Dignos vs CA

FACTS:

The spouses Silvestre and Isabel Dignos were owners of a parcel of land in Opon, Lapu-Lapu

City. On June 7, 1965, appellants, herein petitioners Dignos spouses sold the said parcel of land

to respondent Atilano J. Jabil for the sum of P28,000.00, payable in two installments, with an

assumption of indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00

[encumbrance], which was paid and acknowledged by the vendors in the deed of sale executed in

favor of plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or

before September 15, 1965.

On November 25, 1965 the Dignos spouses sold the same land in favor of defendants spouses,

Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the price of

P35,000.00. A deed of absolute sale was executed by the Dignos spouses in favor of the Cabigas

spouses, and which was registered in the Office of the Register of Deeds pursuant to the

provisions of Act No. 3344.

As the Dignos spouses refused to accept from plaintiff-appellant the balance of the purchase price

of the land, and as plaintiff- appellant discovered the second sale made by defendants-appellants

to the Cabigas spouses, plaintiff-appellant brought the present suit.

ISSUES:

1 . Whether or not there was an absolute contract of sale.

2. Whether or not the contract of sale was already rescinded when the Dignos spouses sold the

land to Cabigas

HELD:

I. Yes.

That a deed of sale is absolute in nature although denominated as a “Deed of Conditional Sale”

where nowhere in the contract in question is a proviso or stipulation to the effect that title to the

property sold is reserved in the vendor until full payment of the purchase price, nor is there a

stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee

fails to pay within a fixed period.

A careful examination of the contract shows that there is no such stipulation reserving the title of

the property on the vendors nor does it give them the right to unilaterally rescind the contract

upon non-payment of the balance thereof within a fixed period.

On the contrary, all the elements of a valid contract of sale under Article 1458 of the Civil Code

are present. While it may be conceded that there was no constructive delivery of the land sold in

the case at bar, as subject Deed of Sale is a private instrument, it is beyond question that there

was actual delivery thereof. As found by the trial court, the Dignos spouses delivered the

possession of the land in question to Jabil as early as March 27,1965 so that the latter constructed

thereon Sally’s Beach Resort also known as Jabil’s Beach Resort in March, 1965; Mactan White

Beach Resort on January 15, J 966 and Bevirlyn’s Beach Resort on September 1, 1965. Petitioner

spouses admitted the facts.

2. No.

The contract of sale being absolute in nature is governed by Article 1592 of the Civil Code. It is

undisputed that petitioners never notified private respondents Jabil by notarial act that they were

rescinding the contract, and neither did they file a suit in court to rescind the sale. There is no

showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for

the latter that, on the contrary, vigorously denied having sent Amistad to tell petitioners that he

was already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it is

required that acts and contracts which have for their object extinguishment of real rights over

immovable property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no money on

the stipulated date of payment on September 15,1965 and was able to raise the necessary amount

only by mid-October 1965. It has been ruled, however, that where time is not of the essence of

the agreement, a slight delay on the part of one party in the performance of his obligation is not a

sufficient ground for the rescission of the agreement. Considering that private respondent has

only a balance of P4,OOO.00 and was delayed in payment only for one month, equity and justice

mandate as in the afore cited case that Jabil be given an additional period within which to

complete payment of the purchase price.

JACOBUS BERNHARD HULST v. PR BUILDERS INC. (G.R. No. 156364)

FACTS:

The Petitioner and his spouse, both Dutch Nationals, entered into a Contract to Sell with PR

Builders, Inc. to purchase a 210-sq m residential unit in the respondent's townhouse project in

Batanagas. When PR Builder's failed to comply with their verbal promise to complete the project,

the spouses Hulst filed a complaint for recession of contract with interest, damages and attorney's

fees before the Housing and Land Regulatory Board (HLURB), which then was granted. A Writ

of Execution was then addressed to the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, but

upon the complaint of the respondent, the levy was set aside, leaving only the respondent's

personal properties to be levied first. The Sheriff set a public auction of the said levied properties,

however, the respondent filed a motion to quash Writ of levy on the ground that the sheriff made

an over levy since the aggregate appraised value of the properties at P6,500 per sq m is

P83,616,000. Instead of resolving the objection of the respondent's regarding the auction, the

Sheriff proceeded with the auction since there was no restraining order from the HLURB. The 15

parcels of land was then awarded to Holly Properties Realty at a bid of P5,450,653. On the same

day, the Sheriff remitted the legal fees and submitted to contracts of sale to HLURB, however, he

then received orders to suspend proceedings on the auction for the reason that the market value of

the properties was not fair. There was disparity between the appraised value and the value made

by the petitioner and the Sheriff, which should've been looked into by the Sheriff before making

the sale. While an inadequacy in price is not a ground to annul such sale, the court is justified to

such intervention where the price shocks the conscience.

ISSUES:

1. Whether or not the Sheriff erred in the value that was attached to the properties during the

auction and as well as disregarding the objection made by the respondent's?

2. Whether or not the market value of the said property was inadequate?

3. Whether or not the spouses Hulst's request for damages is actionable?

HELD:

1. No. According to the Rules of Court, the value of the property levied is not required to be

exactly the same as the judgment debt. In the levy of property, the Sheriff does not determine the

exact valuation of the levied property. The Sheriff is left to his own judgment. He should be

allowed a reasonable margin between the value of the property levied upon and the amount of the

execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy the

execution does not render his actions improper.

In the absence of a restraining order, no error can be imputed to the Sheriff in proceeding

with the auction sale despite the pending motion to quash the levy filed by the respondents with

the HLURB. Sheriff’s, as officers charged with the task of the enforcement and/or

implementation of judgments, must act with considerable dispatch so as not to unduly delay the

administration of justice. It is not within the jurisdiction of the Sheriff to consider and resolve

respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no

authority, on his own, to suspend the auction sale. His duty being ministerial, he has no discretion

to postpone the conduct of the auction sale.

2. No. The HLURB Arbiter and Director had no sufficient factual basis to determine the value of

the levied property. The Appraisal report, that was submitted, was based on the projected value of

the townhouse project after it shall have been fully developed, that is, on the assumption that the

residential units appraised had already been built. Since it is undisputed that the townhouse

project did not push through, the projected value did not become a reality. Thus, the appraisal

value cannot be equated with the fair market value.

3. No. Under Article 12, Sec.7 of the 1987 Constitution, foreign nationals, the spouses Hulst, are

disqualified form owning real property. However, under article 1414 of the Civil Code, one who

repudiates the agreement and demands his money before the illegal act has taken place is entitled

to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his

claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to

acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery

only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No

damages may be recovered on the basis of a void contract; being nonexistent, the agreement

produces no juridical tie between the parties involved. Further, petitioner is not entitled to actual

as well as interests thereon, moral and exemplary damages and attorney's fees.

Toyota Shaw Inc. vs. Court of Appeals, and Sosa

244 SCRA 320

May 1995

FACTS:

Luna L. Sosa and his son, Gilbert, went to purchase a yellow Toyota Lite Ace from the Toyota

office at Shaw Boulevard, Pasig (petitioner Toyota) on June 14, 1989 where they met Popong

Bernardo who was a sales representative of said branch. Sosa emphasized that he needed the car

not later than June 17, 1989 because he, his family, and a balikbayan guest would be using it on

June 18 to go home to Marinduque where he will celebrate his birthday on June 19. Bernardo

assured Sosa that a unit would be ready for pick up on June 17 at 10:00 in the morning, and

signed the "Agreements Between Mr. Sosa &Popong Bernardo of Toyota Shaw, Inc.,” a

document which did not mention anything about the full purchase price and the manner the

installments were to be paid. Sosa and Gilbert delivered the down payment of P100,000.00 on

June 15, 1989 and Bernardo accomplished a printed Vehicle Sales Proposal (VSP) No. 928 which

showed Sosa’s full name and home address, that payment is by "installment," to be financed by

"B.A.," and that the "BALANCE TO BE FINANCED" is "P274,137.00", but the spaces provided

for "Delivery Terms" were not filled-up.

When June 17 came, however, petitioner Toyota did not deliver the Lite Ace. Hence, Sosa asked

that his down payment be refunded and petitioner Toyota issued also on June 17 a Far East Bank

check for the full amount of P100,000.00, the receipt of which was shown by a check voucher of

Toyota, which Sosa signed with the reservation, "without prejudice to our future claims for

damages." Petitioner Toyota contended that the B.A. Finance disapproved Sosa’s the credit

financing application and further alleged that a particular unit had already been reserved and

earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of

the purchase price. Toyota then gave Sosa the option to purchase the unit by paying the full

purchase price in cash but Sosa refused.

The trial court found that there was a valid perfected contract of sale between Sosa and Toyota

which bound the latter to deliver the vehicle and that Toyota acted in bad faith in selling to

another the unit already reserved for Sosa, and the Court of Appeals affirmed the said decision.

ISSUE:

Was there a perfected contract of sale between respondent Sosa and petitioner Toyota?

COURT RULING:

The Supreme Court granted Toyota’s petition and dismissed Sosa’s complaint for damages

because the document entitled “Agreements Between Mr. Sosa &Popong Bernardo of Toyota

Shaw, Inc.,” was not a perfected contract of sale, but merely an agreement between Mr. Sosa and

Bernardo as private individuals and not between Mr. Sosa and Toyota as parties to a contract.

There was no indication in the said document of any obligation on the part of Toyota to transfer

ownership of a determinate thing to Sosa and neither was there a correlative obligation on the part

of the latter to pay therefor a price certain. The provision on the downpayment of P100,000.00

made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could

only refer to a sale on installment basis, as VSP No.928 executed on June 15, 1989 confirmed.

The VSP also created no demandable right in favor of Sosa for the delivery of the vehicle to him,

and its non-delivery did not cause any legally indemnifiable injury.

SPS. EDRADA vs. RAMOS [no digest]

LLOYD'S ENTERPRISES AND CREDIT CORPORATION, PETITIONERS

VS

SPS. FERDINAND AND PERSEVERANDA DOLLETON, RESPONDENTS

[G.R. No. 171373, June 18, 2008]

FACTS:

Spouses Dolleton, were the registered owners of a parcel of land covered by TCT No. 153554

with a four-door apartment building being leased to various tenants. Respondents mortgaged the

property to a certain Santos to secure a loan in the amount of P100,000.00. Upon payment of the

loan on 15 August 1994, Santos executed a release and cancellation of the mortgage. The same

was annotated on the TCT.

On 15 September 1994, TCT No. 153554 in the name of respondents was cancelled and a new

TCT No. 197220 was issued in the name of Gagan on the basis of a Deed of Absolute Sale dated

5 August 1994 whereby respondents purportedly sold to Gagan the subject property for the sum

of P120,000.00.

On 19 September 1994, Gagan and Gueverra mortgaged said property with TCT No. 197220 to

petitioner LECC for second loan of P542,928.00 and was annotated on said Title. However,

Gagan and Guevarra failed to pay the loan upon maturity. Thus, petitioner foreclosed mortgaged

property being the highest bidder and was not redeemed within the one-year period. Hence,

ownership was consolidated in favor of petitioner and was issue a new TCT No. 210363

cancelling TCT No. 197220.

Petitioner then sent notices to the apartment tenants on the transfer of ownership and rentals were

not remitted to respondents anymore, prompting the latter to cause the annotation of an adverse

claim on TCT No. 210363.

Respondents prayed among others for the restoration of TCT No. 153554 and nullification of the

Deed of Absolute Sale, and the extrajudicial foreclosure proceedings. They denied having

executed the Deed of Absolute Sale and alleged that they had merely offered to sell to Gagan the

subject property for P900,000.00 on installment basis so that they could pay their loan obligation

to Santos. After Gagan had initially paid P200,000.00, they entrusted the owner's copy of TCT

No. 153554 to him. Gagan was unable to pay the balance of the purchase price, rather she caused

the fraudulent cancellation of TCT No. 153554 and the issuance of TCT No. 197220 in her name,

and of eventually using TCT No. 197220 to secure the loans obtained from petitioner.

Respondents also faulted petitioner for failing to make adequate inquiries on the true ownership

of the property considering the suspicious circumstances surrounding Gagan's and Guevarra's

request for loan immediately after the issuance of the new certificate of title.

The RTC declared the Deed of Absolute Sale between Gagan and Dolleton as spurious and

directed the reconveyance of the property to the true and genuine owners, the spouses Dolleton.

CA affirmed RTC’s decision.

ISSUE:

WON Petitioner is a Mortgagee and Buyer in Good Faith

RULING:

The Court affirmed the reconveyance of the property to respondents Dolleton as petitioner is not

a mortgagee in good faith, hence, foreclosure was not valid. Petitioner failed to verify the actual

condition of the property, particularly as to who is in actual possession and if the premises are

leased to third persons, who is receiving the rental payments therefore.

Appellant LECC merely submitted in evidence forms for credit investigation on the borrower's

capacity to pay, there is no showing that they actually inspected the property offered as collateral.

Had precautionary measure been taken, the lending company's representatives would have easily

discovered that the four (4)-door apartment in the premises being mortgaged is rented by tenants

and they could have been provided with information that plaintiffs-appellees are still the present

lessors/owners thereof.

Moreover, the circumstance that the certificate of title covering the property offered as security

was newly issued should have put petitioner on guard and prompted it to conduct an investigation

surrounding the transfer of the property to defendant Gagan. Had it inquired further, petitioner

would have discovered that the property was sold for an unconscionably low consideration of

only P120,000.00 when it could have fetched as high as P900,000.00. A purchaser cannot close

his eyes to facts which should put a reasonable man on his guard and claim that he acted in good

faith under the belief that there was no defect in the title of the vendor. Petitioner is engaged in

the business of extending credit to the public and is, thus, expected to exercise due diligence in

dealing with properties offered as security. The failure of respondent to take such precautionary

steps is considered negligence on its part and would thereby preclude the defense of good faith.

Heirs of Jesus Mascunana v. CA

FACTS:

Mascunana bought a parcel of land from the Wuthrich siblings. Part of which Mascunana, he later

sold to Sumilhig. The contract price is 4,690 with 3,690 as down payment. Their agreement says:

That the balance of ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto

the VENDOR as soon as the above-portions of Lot 124 shall have been surveyed in the name of

the VENDEE and all papers pertinent and necessary to the issuance of a separate Certificate of

Title in the name of the VENDEE shall have been prepared. Sumilhig later sold the same lot to

Layumas. Years after, Layumas wrote to the heirs of Mascunana (since Mascunana died already)

offering to pay the 1,000 balance of the purchase price of the property. The addressee, however,

refused to receive the mail matter. Heirs Mascunana then filed a complaint for recovery of

possession against Barte ( an individual whom Layumas allowed to stay on the subject property).

Issue:

WON the contract of alienation of the subject lot in favor of Sumilhig was a contract to sell or a

contract of sale

Held:

Sale.

Article 1458 of the New Civil Code provides: By the contract of sale, one of the contracting

parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the

other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute

or conditional. Thus, there are three essential elements of sale, to wit: a) Consent or meeting of

the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate

subject matter; and c) Price certain in money or its equivalent. In this case, there was a meeting of

the minds between the vendor and the vendee, when the vendor undertook to deliver and transfer

ownership over the property covered by the deed of absolute sale to the vendee for the price of

P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down payment. The

vendor undertook to have the property sold, surveyed and segregated and a separate title therefor

issued in the name of the vendee, upon which the latter would be obliged to pay the balance of

P1,000.00. There was no stipulation in the deed that the title to the property remained with the

vendor, or that the right to unilaterally resolve the contract upon the buyer’s failure to pay within

a fixed period was given to such vendor. Patently, the contract executed by the parties is a deed of

sale and not a contract to sell. As the Court ruled in a recent case: In Dignos v. Court of Appeals

(158 SCRA 375), we have said that, although denominated a “Deed of Conditional Sale,” a sale is

still absolute where the contract is devoid of any proviso that title is reserved or the right to

unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be

transferred to the buyer upon actual or constructive delivery (e.g. by the execution of a public

document) of the property sold. Where the condition is imposed upon the perfection of the

contract itself, the failure of the condition would prevent such perfection. If the condition is

imposed on the obligation of a party which is not fulfilled, the other party may either waive the

condition or refuse to proceed with the sale. (Art. 1545, Civil Code).Thus, in one case, when the

sellers declared in a “Receipt of Down Payment” that they received an amount as purchase price

for a house and lot without any reservation of title until full payment of the entire purchase price,

the implication was that they sold their property. In People’s Industrial and

Commercial Corporation v. Court of Appeals, it was stated: A deed of sale is considered absolute

in nature where there is neither a stipulation in the deed that title to the property sold is reserved

in the seller until full payment of the price, nor one giving the vendor the right to unilaterally

resolve the contract the moment the buyer fails to pay within a fixed period. Applying these

principles to this case, it cannot be gainsaid that the contract of sale between the parties is

absolute, not conditional. There is no reservation of ownership nor a stipulation providing for

a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of

the lot to respondent. Thus, Art. 1477 provides that the ownership of the thing sold shall be

transferred to the vendee upon the actual or constructive delivery thereof. The condition in the

deed that the balance of P1,000.00 shall be paid to the vendor by the vendee as soon as the

property sold shall have been surveyed in the name of the vendee and all papers pertinent and

necessary to the issuance of a separate certificate of title in the name of the vendee shall have

been prepared is not a condition which prevented the efficacy of the contract of sale. It merely

provides the manner by which the total purchase price of the property is to be paid. The condition

did not prevent the contract from being in full force and effect: The stipulation that the “payment

of the full consideration based on a survey shall be due and payable in five (5) years from the

execution of a formal deed of sale” is not a condition which affects the efficacy of the contract of

sale. It merely provides the manner by which the full consideration is to be computed and the

time within which the same is to be paid. But it does not affect in any manner the effectivity of

the contract. …In a contract to sell, ownership is retained by a seller and is not to be transferred to

the vendee until full payment of the price. Such payment is a positive suspensive condition, the

failure of which is not a breach of contract but simply an event that prevented the obligation from

acquiring binding force. It bears stressing that in a contract of sale, the non-payment of the price

is a resolutory condition which extinguishes the transaction that, for a time, existed and

discharges the obligation created under the transaction. A seller cannot unilaterally and extra

judicially rescind a contract of sale unless there is an express stipulation authorizing it. In such

case, the vendor may file an action for specific performance or judicial rescission. Article 1169 of

the New Civil Code provides that in reciprocal obligations, neither party incurs in delay if the

other does not comply or is not ready to comply in a proper manner with what is incumbent upon

him; from the moment one of the parties fulfil his obligation, delay by the other begins. In this

case, the vendor (Jesus Mascuñana) failed to comply with his obligation of segregating Lot No.

124-B and the issuance of a Torrens title over the property in favor of the vendee, or the latter’s

successors-in-interest, the respondents herein. Worse, petitioner Jose Mascuñana was able to

secure title over the property under the name of his deceased father.

NICOLAS SANCHEZ v. SEVERINA RIGOS

G.R. No. L-25494. June 14, 1972

SYLLABUS:

1.CIVIL LAW; CONTRACTS; CONTRACT TO BUY AND SELL; OPTION WITHOUT

CONSIDERATION; CASE AT BAR. — Where both parties indicated in the instrument in the

caption, as an "Option to Purchase," and under the provisions thereof, the defendant "agreed,

promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00,

but there is nothing in the contract to indicate that her aforementioned agreement, promise and

undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the

land, it is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy.

2.ID.; ID.; ID.; ID.; ARTICLES 1354 AND 1479, NEW CIVIL CODE; APPLICABILITY. — It

should be noted that: Article 1354 applies to contracts in general, whereas the second paragraph

of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral

promise to buy or to sell."

3.ID.; ID.; REQUISITE OF A UNILATERAL PROMISE IN ORDER TO BIND PROMISOR;

BURDEN OF PROOF REST UPON PROMISEE. — In order that a unilateral promise may be

"binding" upon the promisor, Article 1479 requires the concurrence of a condition namely, that

the promise be "supported by a consideration distinct from the price." Accordingly, the promisee

cannot compel the promisor to comply with the promise, unless the former establishes the

existence of said distinct consideration. In other words, the promisee has the burden of proving

such consideration.

4.ID.; ID.; WHERE A UNILATERAL PROMISE TO SELL GENERATED TO A BILATERAL

CONTRACT OF PURCHASE AND SALE; ARTICLES 1324 AND 1479, NCC., NO

DISTINCTION. — This Court itself, in the case of Atkins, Kroll & Co., Inc. vs. Cua Hian Tek

(102 Phil., 948), decided later than Southwestern Sugar & Molasses Co. vs. Atlantic & Pacific

Co., 97 Phil., 249, saw no distinction between Articles 1324 and 1479 of the Civil Code and

applied the former where a unilateral promise to sell similar to the one sued upon was involved,

treating such promise as an option which, although not binding as a contract in itself for lack of a

separate consideration, nevertheless generated a bilateral contract of purchase and sale upon

acceptance. In other words, since there may be no valid contract without a cause or consideration

promisor is not bound by his promise and may, accordingly withdraw it. Pending notice of its

withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if

accepted, results in a perfected contract of sale.

5.REMEDIAL LAW; PLEADINGS AND PRACTICE; JUDGMENT ON THE PLEADINGS;

IMPLIED ADMISSION. — Defendant explicitly averred in her answer, and pleaded as a special

defense, the absence of said consideration for her promise to sell and, by joining in the petition

for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in

defendant's answer.

6.STATUTORY CONSTRUCTION; INTERPRETATION OF PROVISIONS OF SAME LAW;

CARDINAL RULE. — The view that an option to sell can still be withdrawn, even if accepted, if

the same is not supported by any consideration, has the advantage of avoiding a conflict between

Article 1324 — on the general principles on contracts — and 1479 — on sales — of the Civil

Code, in line with the cardinal rule of statutory construction that, in construing different

provisions of one and the same law or code, such interpretation should be favored as will

reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the

presumption is that, in the process of drafting the Code, its author has maintained a consistent

philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. vs.

Atlantic Gulf & Pacific Co., supra, holding that Article 1324 is modified by Article 1479 of the

Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not

favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2)

articles are concerned. What is more, the reference, in both the second paragraph of Article 1479

and Article 1324, to an option or promise supported by or founded upon a consideration, strongly

suggests that the two (2) provisions intended to enforce or implement the same principle.

