said property should not be released
as the PEPI is not yet paid of its loan.

ISSUE: WON, PNB should deliver the title of the property to Dee

HELD: It must be stressed that the mortgage contract between PEPI and the petitioner is merely an accessory contract to
the principal three-year loan takeout from the petitioner by PEPI for its expansion project. It need not be belaboured that
"[a] mortgage is an accessory undertaking to secure the fulfillment of a principal obligation," and it does not affect the
ownership of the property as it is nothing more than a lien thereon serving as security for a debt. Note that at the time
PEPI mortgaged the property to the petitioner, the prevailing contract between respondents PEPI and Dee was still
the Contract to Sell, as Dee was yet to fully pay the purchase price of the property. Nevertheless, despite the apparent
validity of the mortgage between the petitioner and PEPI, the former is still bound to respect the transactions between
respondents PEPI and Dee. The petitioner was well aware that the properties mortgaged by PEPI were also the subject of
existing contracts to sell with other buyers. While it may be that the petitioner is protected by Act No. 3135, as amended, it
cannot claim any superior right as against the installment buyers. This is because the contract between the respondents is
protected by P.D. No. 957, a social justice measure enacted primarily to protect innocent lot buyers

16. Sps. Cacayorin vs. AFPMBAI (Consignation is necessarily judicial)

FACTS: Petitioner filed an application with AFPMBAI to purchase a piece of property which the latter owned. Oscar and
his wife and the Rural Bank of San Teodoro (the Rural Bank) executed a Loan and Mortgage Agreement. Unfortunately,
the PAG-IBIG loan facility did not push through and the Rural Bank closed and was placed under receivership by the
Philippine Deposit Insurance Corporation (PDIC). Meanwhile, AFPMBAI somehow was able to take possession of
petitioners' loan documents. Then, Petitioners filed a Complaint for consignation of loan payment. Petitioners alleged in
their Complaint that because of the Rural Bank's closure and PDIC's claim that their loan papers could not be located, they
were left in a quandary as to where they should tender full payment of the loan. AFPMBAI files a motion to dismiss claiming
that complaint falls under HLURB’s jurisdiction and not RTC because it was filed by the petitioners in their capacity
as buyers. RTC ruled in favor of the Petitioner and that since the title has been transferred and the case involves consignation
of loan payment, RTC has jurisdiction. CA reversed.

ISSUE: WON, the case falls exclusively within the jurisdiction of the HLURB

HELD: No. Because the case is about consignation which is necessarily judicial. Applying Article 1256, the Court finds
that a case for consignation has been made out which do not require tender of payment, as it now appears that there are two
entities which petitioners must deal with in order to fully secure their title to the property: 1) the Rural Bank (through PDIC);
and 2) AFPMBAI, which is currently in possession of the loan documents and the certificate of title, and the one making
demands upon petitioners to pay. Clearly, the allegations in the Complaint present a situation where the creditor is unknown,
or that two or more entities appear to possess the same right to collect from petitioners.
 17. SPOUSES BARREDO VS. SPOUSES LEAÑO (Rescission requires substantial, not causal breach)

FACTS: Spouses Leaño purchased a house and lot from spouses Barredo by way of a Conditional Deed of Sale with
Assumption of Mortgage. Thus, Respondents are obliged to furnish to the Petitioners the purchase price worth P200,000
and to assume the mortgage applied on the said house and lot, payable to SSS and Apex. 2 years later, Petitioners filed a
complaint before RTC seeking to rescind the contract claiming that Respondents after demands, failed to pay the mortgage
amortizations to the SSS and Apex. Respondents answered that they were up-to-date with their amortization payments to
Apex but were not able to pay the SSS amortizations because their payments were refused upon the instructions of the
Barredo Spouses. In order to preserve their good name, credit standing and reputation, Petitioners settled the mortgage
loans. RTC ruled in favor of the Petitioners claiming that the payment of mortgage loan is a substantial condition a breach
of it would warrant rescission of contract. CA reversed the decision claiming that payment of mortgage loan were mere
collateral matters which do not detract from the condition of paying the principal consideration. Hence, the Petition.

