THIRD DIVISION

[G.R. No. 148516. December 27, 2007.]

MANUEL LUIS SANCHEZ, petitioner, vs. MAPALAD REALTY CORPORATION, respondent.

D E C I S I O N

REYES, J p:

KAPAG ang isang kasunduan ng bilihan ay may kaakibat na pandaraya at napatunayang huwad, ang bumili ay walang nakamit na titulo ng pag-aari. Ang bentahan ng apat na parsela ng mamahaling lupa sa Roxas Boulevard na isinuko ng dating kasamahan ng Pangulong Marcos sa pamahalaang Aquino ay nagtataglay ng mga palatandaan ng isang malakihang pandaraya na isinagawa mismo ng mga taong hinirang ng Presidential Commission on Good Government (PCGG) upang pangalagaan ang pag-aari ng isang na-sequester na kumpanya. ECTIHa

Ang mga ito ay dapat ibalik sa pamahalaan hanggang di pa tiyak ang tunay na may-ari. Hindi kanais-nais na nagpakahirap ang PCGG sa pagbawi ng nasabing pag-aari para lamang mawala ito dahil sa manipulasyon ng isang di mapagkakatiwalaang opisyal.

Where a deed of sale was attended by fraud and proved to be fictitious, the buyer acquired no title to the subject property. The sale of four parcels of prime land along Roxas Boulevard surrendered by a former associate of President Marcos to the Aquino government bears the earmarks of a grand scam perpetrated by the very same persons appointed by the Presidential Commission on Good Government (PCGG) to safeguard the assets of the sequestered companies. 1

They must be restored to the custody of the government until their true owner is finally determined. It would be odious to have the PCGG work so hard to recover them only to have them lost due to manipulation of an unscrupulous official.

This petition for review on certiorari seeks a reversal of the Decision 2 of the Court of Appeals (CA) which reversed and set aside that 3 of the Regional Trial Court (RTC), Branch 135, Makati City in an action for annulment of deed of sale and reconveyance 4 filed by respondent Mapalad Realty Corporation (Mapalad, for brevity).

Petitioner Manuel Luis Sanchez, who bought the properties during the pendency of the case at the trial court, intervened in the appeal before the CA.

The Facts

The facts, as gleaned from the records, are as follows: aDHCEA

Respondent Mapalad was the registered owner of four (4) parcels of land located along Roxas Boulevard, Baclaran, Paraaque. The properties, covered by Transfer Certificates of Title (TCT) Nos. S-81403, S-81404, S-81405 and S-81406 have a total land area of 4,038 square meters. 5

On March 21, 1986, shortly after the February 1986 EDSA Revolution, Jose Y. Campos executed an affidavit 6 admitting, among others, that Mapalad was one of the companies he held in trust for former President Ferdinand E. Marcos. Campos turned over all assets, properties, records and documents pertaining to Mapalad to the new administration led by then President Corazon C. Aquino.

On March 23, 1986, the PCGG issued writs of sequestration for Mapalad and all its properties. 7

On August 2, 1992, the PCGG appointed Rolando E. Josef as Vice President/Treasurer and General Manager of Mapalad. He immediately conducted an inventory of the assets of the corporation. This was when it was discovered that four (4) TCTs were missing, namely, TCT Nos. S-81403, S-81404, S-81405, and S-81406.

Josef inquired on the whereabouts of these missing TCTs from Luis R. Narciso, an employee of Port Center Development Corporation, a sister company of Mapalad. Josef was informed that Mapalad's former director and general manager, Felicito L. Manalili (GM Manalili) took the said missing TCTs sometime in July 1992. cADSCT

On September 8, 1992, Narciso executed an affidavit 8 stating that the missing TCTs were taken from him by GM Manalili.

Josef personally talked to GM Manalili to inquire about what happened to the titles he took from Narciso. GM Manalili promised to return the titles as soon as he found them. He never did, despite repeated demands on him.

On November 16, 1992, Felimon Oliquiano, Jr., president of Nordelak Development Corporation (Nordelak, for brevity), filed a notice of adverse claim 9 over the subject properties based on a deed of sale purportedly executed on November 2, 1989 by Miguel Magsaysay in his capacity as president and board chairman of Mapalad, selling the four lots to Nordelak for the total purchase price of P20,190,000.00. This deed of sale was notarized by Elpidio T. Clemente as Document No. 121, Page 26, Book No. 82 Series of 1989. 10

Josef notified the Register of Deeds (RD) of Paraaque by three successive letters dated November 18, December 7 and 8, 1992 that the owner's duplicate copies of four (4) TCTs in the name of Mapalad were missing, and requested the RD not to entertain any transaction, particularly any attempt to transfer ownership thereof, or annotate any encumbrance or lien of any kind on these four TCTs.

Since Josef's letters to the RD were not verified, the RD instructed him to submit a verified petition or cancellation of adverse claim; Josef complied.

On December 22, 1992, Mapalad filed with the RD a verified petition for cancellation of adverse claim annotated on its titles by Nordelak. 11 The petition also included a notice of loss of the owners' duplicate copies of the TCTs concerned. This was annotated on the titles as Entry No. 154431 on the next day. ASTDCH

On January 14, 1993, Mapalad discovered, after verification with the records of the RD, that its titles to the four (4) properties were cancelled as early as December 22, 1992. In lieu of them, TCT Nos. 68493, 68494, 68495, and 68496 in the name of Nordelak were issued 12 by virtue of another deed of sale also dated November 2, 1989 and purportedly signed by the same Miguel Magsaysay in his capacity as president and chairman of the board of Mapalad.

Although this document was also notarized by the same Elpidio T. Clemente, bearing the same Document No. 121, Page 26, Book No. 82, Series of 1989, the amount indicated in this deed of sale as total purchase price was P7,268,400.00 instead of P20,190,000.00 as earlier annotated in the title per the adverse claim on November 16, 1992. In other words, there were two deeds of absolute sale, bearing the same dates, involving the same parties, the same parcel of land, and notarized by the same Notary Public under identical notarial entries, with different considerations or purchase price.

Way back October 13, 1978, A. Magsaysay, Inc., a corporation controlled by Miguel Magsaysay, acquired ownership of all shares of stock of Mapalad. 13

On December 3, 1982, however, A. Magsaysay, Inc. sold all its shares to Novo Properties, Inc. 14 Miguel Magsaysay also sold his one and only share to Novo Properties, Inc., thus completely terminating any and all rights or interest he used to have over the properties of Mapalad.

Immediately upon learning of the cancellation of Mapalad's four TCTs, Josef conferred with Miguel Magsaysay to find out whether the latter indeed signed the purported deeds of absolute sale both dated November 2, 1989. aSAHCE

Magsaysay denied having signed those deeds.

On January 19, 1993, the PCGG asked the Paraaque RD to immediately recall, revoke and cancel the four (4) titles that were issued in favor of Nordelak. 15

On January 22, 1993, the PCGG issued a writ of injunction, enjoining and restraining the Paraaque RD from entertaining and processing any document or transaction relative to the titles in the name of Nordelak. This PCGG injunction was annotated on the titles as Entry No. 93-14786.

On January 25, 1993, the RD in turn requested Nordelak to surrender the titles issued in its name, but Nordelak refused to comply.

On February 3, 1993, Mapalad commenced, before the RTC, Makati City, the present action for annulment of deed of sale and reconveyance of title with damages against Nordelak, that is now the subject of this petition.

Mapalad's complaint alleged that: (a) the deed of sale is falsified and a forgery; (b) defendant Felicito L. Manalili 16 conspired and confederated with the other defendants to defraud Mapalad by fabricating a fictitious, spurious and falsified deed of sale; and (c) there is another deed of absolute sale with the same date of November 2, 1989 and also bearing the purported signature of Miguel Magsaysay, but the two deeds of sale differ in the amounts of consideration, one for P20,190,000.00 and the other for P7,268,400.00, which was used in the transfer of Mapalad's titles in favor of Nordelak.

Mapalad prayed for judgment: (a) declaring the two (2) deeds of absolute sale null and void; (b) ordering Nordelak to reconvey the four (4) parcels of land in favor of Mapalad; (c) ordering the Register of Deeds to cancel TCT Nos. 68493, 68494, 68495, and 68496, and in lieu thereof, to issue replacement titles in the name of Mapalad; and (d) ordering Nordelak to pay exemplary damages, attorney's fees and costs of suit. caCSDT

On February 22, 1993, a notice of lis pendens was annotated as Entry No. 93-91718 on the TCTs in Nordelak's name. 17

On March 4, 1993, the RD, through the Office of the Solicitor General, filed its answer alleging that when the requirements of registration are complied with, the duty of the register of deeds becomes simply ministerial.

On April 26, 1993, Nordelak and its president, Oliquiano filed their answer with special and affirmative defenses, alleging that Nordelak is a buyer in good faith, and that it never dealt with defendant Manalili in the purchase of the subject properties.

Defendant Manalili, however, failed to file any answer within the reglementary period. The RTC declared him in default despite Section 14, Rule 18 of the Rules of Court stating that "when a complaint states a common cause of action against several defendants, some of whom answer, and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented . . . ."