ANTONIO, J., concurring opinion:

1.CIVIL LAW; CONTRACTS; OPTION TO SELL; EFFECT OF ACCEPTANCE. — I fully

agree with the abandonment of the view previously adhered to in Southwestern Sugar & Molasses

Co. vs. Atlantic Gulf and Pacific Co. (97 Phil., 249), which holds that an option to sell can still be

withdrawn, even if accepted if the same is not supported by any consideration, and the

reaffirmance of the doctrine in Atkins, Kroll & Co. Inc. vs. Cua Hian Tech (102 Phil., 948),

holding that "an option implies . . . the legal obligation to keep the offer (to sell) open for the time

specified"; that it could be withdrawn before acceptance, if there was no consideration for the

option, but once the "offer to sell" is accepted, a bilateral promise to sell and to buy ensues, and

the offeree ipso facto assumes the obligations of a purchaser.

2.ID.; ID.; ID.; OPTION WITHOUT CONSIDERATION IS A MERE OFFER TO SELL, NOT

BINDING UNTIL ACCEPTED. — If the option to sell is given without a consideration, it is a

mere offer to sell, which is not binding until accepted. If, however, acceptance is made before a

withdrawal, it constitutes a binding contract of sale. The concurrence of both acts — the offer and

the acceptance — could in such event generate a contract.

3.ID.; ID.; ID.; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE, OFFER IMPLIES AN

OBLIGATION ON THE PART OF OFFEROR. — While the law permits the offeror to

withdraw the offer at any time before acceptance even before the period has expired, some writers

hold the view, that the offeror can not exercise this right in an arbitrary or capricious manner.

This is upon the principle that an offer implies an obligation on the part of the offeror to maintain

it for such length of time as to permit the offeree to decide whether to accept or not, and therefore

cannot arbitrarily revoke the offer without being liable for damages which the offeree may suffer.

A contrary view would remove the stability and security of business transactions.

4.ID.; ID.; ID.; A BILATERAL RECIPROCAL CONTRACT; CASE AT BAR. — Where, as in

the present case, the trial court found that the "Plaintiff (Nicolas Sanchez) had offered the sum of

P1,510.00 before any withdrawal from the contract has been made by the Defendant (Severina

Rigos)," and Rigos' offer to sell was accepted by Sanchez, before she could withdraw her offer, a

bilateral reciprocal contract — to sell and to buy — was generated.

FACTS:

1. On April 3, 1961 – Nicolas Sanchez and Severina Rigos executed an instrument, entitled

"Option to Purchase” where Rigos "agreed, promised and committed . . . to sell" to

Sanchez a parcel of land situated in the barrios of Abar and Sibot, municipality of San

Jose, province of Nueva Ecija (as described in TCT NT-12528) for the sum of P1,510.00

within two (2) years from said date.

2. Such agreement was executed with the understanding that the said option shall be

deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the

property" within the stipulated period.

3. Several tenders of payment of sum of P1,510.00 was made by Sanchez within the said

period but these were rejected by Mrs. Rigos.

4. Hence, On March 12, 1963 – Sanchez deposited said amount with the CFI of Nueva Ecija

and commenced against Rigos an action for specific performance and damages.

5. As a special defense, Rigos alleged that the contract between the parties "is a unilateral

promise to sell, and the same being unsupported by any valuable consideration, by force

of the New Civil Code, is null and void"

6. On February 28, 1964 – Lower court rendered judgment in favour of Sanchez:

a. Ordering Mrs. Rigos to accept the sum judicially consigned by him and to

execute the requisite deed of conveyance.

b. Also, sentenced Rigos to pay P200.00, as attorney's fees, and the costs.

NOTES:

A. Case revolves around the proper application of Article 1479 of our Civil Code:

ART. 1479.A promise to buy and sell a determinate thing for a price certain is reciprocally

demandable.

"An accepted unilateral promise to buy or to sell a determinate thing for a price certain is

binding upon the promisor if the promise is supported by a consideration distinct from the price

B. Plaintiff’s arguments (Sanchez):

a. by virtue of the option under consideration, "defendant agreed and committed to

sell" and "the plaintiff agreed and committed to buy" the land described in the

option. HENCE, plaintiff maintains that the promise contained in the contract is

"reciprocally demandable," pursuant to the first paragraph of said Article 1479

C. Relying upon Article 1354 of our Civil Code, the LOWER COURT presumed the

existence of said consideration, and this would seem to be the main factor that influenced

its decision in favour of Sanchez.

ISSUE:

WON the promisor can withdraw an option to sell, after acceptance, if the option is not

supported by any consideration

HELD: Acceptance resulted in a perfected contract of sale.

1. The option did not impose upon Sanchez the obligation to purchase defendant's property.

2. The instrument “Option to Purchase” is not a "contract to buy and sell." It merely granted

plaintiff an "option" to buy (as understood by parties and obvious from the title of the

instrument itself)

3. Under the provisions thereof, the defendant "agreed, promised and committed" herself to

sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the

contract to indicate that her aforementioned agreement, promise and undertaking is

supported by a consideration "distinct from the price" stipulated for the sale of the land.

4. NOTE THAT:

a. Article’s coverage:

i. Art. 1354 - applies to contracts in general

ii. Art. 1479 - refers to "sales" in particular, and, more specifically, to "an

accepted unilateral promise to buy or to sell."

b. In order that said unilateral promise may be "binding" upon the promisor, Article

1479 requires the concurrence of a condition that the promise be "supported

by a consideration distinct from the price."

c. The promisee cannot compel the promisor to comply with the promise, unless the

former establishes the existence of said distinct consideration.

d. Hence, promisee has the burden of proving such consideration (In here, Rigos

has not even alleged the existence thereof in his complaint)

5. Cited CONFLICTING Cases:

Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co. "There is no question that

under article 1479 of the new Civil Code 'an option to sell,' or 'a promise to buy or to sell,' as used

in said article, to be valid must be 'supported by a consideration distinct from the price.' This is

clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if

accepted, is only binding if supported by a consideration. In other words, 'an accepted unilateral

promise' can only have a binding effect if supported by a consideration, which means that the

option can still be withdrawn, even if accepted, if the same is not supported by any consideration.

Here it is not disputed that the option is without consideration. It can therefore be withdrawn

notwithstanding the acceptance made of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and

acceptance is that, when the offerer gives to the offeree a certain period to accept, 'the offer may

be withdrawn at any time before acceptance' except when the option is founded upon

consideration, but this general rule must be interpreted as modified by the provision of article

1479 above referred to, which applies to 'a promise to buy and sell' specifically. As already

stated, this rule requires that a promise to sell to be valid must be supported by a consideration

distinct from the price.

We are net oblivious of the existence of American authorities which hold that an offer, once

accepted, cannot be withdrawn, regardless of whether it is supported or not by a consideration.

These authorities, we note, uphold the general rule applicable to offer and acceptance as

contained in our new Civil Code. But we are prevented from applying them in view of the

specific provision embodied in article 1479. While under the 'offer of option' in question

appellant has assumed a clear obligation to sell its barge to appellee and the option has been

exercised in accordance with its terms, and there appears to be no valid or justifiable reason for

appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the

matter is clear. Our imperative duty is to apply it unless modified by Congress."

Atkins, Kroll and Co., Inc. v. Cua Hian Tek – saw no distinction between Articles 1324 and 1479

of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued

upon here was involved, treating such promise as an option which, although not binding as a

contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of

purchase and sale upon acceptance. “Furthermore, an option is unilateral: a promise to sell at

the price fixed whenever the offeree should decide to exercise his option within the specified time.

After accepting the promise and before he exercises his option, the holder of the option is not

bound to buy. He is free either to buy or not to buy later. In this case however, upon accepting

herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso

facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or

not to buy. It was not a mere option then; it was bilateral contract of sale.”

6. In other words, in accepted unilateral promise to sell, since there may be no valid contract

without a cause or consideration, the promisor is not bound by his promise and may,

accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise

partakes, however, of the nature of an offer to sell which, if accepted, results in a

perfected contract of sale.

a. This view has the advantage of avoiding a conflict between Articles 1324 — on

the general principles on contracts — and 1479 — on sales — of the Civil Code,

in line with the cardinal rule of statutory construction that, in construing different

provisions of one and the same law or code, such interpretation should be favored

as will reconcile or harmonize said provisions and avoid a conflict between the

same. Indeed, the presumption is that, in the process of drafting the Code, its

author has maintained a consistent philosophy or position.

b. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf

& pacific Co., holding that Art. 1324 is modified by Art. 1479 of the Civil Code,

in effect, considers the latter as an exception to the former, and exceptions are not

favored, unless the intention to the contrary is clear, and it is not so, insofar as

said two (2) articles are concerned. What is more, the reference, in both the

second paragraph of Art. 1479 and Art. 1324, to an option or promise supported

by or founded upon a consideration, strongly suggests that the two (2) provisions

intended to enforce or implement the same principle.

7. Upon mature deliberation, the Court is of the considered opinion that it should, as it

hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar

all inconsistent therewith, the view adhered to in the South western Sugar & Molasses

Co. case should be deemed abandoned or modified.

8. In the present case, the trial court found that the plaintiff (Sanchez) had offered the sum

of P1,510.00 before Rigos could withdraw her offer. Since Rigos’offer to sell was

accepted by Sanchez, before she could withdraw her offer, a bilateral reciprocal contract

to sell and to buy was generated.

SEPARATE OPINION:

ANTONIO, J., concurring:

I fully agree with the abandonment of the view previously adhered to in Southwestern Sugar &

Molasses Co. vs. Atlantic Gulf and Pacific Co. which holds that an option to sell can still be

withdrawn, even if accepted, if the same is not supported by any consideration, and the

reaffirmance of the doctrine in Atkins, Kroll & Co., Inc. vs. Cua Hian Tek, holding that "an

option implies . . . the legal obligation to keep the offer (to sell) open for the time specified;" that

it could be withdrawn before acceptance, if there was no consideration for the option, but once

the "offer to sell" is accepted, a bilateral promise to sell and to buy ensues, and the offeree ipso

facto assumes the obligations of a purchaser In other words, if the option is given without a

consideration, it is a mere offer to sell, which is not binding until accepted. If, however,

acceptance is made before a withdrawal, it constitutes a binding contract of sale. The concurrence

of both acts — the offer and the acceptance — could in such event generate a contract.

While the law permits the offeror to withdraw the offer at any time before acceptance even before

the period has expired, some writers hold the view, that the offeror can not exercise this right in

an arbitrary or capricious manner. This is upon the principle that an offer implies an obligation on

the part of the offeror to maintain it for such length of time as to permit the offeree to decide

whether to accept or not, and therefore cannot arbitrarily revoke the offer without being liable for

damages which the offeree may suffer. A contrary view would remove the stability and security

of business transactions.

G.R. No. 86150. March 2, 1992 GUZMAN, BOCALING & CO., petitioner,

vs. RAOUL S.V. BONNEVIE, respondent.

FACTS:

A more or less 600 sqm parcel of land with two buildings constructed thereon, belonging to the

Intestate Estate of Jose L. Reynoso was leased to Raoul S. Bonnevie and Christopher Bonnevie

by the administratrix, Africa Valdez de Reynoso, for a period of one year beginning August 8,

1976, at a monthly rental of P4,000. In the contract of lease, there is a stipulation that in case the

LESSOR desires or decides to sell the leased property, the LESSEES shall be given a first

priority to purchase the same, all things and considerations being equal. On November 3, 1976,

according to Reynoso, she notified the private respondents that she was selling the leased

premises for P600,000.00 less a mortgage loan of P100,000.00, and was giving them 30 days

from receipt of the letter within which to exercise their right of first priority to purchase the

subject property. She said that in the event that they did not exercise the said right, she would

expect them to vacate the property not later than March, 1977. On January 20, 1977, Reynoso

sent another letter to private respondents advising them that in view of their failure to exercise

their right of first priority, she had already sold the property to the petitioner. The private

respondents wrote Reynoso informing her that neither of them had received her letter; that they

had advised her agent to inform them officially should she decide to sell the property so

negotiations could be initiated; and that they were "constrained to refuse her request for the

termination of the lease."

On April 12, 1977, Reynoso wrote a letter to the private respondents demanding that they vacate

the premises within 15 days for their failure to pay the rentals for four months. When they

refused, Reynoso filed a complaint for ejectment against them which was docketed as Civil Case

No. 043S51-CV in the then City Court of Manila. The private respondents filed an action for

annulment of the sale between Reynoso and herein petitioner Guzman, Bocaling & Co. with CFI

of Manila and cancellation of the transfer certificate of title in the name of the latter. They also

asked that Reynoso be required to sell the property to them under the same terms and conditions

agreed upon in the Contract of Sale in favor of the petitioner. The City Court decided the

ejectment case in favor of Reynoso, ordering defendants and all persons holding under them to

vacate the premises and to pay: (1) The sum of P4,000.00 a month from April 1,1977 to August 8,

1977; (2) The sum of P7,000.00 a month, as reasonable compensation for the continued unlawful

use and occupation of said premises, from August 9, 1977 and every month thereafter until

defendants actually vacate and deliver possession thereof to the plaintiff; (3) The sum of

P1,000.00 as and for attorney's fees; and (4) The costs of suit. Upon appeal to the Court of First

Instance of Manila, affirmed the said ejection case with modification and granted respondents

petition to cancel the Deed of Sale executed between Africa and the petitioner and ordered her to

sell the property to respondent, and for petitioner and Africa to pay respondent for damages. CA

affirmed the said decision but with modification on the amount of damages. Hence the petition.

ISSUE: Whether or not the respondent court erred in ruling that the grant of first priority to

purchase the subject properties by the judicial administratrix needed no authority from the

probate court

HELD:

No, Reynoso claimed to have sent the November 3, 1976 letter by registered mail, but the registry

return card was not offered in evidence. What she presented instead was a copy of the said letter

with a photocopy of only the face of a registry return card claimed to refer to the said letter. A

copy of the other side of the card showing the signature of the person who received the letter and

the date of the receipt was not submitted. There is thus no satisfactory proof that the letter was

received by the Bonnevies. Even if the letter had indeed been sent to and received by the private

respondents and they did not exercise their right of first priority, Reynoso would still be guilty of

violating Paragraph 20 of the Contract of Lease which specifically stated that the private

respondents could exercise the right of first priority, "all things and conditions being equal." The

Court reads this to mean that there should be identity of the terms and conditions to be offered to

the Bonnevies and all other prospective buyers, with the Bonnevies to enjoy the right of first

priority. The fact that the Bonnevies had financial problems at that time was no justification for

denying them the first option to buy the subject property. Even if the Bonnevies could not buy it

at the price quoted, Reynoso could not sell it to another for a lower price and under more

favorable terms and conditions. Only if the Bonnevies failed to exercise their right of first priority

could Reynoso lawfully sell the subject property to others, and at that only under the same terms

and conditions offered to the Bonnevies. The Court agrees with the respondent court that it was

not necessary to secure the approval by the probate court of the Contract of Lease because it did

not involve an alienation of real property of the estate nor did the term of the lease exceed one

year so as to make it fall under Article 1878(8) of the Civil Code. Only if Paragraph 20 of the

Contract of Lease was activated and the said property was intended to be sold would it be

required of the administratrix to secure the approval of the probate court pursuant to Rule 89 of

the Rules of Court.

WHEREFORE, the petition is DENIED, with costs against the petitioner. The challenged

decision is AFFIRMED in toto.

It is so ordered.

SECOND DIVISION

[G.R. No. 117355. April 5, 2002]

RIVIERA FILIPINA, INC., petitioner, vs. COURT OF APPEALS, JUAN L. REYES, (now

deceased), substituted by his heirs, namely, Estefania B. Reyes, Juanita R. de la Rosa, Juan

B. Reyes, Jr. and Fidel B. Reyes, PHILIPPINE CYPRESS CONSTRUCTION &

DEVELOPMENT CORPORATION, CORNHILL TRADING CORPORATION AND

URBAN DEVELOPMENT BANK,respondents.

FACTS:

Before us is a petition for review on certiorari of the Decision of the Court of Appeals dated June

6, 1994 in CA-G.R. CV No. 26513 affirming the Decision dated March 20, 1990 of the Regional

Trial Court of Quezon City, Branch 89 dismissing Civil Case No. Q-89-3371.

On August 31, 1989, Riviera Filipina, Inc. (Riviera) instituted a suit to compel the defendants

therein Juan L. Reyes, now deceased, Philippine Cypress Construction & Development

Corporation (Cypress), Cornhill Trading Corporation (Cornhill) and Urban Development Bank to

transfer the title covering a 1,018 square meter parcel of land located along EDSA, Quezon City

for alleged violation of Riviera’s right of first refusal.

It appears that on November 23, 1982, respondent Juan L. Reyes (Reyes, for brevity) executed a

Contract of Lease with Riviera. The ten-year (10) renewable lease of Riviera involved a 1,018

square meter parcel of land located along Edsa, Quezon City, covered and described in Transfer

Certificate of Title No. 186326 of the Registry of Deeds of Quezon City in the name of Juan L.

Reyes.

The said parcel of land was subject of a Real Estate Mortgage executed by Reyes in favor of

Prudential Bank. Since the loan with Prudential Bank remained unpaid upon maturity, the

mortgagee bank extrajudicially foreclosed the mortgage thereon. At the public auction sale, the

mortgagee bank emerged as the highest bidder. The redemption period was set to expire on

March 7, 1989. Realizing that he could not possibly raise in time the money needed to redeem

the subject property, Reyes decided to sell the same.

Since paragraph 11 of the lease contract expressly provided that the “LESSEE shall have the right

of first refusal should the LESSOR decide to sell the property during the term of the lease. Reyes

offered to sell the subject property to Riviera, through its President Vicente C. Angeles, for Five

Thousand Pesos (P5,000.00) per square meter but Angeles bargained to lower the price to Three

thousand Pesos per square meter. A consensus was not met between the two with regard to the

price.

Seven months later, Angeles offered to purchase the property at Four Thousand Pesos per square

meter but Reyes refused the offer, insisting that the price is now Six Thousand Pesos per square

meter since the value of the area had appreciated in view of the plans of Araneta to develop the

vicinity.

In a letter dated November 2, 1988, Atty. Irineo S. Juan, acting as counsel for Reyes, informed

Riviera that Reyes was selling the subject property for Six Thousand Pesos (P6,000.00) per

square meter, net of capital gains and transfer taxes, registration fees, notarial fees and all other

attendant charges. He further stated therein that:

In this connection, conformably to the provisions stipulated in Paragraph/Item

No. 11 of your CONTRACT OF LEASE (Doc. No. 365, Page No. 63, Book No.

X, Series of 1982, of the Notarial Registry of Notary Public Leovillo S. Agustin),

notice is served upon your goodselves for you to exercise “the right of first

refusal” in the sale of said property, for which purpose you are hereby given a

period of ten (10) days from your receipt hereof within which to thus purchase

the same under the terms and conditions aforestated, and failing which you shall

be deemed to have thereby waived such pre-emptive right and my client shall

thereafter be absolutely free to sell the subject property to interested buyers.

To answer the foregoing letter and confirm their telephone conversation on the matter, Riviera

sent a letter dated November 22, 1988 to Atty. Juan, counsel for Reyes, expressing Riviera’s

interest to purchase the subject property and that Riviera is already negotiating with Reyes which

will take a couple of days to formalize. Riviera increased its offer to Five Thousand Pesos per

square meter but Reyes did not accept. Angeles asked Reyes until the end of November 1988 for

Riviera’s Final decision.

In a letter dated December 2, 1988, Angeles wrote Reyes confirming Riviera’s intent to purchase

the subject property for the fixed and final price of Five Thousand Pesos (P5,000.00) per square

meter, complete payment within sixty (60) to ninety (90) days which “offer is what we feel should

be the market price of your property.” Angeles asked that the decision of Reyes and his written

reply to the offer be given within fifteen (15) days since there are also other properties being

offered to them at the moment.

In response to the foregoing letter, Atty. Juan sent a letter to Riviera dated December 5, 1988

informing Riviera that Riviera’s offer is not acceptable to his client. He further expressed, “let it

be made clear that, much as it is the earnest desire of my client to really give you the preference

to purchase the subject property, you have unfortunately failed to take advantage of such

opportunity and thus lost your right of first refusal in sale of said property.”

On December 4, 1988, Reyes confided to Rolando P. Traballo his predicament about the nearing

expiry date of the redemption period of the foreclosed mortgaged property with Prudential Bank

the money for which he could not raise on time thereby offering the subject property to him for

Six Thousand Pesos (P6,000.00) per square meter. Traballo expressed interest in buying the said

property. They met the next day at which time Traballo bargained for Five Thousand Three

Hundred Pesos (P5,300.00) per square meter. After considering the reasons cited by Traballo for

his quoted price, Reyes accepted the same However, since Traballo did not have the amount with

which to pay Reyes, he told the latter that he will look for a partner for that purpose. Reyes told

Traballo that he had already afforded Riviera its right of first refusal but they cannot agree

because Riviera’s final offer was for Five Thousand Pesos (P5,000.00) per square meter.

Apprehensive of the impending expiration in March 1989 of the redemption period of the

foreclosed mortgaged property with Prudential Bank and the deal between Reyes and Traballo

was not yet formally concluded, Reyes decided to approach anew Riviera. For this purpose, he

requested Atty. Estanislao Alinea to approach Angeles and find out if the latter was still interested

in buying the subject property and ask him to raise his offer for the purchase of the said property

a little higher. As instructed, Atty. Alinea met with Angeles and asked the latter to increase his

offer of Five Thousand Pesos (P5,000.00) per square meter but Angeles said that his offer is still

the same.

Following the meeting, Angeles sent a letter dated February 4, 1989 to Reyes, through Atty.