ISSUE: WON, the payment of mortgage loan is a substantial condition that a breach of it would warrant rescission

HELD: No. A careful reading of the pertinent provisions of the agreement readily shows that the principal object of the
contract was the sale of the Barredo house and lot. The assumption of the mortgages by the Leaño Spouses over the
mortgaged property and their payment of amortizations are just collateral matters which are natural consequences
of the sale of the said mortgaged property. To include the full payment of the obligations with the SSS and Apex as a
condition would be to unnecessarily stretch and put a new meaning to the provisions of the agreement. But even if we
consider the payment of the mortgage amortizations to the SSS and Apex as a condition on which the sale is based
on, still rescission would not be available since non-compliance with such condition would just be a minor or casual
breach thereof as it does not defeat the very object of the parties in entering into the contract.

18. BPI VS. CA

FACTS: Respondent has a joint savings account with his grandmother Fernandez at the Petitioner Bank. 3 days after
Fernandez died without the knowledge of the US Treasury, she was still sent a US Treasury Warrant amounting to $377 or
P10,566. Respondent deposited such check to their joint savings account. 2 months after, Respondent closed the joint
savings account and transferred its fund to the joint account with his wife. Subsequently, the U.S. Treasury check was
dishonored as it was discovered that Fernandez died three (3) days prior to its issuance. The U.S. Department of Treasury
requested petitioner bank for a refund. After verbally authorizing the Petitioner Bank debit his account, the Petitioner
proceeded with the same. Surprisingly, private respondent demanded from petitioner bank restitution of the debited amount.
He claimed that because of the debit, he failed to withdraw his money when he needed them and that such debit was without
his authority. He then filed a suit for Damages against petitioners before RTC where it was dismissed for lack of cause of
action. Appealed to the CA, the CA ruled in favor of the Respondent. Hence, the Petition.

ISSUE: WON, the Petitioner Bank had the right to debit Respondent’s account.

HELD: Granting arguendo, testimonial evidence show that Respondent gave his authority to debit his account. However,
such authority is not necessary especially in a case of compensation. Compensation shall take place when two persons, in
their own right, are creditors and debtors of each other. Legal compensation operates even against the will of the
interested parties and even without the consent of them. Since this compensation takes place ipso jure, its effects arise
on the very day on which all its requisites concur. When used as a defense, it retroacts to the date when its requisites are
fulfilled. The elements of legal compensation are all present in the case at bar. The obligors bound principally are at the
same time creditors of each other. Petitioner bank stands as a debtor of the private respondent, a depositor. At the
same time, said bank is the creditor of the private respondent with respect to the dishonored U.S. Treasury Warrant
which the latter illegally transferred to his joint account. The debts involved consist of a sum of money. They are
due, liquidated, and demandable. They are notclaimed by a third person.
 19. GO SINCO VS. CA

FACTS: Petitioner Manuel Cinco obtained a loan in the amount 700,000.00 from respondent MTLC. The loan was
evidenced by the promissory note, and secured by a real estate mortgage over the spouses Cinco’s land and 4-storey building.
To pay the loan in favor of MTLC, the spouses Cinco applied for a loan with the Philippine National Bank (PNB), and
offered the same properties they previously mortgage to MTLC. The PNB approved the load application for 1.3 Million;
the release was, however, conditioned on the cancellation of the mortgage in favor of MTLC. Manuel went to Ester
Servacio, MTLC’s President to inform her that there was money with PNB for Payment of his loan. Manuel executed a
Special Power of Attorney (SPA) authorizing Ester to collect the proceeds of the loan. The bank officer confirmed the
existence of such loan, but they required Ester to first sign a deed of release/cancellation of the mortgage before they could
release the proceeds of the loan to her. Outraged, Ester refused the deed and did not collect the 1.3 Million. Ester instituted
foreclosure proceeding. To prevent the foreclosure, the spouses Cinco filed an action for specific performance, damages,
and preliminary injunction.