On October 24, 1994, while the case was still pending before the RTC, Nordelak sold the subject properties for P50,000,000.00 to a certain Manuel Luis S. Sanchez, now petitioner before Us.

RTC Judgment

On December 6, 1994, ruling that Mapalad failed to adduce positive proof of forgery, the RTC upheld the validity of the deed of absolute sale as a notarial document and rendered judgment 18 with the following fallo: DAaEIc

WHEREFORE, premises considered, for failure of plaintiff to establish preponderance of evidence to support its herein Complaint, the above-entitled case is ordered DISMISSED for lack of cause of action and for being without merit.

On the other hand, judgment is hereby rendered in favor of defendants against the plaintiff by way of counterclaim, for the latter to pay actual and compensatory damages in favor of private defendants (excluding public defendant Register of deeds of Paraaque herein represented by the Office of the Solicitor General) the sum of P50,000.00; attorney's fees in the sum of P30,000.00; and the costs of the proceedings.

Furthermore, Entry No. 15431 re a Verified Petition for cancellation of the adverse claim annotated at the back of TCT Nos. S-81403, S-81404, S-81405, and S-81406, (Exhs. "O", "P", "Q", and "R") filed by Rolando E. Josef, V/P-General Manager of Mapalad Realty Corporation inscribed on December 17, 1992 is ordered CANCELLED.

SO ORDERED. 19

On December 19, 1994, upon Nordelak's manifestation, the RTC issued a Supplemental Decision cancelling the notice of lis pendens annotated as Entry No. 93-91718 at the back of Nordelak's TCTs Nos. 68493, 68494, 68495, and 68496, and also lifting the restraining order issued by the PCGG annotated on the said titles as Entry No. 93-14786.

On December 29, 1994 and January 2, 1995, Mapalad filed a motion for reconsideration and supplemental motion for reconsideration, respectively, to which an opposition was filed by Nordelak on January 13, 1995. TAcCDI

On January 2, 1995, the RTC issued an order denying the twin motions for reconsideration. Mapalad then seasonably appealed to the CA.

Having previously bought the properties from Nordelak during the pendency of the case with the RTC, petitioner Sanchez moved to be joined with Nordelak as party defendant-appellee before the CA. The CA granted the motion to intervene.

CA Disposition

Finding merit in the appeal, the CA disposed of it, as follows:

WHEREFORE, premises considered, the assailed decision is REVERSED and SET ASIDE and a new one entered

1.DECLARING as null and void the deed of absolute sale dated 02 November 1989 executed by and between Mapalad Realty Corporation and Nordelak Development Corporation;

2.DECLARING as null and void the deed of absolute sale dated 24 October 1994 executed by and between Nordelak Development Corporation and Manuel Luis S. Sanchez;

3.ORDERING the Register of Deeds of Paraaque to cancel TCT Nos. 68493, 68494, 68495, and 68496 and in lieu thereof, to issue new certificates of title covering the subject properties in the name of Mapalad Realty Corporation. TaDCEc

Further, appellee Nordelak is ordered to pay appellant P100,000.00 as attorney's fees.

SO ORDERED. 20

This ruling was arrived at after the CA's re-evaluation of the entire records, finding clear evidence of fraud in obtaining the certificates of title over the disputed properties, to wit:

First. Miguel A. Magsaysay was no longer appellant Mapalad's President and Chairman of the Board when the subject deed of absolute sale was executed on 02 November 1989. The evidence shows that by virtue of a Deed of Sale of Shares of Stock dated 03 December 1982, Miguel Magsaysay ceded and sold his one and only share of stock in Mapalad Realty Corporation in favor of Novo Properties, Inc. . . . . And in his testimony, Miguel Magsaysay denied having affixed his signature on the questioned deed of sale and categorically stated that he ceased to be connected with appellant Mapalad after the sale of his share in 1982.

xxx xxx xxx

Second. The Deed of Absolute Sale indicating a consideration of P7,268,400.00, which was the basis for the issuance of Transfer Certificates of Title Nos. 68493, 68494, 68495, and 68496 in the name of appellee Nordelak is dated 02 November 1989 but was only registered more than three (3) years later. This bolsters the testimony of Luis R. Narciso that the owner's duplicate original of appellant Mapalad's titles were taken from him by defendant Felicito Manalili in July 1992 and were never returned. Obviously, Manalili got the titles for the purpose of registering the fictitious deed of absolute sale because under the Property Registration Decree (P.D. 1529), no voluntary instrument shall be registered by the Register of Deeds unless the owner's duplicate is presented with the instrument of transfer. cIaHDA

Third. Atty. Elpidio T. Clemente, the Notary Public who notarized the questioned Deed of Absolute Sale, did not submit a copy of said deed in the Notarial Section of the Regional Trial Court of Manila.

xxx xxx xxx

. . . . As pointed out by appellant Mapalad in its brief, the notary public notarized two separate deeds of sale "referring to the same parcels of land on the very same day, and made only one and the same entry for the two documents in his notarial registry. In fact, NOT ONE witness was ever presented by defendants-appellees to explain these highly anomalous documentations.

Fourth. There was no consideration for the deed of sale. On this point, Rolando Josef testified that appellant Mapalad did not receive any amount with respect to the alleged transaction involving the sale of its properties. This was not disputed by the appellees. Since the alleged consideration is in the millions of pesos, it can be assumed that payment was made by check. It was easy enough for appellee Nordelak to have presented the cancelled check. Its failure to do so speaks volumes of truth of Josef's testimony. . . . .

Fifth. In the questioned deed of sale, Nordelak was represented by one Felimon R. Oliquiano, Jr., in his capacity as President of the corporation. Thus, he was in the best position to testify on the validity of the questioned deed of sale and categorically state that it was Magsaysay who signed the deed of sale and refute Magsaysay's testimony. But he was never presented and the failure to present him was never explained. In fact, no one was presented to testify having negotiated with and concluded the transaction with Magsaysay or that he personally saw Magsaysay sign the deed of sale. Defendant-appellee Nordelak presented only two witnesses both of whom were not connected Nordelak and, in fact, did not know Mapalad. AaIDCS

xxx xxx xxx

We therefore find that the execution of the deed of absolute sale was attended by fraud, hence, a nullity. Thus, appellee Nordelak never acquired title over the subject properties. And given the evidence on record, We are left to wonder in no small measure how the court a quo could have upheld the validity of the questioned deed of sale. The transaction has all the earmarks of a grand scam perpetrated by the very same persons appointed by PCGG to safeguard the assets of sequestered companies. 21

The CA further ruled that petitioner Sanchez, who was a transferee pendente lite, was not a buyer in good faith, having purchased the property with an annotation of a notice of lis pendens.

Without prior motion for reconsideration of the CA decision, intervenor-appellee Sanchez elevated the case to Us, raising the following assignment of errors:

I

CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT THE QUESTIONED DEED OF SALE IS GENUINE, VALID AND SUBSISTING, THE COURT OF APPEALS RULED THAT THERE WAS FRAUD ON THE PART OF NORDELAK IN OBTAINING THE CERTIFICATES OF TITLES OVER THE DISPUTED PROPERTY, AND CONSEQUENTLY THE QUESTIONED DEED IS FICTITIOUS.

II

COROLLARILY, CONTRARY TO THE EXPRESS FINDINGS OF THE TRIAL COURT THAT NORDELAK IS A BUYER IN GOOD FAITH AND FOR VALUE, THE COURT OF APPEALS RULED OTHERWISE. (Underscoring supplied) ACcDEa

Issues

Two critical issues are plainly posed for our determination. First, on whether or not there was a valid sale between Mapalad and Nordelak. Second, whether or not petitioner Sanchez acquired valid title over the properties as innocent purchaser for value despite a defect in Nordelak's title.

A procedural issue was raised by the Solicitor General in his Comment, too: whether or not petitioner may raise questions of fact in the present petition.

We shall resolve them in the reverse order, dealing with the procedural ahead of the substantive question.

Our Ruling

I.The case falls within the

exception to the rule that

factual issues may not be

entertained by this Court.

In petitions for review on certiorari such as in the present case, the findings of fact of the CA are generally conclusive on this Court, save for the following admitted exceptions:

(1)the factual findings of the Court of Appeals and the trial court are contradictory; aDACcH

(2)the findings are grounded entirely on speculation, surmises or conjectures;

(3)the inference made by the Court of Appeals from its findings of fact is mainly mistaken, absurd or impossible;

(4)there is grave abuse of discretion in the appreciation of facts;

(5)the appellate court, in making its findings, goes beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee;

(6)the judgment of the Court of Appeals is premised on a misapprehension of facts;

(7)the Court of Appeals fails to notice certain relevant facts which, if properly considered, will justify a different conclusion; and

(8)the findings of fact of the Court of Appeals are contrary to those of the trial court or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record. 22

We note that the basis for the trial court's disposition in favor of Nordelak is Mapalad's apparent failure to adduce sufficient evidence to prove that Miguel Magsaysay's signatures on the two deeds of sale by Mapalad in favor of Nordelak were forged. TcIaHC

The CA, however, went beyond the mere determination of whether the signatures of Miguel Magsaysay were forged or not. It looked into the validity of the deed of absolute sale as a whole, based on the testimonies of Miguel Magsaysay himself, quoted in its decision, as follows:

Atty Calabio:

. . . I am showing to you this Deed of Absolute Sale marked as Exhibit "D", there is here appearing on page 3 above the typewritten name Miguel A. Magsaysay, is this your signature?