Alinea, that his offer is Five Thousand Pesos (P5,000.00) per square meter payment of which

would be fifty percent (50%) down within thirty (30) days upon submission of certain documents

in three (3) days, the balance payable in five (5) years in equal monthly installments at twelve

percent (12%) interest in diminishing balance. With the terms of this second offer, Angeles

admittedly downgraded the previous offer of Riviera on December 2, 1988. Atty. Alinea

conveyed to Reyes Riviera’s offer of Five Thousand Pesos (P5,000.00) per square meter but

Reyes did not agree. Consequently, Atty. Alinea contacted again Angeles and asked him if he

can increase his price. Angeles, however, said he cannot add anymore.

Sometime in February 1989, Cypress and its partner in the venture, Cornhill Trading Corporation,

were able to come up with the amount sufficient to cover the redemption money, with which

Reyes paid to the Prudential Bank to redeem the subject property. A Deed of Absolute Sale

covering the subject property was executed by Reyes in favor of Cypress and Cornhill for the

consideration of Five Million Three Hundred Ninety Five Thousand Four Hundred Pesos

(P5,395,400.00). On the same date, Cypress and Cornhill mortgaged the subject property to

Urban Development Bank for Three Million Pesos (P3,000,000.00). Thereafter, Riviera sought

from Reyes, Cypress and Cornhill a resale of the subject property to it claiming that its right of

first refusal under the lease contract was violated. After several unsuccessful attempts, Riviera

filed the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to transfer the

disputed title to the land in favor of Riviera upon its payment of the price paid by Cypress and

Cornhill.

ISSUE: Whether or not Riviera’s Right of First Refusal was violated?

HELD:

It ruled that the defendants therein did not violate Riviera’s right of first refusal. this Court takes

note that since the beginning of the negotiation between the plaintiff and defendant Reyes for the

purchase of the property, in question, the plaintiff was firm and steadfast in its position, expressed

in writing by its President Vicente Angeles, that it was not willing to buy the said property higher

than P5,000.00, per square meter, which was far lower than the asking price of defendant Reyes

for P6,000.00, per square meter, undoubtedly, because, in its perception, it would be difficult for

other parties to buy the property, at a higher price than what it was offering, since it is in

occupation of the property, as lessee, the term of which was to expire after about four (4) years

more.

On the other hand, it was obvious, upon the basis of the last ditch effort of defendant Reyes, thru

his nephew, Atty. Alinea, to have the plaintiff buy the property, in question, that he was willing to

sell the said property at a price less than P6,000.00 and a little higher than P5,000.00, per square

meter, precisely, because Atty. Alinea, in behalf of his uncle, defendant Reyes, sought plaintiff’s

Angeles and asked him to raise his price a little higher, indicating thereby the willingness of

defendant Reyes to sell said property at less than his offer of P6,000.00, per square meter. This

being the case, it can hardly be validly said by the plaintiff that he was deprived of his right of

first refusal to buy the subject property at a price of P5,300.00, per square meter which is the

amount defendants Cypress/Cornhill bought the said property from defendant Reyes. For, it was

again given such an opportunity to exercise its right of first refusal by defendant Reyes had it

only signified its willingness to increase a little higher its purchase price above P5,000.00, per

square meter, when its President, Angeles, was asked by Atty. Alinea to do so, instead of

adamantly sticking to its offer of only P5,000.00 per square meter, by reason of which, therefore,

the plaintiff had lost, for the second time, its right of first refusal, even if defendant Reyes did not

expressly offer to sell to it the subject land at P5,300.00, per square meter, considering that by the

plea of Atty. Alinea, in behalf of defendant Reyes, for it to increase its price a little, the plaintiff

is to be considered as having forfeited again its right of first refusal, it having refused to budged

from its regid (sic) offer to buy the subject property at no more than P5,000.00, per square meter.

As such, this Court holds that it was no longer necessary for the defendant Reyes to expressly and

categorically offer to the plaintiff the subject property at P5,300.00, per square meter, in order

that he can comply with his obligation to give first refusal to the plaintiff as stipulated in the

Contract of Lease, the plaintiff having had already lost its right of first refusal, at the first

instance, by refusing to buy the said property at P6,000.00, per square meter, which was the

asking price of defendant Reyes, since to do so would be a useless ceremony and would only be

an exercise in futility, considering the firm and unbending position of the plaintiff, which

defendant Reyes already knew, that the plaintiff, at any event, was not amenable to increasing its

price at over P5,000.00, per square meter.

Dissatisfied with the decision of the trial court, both parties appealed to the Court of Appeals.

However, the appellate court, through its Special Seventh Division, rendered a Decision dated

June 6, 1994 which affirmed the decision of the trial court in its entirety.

Riviera posits the view that its right of first refusal was totally disregarded or violated by Reyes

by the latter’s sale of the subject property to Cypress and Cornhill. It contends that the right of

first refusal principally amounts to a right to match in the sense that it needs another offer for the

right to be exercised.

The concept and interpretation of the right of first refusal and the consequences of a breach

thereof evolved in Philippine juristic sphere only within the last decade. It all started in 1992

with Guzman, Bocaling & Co. v. Bonnevie where the Court held that a lease with a proviso

granting the lessee the right of first priority:

“all things and conditions being equal” meant that there should be identity of the

terms and conditions to be offered to the lessee and all other prospective buyers,

with the lessee to enjoy the right of first priority.

Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of Appeals the Court en

banc departed from the doctrine laid down in Guzman, Bocaling & Co. v. Bonnevie and refused

to rescind a contract of sale which violated the right of first refusal. The Court held that:

the so-called “right of first refusal” cannot be deemed a perfected contract of

sale under Article 1458 of the New Civil Code and, as such, a breach thereof

decreed under a final judgment does not entitle the aggrieved party to a writ of

execution of the judgment but to an action for damages in a proper forum for the

purpose.

In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., the Court en

banc reverted back to the doctrine in Guzman Bocaling & Co. v. Bonnevie stating that rescission

is a relief allowed for the protection of one of the contracting parties and even third persons from

all injury and damage the contract may cause or to protect some incompatible and preferred right

by the contract.

Thereafter in 1997, in Parañaque Kings Enterprises, Inc. v. Court of Appeals, the Court

affirmed the nature of and the concomitant rights and obligations of parties under a right of first

refusal. The Court, summarizing the rulings in Guzman, Bocaling & Co. v.

Bonnevie and Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., held that:

in order to have full compliance with the contractual right granting petitioner the

first option to purchase, the sale of the properties for the price for which they

were finally sold to a third person should have likewise been first offered to the

former. Further, there should be identity of terms and conditions to be offered to

the buyer holding a right of first refusal if such right is not to be rendered

illusory. Lastly, the basis of the right of first refusal must be the current offer to

sell of the seller or offer to purchase of any prospective buyer.

Thus, the prevailing doctrine is that a right of first refusal means identity of terms and

conditions to be offered to the lessee and all other prospective buyers and a contract of sale

entered into in violation of a right of first refusal of another person, while valid, is rescissible.

However, we must remember that general propositions do not decide specific cases. Rather,

laws are interpreted in the context of the peculiar factual situation of each proceeding. Each case

has its own flesh and blood and cannot be ruled upon on the basis of isolated clinical classroom

principles. Analysis and construction should not be limited to the words used in the contract, as

they may not accurately reflect the parties’ true intent.

In the case at bar, the Court finds relevant and significant the cardinal rule in the interpretation of

contracts that the intention of the parties shall be accorded primordial consideration and in case of

doubt, their contemporaneous and subsequent acts shall be principally considered. Where the

parties to a contract have given it a practical construction by their conduct as by acts in partial

performance, such construction may be considered by the court in construing the contract,

determining its meaning and ascertaining the mutual intention of the parties at the time for

contracting. The parties’ practical construction of their contract has been characterized as a clue

or index to, or as evidence of, their intention or meaning and as an important, significant,

convincing, persuasive, or influential factor in determining the proper construction of the

contract. An examination of the attendant particulars of the case do not persuade us to uphold

Riviera’s view. It can clearly be discerned from Riviera’s letters dated December 2, 1988 and

February 4, 1989 that Riviera was so intractable in its position and took obvious advantage of the

knowledge of the time element in its negotiations with Reyes as the redemption period of the

subject foreclosed property drew near. Riviera strongly exhibited a “take-it or leave-it” attitude

in its negotiations with Reyes. It quoted its “fixed and final” price as Five Thousand Pesos

(P5,000.00) and not any peso more. It voiced out that it had other properties to consider so Reyes

should decide and make known its decision “within fifteen days.

The instant petition is hereby DENIED, and the Decision of the Court of Appeals dated June 6,

1994 in CA-G.R. CV No. 26513 is AFFIRMED. No pronouncement as to costs.

PARAÑAQUE KINGS ENTERPRISES, INCORPORATED vs. COURT OF APPEALS

FACTS:

Plaintiff is a private corporation with principal place of business of Dr. A. Santos Avenue,

Parañaque, Metro Manila. Defendant Catalina L. Santos is the owner of eight (8) parcels of land

located at Parañaque, Metro Manila. On November 28, 1977, a certain Frederick Chua leased the

above-described property from defendant Catalina L. Santos. On February 12, 1979, Frederick

Chua assigned all his rights and interest and participation in the leased property to Lee Ching

Bing. On August 6, 1979, Lee Ching Bing also assigned all his rights and interest in the leased

property to Parañaque Kings Enterprises. Paragraph 9 of the assigned leased contract provides

among others that: “That in case the properties subject of the lease agreement are sold or

encumbered, Lessors shall impose as a condition that the buyer or mortgagee thereof shall

recognize and be bound by all the terms and conditions of this lease agreement and shall respect

this Contract of Lease as if they are the LESSORS thereof and in case of sale, LESSEE shall have

the first option or priority to buy the properties subject of the lease”. On September 21, 1988,

defendant Santos sold the eight parcels of land subject of the lease to defendant David Raymundo

for a consideration of five million pesos which was in contravention of the contract of lease.

Upon learning of this fact plaintiff’s representative wrote a letter to defendant Santos, requesting

her to rectify the error and consequently realizing the error, she had it reconveyed to her for the

same consideration of five million pesos. The property was offered for sale to plaintiff by the

defendant for the sum of fifteen million pesos Plaintiff was given ten (10) days to make good of

the offer but said period already expired before there was an acceptance or rejection of said offer.

On May 8, 1989, before the period given in the letter offering the properties for sale expired,

plaintiff’s counsel wrote counsel of defendant Santos offering to buy the properties for five

million pesos. On May 15, 1989, before they replied to the offer to purchase, another deed of sale

was executed by defendant Santos (in favor of) defendant Raymundo for a consideration of nine

million pesos. Defendant Santos violated again paragraph 9 of the contract of lease by executing a

second deed of sale to defendant Raymundo. Defendant Santos replied stating that among others

that the period has lapsed and the plaintiff is not a privy to the contract. On July 6, 1989, counsel

for defendant Santos informed the plaintiff that the new owner is defendant Raymundo. Plaintiff

has made considerable investments in the said leased property by erecting a two (2) storey, six (6)

doors commercial building amounting to three million pesos because the consideration given was

made on the belief that eventually the said premises shall be sold to the plaintiff. Plaintiff now

seeks to recover damages for the wanton, fraudulent, reckless, oppressive or malevolent manner

acted by the defendant.

ISSUE:

Whether or not the complaint alleging breach of the contractual right of “first option or priority to

buy” states a valid cause of action.

HELD:

The Court held that A cause of action exists if the following elements are present: (1) a right in

favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an

obligation on the part of the named defendant to respect or not to violate such right, and (3) an act

or omission on the part of such defendant violative of the right of plaintiff or constituting a breach

of the obligation of defendant to the plaintiff for which the latter may maintain an action for

recovery of damages.

Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter

was granted the “first option or priority” to purchase the leased properties in case Santos decided

to sell. If Santos never decided to sell at all, there can never be a breach, much less an

enforcement of such “right.” But on September 21, 1988, Santos sold said properties to

Respondent Raymundo without first offering these to petitioner. Santos indeed realized her error,

since she repurchased the properties after petitioner complained. Thereafter, she offered to sell

the properties to petitioner for P15 million, which petitioner, however, rejected because of the

“ridiculous” price. But Santos again appeared to have violated the same provision of the lease

contract when she finally resold the properties to respondent Raymundo for only P9 million

without first offering them to petitioner at such price.

In order to have full compliance with the contractual right granting petitioner the first option to

purchase, the sale of the properties for the amount of P9 million, the price for which they were

finally sold to respondent Raymundo, should have likewise been first offered to petitioner. The

basis of the right of the first refusal must be the current offer to sell of the seller or offer to

purchase of any prospective buyer. Only after the grantee fails to exercise its right of first priority

under the same terms and within the period contemplated, could the owner validly offer to sell the

property to a third person, again, under the same terms as offered to the grantee.

One of such rights included in the contract of lease and, therefore, in the assignments of rights

was the lessee’s right of first option or priority to buy the properties subject of the lease, as

provided in paragraph 9 of the assigned lease contract. The deed of assignment need not be very

specific as to which rights and obligations were passed on to the assignee. It is understood in the

general provision aforequoted that all specific rights and obligations contained in the contract of

lease are those referred to as being assigned. Needless to state, respondent Santos gave her

unqualified conformity to both assignments of rights.

Court granted the petition and reversed and set aside the decisions of the trial court and Court of

Appeals.

JUAN LAO and CANDELARIA C. LAO, petitioners, vs. HON. MELECIO A. GENATO,

as Presiding Judge, Court of First Instance, Branch 1, Misamis Occidental, SOTERO A.

DIONISIO, JR., as Administrator of the Intestate Estate of ROSENDA ABUTON,

SOTERO B. DIONISIO III, WILLIAM L. GO, ERLINDA DIAZ, represented by

RESTITUTO N. ABUTON Attorney-In-Fact, ESTER AIDA D. BAS, Heirs of

ROSALINDA D. BELLEZA, represented by FELICENDA D, BELLEZA, Attorney- In-

Fact, LUZMINDA D. DAJAO ADELAIDA D. NUEZA, represented by Atty. MAURICIO

O. BAS SR., Attorney-In-Fact, and FLORIDA A. NUQUI, respondents. (1985)

FACTS:

Petitioner spouses were promisees in a Mutual Agreement of Promise to Sell executed

between them and private respondent Sotero B. Dionisio III, son of respondent Sotero A.

Dionisio, Jr. (heir and administrator of the intestate estate of the deceased <Rosenda Abuton>),

whereby the promisor bound himself to sell the subject property to petitioners. Private

respondents, except Sotero Dionisio III and William Go, are the children and only compulsory

heirs of the deceased.

On June 25, 1980, respondent administrator Sotero Dionisio, Jr., with due notice to all his co-

heirs, filed with the Probate Court a Motion for Authority to Sell certain properties of the

deceased to settle the outstanding obligations of the estate. On July 8, 1980, after hearing, there

being no opposition, the lower court issued an Order authorizing the administrator to sell

the therein described properties of the estate and such other properties under his

administration at the best price obtainable, and directing him to submit to the court for

approval the transaction made by him.

On August 15, 1980, respondent-administrator pursuant to said authorization, sold to his

son, Sotero Dionisio III, the subject property for P75,000.00 per deed of sale acknowledged

before a Notary Public. On the same date, Sotero Dionisio III executed a deed of sale of the

same property in favor of respondent William Go for a consideration of P80.000.00. On

August 18, 1980, title was transferred to respondent Go.

On August 27, 1980, respondent-heir Florida Nuqui, filed a Motion for

Annulment/Revocation of the Deeds of Absolute Sale for the reasons that the sale and

subsequent transfer of title of the property were made in violation of the court's order of July 8,

1980 and that the consideration of the two sales were grossly inadequate as in fact many are

willing to buy the property for P400,000.00 since it is located along the corner of two main streets

in the commercial center of Oroquieta City. The respondent-administrator filed an opposition

to said motion of co-heir Nuqui alleging that the actual consideration of the sale made by him is

P200,000.00 and that it is the agreement of the heirs that if any of the heirs or close relatives is

interested in buying the property, preference will be given to him or her in order to keep the

property within the family of the deceased.

On September 9, 1980, respondent Nuqui filed a Reply to said Opposition, stating that the

two sales were but a single transaction simultaneously hatched and consummated in one

occasion as shown by the Notary Public's document Nos. 56 & 57 and with the same witnesses;

that the sales were in reality a single deal between the administrator and William Go, because

Sotero Dionisio III is without means or income and so has no capacity to buy the property; and

that the transaction is an evidence of the administrator's intent to defraud the estate and his co-

heirs, for had it not been for the Motion for Annulment, he would not have disclosed the true and

actual consideration of the sale. On September 10, 1980, all the co-heirs of respondent-

administrator filed a Manifestation to Adopt the Motion for Annulment/Revocation of

Deeds of Absolute Sale. Respondent Go filed a Motion for Leave to Intervene to protect his

rights, manifesting that he paid Sotero Dionisio III the actual consideration of P225,000.00 and

being a purchaser in good faith and for value, his title to the property is indefeasible pursuant to

law.

On February 6, 1981, petitioner spouses filed a "Manifestation In Intervention of Interest to

Purchase Property Authorized by the Court to be Sold", wherein they alleged that

respondent-administrator, without revealing that the property had already been sold to William

Go, entered into a Mutual Agreement of Promise to Sell to herein petitioners, for the amount of

P270,000 which was reduced to P220,000.00; that immediately upon the execution of the

agreement, petitioners paid the earnest money in the amount of P70,000.00, as requested by

respondent-administrator; that it was agreed upon that the balance of P150,000.00 shall

immediately be paid upon the production of the Transfer Certificate of Title and the

execution of the final Deed of Sale; that although the agreement was executed in the name of

Sotero Dionisio III the 'latter, was merely a nominal party, for technically according to the

administrator, he executed a Deed of Absolute Sale in favor of his son, but the negotiation and

transactions were directly and personally entered into between the administrator and

petitioners; that the contract of sale has been perfected considering that the earnest money

was already paid; that despite repeated demands the administrator refused to execute a final

Deed of Sale in favor of petitioners, who later found out that the subject property was sold to

William GO; that both contracts of sale were made to defraud the estate and the other heirs;

that assuming the consideration of P200,000.00 supplied by William Go to Sotero Dionisio III

who was not gainfully employed, then the contract of sale to Go would be without consideration,

hence, it would become fictitious and simulated and there is no other recourse left to the court but

to declare the sale null and void. Petitioners also manifested that in the event that the court should

finally declare the sale null and void, they are still interested to purchase the property for the same

amount of P200,000.00 as previously agreed.

Respondent heir Florida A. Nuqui filed an Opposition to William Go's Motion to Intervene

averring therein that the deed of sale executed by Sotero Dionisio, Jr. in favor of Sotero Dionisio

III created no legal force and effect, since the validity of the sale absolutely depended on its

approval by the court; that it therefore follows that the succeeding sale to Go and consequent

issuance of the title to him are also null and void from their inception and that the admission by

William Go of the actual and true consideration of the sale at his stage, hardly bespeaks of

"innocence" or "good faith".

After several days of hearing, respondent Judge allowed all the interested parties to bid for the

property at the highest obtainable price pursuant to his Order of July 8, 1980. On February 16,

1981, in open court, respondent Go offered to buy the property in the amount of P280,000.00.

Petitioners counter-offered at P282,000.00, spot cash. On that same day, all the heirs, except the

administrator, filed a Motion Ex Parte stating among other things, that the offer of William Go

appears the highest obtainable price and that the offer of petitioners is not well taken as the same

has not been made within a reasonable period of five (5) days from February 11, 1981.

On February 17, 1981, all the parties, with the exception of the Lao spouses and Sotero Dionisio

III, submitted for approval an Amicable Settlement stating: “That after the administrator, Sotero

A. Dionisio, Jr., had accounted for the actual price received by him out of the transaction between

him and Sotero B. Dionisio III in the amount of P200,000.00 Pesos and that in the interest of a

peaceful settlement William L. Go has offered and is ready, able and to pay to the heirs an

additional amount of P80,000.00 pesos, an arrangement which is most advantageous to the heirs

and which they willingly accept to their satisfaction. The heirs of Rosenda Abuton hereby declare

that they have no objection to the confirmation and approval of the sales/transactions executed by

Sotero A. Dionisio, Jr., in favor of Sotero B. Dionisio III and that executed by Sotero B. Dionisio

III in favor of the intervenor, William L. Go.”

On February 18, 1981, petitioners filed an opposition to the approval of the Amicable Settlement.

Despite said opposition, respondent Judge issued an Order approving the Amicable Settlement,

confirming and ratifying the two questioned Deeds of Sale.

Issue: WON the sale in favor of Sotero Dionisio III and by the latter to William Go should be

declared NULL and VOID

Held: YES!!!

In the discharge of his functions, the administrator should act with utmost circumspection in order

to preserve the estate and guard against its dissipation so as not to prejudice its editors and the

heirs of the decedents who are entitled to the net residue thereof. In the case at bar, the sale was

made necessary "in order to settle other existing obligations of the estate. The subsisting

obligation referred to, although not specified, must be those due and owing to the creditors

of the estate and also the taxes due the government. In order to guarantee faithful

compliance with the authority granted, respondent Judge made it an emphatic duty on the

part of the administrator Dionisio, " . . . to submit to this Court for approval the

transactions made by him."

The sale was made. HOWEVER, it was made to his very son Sotero Dionisio III and for the

grossly low price of only P75,000,00. That sale was indubitably shown to be fictitious, it

clearly appearing that Dionisio III has no income whatsoever. In fact, he is still a dependent

of his father, administrator Dionisio, Jr. On top of that, not a single centavo, of the P75,000.00

stated consideration was ever accounted for nor reported by Dionisio, Jr. to the probate

court. Neither did he submit said transaction as mandated by the order authorizing him to

sell, to the probate court for its approval and just so its validity and fairness may be passed

upon and resolved. It was only upon the filing by one of the heirs, Florida A. Nuqui, of the

"Motion for Annulment/Revocation of Deeds of Absolute Sale" questioning the genuineness and

validity of the transactions, that Dionisio, Jr. was compelled to admit that the actual consideration

for the sale made by him was P200,000.00. The sale is an illegal and irregular transactions

that was confirmed and legalized by respondent Judge’s approval of the assailed Amicable

Settlement. No doubt, respondent Judge's questioned approval violates Article 1409 of the New

Civil Code and cannot work to confirm nor serve to ratify a fictitious contract which is non-

existent and void from the very beginning. The fact that practically all the heirs are parties-

signatories to the said Compromise Agreement is of no moment. Their assent to such an illegal

scheme does not legalize the same nor does it impose any obligation upon respondent Judge to

approve the same to the prejudice not only of the creditors of the estate, and the government by

the non-payment of the correct amount of taxes legally due from the estate.