ISSUE: Whether the loan due the MTLC had been extinguished by the act of the spouses Cinco amounted to payment.

HELD: No, While Ester’s refusal was unjustified and unreasonable, the court did not agree with Manuel’s position that this
refusal had the effect of payment that extinguished his obligation to MTLC. Article 1256 is clear that “If the creditor to
whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from
responsibility by the consignation of the thing or sum due.”

In short, a refusal without just cause is not equivalent to payment; to have the effect of payment and the consequent
extinguishment of the obligation to pay, the law requires the companion acts of tender of payment and consignation.

Nonetheless, the SPA stood as an authority to collect the proceeds of the already-approved PNB loan that, upon receipt by
Ester, would have constituted as payment of the MTLC loan. The Court agrees with Manuel that Ester’s refusal of the
payment was without basis. Under these circumstances, the Court holds that while no completed tender of payment and
consignation took place sufficient to constitute payment, the spouses Go Cinco duly established that they have legitimately
secured a means of paying off their loan with MTLC; they were only prevented from doing so by the unjust refusal of Ester
to accept the proceeds of the PNB loan through her refusal to execute the release of the mortgage on the properties mortgaged
to MTLC.

The spouses Go Cinco have undertaken, at the very least, the equivalent of a tender of payment that cannot but have legal
effect. Since payment was available and was unjustifiably refused, justice and equity demand that the spouses Go Cinco be
freed from the obligation to pay interest on the outstanding amount from the time the unjust refusal took place, they would
not have been liable for any interest from the time tender of payment was made if the payment had only been accepted.

20. DALTON VS. FGR REALTY

FACTS: Flora Dayrit owned a parcel of land in Cebu City. Petitioner Soledad Dalton and Sasam et. al., on the other hand,
leased portions of the said property. In 1985, Dayrit sold the property to respondent FGR Realty and Development
Corporation. Consequently, Dayrit and FGR stopped accepting rental payments because they wanted to terminate the lease
agreements with Dalton and Sasam, et al. Dalton and Sasam, et al. then consigned the rental payments with the RTC,
however, they failed to notify Dayrit and FGR about the consignation. In motions, Dayrit and FGR questioned the validity
of the consignation. RTC ruled in favor or Dayrit and FGR and ordered Dalton to vacate the property because it fail to
comply with the requisites of a valid consignation. CA affirmed the RTCs Decision, hence this appeal.

ISSUE: Whether the consignation made by the petitioner is valid or not for lack of notice

HELD: The petition is unmeritorious. Compliance with the requisites of a valid consignation is mandatory. Failure to
comply strictly with any of the requisites will render the consignation void. Substantial compliance is not enough. The
requisites of a valid consignation are: a debt due; the creditor to whom tender of payment was made refused without
just cause to accept the payment, or the creditor was absent, unknown or incapacitated, or several persons claimed
the same right to collect, or the title of the obligation was lost; the person interested in the performance of the
obligation was given notice before consignation was made; the amount was placed at the disposal of the court; and
the person interested in the performance of the obligation was given notice after the consignation was made. No error,
therefore, can be attributed to the lower court when it held that the consignation made by the plaintiff-appellant was invalid
for failure to meet requisites 3 and 5 of a valid consignation (i.e., previous notice of the consignation given to the person
interested in the performance of the obligation and, after the consignation had been made, the person interested was notified
thereof). The giving of notice to the persons interested in the performance of the obligation is mandatory. Failure to notify
the persons interested in the performance of the obligation will render the consignation void.

21. LANDBANK VS. ONG

FACTS: On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the
amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks, and a warehouse. The
Spouses Sy could no longer pay their loan which resulted to the sale of three (3) of their mortgaged parcels of land for PhP
150,000 to Angelina Gloria Ong, Evangeline’s mother, under a Deed of Sale with Assumption of Mortgage.