A:No, definitely not, so far away from my signature, not even in forgery; and besides I am not the president when it was sold already.

Q:So on the date herein November 2, 1989, you were no longer president, Sir?

A:No, I have nothing to do with them, of the corporation, after the sale in 1982.

Atty. Calabio:

Likewise, showing to you the Deed of Absolute Sale, also dated November 2, 1989, previously marked as Exhibit "F", specifically on page 3, Sir, there is a signature also above the typewritten name, Miguel Magsaysay?

A:Definitely, this is not my signature, and besides I am not the president anymore. It looks exactly like the other one. caEIDA

Atty. Calabio:

Which for purposes of identification, Your Honor, may I respectfully request that his also be encircled and marked as Exhibit "F-1"? 23

Aside from categorically denying under oath that the signatures appearing on the deeds of absolute sale were his, witness Miguel Magsaysay gave another reason why it was impossible for those signatures to be his. According to him, he was no longer connected in any way whatsoever with Mapalad, when it supposedly sold the properties. He divested himself of all his interests in Mapalad way back in 1982. There was no reason for him to sign the subject deeds of absolute sale as president and chairman of the board of Mapalad in 1989. This was another basis for Mapalad to convince the appellate court that the signatures purporting to be those of Magsaysay on the questioned deeds of sale were not written by him.

We sustain the CA finding and conclusion.

While there have been guidelines cited in the petition 24 used by this Court in determining what constitutes sufficient proof to establish whether a signature was forged, it does not preclude a party from adducing other possible proofs to establish whether a particular signature is genuine or not.

In the case at bench, not only did Magsaysay disown the signatures appearing on the deed of sale, he cited a valid legal reason for him not to have signed such document at all. He had no more power and authority to sign for and in behalf of Mapalad because as early as 1982, he had already divested himself of all his interests in said corporation. His testimonies in this case constitute sufficient basis for the Court to conclude that the signatures appearing on the two deeds of sale (Exhibits "D" and "F") were not his signatures. HAaECD

This factual determination on the genuineness or forgery of the signatures purporting to be those of Miguel Magsaysay on the subject deeds of sale is most crucial. When compared with this one, all other factual issues raised in the petition become immaterial, such as: whether the owner's duplicate copies of the TCT were voluntarily delivered to, or surreptitiously taken from Mapalad's custodian of such documents; whether the deeds of sale were in fact notarized by Atty. Elpidio Clemente considering that these documents do not exist in the archives or files in the notarial registry; or even whether there were two or only one document purporting to be the deed of absolute sale dated November 2, 1989.

There is, therefore, no cogent reason for this Court to delve further into these other factual matters.

II.There can be no valid

contract of sale between

Mapalad and Nordelak.

A contract is defined as a juridical convention manifested in legal form, by virtue of which one or more persons bind themselves in favor of another, or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do. There can be no contract unless the following concur: (a) consent of the contracting parties; (b) object certain which is the subject matter of the contract; (c) cause of the obligation which is established. 25

Specifically, by the contract of sale, one of the contracting parties obligates himself to transfer ownership of and to deliver a determinate thing and the other party to pay therefor a price certain in money or its equivalent. 26

The essential requisites of a valid contract of sale are: EAHcCT

(1)Consent of the contracting parties by virtue of which the vendor obligates himself to transfer ownership of and to deliver a determinate thing, and the vendee obligates himself to pay therefor a price certain in money or its equivalent.

(2)Object certain which is the subject matter of the contract. The object must be licit and at the same time determinate or, at least, capable of being made determinate without the necessity of a new or further agreement between the parties.

(3)Cause of the obligation which is established. The cause as far as the vendor is concerned is the acquisition of the price certain in money or its equivalent, which the cause as far as the vendee is concerned is the acquisition of the thing which is the object of the contract. 27

Contracts of sale are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. 28

Consent may be given only by a person with the legal capacity to give consent. In the case of juridical persons such as corporations like Mapalad, consent may only be granted through its officers who have been duly authorized by its board of directors. 29

In the present case, consent was purportedly given by Miguel Magsaysay, the person who signed for and in behalf of Mapalad in the deed of absolute sale dated November 2, 1989. However, as he categorically stated on the witness stand during trial, he was no longer connected with Mapalad on the said date because he already divested all his interests in said corporation as early as 1982. Even assuming, for the sake of argument, that the signatures purporting to be his were genuine, it would still be voidable for lack of authority resulting in his incapacity to give consent for and in behalf of the corporation. EaTCSA

On this score, the contract of sale may be annulled for lack of consent on the part of Mapalad.

The CA also noted that the alleged contract of sale on November 2, 1989 had no consideration. There was no payment effected by Nordelak for this transaction. Josef testified that no funds were infused into Mapalad's coffers on account of this transaction. This testimony remained uncontroverted. In fact, the CA further noted that Nordelak could have easily produced the cancelled check before the trial court, if there was any. Again, Nordelak did not.

The third element for a valid contract of sale is likewise lacking.

Lack of consideration makes a contract of sale fictitious. A fictitious sale is void ab initio. 30

The alleged deed of absolute sale dated November 2, 1989 notwithstanding, the contract of sale between Mapalad and Nordelak is not only voidable on account of lack of valid consent on the part of the purported seller, but also void ab initio for being fictitious on account of lack of consideration.

Despite a void sale between Mapalad and Nordelak, may petitioner still claim valid title to the subject properties? HIaTCc

III.Petitioner as transferee

pendente lite merely steps

into the shoes of his

predecessor-in-interest

who had no valid title.

As We have said, Nordelak did not acquire ownership or title over the four properties subject of this case because the contract of sale between Mapalad and Nordelak was not only voidable but also void ab inito. Not having any title to the property, Nordelak had nothing to transfer to petitioner Sanchez.

Nemo dat non quod habet. Hindi maibibigay ng isang tao ang hindi kanya. No one can give what he does not have.

Petitioner acquired the property subject of litigation during the pendency of the case in the trial court. It is undisputed that notices of lis pendens were annotated on the TCTs in Nordelak's name covering the subject properties as Entry No. 93-91718.

In Lim v. Vera Cruz, 31 this Court explained:

Lis pendens is a Latin term which literally means a pending suit. Notice of lis pendens is filed for the purpose of warning all persons that the title to certain property is in litigation and that if they purchase the same, they are in danger of being bound by an adverse judgment. The notice is, therefore, intended to be a warning to the whole world that one who buys the property does so at his own risk. This is necessary in order to save innocent third persons from any involvement in any future litigation concerning the property. SAcaDE

By virtue of the notice of lis pendens annotated on the four TCTs in this case, petitioner had notice that the property he was intending to buy is under litigation. He is, therefore, a transferee pendente lite who, as held by this Court in Voluntad v. Dizon, 32 stands exactly in the shoes of the transferor and is bound by any judgment or decree which may be rendered for or against the transferor.

Under the circumstances petitioner cannot acquire any better right than his predecessor, Nordelak. No river or stream can rise higher than its source. Walang ilog o batis na ang taas ay higit sa kanyang pinagmulan. There is thus no question that a judgment of reconveyance can be legally enforced by Mapalad against petitioner as transferee pendente lite of Nordelak.

The four parcels of land surrendered by former Marcos associate Jose Y. Campos and sequestered by the PCGG must eventually be returned to their rightful owners. If forfeiture proceedings in the Marcos ill-gotten wealth cases prosper, and these properties are finally shown to form part of such ill-gotten wealth, these properties should go to the Filipino people. If they are not ill-gotten, they should be turned over to the Marcoses. But definitely, these properties cannot be transferred to Nordelak nor to petitioner Manuel Luis Sanchez.

WHEREFORE, the petition is hereby DENIED and the appealed Court of Appeals decision AFFIRMED in toto.

SO ORDERED.

Ynares-Santiago, Austria-Martinez, Chico-Nazario and Nachura, JJ., concur.

Footnotes

1.Rollo, p. 26. AIHDcC

2.Penned by Associate Justice Salvador J. Valdez, Jr. (now deceased) as Chairman, with Associate Justices Wenceslao I. Agnir, Jr. (now retired) and Rebecca de Guia-Salvador, concurring.

3.Penned by then Judge Omar U. Amin.

4.Civil Case No. 93-365, entitled "Mapalad Realty Corporation v. Nordelak Development Corporation, et al."

5.Exhibits "O", "P", "Q", and "R", rollo, p. 11.

6.Exhibit "A-1", id.

7.Exhibit "A", id.