DAVID P. FORNILDA ,vs. BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIALREGION, PASIG, JOAQUIN C. ANTONIO Deputy Sheriff, RTC, 4JR

Tanay, Rizal and ATTY. SERGIO I. AMONOY (G.R. No. 72306 October 6, 1988)

FACTS:

•The Controverted Parcels were part of the estate of the late Julio M. Catolos subject of intestate

estate proceedings, wherein Respondent Amonoy acted as counsel for some of the heirs from

1959 until 1968 by his own admission.

• These properties were adjudicated to Alfonso Fornilda and Asuncion M. Pasamba in the Project

of Partition approved by the Court on 12 January 1965

• On 20 January 1965, or only eight (8) days thereafter, and while he was still intervening in the

case as counsel, these properties were mortgaged by petitioners' predecessor-in-interest to

Respondent Amonoy to secure payment of the latter's attorney's fees in the amount of P27,600.00

• Since the mortgage indebtedness was not paid, Respondent Amonoy instituted an action for

judicial foreclosure of mortgage on 21 January 1970

• The mortgage was subsequently ordered foreclosed and auction sale followed where

Respondent Amonoy was the sole bidder for P23,600.00

• Being short of the mortgage indebtedness, he applied for and further obtained a deficiency

judgment.

ISSUE:

Whether or not the mortgage constituted on the Controverted Parcels in favor of Respondent

Amonoy comes within the scope of the prohibition in Article 1491 of the Civil Code.

HELD: YES

• The pertinent portions of the said Articles read: Art. 1491. The following persons cannot acquire

by

purchase even at a public or judicial or auction, either in person or through the mediation of

another: xxx xxx xxx (5) Justices, judges, prosecuting attorneys, ... the property and rights in

litigation or levied upon on execution before the court within whose junction or territory they

exercise their respective functions; this prohibition includes the act of acquitting by assignment

and shall apply to lawyers with respect to the property and rights which may be the object of any

litigation in which they may take part by virtue of their profession. (Emphasis supplied)

• Under the aforequoted provision , a lawyer is prohibited from acquiring either by purchase or

assignment the property or rights involved which are the object of the litigation in which they

intervene by virtue of their profession. The prohibition on purchase is all embracing to include

not only sales to private individuals but also public or judicial sales

• At the time the mortgage was executed, therefore, the relationship of lawyer and client still

existed, the very relation of trust and confidence sought to be protected by the prohibition, when a

lawyer occupies a vantage position to press upon or dictate terms to a harassed client. From the

time of the execution of the mortgage in his favor, Respondent Amonoy had already asserted a

title adverse to his clients' interests at a time when the relationship of lawyer and client had not

yet been severed.

• Considering that the mortgage contract, entered into in contravention of Article 1491 of the

Civil Code is expressly prohibited by law, the same must be held inexistent and void ab initio.

DIRECTOR OF LANDS v. ABABA

FACTS:

1. The adverse claimant Atty. Fernandez was retained as counsel was retained as counsel by

petitioner (Abarquez) in a civil case for annulment of a contract of sale with right of

repurchase and for the recovery of the land which was the subject matter thereof.

2. Unable to compensate his lawyer from whom he also retained for his appeal, the

petitioner executed a document whereby he obliged himself to give his lawyer ½ of

whatever he might recover from lots 5600 and 5602 should appeal prosper.

3. The real property sought to be recovered was actually the share of the petitioner in lots

5600 and 5602 which were part of the estate of his deceased parents and which were

partitioned among the heirs, which included petitioner and his sister.

4. The case having been resolved and the title having issued to petitioner, adverse claimant

waited for petitioner to comply with his obligation under the document executed by him

by delivering ½ portion of the said parcels of land

5. Petitioner refused to comply with his obligation and instead offered to sell the whole

parcels of land to spouses Larrazabal.

6. Then, adverse claimant immediately took steps to protect his interest by filing a motion to

annotate his attorney's. lien and by notifying the prospective buyers of his claim over the

½ portion of the parcels of land.

7. Motion was granted. The annotation of adverse claim appeared on the new transfer

certificate of title. The adverse claim became the subject of cancellation proceedings filed

by the petitioner-spouses. The trial court resolved the case in favour of the adverse

claimant.

8. On appeal, petitioners contended that a contract for contingent fee violates Art. 1491,

NCC, because it involved an assignment of subject property subject of litigation.

ISSUE: WON the contract for contingent fee as basis of the interest of Atty. Fernandez is

prohibited by Article 1491 of the NCC

HELD: No! Contention without merit!

Article 1491 prohibits only the sale or assignment between the lawyer and his client of

the property which is the subject of the litigation. For the prohibition to operate, the sale or

assignment of the property must take place during the pendency of the litigation involving

property.

Likewise, under the American law, the prohibition does not apply to “cases where after

completion of litigation the lawyer accepts on account of his fee and interest in assets realized by

the litigation.” There is a clear distinction between such cases and one in which the lawyer

speculates on the outcome of the matter in which he is employed.

Further, a contract for a contingent fee is not covered by Art. 1491 because the transfer or

assignment of the property in litigation takes effect only after the finality of a favourable

judgement. In the instant case, the attorney’s fees of Atty. Fernandez, consisting of ½ of whatever

the petitioner might recover from his share in the lots in question is contingent upon the success

of the appeal. Hence, the payment of the attorney’s fees, that is, the transfer or assignment of ½ of

the property in litigation will take place only if the appeal prospers. Therefore, the transfer

actually takes effect after the finality of a favourable judgement rendered on appeal and not

during the pendency of litigation involving the property in question. Consequently, the contract

for contingent fee is not covered by Article 1491, NCC.

Sarsosa Vda. De Barsobia vs. Victoriano Cuenco

FACTS:

Petitioner Epifania Sarsosa owned a parcel of coconut land located at Barrio

Mancapagao, Sagay, Camiguin, Misamis Oriental, with an area of 29, 150 square meters

more or less. She sold the lot to Ong King Po, a Chinese citizen, on September 5,1936. Ong

King Po subsequently sold the same to respondent, Victoriano Cuenco, on August 5,1961.

Then on March 6,1962,

Epifania “usurped” the property and sold one--‐half of it to Pacita W. Vallar, co--‐petitioner

herein. Petitioner claimed it was not her intention to sell the land to Ong King Po, but

merely signed the document of sale to evidence her indebtedness to him amounting

to 1,050. Epifania also retained possession of the other half of the property, while the other was

held by Vallar.

Issue: Who owns the property, Cuenco or Vallar?

Held:

CUENCO OWNS THE PROPERTY. It is well established that petitioner sold the land to a

Chinese citizen, Ong King Po, who later sold it to respondent, a Filipino citizen. While the

Constitution prohibits aliens from acquiring land, the first void sale to Ong King Po was

nonetheless ‘cured’ when he subsequently sold the disputed property to Cuenco. The evil

sought to be remedied by the Constitutional prohibition ceased to exist, because

the land is once again held by a Filipino.

Herrera vs Luy Kim Guan

FACTS:

The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased and who

died in China sometime after he went to that country in the last part of 1931 or early part of 1932.

The said Luis Herrera in his lifetime was the owner of three (3) parcels of land and their

improvements, known as Lots 1740, 4465 and 4467 of Expediente No. 5, G.L.R.O. Before

leaving for China, however, Luis Herrera executed on December 1, 1931, a deed of General

Power of Attorney, which authorized and empowered the defendant Kim Guan, among others to

administer and sell the properties of said Luis Herrera.

Lot 1740 was sold by the defendant Luy Kim in his capacity as attorney-in-fact of the deceased

Luis Her to Luy Chay on September 11, 1939. On January 31, 1947, the said Luy Chay executed

a deed of sale, Exhibit "E", in favor of Lino BangayanLuis Herrera thru his attorney-in-fact Luy

Kim Guan, one of the defendants, sold to Nicomedes Salazar his one half (.) participation in these

two (2) lots (4465 and 4467) (marami pang transactions nangyari na involved yung 3 parcel of

land.)

As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but as to

the specific and precise date of his death the evidence of both parties failed to show. It is the

contention of plaintiff-appellant that all the transactions mentioned in the preceding quoted

portion of the decision were fraudulent and were executed after the death of Luis Herrera and,

consequently, when the power of attorney was no longer operative.

ISSUE: WON these transactions are null and void and of no effect because they were executed by the

attorney-in-fact after the death of his Principal.

RULING: No, since the only evidence presented by the Plaintiff-appellant in this respect is a

supposed letter received from a certain "Candi", dated at Amoy in November, 1936, purporting to

give information that Luis Herrera (without mentioning his name) had died in August of that year.

This piece of evidence was properly rejected by the lower court for lack of identification. the

other hand, we have the testimony of the witness Chung Lian to the effect that when he was in

Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the

latter was still alive at the time. Also, there was no proof that agent was aware of death of

theprincipal; death of the principal does not render th act of an agentunenforceable, where the

agent had no knowledge of suchextinguishment of the agency

Doctrine: The death of the principal does not render the act of an agent unenforceable, where the

latter had no knowledge of such extinguishment the agency.

Vicente Godinez vs Fong Pak Luen [no digest]

-End of Wednesday, August 1, 2012-

DAUS vs. DE LEON

FACTS:

Respondents alleged that they are the owners of a parcel of land described as: No. 4786 of the

Cadastral Survey of San Manuel situated in the Municipality of San Manuel, Bounded on the

NW., by Lot No. 4785; and on the SE., by Lot Nos. 11094 & 11096; containing an area of Four

Thousand Two Hundred Twelve (4,212) sq. m., more or less. Covered by Original Certificate

of Title No. 22134 of the Land Records of Pangasinan which Hermoso de Leon inherited from

his father Marcelino de Leon by virtue of a Deed of Extra-judicial Partition. Sometime in the

early 1960s, respondents engaged the services of the late Atty. Florencio Juan to take care of the

documents of the properties of his parents. Atty.Juan let them sign voluminous documents. After

the death of Atty. Juan, some documents surfaced and most revealed that their properties had

been conveyed by sale or quitclaim to Hermoso’s brothers and sisters, to Atty. Juan and his

sisters, when in truth and in fact, no such conveyances were ever intended by them. His signature

in the Deed of Extra-judicial Partition with Quitclaim made in favor of Rodolfo de Leon was

forged. They discovered that the land in question was sold by Rodolfo de Leon to Aurora

Alcantara. They demanded annulment of the document and reconveyance but defendants refused

Aurora Alcantara-Daus that she bought the land in question in good faith and for value. [She]has

been in continuous, public, peaceful, open possession over the same and has been appropriating

the produce thereof without objection from anyone.

ISSUES:

1. Whether or not the Deed of Absolute Sale \ executed by Rodolfo de Leon over the land in

question in favor of petitioner was perfected and binding upon the parties therein?

2. Whether or not the possession of petitioner including her predecessor-in-interest Rodolfo de

Leon over the land in question was in good faith?

HELD:

Petition has no merit.

1. A contract of sale is consensual. It is perfected by mere consent, upon a meeting of the minds

on the offer and the acceptance thereof based on subject matter, price of payment. At this stage,

the seller’s ownership of the thing sold is not an element in the perfection of the contract of sale

.The contract, however, creates an obligation on the part of the seller to transfer ownership and to

deliver the subject matter of the contract. It is during the delivery that the law requires the seller

to have the right to transfer ownership of the thing sold. In general, a perfected contract of sale

cannot be challenged on the ground of the seller’s non-ownership of the thing sold at the time of

the perfection of the contract.

2. It is well-settled that no title to registered land in derogation of that of the registered owner

shall be acquired by prescription or adverse possession. Neither can prescription be allowed

against the hereditary successors of the registered owner, because they merely step into the shoes

of the decedent and are merely the continuation of the personality of their predecessor in interest.

Consequently, since a certificate of registration covers it, the disputed land cannot be acquired by

prescription regardless of petitioner’s good faith

G.R. No. L-26937 October 5, 1927 PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs. SEVERO EUGENIO LO, ET AL., defendants.

SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants. FACTS:

On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together

with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a

commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000

contributed by said partners. In the articles of copartnership, it appears that the partnership was to

last for five years from after the date of its organization, and that its purpose was to do business in

the City of Iloilo, Province of Iloilo, or in any other part of the Philippine Islands the partners

might desire, under the name of "Tai Sing & Co.," for the purchase and sale of merchandise,

goods, and native, as well as Chinese and Japanese, products, and to carry on such business and

speculations as they might consider profitable.

One of the partners, Ping was appointed general manager of the partnership, with the

appointed general manager of the partnership, with the powers specified in said articles of

copartnership. On June 4, 1917, general manager Ping executed a power of attorney in favor of

Kelam, authorizing him to act in his stead as manager and administrator of "Tai Sing & Co.," on

July 26, 1918, for, and obtained a loan of P8,000 in current account from the plaintiff bank. As

security for said loan, he mortgaged certain personal property of "Tai Sing & Co.

This credit was renew several times and on March 25, 1919, Kelam, as attorney-in-fact of

"Tai Sing & Co., executed a chattel mortgage in favor of plaintiff bank as security for a loan of

P20,000 with interest. This mortgage was again renewed on April 16, 1920 and Kelam, as

attorney-in-fact of "Tai Sing & Co., executed another chattel mortgage for the said sum of

P20,000 in favor of plaintiff bank. According to this mortgage contract, the P20,000 loan was to

earn 9 per cent interest per annum.

On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the

latter represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy Tit by

virtue of which Sy Tit, representing "Tai Sing & Co., obtained a credit of P20,000 from plaintiff

bank on January 7, 1921, executing a chattel mortgage on certain personal property belonging to

"Tai Sing & Co.

Defendants had been using this commercial credit in a current account with the plaintiff

bank, from the year 1918, to May 22, 1921. The total is the sum claimed in the complaint,

together with interest on the P16,518.74 debt, at 9 per cent per annum from January 1, 1925 until

fully paid, with the costs of the trial.

Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a general

partnership, and that the commercial credit in current account which "Tai Sing & Co. obtained

from the plaintiff bank had not been authorized by the board of directors of the company, nor

was the person who subscribed said contract authorized to make the same, under the article

of copartnership. The other defendants, Yap Sing and Ng Khey Ling, answered the complaint

denying each and every one of the allegations contained therein.

After the hearing, the court found the defendants liable to PNB.

ISSUE:

WON a general partnership was formed HELD:

YES. Appellants admit, and it appears from the context of Exhibit A, that the defendant

association formed by the defendants is a general partnership, as defined in article 126 of the

Code Commerce. This partnership was registered in the mercantile register of the Province of

Iloilo. The only anomaly noted in its organization is that instead of adopting for their firm name

the names of all of the partners, of several of them, or only one of them, to be followed in the last

two cases, by the words "and to be followed in the last two cases, by the words "and company"

the partners agreed upon "Tai Sing & Co." as the firm name.

The anomalous adoption of the firm name above noted does not affect the liability of the

general partners to third parties under article 127 of the Code of Commerce. And the Supreme

Court so held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45 Phil., 142), in which

it said that the object of article 126 of the Code of Commerce in requiring a general partnership to

transact business under the name of all its members, of several of them, or of one only, is to

protect the public from imposition and fraud; and that the provision of said article 126 is for the

protection of the creditors rather than of the partners themselves.

And consequently the doctrine was enunciated that the law must be unlawful and

unenforceable only as between the partners and at the instance of the violating party, but not in

the sense of depriving innocent parties of their rights who may have dealt with the offenders in

ignorance of the latter having violated the law; and that contracts entered into by commercial

associations defectively organized are valid when voluntarily executed by the parties, and the

only question is whether or not they complied with the agreement. Therefore, the defendants

cannot invoke in their defense the anomaly in the firm name which they themselves adopted.

As to the alleged death of the manager of the company, Say Lian Ping, before the attorney-

in-fact Ou Yong Kelam executed Exhibits C, D and E, the trial court did not find this fact proven

at the hearing. But even supposing that the court had erred, such an error would not justify the

reversal of the judgment, for two reasons at least: (1) Because Ou Yong Kelam was a partner who

contracted in the name of the partnership, without any objection of the other partners; and (2)

because it appears in the record that the appellant-partners Severo Eugenio Lo, Ng Khey Ling and

Yap Seng, appointed Sy Tit as manager, and he obtained from the plaintiff bank the credit in

current account, the debit balance of which is sought to be recovered in this action.

Appellants allege that such of their property as is not included in the partnership assets

cannot-be seized for the payment of the debts contracted by the partnership until after the

partnership property has been exhausted. The court found that the partnership property

described in the mortgage Exhibit F no longer existed at the time of the filing of the herein

complaint nor has its existence been proven, nor was it offered to the plaintiff for sale. We

find no just reason to reverse this conclusion of the trial court, and this being so, it follows that

article 237 of the Code of Commerce, invoked by the appellant, can in no way have any

application here.

Appellants also assign error to the action of the trial court in ordering them to pay plaintiff,

jointly and severally, the sums claimed with 9 per cent interest on P16,518.74, owing from them.

The judgment against the appellants is in accordance with article 127 of the Code of

Commerce which provides that all the members of a general partnership, be they managing

partners thereof or not, shall be personally and solidarily liable with all their property, for the

results of the transactions made in the name and for the account of the partnership, under the

signature of the latter, and by a person authorized to use it.

The judgment appealed from is in accordance with the law, and must therefore be, as it

is hereby, affirmed with costs against the appellants. SO ORDERED.

Norkis Distributors Inc. vs. Court of Appeals, and Nepales 193 SCRA 694 February 1991 FACTS: On September 20, 1979, private respondent Alberto Nepales bought from the Norkis Distributors,

Inc. (Norkis) in its Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX

with Engine No.L2-329401K Frame No.NL2-0329401, color maroon, which was then on display

in the Norkis showroom. The Branch Manager Avelino Labajo agreed to accept the P7,500.00

price payable by means of a Letter of Guaranty from the Development Bank of the Philippines

(DBP), Kabankalan. Hence, credit was extended to Nepales, and as security for the loan, he

executed a chattel mortgage on the motorcycle in favor of DBP. Labajo issued the Norkis Sales

Invoice No. 0120 perfecting the contract of sale, and Nepales signed the same to conform to the

terms of the sale, while the unit remained in Norkis' possession. On November 6, 1979, it was

registered under Alberto Nepales’ name in the Land Transportation Commission.

On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly

the agent of Alberto Nepales but the latter denies it. The record shows, however, that Alberto and

Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP

offices in Kabankalan, Negros Occidental Branch. On February 3, 1980, the motorcycle met an

accident at Binalbagan, Negros Occidental while being driven by a certain Zacarias Payba. The

unit was a total wreck, was returned, and stored inside Norkis' warehouse.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis

in the total sum of P7,500. As the price of the motorcycle later increased to P7,828 in March,

1980, Nepales paid the difference of P328 and demanded the delivery of the motorcycle. Norkis

failed to deliver the unit, and Nepales filed an action for specific performance with damages in

the RTC of Himamaylan, Negros Occidental. Norkis answered that the motorcycle had already

been delivered to private respondent before the accident, hence, he should bear the risk of loss or

damage as owner of the unit. The lower court ruled in favor of Nepales, and the Court of Appeals

affirmed the decision but deleted the award of damages "in the amount of P50.00 a day from

February 3, 1980 until payment of the present value of the damaged vehicle." Norkis concedes

that there was no "actual" delivery of the vehicle, but insists that there was constructive delivery

of the unit upon the issuance of the sales invoice, upon the registration of the unit in Nepales’

name, and upon the issuance of the official receipt.

ISSUE: Who should bear the risk of loss? HELD: Affirming the decision of the Court of Appeals, the Supreme Court reiterated that Article 1496 of

the Civil Code which provides that "in the absence of an express assumption of risk by the buyer,

the things sold remain at seller's risk until the ownership thereof is transferred to the buyer," is

applicable in the case at bar for there was neither an actual nor constructive delivery of the thing

sold.

The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated

September 20, 1979 and the registration of the vehicle in the name of Alberto Nepales with the

Land Registration Commission was not to transfer the ownership and dominion over the

motorcycle to him, but only to comply with the requirements of the DBP for processing private

respondent's motorcycle loan. The circumstances in the case itself more than amply rebut the

disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action.

Philippine Suburban Dev Corp vs Auditor General

G.R. No. L-19545 Doctrine: Constructive or legal delivery Facts: On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting on

the reports of the Committee created to survey suitable lots for relocating squatters in Manila and

suburbs, approved in principle the acquisition by the People’s Homesite and Housing Corporation

of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan and of another area

either in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for those who desire to settle south of

Manila. On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700

(Annex “C”) authorizing the purchase of the unoccupied portion of the Sapang Palay Estate at

P0.45 per square meter “subject to the following conditions precedent:

3. That the President of the Philippines shall first provide the PHHC with the necessary funds to

effect the purchase and development of this property from the proposed P4.5 million bond issue

to be absorbed by the GSIS. 4. That the contract of sale shall first be approved by the Auditor

General pursuant to Executive Order dated February 3, 1959.

On July 13, 1960, the President authorized the floating of bonds under Republic Act Nos. 1000

and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in order to finance the

acquisition by the PHHC of the entire Sapang Palay Estate at a price not to exceed P0.45 per sq.

meter.

On December 29,1960, Petitioner Philippine Suburban Development Corporation, as owner of the

unoccupied portion of the Sapang Palay Estate and the People’s Homesite and Housing

Corporation, entered into a contract embodied in a public instrument entitled “Deed of Absolute

Sale” whereby the former conveyed unto the latter the two parcels of land abovementioned. This

was not registered in the Office of the Register of Deeds until March 14, 1961, due to the fact,

petitioner claims, that the PHHC could not at once advance the money needed for registration

expenses.