Evangeline’s father, petitioner Alfredo Ong, later went to Land Bank to inform them about the sale and assumption of
mortgage. Land Bank Branch Head told Alfredo that there was nothing wrong with agreement with the Spouses Sy and
provided him requirements for the assumption of mortgage. Alfredo later found out that his application for assumption of
mortgage was not approved by Land Bank. On December 12, 1997, Alfredo initiated an action for recovery of sum of money
with damages against Land Bank, as Alfredo’s payment of PhP. 750,000 was not returned by Land Bank. Alfredo said that
Land Bank’s foreclosure without informing him of the denial of his assumption of the mortgage was done in bad faith and
that he was made to believed that P750,000 would cause Land Bank to approve his assumption to the mortgage.

This prompted Alfredo to file a case with RTC against Land Bank. On its decision to the case, RTC held that the contract
approving the assumption of mortgage was not perfected as a result of the credit investigation conducted on Alfredo where
he was disapproved.. As such, it ruled that it would be incorrect to consider Alfredo a third person with no interest in the
fulfillment of the obligation under Article 1236 of the Civil Code. Although Land Bank was not bound by the Deed between
Alfredo and the Spouses Sy, the appellate court found that Alfredo and Land Bank’s active preparations for Alfredo’s
assumption of mortgage essentially novated the agreement.

ISSUE: Whether or not the Court of Appeals erred in holding that Art. 1236 of the Civil Code does not apply and in finding
that there is novation

HELD: The Supreme Court affirmed with modification to the appealed decision that recourse against Land Bank. Land
Bank contends that Art.1236 of the Civil Code backs their claim that Alfredo should have sought recourse against the
Spouses Sy instead of Land Bank. The court agreed with Land Bank on the point mentioned as to the first part of paragraph
1 of Art. 1236. However,. Alfredo made a conditional payment so that the properties subject of the Deed of Sale with
Assumption of Mortgage which Land Bank required from him would be approved. Thus, he made payment not as a debtor
but as a prospective mortgagor. Furthermore, the contract between Alfredo and LandBank was not perfected nor
consummated because of the adverse disapproval of the proposed assumption. The Supreme Court did not agree with the
Court of Appeals that there was novation in the contract between the parties because not all elements of novation were
present.

Article 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the contrary.

Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or
against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (1158a)

22. SPOUSES REYES VS. BPI FAMILY SAVING BANK

FACTS: Reyes spouses executed a real estate mortgage on their property in Iloilo City in favor of respondent BPI Family
Savings Bank, Inc. (BPI-FSB) to secure a P15,000,000 loan of Transbuilders Resources and Development Corporation
(Transbuilders). When Transbuilders failed to pay its P15M loan within the stipulated period of one year, the bank
restructured the loan through a promissory note executed by Transbuilders in its favor, changing the method of payment.
Petitioners aver that they were not informed about the restructuring of Transbuilders' loan. In fact, when they learned of the
new loan agreement, they wrote BPI-FSB requesting the cancellation of their mortgage and the return of their certificate of
title to the mortgaged property. They claimed that the new loan novated the first loan agreement. Because the novation was
without their knowledge and consent, they were allegedly released from their obligation under the mortgage. RTC denied
the petition of the Petitioners, affirmed by the CA. Hence the Petition.