8.Exhibit "B", id. at 101.

9.Annotated as Entry No. 92-13861 on November 17, 1992.

10.Exhibit "F", rollo, p. 13.

11.Id. at 101.

12.Exhibits "G", "H", "I", and "J", id.

13.Exhibit "N", id. at 14.

14.Exhibit "T", id.

15.Exhibit "C-4", id.

16.In his capacity as Director and General Manager of Mapalad at that time.

17.Rollo, p. 16.

18.Penned by Judge Omar U. Amin.

19.Rollo, p. 110.

20.Id. at 29-30.

21.Id. at 20-26.

22.Landbank of the Philippines v. Monet's Export and Manufacturing Corporation, G.R. No. 161865, March 10, 2005, 453 SCRA 173, 184-185, citing MEA Builders, Inc. v. Court of Appeals, G.R. No. 121484, January 31, 2005, 450 SCRA 155.

23.Rollo, pp. 21-22. ATCaDE

24.Id. at 46-47.

25.Swedish Match, AB v. Court of Appeals, G.R. No. 128120, October 20, 2004, 441 SCRA 1, 17-18.

26.Civil Code, Art. 1458.

27.Jurado, D., Civil Law Reviewer, 19th ed., p. 841.

28.Swedish Match, AB v. Court of Appeals, supra note 25.

29.Since a corporation is only a juridical person, it must act through its officers or agents in the normal course of business (Consumido v. Ros, G.R. No. 166875, July 31, 2007).

30.See Nazareno v. Nazareno, G.R. No. 138842, October 18, 2000, 343 SCRA 637, 655.

31.G.R. No. 143646, April 4, 2001, 356 SCRA 386, 388.

32.G.R. No. 132294, August 26, 1999, 313 SCRA 209.

SECOND DIVISION

[G.R. No. 171165. February 14, 2011.]

CAROLINA HERNANDEZ-NIEVERA, DEMETRIO P. HERNANDEZ, JR., and MARGARITA H. MALVAR, petitioners, vs. WILFREDO HERNANDEZ, HOME INSURANCE AND GUARANTY CORPORATION, PROJECT MOVERS REALTY AND DEVELOPMENT CORPORATION, MARIO P. VILLAMOR and LAND BANK OF THE PHILIPPINES, respondents.

DECISION

PERALTA, J p:

This Rule 45 petition for review assails the October 19, 2005 Decision 1 of the Court of Appeals in CA-G.R. CV No. 83852, 2 as well as the January 11, 2006 Resolution 3 in the same case which denied reconsideration. The said decision had reversed and set aside the August 30, 2004 judgment 4 rendered by the Regional Trial Court (RTC) of San Pablo City, Laguna, Branch 32 in Civil Case No. SP-5742 (2000) one for rescission of a memorandum of agreement and declaration of nullity of a deed of assignment and conveyance, with prayer for preliminary injunction and damages. aICcHA

The facts follow.

Project Movers Realty & Development Corporation (PMRDC), one of the respondents herein, is a duly organized domestic corporation engaged in real estate development. Sometime in 1995, it entered through its president, respondent Mario Villamor (Villamor), into various agreements with co-respondents Home Insurance & Guaranty Corporation (HIGC) 5 and Land Bank of the Philippines (LBP), in connection with the construction of the Isabel Homes housing project in Batangas and of the Monumento Plaza commercial and recreation complex in Caloocan City. In its Asset Pool Formation Agreement, PMRDC conveyed to HIGC the constituent assets of the two projects, 6 whereas LBP agreed to act as trustee of the resulting Asset Pool 7 for a consideration. 8 The execution of the projects would be funded largely through securitization, a method of sourcing development funds by the issuance of participation certificates against the direct backing assets of the projects, 9 whereby LBP would act as the nominal issuer of such certificates with the Asset Pool itself acting as the real issuer. 10 HIGC, in turn, would provide guaranty coverage to these participation certificates in accordance with its Contract of Guaranty with PMRDC and LBP. 11

On November 13, 1997, PMRDC entered into a Memorandum of Agreement (MOA) whereby it was given the option to buy pieces of land owned by petitioners Carolina Hernandez-Nievera (Carolina), Margarita H. Malvar (Margarita) and Demetrio P. Hernandez, Jr. (Demetrio). Demetrio, under authority of a Special Power of Attorney to Sell or Mortgage, 12 signed the MOA also in behalf of Carolina and Margarita. In the aggregate, the realty measured 4,580,451 square meters and was segregated by agreement into Area I and Area II, respectively pertaining to the parcels covered by Transfer Certificate of Title (TCT) Nos. T-3137, T-3138, T-3139 and T-3140 on the one hand, and on the other by TCT Nos. T-3132, T-3133, T-3134, T-3135 and T-3136, all issued by the Register of Deeds of Laguna. The MOA materially provides:

1.THAT, the consideration for the sale of the parcels of land (Areas I and II) shall be TWENTY-FIVE PESOS (Php25.00) per square meter or a total of PESOS: ONE HUNDRED FOURTEEN MILLION FIVE HUNDRED ELEVEN TWO HUNDRED SEVENTY (Php114,511,270.00); IADaSE

2.THAT, the VENDEE shall have the option to purchase the above-described parcels of land within a period of twelve (12) months from the date of this instrument and that the VENDEE shall pay the vendor option money in the following amounts and on the dates herein specified:

Area I

PESOS: SIX MILLION (Php6,000,000.00) payable in two (2) equal installments of PESOS: THREE MILLION (Php3,000,000.00), the first installment due on or before November 20, 1997; the second installment due on or before December 15, 1997, both installments to be covered by postdated checks upon signing of this Agreement.

Area II

Option money of PESOS: EIGHT MILLION FIVE HUNDRED THOUSAND (Php8,500,000.00) payable within thirty (30) days after conveyance to the Isabel Homes Asset Pool. cHaADC

3.THAT, should the VENDEE exercise the option to purchase the parcels of land within the stipulated period, the VENDEE shall complete the TWENTY-FIVE (25%) PERCENT downpayment inclusive of the option money within the said stipulated period. Balance of the TWENTY FIVE (25%) PERCENT downpayment exclusive of the option money for Area I is PESOS: TEN MILLION FOUR HUNDRED EIGHTY-TWO THOUSAND TWO HUNDRED SIXTY-TWO (Php10,482,262.00) and for Area II is PESOS: THREE MILLION SIX HUNDRED FORTY-FIVE THOUSAND FIVE HUNDRED FIFTY-SIX (Php3,645,556.00).

The balance of the purchase price in the amount of PESOS: EIGHTY-FIVE MILLION EIGHT HUNDRED EIGHTY-THREE FOUR HUNDRED FIFTY-SIX (Php85,883,456.00) shall be payable within two (2) years in eight (8) quarterly installments covered by postdated checks. Schedule of payments shall be as follows:

January 31, 1999Php10,735,432.00

April 30, 199910,735,432.00

July 31, 199910,735,432.00

October 31, 199910,735,432.00

January 31, 200010,735,432.00

April 30, 200010,735,432.00

July 30, 200010,735,432.00

October 31, 200010,735,432.00

4.THAT, should the VENDEE fail to exercise its option to purchase the said described parcels of land within the stipulated period, the option money shall be forfeited in favor of the VENDOR and that the VENDEE shall return to the VENDOR all the Transfer Certificates of Title covering the said described parcels of land within a period of THIRTY (30) DAYS from the stipulated period, FREE FROM ALL LIENS AND ENCUMBRANCES; ADCEaH

5.THAT, the VENDOR, at the request of the VENDEE, shall agree to convey the parcels of land to any bank or financial institution by way of mortgage or to a Trustee by way of a Trust Agreement at any time from the date of this instrument, PROVIDED, HOWEVER, that the VENDOR is not liable for any mortgage or loans or obligations that will be incurred by way of mortgage of Trust Agreement that the VENDEE might enter into;

6.It is agreed that the VENDOR shall have the sole responsibility in the settlement of the tenants and eviction of the tenants and eviction of the occupants of the described parcels of land after all consideration have been fully paid by the VENDEE to the VENDOR;

7.THAT, all taxes including capital gains tax, transfer tax and documentary stamps tax shall be for the account of the VENDOR;

8.THAT, the VENDOR hereby warrants valid title to, and peaceful possession of the said described parcels of land after all considerations have been fully paid. 13

As an implementation of the MOA, the lands within Area I were then mortgaged to Solid Bank for which petitioners received consideration from PMRDC. 14

Later on, PMRDC saw the need to convey additional properties to and augment the value of its Asset Pool to support the collateralization of additional participation certificates to be issued. 15 Thus, on March 23, 1998, it entered with LBP and Demetrio the latter purportedly acting under authority of the same special power of attorney as in the MOA into a Deed of Assignment and Conveyance (DAC) 16 whereby the lands within Area II covered by TCT Nos. T-3132, T-3133, T-3134, T-3135 and T-3136 were transferred and assigned to the Asset Pool in exchange for a number of shares of stock which supposedly had already been issued in the name and in favor of Demetrio. These pieces of land are the subject of the present controversy as far as they are affected by the explicit provision in the DAC which dispensed with the stipulated obligation of PMRDC in the MOA to pay option money should it opt to buy the properties. 17 CaSAcH