In the meantime, the Auditor General, to whom a copy of the contract had been submitted for

approval in conformity with Executive Order No. 290, expressed objections thereto and requested

a re-examination of the contract, in view of the fact that from 1948 to December 20, 1960, the

entire hacienda was assessed at P131,590.00, and reassessed beginning December 21, 1960 in the

greatly increased amount of P4,898,110.00.

It appears that as early as the first week of June, 1960, prior to the signing of the deed by the

parties, the PHHC acquired possession of the property, with the consent of petitioner, to enable

the said PHHC to proceed immediately with the construction of roads in the new settlement and

to resettle the squatters and flood victims in Manila who were rendered homeless by the floods or

ejected from the lots which they were then occupying. On April 12, 1961, the Provincial

Treasurer of Bulacan requested the PHHC to withhold the amount of P30,099.79 from the

purchase price to be paid by it to the Philippine Suburban Development Corporation. Said amount

represented the realty tax due on the property involved for the calendar year 1961. Petitioner,

through the PHHC, paid under protest the abovementioned amount to the Provincial Treasurer of

Bulacan and thereafter, or on June 13, 1961, by letter, requested then Secretary of Finance

Dominador Aytona to order a refund of the amount so paid. Upon recommendation of the

Provincial Treasurer of Bulacan, said request was denied by the Secretary of Finance in a letter-

decision dated August 22, 1961. **Petitioner claimed that it ceased to be the owner of the land in

question upon the execution of the Deed of Absolute Sale on December 29, 1960. It is now

claimed in this appeal that the Auditor General erred in disallowing the refund of the real estate

tax in the amount of P30,460.90 because aside from the presumptive delivery of the property by

the execution of the deed of sale on December 29, 1960, the possession of the property was

actually delivered to the vendee prior to the sale, and, therefore, by the transmission of ownership

to the vendee, petitioner has ceased to be the owner of the property involved, and, consequently,

under no obligation to pay the real property tax for the year 1961. **Respondent, however, argues

that the presumptive delivery of the property under Article 1498 of the Civil Code does not apply

because of the requirement in the contract that the sale shall first be approved by the Auditor

General, pursuant to the Executive Order.

ISSUE: WON there was already a valid transfer of ownership between the parties.

HELD: Considering the aforementioned approval and authorization by the President of the

Philippines of the specific transaction in question, the prior approval by the Auditor General

envisioned by Administrative Order would therefore, not be necessary. Under the civil law,

delivery (tradition) as a mode of transmission of ownership maybe actual (real tradition) or

constructive (constructive tradition). 2 When the sale of real property is made in a public

instrument, the execution thereof is equivalent to the delivery of the thing object of the contract, if

from the deed the contrary does not appear or cannot clearly be inferred. 3 In other words, there is

symbolic delivery of the property subject of the sale by the execution of the public instrument,

unless from the express terms of the instrument, or by clear inference therefrom, this was not the

intention of the parties. Such would be the case, for instance, when a certain date is fixed for the

purchaser to take possession of the property subject of the conveyance, or where, in case of sale

by installments, it is stipulated that until the last installment is made, the title to the property

should remain with the vendor, or when the vendor reserves the right to use and enjoy the

properties until the gathering of the pending crops, or where the vendor has no control over the

thing sold at the moment of the sale, and, therefore, its material delivery could not have been

made. In the case at bar, there is no question that the vendor had actually placed the vendee in

possession and control over the thing sold, even before the date of the sale. The condition that

petitioner should first register the deed of sale and secure a new title in the name of the vendee

before the latter shall pay the balance of the purchase price, did not preclude the transmission of

ownership. In the absence of an express stipulation to the contrary, the payment of the purchase

price of the good is not a condition, precedent to the transfer of title to the buyer, but title passes

by the delivery of the goods.

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid under

protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban Development

Corporation, in the amount of P30,460,90, is hereby ordered refunded. Without any

pronouncement as to costs.

HEIRS OF ARTURO REYES, represented by Evelyn R. San Buenaventura, petitioners,

vs.

ELENA SOCCO-BELTRAN, respondent.

Nature:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the

Decision1dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066,

which affirmed the Decision2 dated 30 June 2003 of the Office of the President, in O.P. Case No.

02-A-007, approving the application of respondent Elena Socco-Beltran to purchase the subject

property.

Ruling of the Supreme Court:

The instant Petition is DENIED.

Facts of the case:

The subject property in this case is a parcel of land allocated to the Spouses Marcelo Laquian and

Constancia Socco (Spouses Laquian). When Marcelo died, the property was left to his wife

Constancia. Upon Constancia’s subsequent death, she left the original parcel of land, along with

her other property, with her heirs – her siblings, namely: Filomena Eliza Socco, Isabel Socco de

Hipolito, Miguel R. Socco, and Elena Socco-Beltran. The parcel of land was partitioned into

three lots–Lot No. 6-A, Lot No. 6-B, and Lot No. 6-C.The subject property, Lot No. 6-B, was

adjudicated to respondent, but no title had been issued in her name.

Elena Socco-Beltran filed an application for the purchase of Lot No. 6-B before the Department

of Agrarian Reform (DAR), alleging that it was adjudicated in her favor in the extra-judicial

settlement of Constancia Socco’s estate. The heirs of the late Arturo Reyes, filed their protest to

respondent’s petition before the DAR on the ground that the subject property was sold by

respondent’s brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as evidenced by the

Contract to Sell, dated 5 September 1954 that for or in consideration of the sum of FIVE PESOS

(P5.00) per square meter, he sell, convey and transfer by way of this conditional sale the said 400

sq.m. more or less unto Atty. Arturo C. Reyes, his heirs, administrator and assigns.

Tolentino heirs averred that they took physical possession of the subject property in 1954 and had

been uninterrupted in their possession of the said property since then.

Petitioners sought remedy from the Office of the President by appealing the 9 November 2001

Decision of the DAR Secretary favoring Socco- Beltran.The Office of the President rendered its

Decision denying petitioners’ appeal and affirming the DAR Secretary’s Decision. They appealed

to Ca and the CA subsequently affirmed the Decision of the Office of the President. Hence, this

present Petition.

Issue:

Whether or not there was valid delivery by Miguel Socco to the heirs of Arturo Reyes that would

enable the latter to acquire title to the said land.

NOTE: Petitioner’s claim over the subject property is anchored on the Contract to Sell

executed between Miguel Socco and Arturo Reyes on 5 September 1954. Petitioners

additionally allege that they and their predecessor-in-interest, Arturo Reyes, have been in

possession of the subject lot since 1954 for an uninterrupted period of more than 40 years.

Held:

The Court is unconvinced.

Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was

unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel

R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the

same as his share as a co-heir of Constancia’s estate. It was also declared in the Contract itself

that Miguel R. Socco’s conveyance of the subject to the buyer, Arturo Reyes, was a conditional

sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was

conditioned upon the event that Miguel Socco would actually inherit and become the owner of

the said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the

subject property which he could validly transfer to Arturo Reyes.

Under Article 1459 of the Civil Code on contracts of sale, "The thing must be licit and the

vendor must have a right to transfer ownership thereof at the time it is delivered." The law

specifically requires that the vendor must have ownership of the property at the time it is

delivered. Petitioners claim that the property was constructively delivered to them in 1954 by

virtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit in the

Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of the

property and was only expecting to inherit it. Hence, there was no valid sale from which

ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes.

Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed

the same to his heirs, herein petitioners.

G.R. No. 122463

RUDOLF LIETZ, INC.,

Petitioner,

- versus-

AUSTRIA-MARTINEZ,

THE COURT OF APPEALS, AGAPITO BURIOL, TIZIANA TURATELLO & PAOLA SANI,

Respondents.

Promulgated: December 19, 2005

*land leased to Italians and subsequently sold; area less than what was in the contract FACTS:

1.Agapito Buriol owned a parcel of unregistered land in Palawan.

2. On 15 Aug 1986,

Buriol entered into a lease agreement with Flavia Turatello, TizianaTuratello, and Paola

Sani, all Italians

involving 1 hectare of the property. Lease agreement was for 25 years, renewable for another 25

years.

3. The Italians then took possession of the land after paying a downpayment of

₱10,000. The lease agreement was reduced into writing in Jan 1987.

4. On 17 Nov 1986, Buriol sold the land to Rudolf Lietz, Inc. for ₱30,000. The Deed of

Absolute Sale states that the land measured 5 hectares, more or less. It also described the

boundaries of the land.

5.Lietz later discovered that Buriol owned only 4 hectares, with 1 more covered by the lease

agreement. Hence, only 3 hectares were actually delivered.

6.Lietz then filed a complaint for Annulment of Lease with Recovery of Possession against

Buriol andthe Italians. He alleged that Buriol sold to him the lot in evident bad faith and malice

knowing that heowned only 4 hectares, not 5.

7. The trial court dismissed the complaint and the counterclaim of the Italians for damages.

8. The CA affirmed the dismissal. It held that under Article 1542, Lietz is no longer entitled to

a reduction in price.

9.Lietz appeals. He contends that he is entitled to reduction under Article 1539.

ISSUE:

Is Lietz entitled to a reduction in the purchase price of the lot because of the reduced area of the

property delivered to him?

HELD:

No. Under Article 1542, there shall be no reduction in the purchase price even if the

area deliveredis less than that stated in the contract.

DECISION:

Affirmed

RATIO DECIDENDI:

1. Article 1539 governs a sale of immovable by the unit, that is, at a stated price per

unit area. In a unit price contract, the statement of area of immovable is not conclusive

and the price maybe reduced or increased depending on the area actually delivered.

2. In some instances, a sale of an immovable may be made for a lump sum and not at a

rate per unit. In the case where the area of the immovable is stated in the contract based

on an estimate, the actual area delivered may not measure up exactly with the area stated

in the contract.

3. A vendee of land, when sold in gross or with the description “more or less” with

reference to its area, does not thereby ipso facto take all risk of quantity in the land. The

use of “more or less” or similar words in designating quantity covers only

a reasonable excess or deficiency

.

4. What really defines a piece of ground is not the area mentioned in its description,

but the boundaries therein laid down, as enclosing the land and indicating its limits. In

a contract of sale of land in a mass, it is well established that the specific boundaries

stated in the contract must control over any statement with respect to the area

contained within its boundaries.

5. In this case, the sale is one made for a lump sum. The Deed of Absolute Sale shows

that the parties agreed on the purchase price on a predetermined area of 5 hectares within

the specified boundaries and not based on a particular rate per area.

6. In accordance with Article 1542, there shall be no reduction in the purchase price

even if the area delivered to Lietz is less than that stated in the contract. The area

within the boundaries as stated in the contract shall control over the area agreed

upon.

7. Lietz had an ocular inspection prior to the perfection of the contract. Thus, he gained

a fair estimate of the area of the property sold to him. Also, his subscription to the Deed

of Absolute Sale indicates his assent to the correct description of the boundaries of the

property.

Law: Art. 1539.

The obligation to deliver the thing sold includes that of placing in the control of the vendee all

that is mentioned in the contract, in conformity with the following rules: If the sale of real estate

should be made with a statement of its area, at the rate of a certain price for a unit of measure or

number, the vendor shall be obliged to deliver to the vendee, if the latter should demand it, all

that may have been stated in the contract; but, should this be not possible, the vendee may choose

between a proportional reduction of the price and the rescission of the contract, provided that, in

the latter case, the lack in the area be not less than one-tenth of that stated. x x x

Salinas VS Faustino

G.R. No. 153077, September 19, 2008

FACTS:

In June, 1962, respondent herein, Bienvenido Faustino with his wife, purchased from

several co-heirs, including the petitioner, Dolores Salinas a parcel of land with a surface area of

“300 Square meters more or less and with boundaries “in the North: Carmen Labitan; in the

South: Calle, in the East: Callejon and in the West: Roque Demetrio.”. Two years later, they

filed a civil case for recovery of possession with damages against herein Salinas, alleging that the

parcel of land they purchased was for the whole of 1,381 square meters. These allegations were

supported by a tax declaration. They further allege that they have only allowed the petitioners and

other co-heirs to occupy 627 square meters on the condition that they would vacate the said

portion when the respondents need arises.The RTC of Olongapo ruled in favor of Salinas, finding

the allegation of forgery, presented by Faustino, unsupported, in that the deed of sale indicated

that 300 square meters was sold to him. On appeal to the CA, it modified the ruling of the RTC,

the decision being that Faustino owns 753 square meters of the said parcel of land. Hence this

petition by Dolores

ISSUE:

Whether or not the tax declaration is to be followed regarding the size of the land sold to

the respondent.

HELD:

Being that the boundaries were clearly stated in the Tax Declaration and on the Deed of

Sale, it is clear that the parties intended to sell the remaining portion to the respondent (753

square meters). Furthermore, the fact that the petitioners have occupied 627 square meters for

quite some time, it can be denounced that the remaining 753 square meters of the property were

owned by the respondents. The deicision of the CA is reversed and set aside, and the case is

reinstated.

De Leon vs. Ong

GR. 170405, February 2, 2010

FACTS: On March 10, 1993, (petitioner) Raymundo De Leon sold 3 parcels of land to

(respondent) Benita Ong. The properties were mortgaged to Real Savings and Loan Association

Inc (RSLAI). The parties executed a notarized deed of absolute sale with assumption of

mortgage. In the deed of mortgage, the parties stipulated that Petitioner will execute a deed of

assumption of mortgage in favor of Respondent after full payment of P415,000 and they also

agreed that respondent will assume payment of mortgage of P684,500. Respondent then

subsequently gave Petitioner P415,000 as partial payment. Petitioner, in turn, handed the keys to

Respondent and Petitioner wrote a letter to inform RSLAI that the mortgage will be assumed by

Respondent. Thereafter, Respondent took repairs and made improvements in the properties.

Subsequently, Respondent learned that the same properties were sold to Viloria after

March 10, 1993 and changed the locks, rendering the keys given to her useless. Respondent

proceeded to RSLAI but she was informed that the mortgage has been fully paid and that the

titles have been given to Viloria. Respondent then filed a complaint for specific performance and

declaration of nullity of the second sale and damages. Petitioner contended that respondent does

not have a cause of action against him because the sale was subject to a suspensive condition

which requires the approval of RSLAI of the mortgage. Petitioner reiterated that they only

entered into a contract to sell.

RTC dismissed the case. CA, on appeal, upheld the sale to Respondent and nullified the

sale to Viloria. Petitioner moved for an MR to the SC.

ISSUE: Whether the parties entered into a contract of sale or contract to sell

HELD: Contract of Sale.

RATIO: In a contract of sale, the seller conveys ownership of the property to the buyer upon the

perfection of the contract. The non-payment of the price is a negative resolutory condition.

Contract to sell is subject to a positive suspensive condition. The buyer does not acquire

ownership of the property until he fully pays the purchase price.

In this case, the deed executed by the parties did not show that the owner (petitioner) intends to

reserve ownership of the properties. The terms and conditions affected only the manner of

payment and not the immediate transfer of ownership. Clearly, petitioner intended a sale because

he unqualifiedly delivered and transferred ownership of properties to the respondent.

*NOTE: There was also a minor issue whether there was a void second dale or a Double Sale. To

which the SC held that there was a Double Sale because the properties were sold validly on two

separate occasions by the same seller to the two different buyers in good faith (De Leon and

Viloria).

Asset Privatization Trust vs. T.J. EnterpriseG.R. No. 167195 May 8, 2009 Facts: Petitioner was a government entity created for the purpose to conserve, to provisionally manage

and to dispose assets of government institutions. It had acquired assets consisting of machinery

and refrigeration equipment stored at the Golden City compound which was leased to and in the

physical possession of Creative Lines, Inc., (Creative Lines). These assets were being sold on

an as-is-where-is basis. Petitioner and respondent entered into an absolute deed of sale over

certain machinery and refrigeration equipment wherein respondent paid the full amount as

evidenced by petitioner’s receipt. After two (2) days, respondent demanded the delivery of the

machinery it had purchased. Petitioner issued a Gate Pass to respondent to enable them to pull out

from the compound the properties designated; however, during the hauling of Lot No. 2

consisting of sixteen (16) items, respondent pulled out only nine (9) items. Respondent filed a

complaint for specific performance and damages against petitioner and Creative Lines. Upon

inspection of the remaining items, they found the machinery and equipment damaged and had

missing parts. Petitioner claimed that there was already a constructive delivery of the machinery

and equipment upon the execution of the deed of sale it had complied with its obligation to

deliver the object of the sale since there was no stipulation to the contrary and it was the duty

of respondent to take possession of the property. The RTC ruled that petitioner is liable for breach

of contract and should pay for the actual damages suffered by respondent. It found that at the time

of the sale, petitioner did not have control over the machinery and equipment and, thus, could not

have transferred ownership by constructive delivery. The Court of Appeals affirmed the

judgment; hence, this petition.

Issue: Whether or not the petitioner had complied with its obligations to make delivery of the properties

and failure to make actual delivery of the properties was not attributable was beyond the control

of petitioner?

Held:

No. There was no constructive delivery of the machinery and equipment upon the execution of

the deed of absolute sale or upon the issuance of the gate pass since it was not the petitioner but

Creative Lines which had actual possession of the property. The presumption of constructive

delivery is not applicable, as it has to yield to the reality that the purchaser was not placed in

possession and control of the property. Petitioner also claims that its failure to make actual

delivery was beyond its control. It posits that the refusal of Creative Lines to allow the hauling of

the machinery and equipment was unforeseen and constituted a fortuitous event. The matter of

fortuitous events is governed by Art.1174 of the Civil Code which provides that except in cases

expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature

of the obligation requires assumption of risk, no person shall be responsible for those events

which could not be foreseen, or which though foreseen, were inevitable. A fortuitous event may

either be an act of God, or natural occurrences such as floods or typhoons, or an act of man such

as riots, strikes or wars. However, when the loss is found to be partly the result of a person’s

participation whether by active intervention, neglect or failure to act, the whole occurrence is

humanized and removed from the rules applicable to a fortuitous event. Thus, the risk of loss or

deterioration of property is borne by petitioner. Thus, it should be liable for the damages that may

arise from the delay.

BOARD OF LIQUIDATORS, petitioner and

appellant, vs. EXEQUIEL FLORO, ET AL., oppositors and appellees.

FACTS: Melecio Malabanan entered into an agreement with the Board for the salvage of

surplus properties sunk in territorial waters off the provinces of Mindoro, La Union, and

Batangas. By its terms, Malabanan was to commence operations within 30 days from

execution of said contract, which was to be effective for a period of one (1) year from the

start of operations, extendible for a total period of not more than six (6) months. On June 10,

1953, Malabanan requested for an extension of one (1) year for the salvage in waters of

Mindoro and Batangas; and the Board extended the contract up to November 30, 1953. On

November 18, 1953, Malabanan requested a second extension of one (1) more year for the

waters of Occidental Mindoro, and the Boardagain extended the contract up to August 31,

1954. Malabanan submitted a recovery report dated July 26,1954, wherein it is stated that he

had recovered a total of 13,107 pieces of steel mattings.

Four months previously, Malabanan had entered into an agreement

with Exequiel Floro, in which, among other things, it was agreed that Floro would advance to

Malabanan certain sums of money, not to exceed P25,000.00, repayment thereof being

secured by quantities of steel mattings which Malabanan would consign to Floro; that said

advances were to be paid within a certain period, and upon default at the expiration

thereof, Floro was authorized to sell whatever steel mattings were in his possession under

said contract, in an amount sufficient to satisfy the advance. Pursuant thereto, Floro claims to

have made total advances to the sum of P24,224.50.

It appears that as Malabanan was not able to repay Floro's advances, the latter, sold

11,047 pieces of steel mattings to Eulalio Legaspi for the sum of P24,303.40.

Seventeen days later, Malabanan filed in the Court of First Instance of Manila a

petition for voluntary insolvency, attaching thereto a schedule of accounts, in which

the Board was listed as one of the creditors and Exequiel Floro for, the origin of the

obligations being described as "Manila Royalty" and "Salvaging Operations", respectively.

Also attached was an Inventory of Properties.

Soon after, the Board, claiming to be the owner of the listed steel matting, filed a

petition to exclude them from the inventory; Exequiel Floro opposed the Board's petition and

claimed that the steel matting listed had become the property of Eulalio Legaspi by virtue of a

deed of sale in his favor, executed by Floro pursuant to the latter's contract with Malabanan.

The court below, after reception of evidence as to the genuineness and due execution of the

deed of sale to Legaspi, as well as of the contract between Malabanan and Floro, denied

the Board's petition, declaring that Malabanan had acquired ownership over the steel mattings

under his contract with the Board; thatExequiel Floro was properly authorized to dispose of

the steel mattings under Floro's contract with Malabanan; and that the sale to Eulalio Legaspi

was valid and not contrary to the Insolvency Law hence, the appeal.

ISSUE: whether or not Malabanan did not acquire ownership over the steel mattings due to

his failure to comply with the terms of the contract, allegedly constituting conditions

precedent for the transfer of title.

HELD: The contract between Malabanan and the Board had the effect of vesting Malabanan

with title to, or ownership of, the steel mattings in question as soon as they were brought up

from the bottom of the sea. This is shown by pertinent provisions of the contract as follows:

"10. For and in consideration of the assignment by

the BOARD OF LIQUIDATORS to the CONTRACTOR (Malabanan) of all

right, title and interest in and to all surplus properties salvaged by the

CONTRACTOR under this contract, the CONTRACTOR shall pay to the

Government NINETY PESOS (P90.00) per long ton (2,240 lbs.) of surplus

properties recovered.

"11. Payment of the agreed price shall be made monthly during the

first ten (10) days of every month on the basis of recovery reports of sunken

surplus properties salvaged during the preceding month, duly verified and

audited by the authorized representative of the BOARD OF LIQUIDATORS."

That Malabanan was required under the contract to post a bond of P10,000.00 to

guarantee compliance with the terms and conditions of the contract; that the operations for

salvage were entirely at Malabanan's expense and risks; that gold, silver, copper, coins,

currency, jewelry, precious stones, etc. were excepted from the contract, and were instead

required to be turned over to the Board for disposition; that the expenses for storage,

including guard service, were for Malabanan's account — all these circumstances indicated

that ownership of the goods passed to Malabanan as soon as they were recovered or salvaged

(i.e., as soon as the salvor had gained effective possession of the goods), and not only after

payment of the stipulated price.