ISSUE: WON, there was a novation of mortgage loan contract

HELD: None. Novation is defined as the extinguishment of an obligation by the substitution or change of the obligation by
a subsequent one which terminates the first, either by changing the object or principal conditions, or by substituting the
person of the debtor, or subrogating a third person in the rights of the creditor. BPI-FSB and Transbuilders only
extended the repayment term of the loan from one year to twenty quarterly installments at 18% interest per annum. There
was absolutely no intention by the parties to supersede or abrogate the old loan contract secured by the real estate mortgage
executed by petitioners in favor of BPI-FSB. In fact, the intention of the new agreement was precisely to revive the old
obligation after the original period expired and the loan remained unpaid. The cancellation of the old obligation by the new
one is a necessary element of novation which may be effected either expressly or impliedly. While there is no hard and fast
rule to determine what might constitute enough change resulting in novation, the touchstone, however, is irreconcilable
incompatibility between the old and the new obligations. Thus, the well-settled rule is that, with respect to obligations to
pay a sum of money, the obligation is not novated by an instrument that expressly recognizes the old, changes only
the terms of payment, adds other obligations not incompatible with the old ones, or the new contract merely
supplements the old one.

23. MONDRAGON PERSONAL SALES, INC. VS. SOLA, JR.

FACTS: Petitioner Mondragon Personal Sales entered into a Contract of Services with respondent Sola whereby the latter
would provide service facilities (bodega cum office) to petitioner’s products, sales force and customers for a consideration
of commission or service fee which at a certain rate of the monthly sales of Mondragon.

Prior to the execution of the said contract, respondent’s wife had an existing obligation with petitioner. Such obligation was
acknowledged and confirmed by the respondent and made himself (with his wife) liable to pay such debt on installment
basis. By virtue of which, the petitioner withheld the payment of the respondent’s service fees and applied the same as
partial payments to the debt which he obligated to pay. Thereafter, respondent closed and suspended the operation of his
office cum bodega and subsequently filed for an action for accounting and rescission against the petitioner.

The RTC ruled in favor of the petitioner Mondragon and held that there was no fraud on the part of the latter that would
rescind their contract and that it is correct when it deducted the service commission of Sola to his wife’s account. The CA
reversed the RTC’s decision.

ISSUE: Whether legal compensation under Art. 1279 of the Civil Code would apply in this case.

HELD: Yes. The petitioner's act of withholding respondent's service fees/commissions and applying them to the latter's
outstanding obligation with the former is merely an acknowledgment of the legal compensation that occurred by operation
of law between the parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of persons
who in their own right and as principals are reciprocally debtors and creditors of each other. Legal compensation takes
place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place
when the parties agree to compensate their mutual obligations even in the absence of some requisites. Legal compensation
requires the concurrence of the following conditions:

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

 (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in
due time to the debtor.

All the requisites for legal compensation are present in this case. Petitioner and respondent are both principal obligors and
creditors of each other. Their debts to each other consist in a sum of money. Respondent acknowledged and bound himself
to pay petitioner the amount of P1,973,154.73 which was already due, while the service fees owing to respondent by
petitioner become due every month. Respondent's debt is liquidated and demandable, and petitioner's payments of service
fees are liquidated and demandable every month as they fall due. Finally, there is no retention or controversy commenced
by third persons over either of the debts. Thus, compensation is proper up to the concurrent amount where petitioner owes
respondent P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73.

24. URACA VS. CA

FACTS: The Velezes were the owners of the lot and commercial building in Cebu while the petitioners were lessees of the
said building. The Velezes through Ting wrote a letter offering to sell the subject property for P1,050,000.00 and at the
same time requesting the petitioners to reply in three days. Such sale was accepted. Uraca went to see Ting about the offer
to sell but she was told by the latter that the price was P1,400,000.00 in cash or managers 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. However, no payment was made. The Velezes sold the lot and commercial building to the Avenue Group for
P1,050,000.00 net of taxes, registration fees, and expenses of the sale. At the time the Avenue Group purchased the 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.

ISSUE: WON, (1) the contract of sale was perfected; (2) the CA 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 Groups registration of their
deeds of sale

HELD: 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. On the first issue: no extinctive novation. The lynchpin of the
assailed Decision is the public respondents conclusion that the sale of the real property in controversy. The Court noted 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. Article 1600 of the Civil Code
provides that (s)ales are extinguished by the same causes as all other obligations, x x x. 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.

On the second issue: double sale of an immovable. 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
buyers 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.