PMRDC admittedly did not avail of its option to purchase the lands in Area II in the twelve months that passed after the execution of the MOA. Although PMRDC delivered to petitioners certain checks representing the money, the same however allegedly bounced. 18 Hence, on January 8, 1999, petitioners demanded the return of the corresponding TCTs. 19 In its January 21, 1999 letter to Demetrio, however, PMRDC, through Villamor, stated that the TCTs could no longer be delivered back to petitioners as the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the March 23, 1998 DAC. In the correspondence that ensued, petitioners disowned Demetrio's signature in the DAC and labeled it a mere forgery. They explained that Demetrio could not have entered into the said agreement as his power of attorney was limited only to selling or mortgaging the properties and not conveying the same to the Asset Pool. Boldly, they asserted that the fraudulent execution of the DAC was made possible through the connivance of all the respondents. 20

With that final word, petitioners instituted an action before the RTC of San Pablo City, Laguna, Branch 32 for the rescission of the MOA, as well as for the declaration of nullity of the DAC. They prayed for the issuance of a writ of preliminary injunction and for the payment of damages. 21

Ruling for petitioners, the trial court, on August 30, 2004, declared the MOA to be an option contract and ordered its rescission. It, likewise, declared the DAC null and void as it made a definite finding of forgery of Demetrio's signature as well as fraud in its execution, and accordingly, adjudged respondents PMRDC and Villamor liable to petitioner for damages. 22 The dispositive portion of the decision reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the favor of the plaintiffs and against the defendants as follows:

1.Rescinding the Memorandum of Agreement (MOA) executed between the plaintiffs and Project Movers Realty [&] Development Corporation (PMRDC); aCTHDA

2.Declaring null and void the Deed of Assignment and Conveyance (DAC) executed between Project Movers Realty [&] Development Corporation, Land Bank of the Philippines and Demetrio Hernandez whose signature is forged;

3.Ordering Transfer Certificate of Title Nos. T-3132, T-3133, T-3134 and T-3135, all in the names of the plaintiffs, which are in the custody of the Court, to be delivered to plaintiffs immediately and the plaintiffs are ordered to issue a corresponding receipt of said certificates of title signed by all the plaintiffs to be submitted to the OIC-Branch Clerk of Court of this Court within five (5) days from receipt of said titles;

4.Ordering defendants Mario Villamor and Wilfredo Hernandez to pay plaintiffs, jointly and severally, the following:

a.Actual damages of P500,000.00; CSDcTH

b.Moral damages of P200,000.00;

c.Exemplary damages of P200,000.00;

d.Attorney's fees in the amount of P300,000.00;

e.And the costs of the suit.

SO ORDERED. 23

Aggrieved, respondents filed a notice of appeal and elevated the matter to the Court of Appeals. On October 19, 2005, the Court of Appeals issued the assailed Decision reversing and setting aside the trial court's decision as follows:

WHEREFORE, based on the foregoing, the appeal is GRANTED. The decision dated August 30, 2004 of the Regional Trial Court, Branch 32, San Pablo City in Civil Case No. SP-5742 (2000) is REVERSED and SET ASIDE and a new one is entered declaring the Deed of Conveyance valid and thus, the Transfer Certificates of Title subject of this case are ordered returned to HIGC. No costs.

SO ORDERED. 24

Central to the ruling of the Court of Appeals is its contrary finding that the allegation of forgery of Demetrio's signature in the DAC was not established by the evidence and, hence, following the legal presumption of regularity in the execution of notarized deeds, it upheld the validity of the DAC. 25 The Court of Appeals noted that the incompatibility in the terms of the MOA and the DAC clearly signified the intention of the parties to have the MOA novated by subsequent agreement and have the properties conveyed to the Asset Pool in exchange for PMRDC shares to be issued to Demetrio. This, according to the appellate court, completely changed the original obligations of PMRDC as provided in the MOA. It noted further that it was premature to order the release of the subject TCTs to petitioners at this stage of the proceedings, because that would amount to an execution of the decision. 26 EHcaDT

With the denial of their motion for reconsideration, 27 petitioners filed the instant petition for review attributing error to the Court of Appeals in declining to rescind the MOA and declare the DAC null and void.

Petitioners insist that the obligation of PMRDC to deliver back the TCTs arises on its failure to exercise the option to purchase the lands according to the terms of the MOA, and that the deliberate refusal of PMRDC to perform such obligation gives ground for the rescission of the MOA. This thesis is perched on petitioners' argument that the MOA could not have possibly been novated by the DAC because first, Demetrio's signature therein has been forged, and second, Demetrio could not have validly assented to the DAC in behalf of Carolina and Margarita because his special power was limited only to selling or mortgaging the properties and excludes conveying and assigning the said properties to the Asset Pool for consideration. 28 They also point out that the DAC itself is infirm insofar as it stipulated to convey the lands to the Asset Pool as the latter supposedly is neither a registered corporation nor a partnership and does not possess a legal personality. 29

Commenting on the petition, PMRDC and Villamor advance that petitioners' allegation of fraud and forgery are all factual matters that are inappropriate in a Rule 45 petition. 30 More importantly, they aver that the novation of the MOA by the DAC is unmistakable as the DAC itself has made an express reference to the MOA provisions on the payment of option money and, hence, has expressly modified the pertinent terms thereof. 31

HIGC and its president, Wilfredo Hernandez, both represented by the Office of the Government Corporate Counsel (OGCC), 32 and LBP 33 are of the same view. 34 In addition, HIGC explains that contrary to petitioners' belief, the transfer of the properties under the DAC is valid as the conveyance has been made to the Asset Pool with LBP, an entity with juridical entity, acting as trustee thereof. 35 Addressing the issue of forgery and fraud in the execution of the DAC, HIGC maintains that these factual matters remain to be mere allegations which nothing in the records of the case could conclusively prove, except the self-serving testimony of petitioners themselves. 36 cdasiajur

The Court denies the petition.

Petitioners' cause stems from the failure of PMRDC to restore to petitioners the possession of the TCTs of the lands within Area II upon its failure to exercise the option to purchase within the 12-month period stipulated in the MOA. Respondents maintain, however, that said obligation, dependent as it is on the exercise of the option to purchase, has altogether been expressly obliterated by the terms of the DAC whereby petitioners, through Demetrio as attorney-in-fact, have agreed to novate the terms of the MOA by extinguishing the core obligations of PMRDC on the payment of option money. This seems to suggest that with the execution of the DAC, PMRDC has already entered into the exercise of its option except that its obligation to deliver the option money has, by subsequent agreement embodied in the DAC, been substituted instead by the obligation to issue participation certificates in Demetrio's name but which, likewise, has not yet been performed by PMRDC. But petitioners stand against the validity of the DAC on the ground that the signature of Demetrio therein was spurious.

Firmly settled is the jurisprudential rule that forgery cannot be presumed from a mere allegation but rather must be proved by clear, positive and convincing evidence by the party alleging the same. 37 The burden to prove the allegation of forgery in this case has not been conclusively discharged by petitioners because first, nothing in the records supports the allegation except only perhaps Demetrio's explicit self-serving disavowal of his signature in open court. 38 Second, while in fact Demetrio at the trial of the case had committed to have the subject signature examined by an expert, 39 nevertheless, the trial had terminated without the results of the examination being submitted in evidence. Third, the claim of forgery, unsubstantiated as it is, becomes even more unremarkable in light of the fact that the DAC involved in this case is a notarized deed guaranteed by public attestation in accordance with law, such that the execution thereof enjoys the legal presumption of regularity in the absence of compelling proof to the contrary. 40 EcTDCI

Yet the inquiry on the validity of the DAC does not terminate with the finding alone of the genuineness of Demetrio's signature therein, because petitioners also stand against its validity on the ground of Demetrio's non-authority to execute the same. They claim that the execution of the DAC would be beyond the power of Demetrio to perform as his authority is limited only to selling or mortgaging the properties and does not include assigning and conveying said properties to the Asset Pool in consideration of shares of stocks for his lone benefit. For their part, respondents, who believe Demetrio's power of attorney was broad enough to effectuate a novation of PMRDC's core obligations in the MOA or, at the least, implement the provisions thereof through the DAC, invoke the 4th and 5th whereas-clauses in the DAC which, in relation to each other, supposedly pertain to that certain provision in the MOA which authorizes the conveyance of the properties to the Asset Pool in exchange for corporate shares. 41

The 4th and 5th whereas-clauses in the DAC read as follows:

WHEREAS, on November 3, 1997, PMRDC and LANDOWNER have entered into a Memorandum of Agreement whereby the former agreed to convey to the Isabel Homes Asset Pool certain real properties located at Sta. Maria, Laguna;