While there can be reservation of title in the seller until full payment of the price

(Article 1478, N.C.C.), or, until fulfillment of a condition (Article 1505, N.C.C.); and while

execution of a public instrument amounts to delivery only when from the deed the contrary

does not appear or cannot clearly be inferred (Article 1498, supra), there is nothing in the said

contract which may be deemed a reservation of title, or from which it may clearly be inferred

that delivery was not intended.

While there was no physical tradition, there was one by agreement (traditio longa

manu) in conformity with Article 1499 of the Civil Code.

Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June 10, 1953.

The lapse of the bond did not extinguish the contract between Malabanan and

the Board. The requirement that a bond be posted was already complied with when

Malabanan filed the bond dated June 10, 1952. A bond merely stands as guaranty for a

principal obligation which may exist independently of said bond, the latter being merely an

accessory contract. Significantly, its purpose, as per the terms of the contract, was "to

guarantee his (Malabanan's) faithful compliance with the terms and conditions herein"; and,

for violation of the contract, the Board may declare "the bond forfeited" (par. 13). Being for

its benefit, the Board could legally waive the bond requirement, and it did so when, the bond

already having expired, it extended the contract not only once, but twice. In none of the

resolutions extending the contract was there a requirement that the bond be renewed, in the

face of the first endorsement by the Executive Officer of the Board recommending that

Malabanan's request for a second extension be granted "provided the bond be originally

posted should continue."

San Lorenzo Development Corporation vs. CA

FACTS:

On August 20, 1986. Sps. Lu sold two parcel of land to respondent Pablo Babasanta for the price

of 15.00 per square meters. Babasanta made a downpayment of 50,000.

Pabasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale in his favor

so that he could effect full payment and notified the sps. That he received an information that sps.

Sold the same property to another without his knowledge and consent. He demanded that the

second sale be cancelled.

Pacita wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property.

She, however, reminded Babasanta that when the balance of the purchase price become due, he

requested for a eduction of the price. When Babasanta backed out from the sale, Pacita returned

the 50,000. To Babasanta through Eugenio ong.

On January 19, 1990, SLDC alleged that it had better right over the property and they are a buyer

in good faith.

ISSUE:

Whether or not SLDC is a buyer in good faith

HELD: Yes. It must be stressed that from the execution of the first deed up to the moment of

transfer and delivery of possession of the land to SLDC, it had acted in good faith. The

subsequent notice of lis pendes has no effect whatsoever on the consummated sale between

SLDC and the Lu's. Babasanta argues that the registration of the notice served as constructive

notice of their interest in the lands, but again, the registration was made long after the sale to

SLDC was consummated. Even assuming that this is material, Babasanta still cannot claim a

superior right since he already had notice of a previous sale. He cannot therefore be considered a

buyer in good faith either. The law, after all, speaks not only of one criterion. The first priority of

entry in the registry of property; there being none, the second is priority of possession; and in the

absence of both, the third is the date of the title. In any event, since SLDC acquired possession go

the property in good faith in contrast to Babasanta, who neither registered nor possessed the

property at any time, SLDC's right is definitely the superior one.

Abuan vs. Garcia

FACTS:

Laureano Abuan acquired a homestead which was passed to his heirs (plaintiffs) after his death.

Plaintiffs then sold the parcel of land to Defendants, evidenced by a deed of absolute sale, thus a

TCT was issued to defendants on Aug 7, 1953. Plaintiffs then filed an action to recover the land,

alleging that the deed of absolute sale had been executed through fraud, without consideration.

But such was settled amicably (that defendants would pay for the land). Claiming that full

payment of the land was made by the defendants only after the agreed time, plaintiffs filed an

action for legal redemption on Mar 4, 1960. Defendants moved to dismiss on the ground that

plaintiff’s right of action was already barred because the 5-year redemption period had already

expired. The court sustained the defendant’s motion, thus dismissed the complaint.

ISSUE:

When should the 5-year period within which plaintiffs can exercise their right of repurchase begin

to run?

HELD:

The 5-yr period should begin to run from the date the defendants acquired ownership of the land

which was upon the execution of the deed of sale on Aug 7, 1953. *

But assuming that the deed of absolute sale was null and void, the date of the Agreement

can be considered as the time within which the ownership is vested in the defendants. Such

agreement may be a private instrument the execution of which could not be construed as

constructive delivery under Art. 1498 of the New Civil Code. But Art. 1496 explicitly provides

that ownership of the thing sold is acquired by the vendee from the moment it is delivered to him

“in any other manner signifying an agreement that the possession is transferred from the vendor

to the vendee.” The intention to give possession (and ownership) is manifest in the agreement

entered into by the parties, specially considering the following circumstances: (1) the payment of

part of the purchase price, there being no stipulation in the agreement that ownership will not vest

in the vendees until full payment of the price; and (2) the fact that the agreement was entered into

in consideration of plaintiffs’ desistance, as in fact they did desist, in prosecuting their

reivindicatory action, thereby leaving the property in the hands of the then and now defendants —

as owners thereof, necessarily. This was delivery brevi manu permissible under Articles 1499 and

1501 of the New Civil Code.

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

G.R. No. 92989 July 8, 1991

GUTIERREZ, JR., J FACTS:

Wilfredo Dy purchased a truck and a farm tractor through financing extended by Libra Finance

and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as security

for the loan.

Perfecto Dy wanted to buy the tractor from his brother, Wilfredo Dy, so he wrote a letter to Libra

requesting that he be allowed to purchase from his brother the said tractor and assume the

mortgage debt of the latter. Libra approved the request.

On September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of the petitioner

over the tractor in question. At this time, the subject tractor was in the possession of Libra due to

Wilfredo Dy's failure to pay. Despite the offer of full payment by the Perfecto Dy to Libra for the

tractor, the immediate release could not be effected because Wilfredo Dy had obtained financing

not only for said tractor but also for a truck and Libra insisted on full payment for both.

Perfecto Dy was able to convince his sister, Carol Dy-Seno, to purchase the truck so that full

payment could be made for both. A check was issued in favor of Libra, thus settling in full the

indebtedness of Wilfredo Dy with the financing firm. Payment having been effected through an

out-of-town check, Libra insisted that it be cleared first before Libra could release the chattels in

question.

Meanwhile, a civil case entitled "Gelac Trading, Inc. v. Wilfredo Dy", a collection case to recover

the sum of P12,269.80 was pending in another court.

On December 27, 1979, the provincial sheriff was able to seize and levy on the tractor which was

in the premises of Libra through a writ of execution. The tractor was subsequently sold at public

auction where Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its

stockholders, Antonio Gonzales.

It was only when the check was cleared on January 17, 1980 that the Perfecto Dy learned about

GELAC having already taken custody of the subject tractor. So he filed an action to recover the

subject tractor against GELAC Trading.

RTC rendered judgment in favor of the petitioner. Court of Appeals reversed it and held that the

tractor in question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by

virtue of the alias writ of execution issued in the civil case.

ISSUE:

Whether or not Wilfredo Dy was still the owner of the tractor in question when it was obtained

through the writ of execution.

HELD:

NO. The sale of the subject tractor was consummated upon the execution of the public instrument

on September 4, 1979. At this time constructive delivery was already effected. Hence, the subject

tractor was no longer owned by Wilfredo Dy when it was levied upon by the sheriff in December

27, 1979. It is well settled that only properties unquestionably owned by the judgment debtor and

which are not exempt by law from execution should be levied upon or sought to be levied upon.

For the power of the court in the execution of its judgment extends only over properties belonging

to the judgment debtor.

Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by the

vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to

1501 or in any other manner signing an agreement that the possession is transferred from the

vendor to the vendee. Actual delivery of the subject tractor could not be made. However, there

was constructive delivery already upon the execution of the public instrument pursuant to Article

1498 and upon the consent or agreement of the parties when the thing sold cannot be immediately

transferred to the possession of the vendee. (Art. 1499)

The payment of the check was actually intended to extinguish the mortgage obligation so that the

tractor could be released to the petitioner. The clearing or encashment of the check which

produced the effect of payment determined the full payment of the money obligation and the

release of the chattel mortgage. It was not determinative of the consummation of the sale. The

contention, therefore, that the consummation of the sale depended upon the encashment of the

check is untenable.

G.R. No. 66140 January 21, 1993 INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES,

INC., petitioner, vs.

LPJ ENTERPRISES, INC., respondent.

FACTS:

LPJ enterprises had a contract to supply 300,000 cement bags to Atlas Consolidated

Mining and Development Corporation (Atlas) delivered in the common use, kraft paper bags. In

1970, the Vice-president of Industrial Textile Manufacturing Company of the Philippines

(ITMCP) asked the President of LPJ if he would like to be part of an experiment to develop

plastic cement bags in which the latter agreed because ITMCP is a sister corporation of Atlas.

They tested fifty (50) cement bags in the factory of LPJ’s cement supplier Luzon Cement

Corporation but were unsuccessful. They tested another batch to the same result. On the third try,

the cement dust seepage was finally substantially reduced. After another successful test with

Atlas, LPJ finally agreed to the use of the plastic cement bags by ordering 115,800 in four

purchases in January, February, March and April of 1971, totaling P101,500. ITMCP made

delivery in the same months. LPJ made three payments but still left a balance of P84,200. No

other payments were made. ITCMP sent demand letters to LPJ but still no payment was made. A

collection suit was filed. On the trial on merits, LPJ admitted its liability to the initial 53,800 bags

but denied liability for the subsequent purchases saying that the bags posed serious health hazards

by continuous seepage of dust even with adopted safety measures. The trial court favored ITMCP

and ordered LPJ to pay the balance plus interest and attorney’s fees. LPJ appealed where the

Appellate court upheld them removing any liability with costs against petitioner.

Issue:

Is LPJ liable in paying the unused plastic cement bags to ITMCP?

Ruling:

Yes.

Both sides invoke article 1502 of the Civil Code (sale or return/sale on approval), this

cannot apply to the case. The provision in the Uniform Sales Act and the Uniform Commercial

Code from which Article 1502 was taken, clearly requires an express written agreement to make a

sales contract either a "sale or return" or a "sale on approval". Parol or extrinsic testimony could

not be admitted for the purpose of showing that an invoice or bill of sale that was complete in

every aspect and purporting to embody a sale without condition or restriction constituted a

contract of sale or return. If the purchaser desired to incorporate a stipulation securing to him the

right of return, he should have done so at the time the contract was made. On the other hand, the

buyer cannot accept part and reject the rest of the goods since this falls outside the normal intent

of the parties in the "on approval" situation. Therefore, the transaction between respondent and

petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic bags

delivered to it by petitioner. Decision of the trial court reinstated.

G.R. No. 132161 January 17, 2005

CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC., petitioner,

vs.

THE HONORABLE COURT OF APPEALS and HEIRS OF TEODORO DELA CRUZ,

Rule on Double Sale

ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be

transferred to the person who may have first taken possession thereof in good faith, if it should be

movable property.

Should it be immovable property, the ownership shall belong to the person acquiring it who in

good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was

first in possession; and, in the absence thereof, to the person who presents the oldest title,

provided there is good faith.

FACTS:

• The Madrid brothers subdivided their land into several lots. One of the resulting

subdivision lots was Lot No. 7036-A-7 with an area of 5,958 sq. m. which was sold to

Gamiao and Dayag on Aug. 15, 1957 by Rizal Madrid with the confirmation of his

brothers evidenced by their Joint Affidavit. The Deed of Sale was not registered.

However, Gamiao and Dayag declared the property for taxation purposes in their names.

• Gamiao and Dayag sold the southern half of the lot, denominated as Lot No. 7036-A-7-B,

to Teodoro dela Cruz, and the northern half, Lot No. 7036-A-7-A, to Restituto

Hernandez. Thereupon, dela Cruz and Hernandez took possession of and cultivated the

portions of the property respectively sold to them.

• Hernandez donated the northern half to his daughter, Evangeline Hernandez-del Rosario.

The children of Teodoro dela Cruz continued possession of the southern half after their

father’s death.

• In a Deed of Sale dated June 15, 1976, the Madrid brothers sold Lot No. 7036-A-7 to

Pacifico Marquez. The deed of sale was registered.

• Subsequently, Marquez subdivided Lot No. 7036-A-7 into 8 lots, for which titles were

issued to him. Marquez and his spouse, mortgaged 4 lots to the Consolidated Rural Bank,

Inc. of Cagayan Valley (CRB) to secure a loan of P100,000.00.

• A lot was also mortgaged to Rural Bank of Cauayan (RBC) for P10,000.00.

• These deeds of real estate mortgage were registered.

• As Marquez defaulted in the payment of his loan, CRB caused the foreclosure of the

mortgages in its favor.

• On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto.

• The Heirs of dela Cruz (respondents) filed a case for reconveyance and damages for the

southern portion of Lot No. 7036-A (the subject property) against Marquez, Calixto,

RBC and CRB claiming to be null and void the issuance of titles; the foreclosure sale; the

mortgage to RBC; and the sale to Calixto.

• Marquez alleged that apart from being the first registrant, he was a buyer in good faith

and for value. He also argued that the sale executed by Madrid to Gamiao and Dayag was

not binding upon him, it being unregistered. For his part, Calixto manifested that he had

no interest in the subject property as he ceased to be the owner thereof, the same having

been reacquired by defendant Marquez.

• CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good

faith and that they had the right to rely on the titles of Marquez which were free from any

lien or encumbrance.

ISSUE:

WON the Art. 1544 should apply.

HELD:

No. Art. 1544 does not apply. Art. 1544 covers a situation where a single vendor sold one and

the same immovable property to two or more buyers. In the case at bar, the subject property was

not transferred to several purchasers by a single vendor. In the first deed of sale, the vendors were

Gamiao and Dayag, followed by their declaration of the property for taxation purposes in their

names. On the other hand, the vendors in the later deed were the Madrid brothers but at that time

they were no longer the owners since they had long before disposed of the property in favor of

Gamiao and Dayag.

The principle of prior tempore, potior jure or simply "he who is first in time is preferred in right,"

should apply. The only essential requisite of this rule is priority in time; the only one who can

invoke this is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he

bought the real property, there was still no sale to a second vendee. In the instant case, the sale to

the Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale

by the Madrid brothers to Marquez. The Heirs also had possessed the subject property first in

time.

Moreover, it is an established principle that no one can give what one does not have "nemo dat

quod non habet". One can sell only what one owns or is authorized to sell, and the buyer can

acquire no more than what the seller can transfer legally. In this case, since the Madrid brothers

were no longer the owners of the subject property at the time of the sale to Marquez, the latter did

not acquire any right to it.

Following Article 1544, in the double sale of an immovable, the rules of preference are:

(a) the first registrant in good faith;

(b) should there be no entry, the first in possession in good faith; and

(c) in the absence thereof, the buyer who presents the oldest title in good faith.

Prior registration of the subject property does not by itself confer ownership or a better right over

the property. Article 1544 requires that before the second buyer can obtain priority over the first,

he must show that he acted in good faith throughout (i.e., in ignorance of the first sale and of the

first buyer’s rights) from the time of acquisition until the title is transferred to him by registration

or failing registration, by delivery of possession.

In the instant case, the actions of Marquez have not satisfied the requirement of good faith from

the time of the purchase of the subject property to the time of registration. Marquez knew at the

time of the sale that the subject property was being claimed or "taken" by the Heirs. Marquez also

admitted that he did not take possession of the property and at the time he testified he did not

even know who was in possession.

Likewise, it is not necessary that there should be any finding of possession by Gamiao and Dayag

of the subject property. It should be recalled that the regularity of the sale to Gamiao and Dayag

was never contested by Marquez. RTC upheld the validity of this sale, holding that the Madrid

brothers are bound by the sale by virtue of their confirmation thereof in the Joint Affidavit.

Tax declarations "are good indicia of possession in the concept of an owner, for no one in his

right mind would be paying taxes for a property that is not in his actual or constructive

possession."71

Martinez vs. CA G.R. No. 123547 May 21, 2001

FACTS:

Sometime in February 1981, private respondents Godofredo De la Paz and his sister Manuela De

la Paz, married to Maximo Hipolito, entered into an oral contract with petitioner Rev. Fr. Dante

Martinez, then Assistant parish priest of Cabanatuan City, for the sale of Lot No. 1337-A-3 at the

Villa Fe Subdivision in Cabanatuan City for the sum of P15,000.00. At the time of the sale, the

lot was still registered in the name of Claudia De la Paz, mother of private respondents, although

the latter had already sold it to private respondent Manuela de la Paz by virtue of a Deed of

Absolute Sale dated May 26, 1976. It was agreed that petitioner would give a downpayment of

P3,000.00 to private respondents De la Paz and that the balance would be payable by installment.

After giving the P3,000.00 downpayment, petitioner started the construction of a house on the lot

after securing a building permit with the written consent of the then registered owner, Claudia de

la Paz. Petitioner likewise began paying the real estate taxes on said property. Since then,

petitioner and his family have maintained their residence there. On January 31, 1983, petitioner

completed payment of the lot for which private respondents De la Paz executed two documents.

However, private respondents De la Paz never delivered the Deed of Sale they promised to

petitioner.

In the meantime, in a Deed of. Absolute Sale with Right to Repurchase dated October 28, 1981

(Exh. 10),11private respondents De la Paz sold three lots with right to repurchase the same within

one year to private respondents spouses Reynaldo and Susan Veneracion for the sum of

P150,000.00. One of the lots sold was the lot previously sold to petitioner.12

Before the expiration of the one year period, private respondent Godofredo De la Paz informed

private respondent Reynaldo Veneracion that he was selling the three lots to another person for

P200,000.00. Indeed, private respondent Veneracion received a call from a Mr. Tecson verifying

if he had the titles to the properties, as private respondents De la Paz were offering to sell the two

lots along Maharlika Highway to him (Mr. Tecson) for P180,000.00 The offer included the lot

purchased by petitioner in February, 1981. Private respondent Veneracion offered to purchase the

same two lots from the De la razes for the same amount, The offer was accepted by private

respondents De la Paz. Accordingly, on June 2, 1983, a Deed of Absolute Sale was executed over

the two lots Sometime in January, 1984, private respondent Reynaldo Veneracion asked a certain

Renato Reyes, petitioner's neighbor, who the owner of the building erected on the subject lot was.

Reyes told him that it was Feliza Martinez, petitioner's mother, who was in possession of the

property. Reynaldo Veneracion told private respondent Godofredo about the matter and was

assured that Godofredo would talk to Feliza. Based on that assurance, private respondents

Veneracion registered the lots with the Register of Deeds of Cabanatuan on March 5, 1984. The

lot in dispute was registered under TCT No. T-44612.

Petitioner discovered that the lot he was occupying with his family had been sold to the spouses

Veneracion after receiving a letter, (Exh. P/Exh. 6-Veneracion) from private respondent Reynaldo

Veneracion on March 19, 1986, claiming ownership of the land and demanding that they vacate.

Petitioner, in turn, demanded through counsel the execution of the deed of sale from private

respondents De la Paz and informed Reynaldo Veneracion that he was the owner of the property

as he had previously purchased the same from private respondents De la Paz.

As a consequence, on May 12, 1986, private respondent Reynaldo Veneracion brought an action

for ejectment

ISSUE:

Whether or not private respondents Veneracion are buyers in good faith of the lot in

dispute as to make them the absolute owners thereof in accordance with Art. 1544 of the

Civil Code on double sale of immovable property.

HELD:

The supreme court ruled in negative.

This case, however, involves double sale and, on this matter, Art. 1544 of the Civil Code provides

that where immovable property is the subject of a double sale, ownership shall be transferred (1)

to the person acquiring it who in good faith first recorded it to the Registry of Property; (2) in

default thereof, to the person who in good faith was first in possession; and (3) in default thereof,

to the person who presents the oldest title.26 The requirement of the law, where title to the

property is recorded in the Register of Deeds, is two-fold: acquisition in good faith and recording

in good faith. To be entitled to priority, the second purchaser must not only prove prior recording

of his title but that he acted in good faith, i.e., without knowledge or notice of a prior sale to

another. The presence of good faith should be ascertained from the circumstances surrounding the

purchase of the land.27

With regard to the first sale to private respondents Veneracion, private respondent Reynaldo

Veneracion testified that on October 10, 1981, 18 days before the execution of the first Deed of

Sale with Right to Repurchase, he inspected the premises and found it vacant.28 However, this is

belied by the testimony of Engr. Felix D. Minor, then building inspector of the Department of

Public Works and Highways, that he conducted on October 6, 1981 an ocular inspection of the lot

in dispute in the performance of his duties as a building inspector to monitor the progress of the

construction of the building subject of the building permit issued in favor of petitioner on April

23, 1981, and that he found it 100 % completed (Exh. V).29 In the absence of contrary evidence,

he is to be presumed to have regularly performed his official duty.30 Thus, as early as October,

1981, private respondents Veneracion already knew that there was construction being made

on the property they purchased.

With regard to the second sale, which is the true contract of sale between the parties, it should be

noted that this Court in several cases,35 has ruled that a purchaser who is aware of facts which

should put a reasonable man upon his guard cannot turn a blind eye and later claim that he acted

in good faith. Private respondent Reynaldo himself admitted during the pre-trial conference in the

MTC in Civil Case No. 9523 (for ejectment) that petitioner was already in possession of the

property in dispute at the time the second Deed of Sale was executed on June 1, 1983 and

registered on March 4, 1984. He, therefore, knew that there were already occupants on the

property as early as 1981. The fact that there are persons, other than the vendors, in actual

possession of the disputed lot should have put private respondents on inquiry as to the nature of

petitioner's right over the property. But he never talked to petitioner to verify the nature of his

right. He merely relied on the assurance of private respondent Godofredo De la Paz, who

was not even the owner of the lot in question, that he would take care of the matter. This

does not meet the standard of good faith.

Fudot vs. Cattleya Land Inc. [no digest]

SPOUSES AMANCIO and LUISA SARMIENTO and PEDRO OGSINER, Petitioners,

vs.