[WHEREAS], the LANDOWNER and PMRDC have agreed to revise and modify the said Memorandum of Agreement, whereby the LANDOWNER shall dispense with the option money as a requisite to the sale and purchase of the properties by PMRDC, and agreed to convey absolutely and unqualifiedly the same properties directly to the Isabel Homes Asset Pool for and in exchange of shares of stock or equity in PMRDC. 42

While indeed we find no provision in the MOA such as that alluded to in the aforequoted 4th whereas-clause in the DAC which purportedly embodies an agreement by the parties to assign and convey the subject properties to the Asset Pool, we surmise that the clause could be referring to paragraph 5 of the MOA which stipulates a commitment on the part of petitioners to give their consent to an assignment and conveyance of the properties to the Asset Pool but only once a request therefor is made by PMRDC. Paragraph 5 reads: DCcHAa

5.THAT, the VENDOR at the request of the VENDEE shall agree to convey the parcels of land to any bank or financial institution by way of mortgage or to a Trustee by way of a Trust Agreement at any time from the date of this instrument, PROVIDED, HOWEVER, that the VENDOR is not liable for any mortgage or loans or obligations that will be incurred by way of mortgage of Trust Agreement that the VENDEE might enter into; 43

Petitioners profess, however, that no such request was ever intimated to them at any time during the subsistence of the PMRDC's right to exercise the option to buy. But respondents are quick to reason that a request is unnecessary because Demetrio has been legally enabled by his special power to give such consent and accordingly execute the DAC, effect a novation of the MOA, and extinguish the stipulated obligations of PMRDC therein, or at least that he could assent to the implementation of the MOA provisions in the way that transpired. We agree.

Demetrio's special power of attorney granting the powers to sell and/or mortgage reads in part:

1.To sell and/or mortgage in favor of any person, corporation, partnership, private banking or financial institution, government or semi-government banking or financial institution for such price or amount and under such terms and conditions as our aforesaid attorney-in-fact may deem just and proper, parcels of land more particularly described as follows: CacEIS

xxx xxx xxx

2.To carry out the authority aforestated, to sign, execute and deliver such deeds, instruments and other papers that may be required or necessary;

3.To further attain the authority herein given, to do and perform such acts and things that may be necessary or incidental to fully carry out the authority herein granted. 44

It is in the context of this vesture of power that Demetrio, representing his shared interest with Carolina and Margarita, entered into the MOA with PMRDC. It is likewise within this same context that Demetrio later on entered into the DAC and accordingly extinguished the previously subsisting obligation of PMRDC to deliver the stipulated option money and replaced said obligation with the delivery instead of participation certificates in favor of Demetrio.

The powers conferred on Demetrio were exclusive only to selling and mortgaging the properties. Between these two specific powers, the power to sell is quite controversial because it is the sale transaction which bears close resemblance to the deal contemplated in the DAC. In fact, part of the testimony of Atty. Danilo Javier, counsel for respondent HIGC and head of its legal department at the time, is that in the execution of the DAC, respondents had relied on Demetrio's special power of attorney and also on his supposed agreement to be paid in kind, i.e., in shares of stock, as consideration for the assignment and conveyance of the subject properties to the Asset Pool. 45 What petitioners miss, however, is that the power conferred on Demetrio to sell "for such price or amount" 46 is broad enough to cover the exchange contemplated in the DAC between the properties and the corresponding corporate shares in PMRDC, with the latter replacing the cash equivalent of the option money initially agreed to be paid by PMRDC under the MOA. Suffice it to say that "price" is understood to mean "the cost at which something is obtained, or something which one ordinarily accepts voluntarily in exchange for something else, or the consideration given for the purchase of a thing." 47 DHaECI

Thus, it becomes clear that Demetrio's special power of attorney to sell is sufficient to enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita. In particular, it does include the authority to extinguish PMRDC's obligation under the MOA to deliver option money and agree to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration of the assignment and conveyance of the properties to the Asset Pool. Indeed, the terms of his special power of attorney allow much leeway to accommodate not only the terms of the MOA but also those of the subsequent agreement in the DAC which, in this case, necessarily and consequently has resulted in a novation of PMRDC's integral obligations. On this score, we quote with approval the decision of the Court of Appeals, aptly citing the case of California Bus Lines, Inc. v. State Investment House, Inc. 48 thus

There are two ways which could indicate, in fine, the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same. The first is when novation has been explicitly stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether the two obligations can stand together, each one having its independent existence. If they cannot, they are incompatible, and the latter obligation novates the first. Corollarily, changes that breed incompatibility must be essential in nature and not merely accidental. The incompatibility must take place in any of the essential elements of the obligation such as its object, cause or principal conditions thereof; otherwise, the change would be merely modificatory in nature and insufficient to extinguish the original obligation. 49

In view of the foregoing, the Court finds no useful purpose in addressing all the other issues raised in this petition.

A final note. Section 10, Book IV, Title III, Chapter 3 50 of the Revised Administrative Code of 1987 has designated the OGCC to act as the principal law office of government-owned or controlled corporations (GOCCs) in connection with any judicial or quasi-judicial proceeding. Yet between the two respondents GOCCs in this case LBP and HIGC it is only the latter for which the OGCC has entered its appearance. Nowhere in the records is it shown that the OGCC has ever entered its appearance in this case as principal legal counsel of respondent LBP, or that at the very least it has given express conformity to the LBP legal department's representation. 51 ATESCc

In Land Bank of the Philippines v. Martinez, 52 citing Land Bank of the Philippines v. Panlilio-Luciano, 53 we explained that the legal department of LBP is not expressly authorized by its charter to appear in behalf of the corporation in any proceeding as the mandate of the law is explicit enough to place the said department under the OGCC's power of control and supervision. We held in that case:

[Section 10] mandates the OGCC, and not the LBP Legal Department, as the principal law office of the LBP. Moreover, it establishes the proper hierarchical order in that the LBP Legal Department remains under the control and supervision of the OGCC. . . .

At the same time, the existence of the OGCC does not render the LBP Legal Department a superfluity. We do not doubt that the LBP Legal Department carries out vital legal services to LBP. However, the performance of such functions cannot deprive the OGCC's role as overseer of the LBP Legal Department and its mandate of exercising control and supervision over all GOCC legal departments. For the purpose of filing petitions and making submissions before this Court, such control and supervision imply express participation by the OGCC as principal legal counsel of LBP. . . .

It should also be noted that the aforementioned Section 10, Book IV, Title III, Chapter 3 of the Administrative Code of 1987 authorizes the OGCC to receive the attorney's fees adjudged in favor of their client GOCCs, such fees accruing to a special fund of the OGCC. Evidently, the non-participation of the OGCC in litigations pursued by GOCCs would deprive the former of its due funding as authorized by law. Hence, this is another reason why we cannot sustain Attys. Beramo and Berbao's position that the OGCC need not participate in litigations pursued by LBP. CETIDH

It may strike as disruptive to the flow of a GOCC's daily grind to require the participation of the OGCC as its principal law office, or the exercise of control and supervision by the OGCC over the acts of the GOCC's legal departments. For reasons such as proximity and comfort, the GOCC may find it convenient to rely instead on its in-house legal departments, or more irregularly, on private practitioners. Yet the statutory role of the OGCC as principal law office of GOCCs is one of long-standing, and we have to recognize such function as part of public policy. Since the jurisdiction of the OGCC includes all GOCCs, its perspective is less myopic than that maintained by a particular legal department of a GOCC. It is not inconceivable that left to its own devices, the legal department of a given GOCC may adopt a legal position inconsistent with or detrimental to other GOCCs. Since GOCCs fall within the same governmental framework, it would be detrimental to have GOCCs foisted into adversarial positions by their respective legal departments. Hence, there is indubitable wisdom in having one overseer over all these legal departments which would ensure that the legal positions adopted by the GOCCs would not conflict with each other or the government.

. . . Certainly, Section 10, Book IV, Title III, Chapter 3 of the Administrative Code of 1987 can be invoked by adverse parties or by the courts in citing as deficient the exclusive representation of LBP by its Legal Department. Then again, if neither the adverse parties nor the courts of jurisdiction choose to contest this point, there would be no impediment to the litigation to maintain. . . . 54

WHEREFORE, the Petition is DENIED. The October 19, 2005 Decision and January 11, 2006 Resolution of the Court of Appeals, in CA-G.R. CV No. 83852, are hereby AFFIRMED. DTEIaC

SO ORDERED.

Carpio, Nachura, Abad and Mendoza, JJ., concur.

Footnotes

1.Penned by Associate Justice Juan Q. Enriquez, with Associate Justices Conrado M. Vasquez, Jr. and Vicente Q. Roxas, concurring; rollo, pp. 26-36.

2.The case was entitled, Carolina Hernandez-Nievera, Demetrio P. Hernandez, Jr. and Margarita H. Malvar v. Wilfredo F. Hernandez, Home Insurance & Guaranty Corporation, Project Movers Realty & Development Corp., Mario P. Villamor and Land Bank of the Philippines.

3.Rollo, pp. 38-39.

4.The judgment was signed by Judge Zorayda Herradura-Salcedo, records, Vol. I, pp. 170-202.

5.Now known as Home Guaranty Corporation.

6.See Asset Pool Formation Agreement dated May 29, 1995, folder of exhibits, pp. 48-69.

7.See Trust Agreement dated May 29, 1995, id. at 32-47.

8.See Trustee Fee Agreement dated November 15, 1995 between PMRDC and LBP, id. at 81-84.

9.See Trust Agreement dated May 29, 1995, id. at 32.

10.Asset Pool Formation Agreement, rollo, p. 115.

11.See Contract of Guaranty dated May 29, 1995, folder of exhibits, pp. 70-75.

12.See Special Power of Attorney dated January 23, 1997; id. at 21-23.

13.See Memorandum of Agreement, id. at 18-19. (Emphasis supplied.)

14.TSN, September 6, 2000, pp. 19-21, 40-43; TSN, September 27, 2000, p. 5.

15.PMRDC Board Resolution No. 7, 1998, folder of exhibits, p. 85.

16.See Deed of Assignment and Conveyance, id. at 25-27.

17.Id. at 25. It provides:

WHEREAS], the LANDOWNER and PMRDC have agreed to revise and modify the said Memorandum of Agreement, whereby the LANDOWNER shall dispense with the option money as a requisite to the sale and purchase of the properties by PMRDC, and agreed to convey absolutely and unqualifiedly the same properties directly to the Isabel Homes Asset Pool for and in exchange of shares of stock or equity in PMRDC. (Emphasis supplied.)

18.TSN, September 6, 2000, pp. 8-17. TSN, March 8, 2001, p. 13; TSN, December 7, 2000, pp. 28, 32.

19.Records, Vol. I, pp. 29-30.

20.CA rollo, pp. 202-221.

21.Records, Vol. I, pp. 3-13. The trial court declined to issue a preliminary injunctive relief in view of the fact that the TCTs in question have already been put in custodia legis, (Records, Vol. II, pp. 38, 84-87).

22.Records, Vol. II, pp. 199-200.

23.Id. at 201-202.

24.CA rollo, p. 212.

25.Id.

26.Id. at 210-212.

27.CA rollo, pp. 245-246.

28.Rollo, pp. 15-16.

29.Id. at 16-17.

30.Id. at 43-44.

31.Id. at 45.

32.Id. at 68-69.

33.Represented by its own Administrative Legal and Litigation Department; id. at 51-52.

34.Rollo, pp. 55-56, 86, 89-92.

35.Id. at 87-88.

36.Id. at 92-101.

37.St. Mary's Farm, Inc. v. Prima Real Properties, Inc., G.R. No. 158144, July 31, 2008, 560 SCRA 704, 713; Libres v. Delos Santos, G.R. No. 176358, June 17, 2008, 554 SCRA 642, 655; Fernandez v. Fernandez, 416 Phil. 322, 342 (2001); R.F. Navarro & Co., Inc. v. Hon. Vailoces, 413 Phil. 432, 442 (2001); Tenio-Obsequio v. Court of Appeals, G.R. No. 107967, March 1, 1994, 230 SCRA 550, 558.

38.TSN, August 29, 2000, p. 16; TSN, September 27, 2000, pp. 10-11, 19-20.

39.TSN, August 29, 2000, p. 17.

40.Libres v. Delos Santos, supra note 37; Pan Pacific Industrial Sales Co., Inc. v. Court of Appeals, G.R. No. 125283, February 10, 2006, 482 SCRA 164.

41.See Comment of HIGC, rollo, p. 98.

42.Rollo, p. 162. (Emphasis supplied.)

43.Folder of Exhibits, p. 19. (Emphasis supplied.)

44.Id. at 1-3. (Emphasis supplied.)

45.TSN, December 7, 2000, pp. 23-34.

46.Id.

47.Black's Law Dictionary, 6th ed., pp. 1188-1189.

48.463 Phil. 689 (2003).

49.Rollo, p. 34.

50.Section 10. Office of the Government Corporate Counsel. The Office of the Government Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or controlled corporations, their subsidiaries, other corporate offsprings and government acquired asset corporations and shall exercise control and supervision over all legal departments or divisions maintained separately and such powers and functions as are now or may hereafter be provided by law. In the exercise of such control and supervision, the Government Corporate Counsel shall promulgate rules and regulations to effectively implement the objectives of the Office.

The OGCC is authorized to receive the attorney's fees adjudged in favor of their client government-owned or controlled corporations, their subsidiaries/other corporate offsprings and government acquired asset corporations. These attorney's fees shall accrue to a Special fund of the OGCC, and shall be deposited in an authorized government depository as trust liability and shall be made available for expenditure without the need for a Cash Disbursement Ceiling, for purposes of upgrading facilities and equipment, granting of employee's incentive pay and other benefits, and defraying such other incentive expenses not provided for in the General Appropriations Act as may be determined by the Government Corporate Counsel.

51.See Entry of Appearance with Motion for Extension of Time to File Comment, rollo, pp. 51-52.

52.G.R. No. 169008, August 14, 2007, 530 SCRA 158.

53.G.R. No. 165428, July 13, 2005 (Resolution).

54.Land Bank of the Philippines v. Martinez, supra note 52, at 164-166, citing Land Bank of the Philippines v. Panlilio-Luciano, supra note 53. (Emphasis supplied.)

THIRD DIVISION

[G.R. No. 170405. February 2, 2010.]

RAYMUNDO S. DE LEON, petitioner, vs. BENITA T. ONG, 1 respondent.

DECISION

CORONA, J p:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land 2 with improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these properties were mortgaged to Real Savings and Loan Association, Incorporated (RSLAI), petitioner and respondent executed a notarized deed of absolute sale with assumption of mortgage 3 stating: CADHcI

xxx xxx xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED THOUSAND PESOS (P1.1 million), Philippine currency, the receipt whereof is hereby acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said [PETITIONER] does hereby sell, transfer and convey in a manner absolute and irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate together with the buildings and other improvements existing thereon, situated in [Barrio] Mayamot, Antipolo, Rizal under the following terms and conditions:

1.That upon full payment of [respondent] of the amount of FOUR HUNDRED FIFTEEN THOUSAND FIVE HUNDRED (P415,000), [petitioner] shall execute and sign a deed of assumption of mortgage in favor of [respondent] without any further cost whatsoever;

2.That [respondent] shall assume payment of the outstanding loan of SIX HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (P684,500) with REAL SAVINGS AND LOAN, 4 Cainta, Rizal . . . (emphasis supplied) cTACIa

xxx xxx xxx

Pursuant to this deed, respondent gave petitioner P415,500 as partial payment. Petitioner, on the other hand, handed the keys to the properties and wrote a letter informing RSLAI of the sale and authorizing it to accept payment from respondent and release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties. 5 Respondent likewise informed RSLAI of her agreement with petitioner for her to assume petitioner's outstanding loan. RSLAI required her to undergo credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave her useless. Respondent thus proceeded to RSLAI to inquire about the credit investigation. However, she was informed that petitioner had already paid the amount due and had taken back the certificates of title.

Respondent persistently contacted petitioner but her efforts proved futile.

On June 18, 1993, respondent filed a complaint for specific performance, declaration of nullity of the second sale and damages 6 against petitioner and Viloria in the Regional Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had previously sold the properties to her on March 10, 1993, he no longer had the right to sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties. AcSEHT

Petitioner, on the other hand, insisted that respondent did not have a cause of action against him and consequently prayed for the dismissal of the complaint. He claimed that since the transaction was subject to a condition (i.e., that RSLAI approve the assumption of mortgage), they only entered into a contract to sell. Inasmuch as respondent did apply for a loan from RSLAI, the condition did not arise. Consequently, the sale was not perfected and he could freely dispose of the properties. Furthermore, he made a counter-claim for damages as respondent filed the complaint allegedly with gross and evident bad faith.

Because respondent was a licensed real estate broker, the RTC concluded that she knew that the validity of the sale was subject to a condition. The perfection of a contract of sale depended on RSLAI's approval of the assumption of mortgage. Since RSLAI did not allow respondent to assume petitioner's obligation, the RTC held that the sale was never perfected.

In a decision dated August 27, 1999, 7 the RTC dismissed the complaint for lack of cause of action and ordered respondent to pay petitioner P100,000 moral damages, P20,000 attorney's fees and the cost of suit.

Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that the court a quo erred in dismissing the complaint.

The CA found that the March 10, 2003 contract executed by the parties did not impose any condition on the sale and held that the parties entered into a contract of sale. Consequently, because petitioner no longer owned the properties when he sold them to Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral and exemplary damages for fraudulently depriving respondent of the properties. CSHDTE

In a decision dated July 22, 2005, 9 the CA upheld the sale to respondent and nullified the sale to Viloria. It likewise ordered respondent to reimburse petitioner P715,250 (or the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the certificates of titles to respondent and pay her P50,000 moral damages and P15,000 exemplary damages.

Petitioner moved for reconsideration but it was denied in a resolution dated November 11, 2005. 10 Hence, this petition, 11 with the sole issue being whether the parties entered into a contract of sale or a contract to sell.