THE HON. COURT OF APPEALS (Special Former Fifth Division), RODEANNA

REALTY CORPORATION, THE HEIRS OF CARLOS MORAN SISON, PROVINCIAL

SHERIFF OF PASIG, M.M., MUNICIPAL (CITY) TREASURER OF MARIKINA, JOSE

F. PUZON, THE HON. EFICIO ACOSTA, REGIONAL TRIAL COURT OF PASIG

CITY, BRANCH 155 and REGISTER OF DEEDS OF MARIKINA (CITY),

RIZAL, Respondent.

G.R. No. 152627 September 16, 2005

Case Doctrine: The general rule is that a purchaser may be considered a purchaser in good faith

when he has examined the latest certificate of title. An exception to this rule is when there exist

important facts that would create suspicion in an otherwise reasonable man to go beyond the

present title and to investigate those that preceded it. Thus, it has been said that a person who

deliberately ignores a significant fact which would create suspicion in an otherwise reasonable

man is not an innocent purchaser for value.

Facts: The subject of the present controversy is a parcel of land situated in Marikina covered by

Transfer Certificate of Title No. N-119631 and registered in the name of the plaintiff-appellee

RODEANNA REALTY CORPORATION (Rodeanna Realty / RRC).

The land was previously owned by the Sarmiento spouses by virtue of a deed of absolute sale

executed on July 17, 1972 and as evidenced by a Transfer Certificate of Title No. 3700807. Upon

acquisition of the land, the Sarmiento spouses appointed PEDRO OGSINER as their overseer.

On August 15, 1972, the subject land was mortgaged by the Sarmiento spouses to Carlos Moran

Sison (Mr. Sison) as a security for a loan obtained by the Sarmiento spouses from Mr. Sison.

Upon failure of the Sarmiento spouses to pay the loan, Mr. Sison initiated the extra-judicial

foreclosure sale of the mortgaged property, and on October 20, 1977, the said property was

foreclosed through the Office of the Sheriff of Rizal, which accordingly, issued a certificate of

sale in favor of Mr. Sison, and which Mr. Sison caused to be annotated on the title of Sarmiento

spouses on January 31, 1978.

On August 25, 1982, JOSE PUZON (Mr. Puzon) purchased the same property in an auction sale

for non-payment of taxes. After paying P3,400.00, he was issued a certificate of sale and caused it

to be registered in the Registry of Deeds of Marikina. No redemption having been made by the

Sarmiento spouses, a final bill of sale was issued in his Mr. Puzon’s favor. Thereafter, Mr. Puzon

filed a petition for consolidation of ownership and issuance of new title over the subject property

before the Regional Trial Court of Pasig. The said petition was granted by the court on August

03, 1984. Thereafter, Transfer Certificate of Title No. 102902 was issued in the name of Jose

Puzon.

On August 16, 1986, Mr. Puzon sold the property in question to Rodeanna Realty. By virtue of

such sale, a transfer certificate of title over the subject property was issued in favor of Rodeanna

Realty. Records show that Mr. Puzon assured Rodeanna Realty that he will take care of the

squatters in the subject property by filing an ejectment case against them. However, Mr. Puzon

failed to comply with his promise.

On December 19, 1986, Rodeanna Realty filed a complaint for recovery of possession with

damages against the Sarmiento spouses and Pedro Ogsiner, the Sarmiento spouses’ caretaker of

the subject property who refused to vacate the premises. In its complaint, plaintiff-appellee

alleged that the Sarmiento spouses lost all the rights over the property in question when a

certificate of sale was executed in favor of Mr. Sison for their failure to pay the mortgage loan.

The trial court ruled in favor of plaintiff against all defendants and ordered defendant Pedro

Ogsiner and all persons claiming rights under him to vacate the premises and surrender peaceful

possession to the plaintiff to Rodeanna Realty. The Court of Appeals affirmed the trial court’s

decision

Issue: Whether or not Rodeanna Realty Corporation is entitled to ownership of subject property

as an innocent purchaser for value.

Held: No. Every person dealing with registered land may safely rely on the correctness of the

certificate of title issued therefor and the law will in no way oblige him to go behind the

certificate to determine the condition of the property.44 Thus, the general rule is that a purchaser

may be considered a purchaser in good faith when he has examined the latest certificate of

title.45 An exception to this rule is when there exist important facts that would create suspicion in

an otherwise reasonable man to go beyond the present title and to investigate those that preceded

it. Thus, it has been said that a person who deliberately ignores a significant fact which would

create suspicion in an otherwise reasonable man is not an innocent purchaser for value.46 A

purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and

then claim that he acted in good faith under the belief that there was no defect in the title of the

vendor.

One who purchases real property which is in the actual possession of another should, at least

make some inquiry concerning the right of those in possession. The actual possession by other

than the vendor should, at least put the purchaser upon inquiry. He can scarely, in the absence of

such inquiry, be regarded as a bona fide purchaser as against such possessors.

The fact that private respondent RRC did not investigate the Sarmiento spouses’ claim over the

subject land despite its knowledge that Pedro Ogsiner, as their overseer, was in actual possession

thereof means that it was not an innocent purchaser for value upon said land.

Mercado vs. Allied Bank

G.R. No. 171460

FACTS:

The deceased Perla Mercado executed a Special Power of Attorney in favor of the

petitioner Julian Mercado, her husband, authorizing the latter to sell, alienate, mortgage, lease and

deal several real estate properties registered under her name. For this reason, Julian obtained a

loan from the Respondent bank which covers a parcel of land. Still using the same security

property, Julian obtained an additional loan from the respondent. Later, the property used as

security by petitioner Julian was not identified in the SPA. Subsequently, Julian defaulted on the

payment of his loan obligations. Thus, respondent initiated extra-judicial foreclosure proceedings

over the subject property which was subsequently sold at public auction wherein the respondent

was declared as the highest bidder. With this, the petitioners initiated an action for the annulment

of REM constituted over the subject property on the ground that the same was not covered by the

SPA because the land used as security in the mortgage was registered in the registry of deeds

Quezon City and the one mentioned in the SPA was registered in the registry of deeds Pasig City,

and that at the time the loan obligations were contracted, the SPA had no longer force and effect

since it was previously revoked by Perla. Likewise, they also prayed for the nullification of the

extra-judicial foreclosure proceedings and the auction sale of the subject property.

Issue: Whether or not there was a valid mortgage constituted over the subject property.

Held:

The mortgage constituted over the subject property was not valid. For a mortgage to be

valid, Article 2085 (3) of the Civil Code requires that the persons constituting the pledge or

mortgage must have the free disposal of their property, and in the absence thereof, that they be

legally authorized for the purpose. In the case at bar, Julian does not have the authority to

mortgage the subject property because the property the SPA does not extend his authority over

the real property in Quezon City. Thus, the act of Julian constituting a mortgage over the subject

property is unenforceable for having been done without authority.

Gabriel vs. Mabanta

G.R. No. 142403 March 26, 2003

FACTS:

On October 25, 1975 spouses Mabanta mortaged 2 parcels of land with the DBP as

collateral for a P14,000 loan. In 1980, they sold the lots to Susana Soriano with the right to

repurchase the property within 2 years. They failed to do repurchase. In 1984, they convinced

petitioner Alejandro Gabriel to purchase the lot from Soriano as a result, DBP had to restructure

the loan making Gabriel as the mortgagor. In 1982 however, one lot was sold to Zenaida Tan-

Reyes by the spouses Mabanta who in turn filed an intervention to the case after not being a party

in the instant case. As a result, the petitioners filed for damages, and specific performance which

the trial court ruled in their favor holding that the sale between the spouses Mabanta and Tan-

Reyes null and void. On appeal, the CA modified the trial court’s decision holding that the second

sale was indeed valid.

ISSUE:

Whether or not the second sale in 1982, to Tan-Reyes is valid.

HELD:

Article 1544 of the Civil Code provides that should immovableproperty be

sold to different vendees, the ownership shall belong to the first person in good faith

to record it in the registry o f property. Unfortunately, the registration made by Zenaida Tan-

Reyes of her deed of sale was not in good faith, and for this reason in accordance with the same

Article 1544, the land shall pertain to the person who ingood faith was first in possession.

There is no question that it is the Gabriels who are in possession of the land.

Salinas VS Faustino

G.R. No. 153077, September 19, 2008

FACTS:

In June, 1962, respondent herein, Bienvenido Faustino with his wife, purchased from

several co-heirs, including the petitioner, Dolores Salinas a parcel of land with a surface area of

“300 Square meters more or less and with boundaries “in the North: Carmen Labitan; in the

South: Calle, in the East: Callejon and in the West: Roque Demetrio.”. Two years later, they

filed a civil case for recovery of possession with damages against herein Salinas, alleging that the

parcel of land they purchased was for the whole of 1,381 square meters. These allegations were

supported by a tax declaration. They further allege that they have only allowed the petitioners and

other co-heirs to occupy 627 square meters on the condition that they would vacate the said

portion when the respondents need arises.The RTC of Olongapo ruled in favor of Salinas, finding

the allegation of forgery, presented by Faustino, unsupported, in that the deed of sale indicated

that 300 square meters was sold to him. On appeal to the CA, it modified the ruling of the RTC,

the decision being that Faustino owns 753 square meters of the said parcel of land. Hence this

petition by Dolores

ISSUE:

Whether or not the tax declaration is to be followed regarding the size of the land sold to

the respondent.

HELD:

Being that the boundaries were clearly stated in the Tax Declaration and on the Deed of

Sale, it is clear that the parties intended to sell the remaining portion to the respondent (753

square meters). Furthermore, the fact that the petitioners have occupied 627 square meters for

quite some time, it can be denounced that the remaining 753 square meters of the property were

owned by the respondents. The deicision of the CA is reversed and set aside, and the case is

reinstated.

Ten Forty vs Marina

FACTS:

A complaint for ejectment was filed by Petitioner Ten Forty Realty and Development

Corporation against Respondent Marina Cruz before the Municipal Trial Court in Cities (MTCC)

of Olongapo City, which alleged that: petitioner is the true and absolute owner of a parcel of lot

and residential house. It was acquired the property on December 1996 from Barbara Galino by

virtue of a Deed of Absolute Sale; the sale was acknowledged by said Galino through a

'Katunayan'. Petitioner came to know that Galino sold the same property on April 1998 to Cruz,

who immediately occupied the property and which occupation was merely tolerated by petitioner.

Then respondent answered, it was alleged that: petitioner is not qualified to own the residential

lot in dispute, being a public land; according to Barbara Galino, she did not sell her house and lot

to petitioner but merely obtained a loan from Veronica Lorenzana, president of the petitioner

corporation.

The MTCC rendered decision in favor of the petitioner. The RTC reversed the decision and ruled

as follows: 1) respondent’s entry into the property was not by mere tolerance of petitioner, but by

virtue of a Waiver and Transfer of Possessory Rights and Deed of Sale in her favor; 2) the

execution of the Deed of Sale without actual transfer of the physical possession did not have the

effect of making petitioner the owner of the property, because there was no delivery of the object

of the sale as provided for in Article 1428 of the Civil Code; and 3) being a corporation,

petitioner was disqualified from acquiring the property, which was public land.

On appeal, CA sustained the RTC decision.

Issue: Whether or not the petitioner is the owner of the property?

Ruling: The court held in the negative.

Ownership is not passed by contract but by tradition or delivery. The execution of a public

instrument gives rise only to a prima facie presumption of delivery. Such presumption is

destroyed when the delivery is not effected because of a legal impediment. the CA found it

highly unbelievable that petitioner -- which claims to be the owner of the disputed property --

would tolerate possession of the property by respondent from April 1998 up to October 1998.

Under Article 1544, xxx “Should it be immovable property, the ownership shall belong to the

person acquiring it who in good faith first recorded it in the Registry of Property.

“Should there be no inscription, the ownership shall pertain to the person who in good faith was

first in possession; and, in the absence thereof, to the person who presents the oldest title,

provided there is good faith.

First, the possession mentioned in Article 1544 includes not only material but also symbolic

possession. Second, possessors in good faith are those who are not aware of any flaw in their title

or mode of acquisition. Third, buyers of real property that is in the possession of persons other

than the seller must be wary -- they must investigate the rights of the possessors. Fourth, good

faith is always presumed; upon those who allege bad faith on the part of the possessors rests the

burden of proof.

The petitioner did not acquired the possession either materially or symbolically. As between the

buyers, it was the respondent was first in actual possession of property.

Private corporations are disqualified from acquiring lands of public domain. Since the contested

land is alienable and disposable land of public domain.

Lichanco vs. Berenguer [no digest]

PARAGAS vs. HEIRS OF DOMINADOR BALACANO

FACTS:

Gregorio and Lorenza Balacano are owners of two parcel of land. They had three children

namely, Domingo, Catalino, and Alfredo. Lorenza died on December 11, 1991, while Gregorio

died on July 28, 1996. Prior to Gregorio’s death, he was admitted in veteran’s general hospital in

Nueva Vizcaya and later transferred to Quezon City. It was alleged that Gregorio, barely a week

prior to his death, sold the two lots to sps. Rudy and Corazon Paragas. Domingo’s children filed a

complaint for the annulment of the sale against Catalno and the sps. Paragas. They argued that,

Gregorio was seriously ill at the time of the execution of the deed of sale, that his consent was

vitiated and that the lots form part of the conjugal partnership properties.

ISSUE:

Whether or not the Deed of sale is null and void

HELD:

The court ruled that the deed of sale is null and void. Gregorio died due to complications by

cirrhosis of the liver, had been fighting the disease for a month. Due to his condition, there are

serious doubts as to whether he could read, or fully understood the contents of the deed of sale.

There are no conclusive evidence that shows that the evidence of the deed were sufficiently

explained to Gregorio before he affixed his signature.

SPOUSES BIENVENIDO R. MACADANGDANG and VIRGINIA C.

MACADANGDANG, petitioners vs. SPOUSES RAMON MARTINEZ and GLORIA

F. MARTINEZ, respondents.

G.R. No. 158682

Case Doctrine: Between two transactions concerning the same parcel of land, the registered

transaction prevails over the earlier unregistered right. The act of registration operates to convey

and affect the registered land so that a bonafide purchaser of such land acquires good title as

against a prior transferee, if such prior transfer was unrecorded. The rule on prior registration is

subject only to one exception: that is, when a party has knowledge of a prior existing interest

which is unregistered at the time he acquires a right to the same land, his knowledge of that prior

unregistered interest has the effect of registration as to him.

Facts: On December 20, 1986, petitioner spouses Bienvenido and Virginia Macadangdang

(Macadangdang spouses) offered to buy a house and lot in Parkhomes Subdivision, Tunasan,

Muntinlupa, Metro Manila, covered by TCT No. 146553 in the name of Emma A. Omalin from

Omalin for P380,000 on installment basis.

After making a downpayment of P 5,000 and P175,000 on separate occasions through the

broker, Sto. Nino Realty Services, Inc., Omalin executed a deed of sale with mortgage dated

January 5, 1987. The deed provided for the payment of the balance of P200,000 in three

installments.

The Macadangdang spouses thereafter took possession of the house and lot on January 18,

1987. The Macadangdang spouses paid P60,000 and P30,000 also on separate occasions making

it a total of P270,000. The parties then agreed that the balance of P110,000 was to be paid upon

delivery of the TCT.

On January 29, 1988, Omalin executed a deed of absolute sale in favor of the Macadangdang

spouses. However, the latter did not pay the P110,000 balance because Omalin failed to deliver

the TCT. It turned out that the property was mortgaged to private respondent spouses Ramon and

Gloria Martinez (Martinez spouses).

It appears that on March 5, 1987, a certain Atty. Paterno Santos, a broker, offered to

mortgage the subject property to the Martinez spouses for P200,000. Atty. Santos was in

possession of a “clean” TCT No. 146553 and a fire insurance policy covering said property. The

spouses Martinez accepted the mortgage with interest at 36% p.a. and duly recorded it at the

Registry of Deeds of Makati. The proper annotation was made at the back of the title.

From September 1987 to March 9, 1988, Omalin paid the monthly interest of P6,000 but

failed to pay the subsequent interest from April 1988 to October 1989 amounting to P114,000.

The Macadangdang spouses filed a criminal case for estafa against Omalin and a combined

action for specific performance, annulment of contract and damages against the spouses Martinez

and Omalin.

After trial, the Makati RTC rendered a decision in favor of the Macadangdang spouses and

ordered defendants Omalin and the Martinez spouses to deliver to the Macadangdang spuses the

owner’s duplicate copy of TCT, free from encumbrance of the mortgage. On appeal, however, the

appellate court modified the decision of the Makati RTC. The Macadangdang spouses are now

before the Court with the following assignments of error.

Issue: Whether or not the Macadangdang spouses are entitled to the land notwithstanding the

fact that a prior registered mortgage was attached to it.

Held: No. Between two transactions concerning the same parcel of land, the registered

transaction prevails over the earlier unregistered right. The act of registration operates to convey

and affect the registered land so that a bonafide purchaser of such land acquires good title as

against a prior transferee, if such prior transfer was unrecorded.

The registration of the deed is the effectual act which binds the land insofar as third persons

are concerned. Prior registration of a lien creates a preference as the act of registration is the

operative act that conveys and affects the land. Considering that the prior sale of the subject

property to the Macadangdang spouses was not registered, it was the registered mortgage to the

spouses Martinez that was valid and effective. For sure, it was binding on Omalin and, for that

matter, even on the Macadangdang spouses, the parties to the prior sale.

The rule on prior registration is subject only to one exception, that is, when a party has

knowledge of a prior existing interest which is unregistered at the time he acquires a right to the

same land, his knowledge of that prior unregistered interest has the effect of registration as to

him.

The Martinez spouses claimed they had never met the Macadangdang spouses and were

unaware that Omalin had already sold the property to them. Hence, the appellate court declared

the Martinez spouses as mortgagees in good faith and innocent mortgagees for value.

On this note, being innocent registered mortgagees for value, the Martinez spouses acquired

a superior right over the property.

Premiere Development Bank vs CA

Lilian M. Tondjuis vs. CA

Joselito P. Garaygay and Century Realty vs CA

Doctrine:

- Premiere Bank, being in the business of extending loans secured by real estate mortgage,

is familiar with rules on land registration. As such, it was, as here, expected to exercise

more care and prudence than private individuals in their dealing with registered lands.

- If the land mortgaged is in the possession of a person other than the mortgagor, the

mortgagee is required to go beyond the certificate of title and make inquiries as to the

rights of the actual possessors. Failure to do so would make him a mortgagee in bad faith.

- A purchaser of a property cannot be in good faith where the title thereof shows that it was

reconstituted.

- Where innocent third persons, relying on the correctness of the certificate, acquire rights

over the property as buyer or mortgagee, the subsequent declaration of nullity of title is

not a ground for nullifying the right of such buyer or mortgagee.

Facts

1.) Originally Lot 23, a 2,660 sq. meter land located along Matandang Balara, which records

were in the Manila Registry. This was because back then Matandang Balara was part of

Caloocan.

2.) The creation of Quezon City found Lot 23 within its borders. TCT 9780 was then

transferred and designated as TCT 9780 (693).

Lot 23 (TCT 9780) Vicente T. Garaygay of Rizal (TCT

9780) Vicente T. Garaygay of Cebu (TCT 9780

[693]) Sold to Liberto G. Yambao and Jesus B. Rodriguez

Sold to Joselito P. Garaygay

Sold to Jesus D. Morales Lot subdivided into Lots 23-A, 23-B and 23-C with corresponding TCTs issued in Joselito’s favor.

Lot 23-A sold to Lilian M. Tondjuis Lot 23-B and 23-c sold to Century Realty Mortgaged to Premiere Development

Bank

3.) Come May 1990, Yambao and his hired hands prevented Joselito and his agents from

fencing a part of the property.

4.) Yambao, Rodriguez and Morales thereafter annotate adverse claims on Joselito’s TCTs

and sue Joselito, Century Realty and Premiere.

5.) Lilian M. Tondjuis permitted by the court to intervene and file cross-claim and

counterclaim.

Issues

1.) WON the lower courts erred in declaring Yambao, Rodriguez and Morales as rightful

owners of the land?

2.) WON Tondjuis and Premiere can be considered as purchaser and mortgagee in good

faith, respectively?

Held

1.) NO. To preserve the Torrens system, one of the two titles must be adjudges as

spurious. The records from the lower courts cannot satisfactorily explain how it was

possible that two TCTs could be issued in favor of two distinct persons over the same

property. The trial court and the CA rightly adjudged in favor of Yambao, Rodriguez and

Morales since Garaygay of Rizal aptly proved his identity as owner of Lot 23 by

presenting his voter’s ID, COMELEC and barangay certfications. He was also backed up

by the testimony of an occupant of Lot 23. On the other hand, it was clearly established

that Garaygay of Cebu nor his nephew Joselito were ever in possession of Lot 23. There

were also several dubious marks on Garaygay of Cebu’s title – stamps were on it that

weren’t issued yet, and there appeared to be corrections written in ink.

On the alleged payment of taxes over the land by Garaygay of Cebu, this cannot

automatically merit that he is the owner of the land. He and Joselito also never instituted

ay ejectment against the other occupants of Lot 23.

2.) NO.

The Court also rejected Tondjuis’s contention that she be considered an

innocent purchaser for value. A study of the record shows that TCT

14414 covering Lot. 23-A that Toundjis contracted to buy from Joselito carried an

annotation that it was administratively reconstituted. Records also indicate that

Toundjis knew at the time of the sale that Joselito did not have possession of the

lot inasmuch as she agreed to pay the balance of the purchase price as soon as the

seller can fence off the property and surrender physical possession thereof to her.

Premiere Bank cannot also be accorded the status of an innocent

mortgagee for value. As can be gleaned from the bank’s real estate appraisal

report, there was already an adverse claim annotated on the title. There were also

buildings of strong materials on the land. Premiere claimed in its report that there

were ‘shanties’ on lot 23 when in fact there were two concrete buildings there,

among other structures. Despite these anomalies, the bank still pushed through

with the mortgage contract. Given the suspicion-provoking presence of occupants

other than the owner on the land to be mortgaged, it behooved Premiere Bank to

conduct a more exhaustive investigation on the history of the mortgagor’s title.