Petitioner insists that he entered into a contract to sell since the validity of the transaction was subject to a suspensive condition, that is, the approval by RSLAI of respondent's assumption of mortgage. Because RSLAI did not allow respondent to assume his (petitioner's) obligation, the condition never materialized. Consequently, there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of sale as petitioner already conveyed full ownership of the subject properties upon the execution of the deed.

We modify the decision of the CA.

CONTRACT OF SALE OR

CONTRACT TO SELL?

The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The RTC ruled that it was a contract to sell while the CA held that it was a contract of sale. DTSaHI

In a contract of sale, the seller conveys ownership of the property to the buyer upon the perfection of the contract. Should the buyer default in the payment of the purchase price, the seller may either sue for the collection thereof or have the contract judicially resolved and set aside. The non-payment of the price is therefore a negative resolutory condition. 12

On the other hand, a contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership of the property until he fully pays the purchase price. For this reason, if the buyer defaults in the payment thereof, the seller can only sue for damages. 13

The deed executed by the parties (as previously quoted) stated that petitioner sold the properties to respondent "in a manner absolute and irrevocable" for a sum of P1.1 million. 14 With regard to the manner of payment, it required respondent to pay P415,500 in cash to petitioner upon the execution of the deed, with the balance 15 payable directly to RSLAI (on behalf of petitioner) within a reasonable time. 16 Nothing in said instrument implied that petitioner reserved ownership of the properties until the full payment of the purchase price. 17 On the contrary, the terms and conditions of the deed only affected the manner of payment, not the immediate transfer of ownership (upon the execution of the notarized contract) from petitioner as seller to respondent as buyer. Otherwise stated, the said terms and conditions pertained to the performance of the contract, not the perfection thereof nor the transfer of ownership. cATDIH

Settled is the rule that the seller is obliged to transfer title over the properties and deliver the same to the buyer. 18 In this regard, Article 1498 of the Civil Code 19 provides that, as a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing sold.

In this instance, petitioner executed a notarized deed of absolute sale in favor of respondent. Moreover, not only did petitioner turn over the keys to the properties to respondent, he also authorized RSLAI to receive payment from respondent and release his certificates of title to her. The totality of petitioner's acts clearly indicates that he had unqualifiedly delivered and transferred ownership of the properties to respondent. Clearly, it was a contract of sale the parties entered into.

Furthermore, even assuming arguendo that the agreement of the parties was subject to the condition that RSLAI had to approve the assumption of mortgage, the said condition was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding obligation and taking back the certificates of title without even notifying respondent. In this connection, Article 1186 of the Civil Code provides:

Article 1186.The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.

VOID SALE OR

DOUBLE SALE?

Petitioner sold the same properties to two buyers, first to respondent and then to Viloria on two separate occasions. 20 However, the second sale was not void for the sole reason that petitioner had previously sold the same properties to respondent. On this account, the CA erred. aTcSID

This case involves a double sale as the disputed properties were sold validly on two separate occasions by the same seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides:

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

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

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. (emphasis supplied)

This provision clearly states that the rules on double or multiple sales apply only to purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or an interest in, such property and pays a full and fair price for the same at the time of such purchase, or before he has notice of some other person's claim or interest in the property. 21 The law requires, on the part of the buyer, lack of notice of a defect in the title of the seller and payment in full of the fair price at the time of the sale or prior to having notice of any defect in the seller's title. THEDCA

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the mortgage to RSLAI. According to her agreement with petitioner, respondent had the obligation to assume the balance of petitioner's outstanding obligation to RSLAI. Consequently, respondent informed RSLAI of the sale and of her assumption of petitioner's obligation. However, because petitioner surreptitiously paid his outstanding obligation and took back her certificates of title, petitioner himself rendered respondent's obligation to assume petitioner's indebtedness to RSLAI impossible to perform.

Article 1266 of the Civil Code provides:

Article 1266.The debtor in obligations to do shall be released when the prestation become legally or physically impossible without the fault of the obligor.

Since respondent's obligation to assume petitioner's outstanding balance with RSLAI became impossible without her fault, she was released from the said obligation. Moreover, because petitioner himself willfully prevented the condition vis--vis the payment of the remainder of the purchase price, the said condition is considered fulfilled pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining whether respondent was a purchaser in good faith, she is deemed to have fully complied with the condition of the payment of the remainder of the purchase price. AIaDcH

Respondent was not aware of any interest in or a claim on the properties other than the mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the properties from petitioner after the latter sold them to respondent. Respondent was therefore a purchaser in good faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the properties with the registrar of deeds, the one who took prior possession of the properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he executed the notarized deed 22 and handed over to respondent the keys to the properties. For this reason, respondent took actual possession and exercised control thereof by making repairs and improvements thereon. Clearly, the sale was perfected and consummated on March 10, 1993. Thus, respondent became the lawful owner of the properties.

Nonetheless, while the condition as to the payment of the balance of the purchase price was deemed fulfilled, respondent's obligation to pay it subsisted. Otherwise, she would be unjustly enriched at the expense of petitioner.

Therefore, respondent must pay petitioner P684,500, the amount stated in the deed. This is because the provisions, terms and conditions of the contract constitute the law between the parties. Moreover, the deed itself provided that the assumption of mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must deliver the certificates of title to respondent. We likewise affirm the award of damages. cECaHA

WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner Raymundo de Leon P684,500 representing the balance of the purchase price as provided in their March 10, 1993 agreement.

Costs against petitioner.

SO ORDERED.

Carpio, * Velasco, Jr., Nachura and Peralta, JJ., concur.

Footnotes

1.The Court of Appeals was impleaded as respondent but was excluded pursuant to Section 4, Rule 45 of the Rules of Court.

2.Covered by TCT Nos. 226469, 226470 and 226471 registered in the name of petitioner.

3.Rollo, pp. 55-56. There is a marked discrepancy between the total amount and the sum of the payments to be made by respondent (or P1,099,500).

4.The records of this case revealed that petitioner's outstanding obligation to RSLAI amounted to P715,000 as of April 1, 1993.

5.Respondent had the properties cleaned and landscaped. She likewise had the house (built thereon) painted and repaired.

6.Docketed as Civil Case No. 93-2739.

7.Penned by Judge Francisco A. Querubin. Id., pp. 129-151.

8.Docketed as CA-G.R. CV No. 59748.

9.Penned by Associate Justice Eugenio S. Labitoria and concurred in by Associate Justices Eliezer R. delos Santos and Arturo D. Brion (now a member of this Court) of the Third Division of the Court of Appeals. Rollo, pp. 30-34.

10.Id., pp. 46-47.

11.Under Rule 45 of the Rules of Court.

12.Dijamco v. Court of Appeals, G.R. No. 113665, 7 October 2004, 440 SCRA 190, 197. See also J.B.L. Reyes, 5 OUTLINE OF PHILIPPINE CIVIL LAW, 2-3 (1957).

13.Id.

14.Supra note 3.

15.Supra note 4.

16.Paragraph 2 of the deed did not prescribe a period within which respondent should settle petitioner's obligation to RSLAI.

17.See Civil Code, Art. 1370 which provides:

Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of the stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

18.CIVIL CODE, Art. 1495 provides:

Article 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale.

19.CIVIL CODE, Art. 1498 provides:

Article 1498. When a 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 be clearly inferred.

With regard to movable property, its delivery may also be made by the delivery of the keys of the place or depository where it is stored or kept. (emphasis supplied)

20.See Delfin v. Lagon, G.R. No. 132262, 15 September 2006, 502 SCRA 24, 31.

21.Centeno v. Spouses Viray, 440 Phil. 881, 885 (2002).

22.See CIVIL CODE, Art. 1498.

*Per Special Order No. 818 dated January 18, 2010.

SECOND DIVISION

[G.R. No. 174118. April 11, 2012.]

THE ROMAN CATHOLIC CHURCH, represented by the Archbishop of Caceres, petitioner, vs. REGINO PANTE, respondent.

DECISION

BRION, J p:

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

THE FACTUAL ANTECEDENTS

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

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

The Church filed its answer with a counterclaim, seeking the annulment of its contract with Pante. The Church alleged that its consent to the contract was obtained by fraud when Pante, in bad faith, misrepresented that he had been an actual occupant of the lot sold to him, when in truth, he was merely using the 32-square meter lot as a passageway from his house to the town proper. It contended that it was its policy to sell its lots only to actual occupants. Since the spouses Rubi and their predecessors-in-interest have long been occupying the 215-square meter lot that included the 32-square meter lot sold to Pante, the Church claimed that the spouses Rubi were the rightful buyers.

During pre-trial, the following admissions and stipulations of facts were made:

1.The lot claimed by Pante is a strip of land measuring only 2 x16 meters; TDcEaH

2.The lot had been sold by the Church to Pante on September 25, 1992;

3.The lot was included in the sale to the spouses Rubi by the Church; and

4.Pante expressly manifested and represented to the Church that he had been actually occupying the lot he offered to buy. 8

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

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