That Premiere Bank accepted in mortgage the property in question

notwithstanding the existence of structures on the property and which were in

actual, visible and public possession of a person other than the mortgagor,

constitutes gross negligence amounting to bad faith.

Sigaya vs. Mayuga, G.R. No. 143254 August 18, 2005

FACTS:

Dionisia Alorsabes owned a three hectare land in Dao, Capiz. In 1934, she sold a portion of the

lot to Juanito Fuentes while the remainder was inherited by her children Paz Dela Cruz, Rosela

Dela Cruz, and Consorcia Arroja (an adopted child), and a grandson, Francisco Abas, in

representation of his deceased mother Margarita Dela Cruz. These four heirs executed an Extra-

Judicial Settlement with Sale dated February 4, 1964 wherein Consorcia sold her share with an

area of 6,694 square meters to spouses Balleriano Mayuga. On April 1, 1977, Paz also sold her

share to Honorato de los Santos. Later, another document entitled Extra-Judicial Partition with

Deed of Sale dated November 2, 1972 was uncovered wherein the heirs of Dionisia purportedly

adjudicated Lot 3603 among themselves and sold their shares to Francisco. On January 9, 1978,

Francisco executed a Deed of Sale over Lot 3603 in favor of Teodulfo Sigaya. Thus, the title over

Lot 3603 was cancelled and a new one was issued in the name of Teodulfo, predecessor-in-

interest of the petitioners herein.1

On October 14, 1986, the petitioners, who are the widow and children of Teodulfo, filed Civil

Case for recovery of possession and praying that respondents be ordered to vacate Lot 3603, and

turn over the same to petitioners;

Petitioners argue that: Teodulfo, their predecessor-in-interest, purchased the subject property

from Francisco, who was in possession of the Original Certificate of Title (OCT) No. RO-5841

(17205), in the name of Dionisia and of the Extra-Judicial Partition with Deed of Sale, relying on

these instruments and after inspecting the land and seeing that nobody occupied the same,

Teodulfo bought the land and had the title subsequently issued in his name

Petitioners, in their Memorandum, further aver that: Teodulfo is a purchaser in good faith having

relied on OCT No. RO-5841 (17205) in the name of Dionisia and the Extra-Judicial Partition with

Deed of Sale which shows that Francisco is the absolute owner of the lot; four years had elapsed

from the date that the OCT was reconstituted and the time Teodulfo bought the property from

Francisco and yet none of the respondents had registered their right in the property; the Extra-

Judicial Settlement of Lot 3603 of the Cadastral Survey of Dao, Capiz with Sale, on which

respondents base their claims, was never registered with the Registry of Deeds; not having been

registered, this will not affect the right of third persons who had no knowledge thereof;

ISSUE:

Whether a person dealing with a registered land can safely rely on the correctness of the

Certificate of Title issued therefor.16

HELD:

This Court has held that the burden of proving the status of a purchaser in good faith lies upon

one who asserts that status and this onus probandi cannot be discharged my mere invocation of

the legal presumption of good faith. In this case, the Court finds that petitioners have failed to

discharge such burden.

A purchaser in good faith is one who buys property without notice that some other person has a

right to or interest in such property and pays its fair price before he has notice of the adverse

claims and interest of another person in the same property. The honesty of intention which

constitutes good faith implies a freedom from knowledge of circumstances which ought to put a

person on inquiry.

Where there is nothing in the certificate of title to indicate any cloud or vice in the ownership of

the property, or any encumbrance thereon, the purchaser is not required to explore further than

what the Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that

may subsequently defeat his right thereto.34

However, this rule shall not apply when the party has actual knowledge of facts and

circumstances that would impel a reasonably cautious man to make such inquiry or when the

purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to

induce a reasonably prudent man to inquire into the status of the title of the property in

litigation.35

In this case, preponderance of evidence shows that respondents had been in actual possession of

their respective portions even prior to 1960. Rolly Daniel, which the trial court considered as a

credible witness, testified that not only were respondents in actual possession of their respective

portions prior to 1960, he even accompanied Francisco and Teodulfo to the different houses of

respondents sometime between 1976 to 1978 as Teodulfo was going to buy the portion of

Francisco. This Court cannot give credence therefore to the claim of petitioners that Teodulfo

found no occupants in the property.

A purchaser cannot simply close his eyes to facts which should put a reasonable man on his guard

and then claim that he acted in good faith under the belief that there was no defect in the title of

his vendor. His mere refusal to believe that such defect exists or his willful closing of his eyes to

the possibility of the existence of a defect in his vendor’s title will not make him an innocent

purchaser for value if it later develops that the title was in fact defective, and it appears that he

would have notice of the defect had he acted with that measure of precaution which may

reasonably be required of a prudent man in a similar situation.

(2)Petitioners also argue that the rule on double sale of real property should apply in this case,

and since they are the first to register the sale in good faith, they are entitled to be awarded

ownership thereof.

The Court disagrees. Apart from the fact that Teodulfo is not a purchaser in good faith, the law on

double sales as provided in Art. 1544 of the Civil Code38 contemplates a situation where a single

vendor sold one and the same immovable property to two or more buyers. For the rule to apply, it

is necessary that the conveyance must have been made by a party who has an existing right in the

thing and the power to dispose it. The rule cannot be invoked where the two different contracts of

sale are made by two different persons, one of them not being the owner of the property sold.39 In

this case, respondents derive their right over their respective portions either through inheritance or

sale from Dionisia while petitioners’ invoke their right from the sale of the land from Francisco.

Clearly, the law on double sales does not apply here.

ULEP VS CA

472 SCRA 241

October 11, 2005

FACTS:

Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and

VALENTINA ULEP are brother-and-sister. Together with their siblings, namely, Atinedoro Ulep

and Rosita Ulep, they are children of the late Valentin Ulep. During his lifetime, the father

Valentin Ulep owned a parcel of land, identified as Lot 840 with an area of 3,270 square meters,

located at Asingan, Pangasinan.

Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of Lot 840,

comprising an area of 1,635 square meters, to respondent Maxima Rodico, while the remaining

one-half (1/2) western portion with the same area, to his son Atinedoro Ulep married to Beatriz

Ulep, and to his other daughter Valentina Ulep. On June 5, 1952, all the transferees of Lot 840,

namely, Maxima Rodico (for the eastern portion) and Atinedoro Ulep and Valentina Ulep (for the

western portion), were jointly issued in their names Transfer Certificate of Title No. 12525.

On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep sold the

one-half (1/2) portion of the area sold to them by their father to their brother Samuel Ulep and the

latter’s wife, Susana Repogia-Ulep. The document of sale was registered with the Office of the

Registry of Deeds of Pangasinan on February 20, 1973.

Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by the

spouses Atinedoro Ulep and Beatriz Ulep to respondent Warlito Paringit and the latter’s

spouse Encarnacion Gante, who were then issued TCT No. 12688 on September 23, 1975.

Evidently, all the foregoing transactions were done and effected without an actual

ground partition or formal subdivision of Lot 840.

In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its chapel on Lot

840. In the process, INC encroached portions thereof allegedly pertaining to petitioners and

blocked their pathways.

This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the Office of

the Register of Deeds and they discovered from the records of said office that a deed of sale

bearing date December 21, 1954, was purportedly executed by their brother Atinedoro

Ulep his, wife Beatriz and their sister Valentina Ulep in favor of INC over a portion of 620

square meters, more or less, of Lot 840, and that on the basis of said deed, INC was issued TCT

No. 12689 on September 23, 1975 over the portion allegedly sold to it by the three. Samuel was

further shocked to find out that on July 9, 1975, an affidavit of subdivision was executed by

respondents INC, Maxima Rodico and the spouses Warlito Paringit and Encarnation Gante, on

the basis of which affidavit Lot 840 was subdivided into four (4) lots.

Such was the state of things when, on March 29, 1983, in the Regional Trial Court at

Pangasinan, the spouses Samuel Ulep and Susana Repogia-Ulep, the spouses Atinedoro Ulep and

Beatriz Ulep and their sister Valentina Ulep, filed their complaint for Quieting of Title,

Reconveyance and Declaration of Nullity of Title and Subdivision Plan with

Damages against respondents INC, Maxima Rodico and the spouses Warlito Paringit and

Encarnacion Gante.

In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and their sister

Valentina Ulep denied having executed a deed of sale in favor of INC over a portion of 620

square meters of Lot 840, claiming that their signatures appearing on the deed were forged. At

the most, so they claimed, what they sold to INC was only 100 square meters and not 620 square

meters. Petitioners Samuel Ulep and Valentina Ulep, along with the spouses Atinedoro Ulep and

Beatriz Ulep, likewise averred that the subject lot was subdivided without their knowledge and

consent.

Eventually, RTC ruled against INC. Dissatisfied, INC interposed an appeal to CA. In so

ruling, the Court of Appeals explained: There is no adequate evidentiary demonstration in the

record that the deed of sale (dated December 21, 1954 executed by Atinedoro Ulep, his wife

Beatriz and sister Valentina Ulep in favor of INC over the 620 square-meter area of the western

portion of Lot 840) is void and inefficacious on account of forgery.

ISSUE:

WON there was a double sale

HELD:

YES. As the Court sees it, the present controversy is a classic case of double sale.

On December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep sold the

disputed area (620 square-meter) of Lot 840 to INC. Subsequently, on January 18, 1971, a

second sale was executed by the same vendors in favor of spouses Samuel Ulep and Susana

Ulep. The Court is, therefore, called upon to determine which of the two groups of buyers

has a better right to the area in question.

The law provides that a double sale of immovable transfers ownership to (1) the first

registrant in good faith; (2) then, the first possessor in good faith; and (3) finally, the buyer who

in good faith presents the oldest title.

Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in

time, stronger in right). Knowledge gained by the first buyer of the second sale cannot defeat the

first buyer’s rights except where the second buyer registers in good faith the second sale ahead of

the first, as provided by the aforequoted provision of the Civil Code.

Such knowledge of the first buyer does not bar him from availing of his rights under the

law, among them to register first his purchase as against the second buyer. 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

Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent

INC was made on December 21, 1954 and registered with the Registry of Deeds of Pangasinan

on January 5, 1955. In fact, INC was issued a title over the same portion on September 23,

1975. On the other hand, the conveyance to the spouses Samuel Ulep and Susana Repogia-Ulep

happened on January 18, 1971 and the spouses registered their document of conveyance only

on February 22, 1973.

Clearly, not only was respondent INC the first buyer of the disputed area. It was also the

first to register the sale in its favor long before petitioners Samuel’s and Susana’s intrusion as

second buyers. Although Samuel and Susana thereafter registered the sale made to them, they did

so only after 18 years from the time INC caused the registration of its own document of sale.

“Registration” means any entry made in the books of the Registry which records

solemnly and permanently the right of ownership and other real rights. However, mere

registration is not sufficient. Good faith must concur with registration, else registration becomes

an exercise in futility. In the instant case, the registration made by respondent INC of its deed of

sale more than satisfies this requirement. The same thing cannot be said of petitioners Samuel

Ulep and Susana Ulep. Said petitioners, by their own admission, were aware that there existed an

agreement between INC and vendors Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep

involving a portion of 100 square meters of Lot 840. Hence, proof of such knowledge overcomes

the presumption of good faith.

Petitioners’ allegation of forgery relative to the deed of sale executed on December 21,

1954 by the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the 620

square-meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be presumed and

must be proved by clear, positive and convincing evidence, the burden for which lies on the party

alleging it. The fact of forgery can only be established by a comparison between the alleged

forged signature and the authentic and genuine signature of the person whose signature is

theorized to have been forged. Here, petitioners’ claim of forgery is unsupported by any

substantial evidence other than their own self-serving testimonies.

Petitioners insist that the conveyance of only 100 square meters to INC was in fact

evidenced by a deed of sale notarized by a certain Atty. Benjamin Fernandez. However, they

sorely failed to produce in court the said alleged deed of sale. They could have, at the very least,

presented Atty. Fernandez to prove the existence of that deed, but they did not. The only plausible

conclusion is that no such deed exists.

In a last-ditch but futile attempt to persuade the Court, petitioners alternatively pray that

INC’s portion of 620 square meters of Lot 840, assuming that INC is entitled to it, should be

taken from the western portion of the same lot sold to respondent spouses Warlito Paringit and

Encarnacion Gante, and not from them. To petitioners, the share of the spouses Warlito and

Encarnacion should accordingly be reduced from 507.5 square meters to only 197 square meters.

We note, however, that petitioners never raised before the trial court nor before the

appellate court the issue of Warlito’s and Encarnacion’s entitlement to 507.5 square meters. This

issue was only posed by petitioners in the instant petition before this Court. It is certainly too late

for them to raise said issue for the first time at this late stage of the proceedings. Basic

considerations of fair play, justice and due process underlie the rule. It would be unfair to the

adverse party who would have no opportunity to present evidence in contra to the new theory,

which it could have done had it been aware of it at the time of the hearing before the trial court.

WHEREFORE, the petition is DENIED and the assailed decision and resolution of the

Court of Appeals AFFIRMED in toto.

SO ORDERED.

LEONCIO and ENRIQUETA, both surnamed BARRERA, petitioners, vs.

COURT OF APPEALS and ROSENDO C. PALABASAN, respondents.

FACTS:

Azalia Salome (Salome) owned a house and lot located at No. 2641 Bonifacio St., Bangkal,

Makati City. Salome mortgaged the property to Country Bankers Insurance and Surety Company

to secure a P10,000.00 loan. On July 1, 1966, Salome sold the property to Rosendo C. Palabasan.

On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera) filed with the Regional Trial

Court, Makati City, Branch 138, a complaint against Palabasan for reconveyance with damages.

They alleged that they had been in possession of the property since 1962 by virtue of a Deed of

Sale with Assumption of Mortgage which was not notarized; that Salome executed a notarized

Deed of Sale with Assumption of Mortgage in their favor on March 31, 1966; that, pursuant to

this notarized deed, they settled Salome's obligations with the Country Bankers Insurance and

Surety Company; that they tried to redeem the property but were not able to do so because

Palabasan had done so and the title to the property was released to Palabasan; that in 1970, they

signed a blank document which was supposed to become Palabasan's authority to sell the land for

them; that in 1975, they were surprised to learn that the blank document which they had signed

turned out to be a contract of lease wherein they were the lessees and Palabasan was the lessor of

the property; and that Palabasan registered the property in his name and was able to secure

Transfer Certificate

Palabasan asserted that he bought the property from Salome on June 30, 1966, after he had paid

the obligation of Salome with Country Bankers Insurance and Surety Company; that he had been

issued Transfer Certificate of Title No. 167387 in his name after he had the deed of sale

registered; that the spouses Barrera were in possession of the property as lessees of Salome; and

that a contract of lease was executed by and between the spouses Barrera and Palabasan in 1970.

On February 23, 1993, after trial, the lower court rendered a decision declaring Palabasan to have

validly acquired title to the property in question. The trial court, ruling that the case is one of

double sale of an immovable, applied the second paragraph of Article 1544 of the Civil Code.

The spouses appealed. On October 25, 1995, the Court of Appeals promulgated a decision

affirming in toto the decision of the trial court. The appellate court, however, found Article 1544

of the Civil Code inapplicable to the case as there was no sale between the spouses Barrera and

Salome because Salome's testimony given in a previous case12 to this effect was stricken off the

record since she died prior to cross-examination; the testimony of Cenon Mateo, the common-law

husband of Salome showed that he was not aware of the transaction entered into on March 31,

1966; and counsel for spouses Barrera admitted that the sale transaction in 1962 did not

materialize as the property was mortgaged to Country Bankers Insurance and Surety Company.

ISSUES:

1. Whether respondent Palabasan is the owner of the property in question?

2. Whether there was double sale of an immovable property covered by Article 1544 of the

Civil Code.

HELD:

1. We find respondent Palabasan to be the owner of the property. An action for

reconveyance of a property is the sole remedy of a landowner whose property has been

wrongfully or erroneously registered in another's name after one year from the date of the

decree so long as the property has not passed to an innocent purchaser for value. The

action does not seek to reopen the registration proceedings and set aside the decree of

registration but only purports to show that the person who secured the registration of the

property in controversy is not the real owner thereof. Fraud may be a ground for

reconveyance. For an action for reconveyance based on fraud to prosper. It must be

stressed that mere allegations of fraud are not enough. Intentional acts to deceive and

deprive another of his right, or in some manner, injure him, must be specifically alleged

and proved. As to proof of title to the property, respondent Palabasan offered the

following: Transfer Certificate of Title No. 167387, Tax Declaration No. 03251, the Deed

of Absolute Sale dated June 30, 1966, executed by Salome in favor of respondent

Palabasan, the Contract of Lease, with respondent Palabasan as the lessor and petitioner

Leoncio Barrera as the lessee, and the decision for the court of First Instance, Pasig,

Branch XIX in Civil Case No. 38608, finding respondent Palabasan to be the lawful

owner of the property covered by Transfer Certificate of Title No. 167387.

2. Anent the question of whether this case is one of double sale, suffice it to say that there is

no sufficient proof on the sale between Salome and petitioners. There is no double sale

that would warrant the application of Article 1544 of the Civil Code. the evidence

petitioners adduced to prove the sale was the notarized deed executed on March 31, 1966.

However, a perusal of the deed would show that the sale is conditioned on the payment

by the petitioners of Salome's obligation with the Country Bankers Insurance and Surety

Company under the contract of mortgage. Petitioners submitted no evidence to show that

they complied with the condition given. Hence, there was no consummation of the

contract which would transfer ownership of the property to the petitioners. The only sale

that materialized in this case was the sale by Salome to respondent Palabasan that was

evidenced by a deed of absolute sale that enabled respondent Palabasan to redeem the

property from Country Bankers Insurance and Surety Company and consequently to

secure Transfer Certificate of Title No. 167387 in his favor over the same property.

Aitken vs. Lao [no digest]

FABIAN vs. SMITH, BELL & Co.

FACTS:

On the 28th of January 1901 Emiliano Boncan was the owner of the real estate in question in this

case his title thereto being recorded in the registry of property. On that they he sold and conveyed

the same by a public documents to the plaintiffs. This deed was never recorded in the registry of

property. The appellees, Smith, Bell & Co., having some years thereafter obtained a judgment

against Emiliano Boncan, levied an execution issued on said judgment upon the real estate in

question, which then stood upon the said record in the name of said Boncan. The plaintiffs

thereupon brought this action to restrain the judgment creditors from selling property under this

execution. Judgment was entered in the court below in favor of the defendants, and the plaintiffs

have appealed.

ISSUE: Whether or not the levy of an execution against a judgment debtor upon real estate,

which stands in his name in the registry of property takes precedence or not of an unrecorded

deed of the same property made by the judgment debtor prior to the levy in question?

HELD:

In accordance with the provisions of Mortgage Law and the Civil Code, as they have thus

construed by this court, there can be no doubt that the claim of the appellants is superior to the

claim of the appellees.

These provisions of the Spanish law had not been modified or repealed in the respect by the Code

of Civil Procedure. The section of that code relating to attachment provide that when real estate

stands upon the records in name of the defendant the attachment shall be made in a certain way,

and when it stands in the name of the third person the attachment shall be made in a certain way;

but nothing is said in any of these sections as to any priority secured by the attachment. The

provision which is found in the statute law of a great many of the States of America, to the effect

that an unrecorded deed shall be void as to subsequent attaching or judgment creditors, nowhere

appears in this code. Article 1473 of the Civil Code, which gives preference to that one of two

deeds which is first recorded, does not extend to attachments or executions.

The same is true of the sections of the code (Civil Procedure) relating to executions; it appearing,

moreover, in section 463, that a purchaser under an execution sale “shall be substituted to and

acquire all the right, interest, title, and claim of the judgment debtor thereto,” which in this case

would be nothing. The case of Peterson vs. Newberry, above cited, arose after the publication of

the present Code of Civil Procedure.

Article 389 of the Mortgage Law is in part as follows:

From the time this law goes into operation, no document or instrument which has not been

recorded in the registry shall be admitted in the ordinary of special courts or tribunals. in the

councils and offices of the Government, by which interest subject to record are created,

conveyed, acknowledged, modified or extinguished, according to the same law, if the object of the

presentation be to enforce, to the prejudice of the third persons, the interest which should have

been recorded.

ified or extinguished, according to the same law, if the object of the presentation be to enforce, to

the prejudice of the third persons, the interest which should have been recorded.

This article does not aid the appellees for they do not come within the meaning of the phrase

“third persons” found therein. In the Commentaries of Galindo y Escolsura upon the Mortgage

Law, volume 2 (2d ed.), page 635, it is said:

Therefore it is the general opinion that when a person, by virtue of a judgment for the recovery of

the debt not supported by a mortgage , secures an attachment against property which turns out to

have been previously sold, although the purchaser did not have the property registered in his

name, the latter has a superior right, as the attachment does not confer a real right.

The judgment of the court below is reversed, and the cause remanded with directions to enter

judgment for the plaintiffs as prayed in the complaint. No costs will be allowed to either party in

this court. So ordered.

CARAM v. LAURETA103 SCRA 7

FACTS:

On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for

nullity, recovery of ownership and/or reconveyance with damages and attorney's fees against

Marcos Mata, Codidi Mata, Fermin Z. Caram, Jr.and the Register of Deeds of Davao City.On

June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original

Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed

of absolute sale in favor of the plaintiff was not registered because it was not acknowledged

before a notary public or any other authorized officer. At the time the sale was executed, there

was no authorized officer before whom the sale could be acknowledged inasmuch as the civil

government in Tagum, Davao was not as yet organized. However, the defendant Marcos Mata

delivered to Laureta the peaceful and lawful possession of the premises of the land together with

the pertinent papers thereof such as the Owner's Duplicate Original Certificate of Title No.

3019,sketch plan, tax declaration, tax receipts and other papers related thereto. Since June 10,

1945, the plaintiff Laureta had been and is still in continuous, adverse and notorious occupation

of said land, without being molested, disturbed or stopped by any of the defendants or their

representatives. Infact, Laureta had been paying realty taxes due thereon and had introduced

improvements worth not less thanP20,000.00 at the time of the filing of the complaint. On May 5,

1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata

to defendant Fermin Z. Caram, Jr., petitioner herein. The deed of sale in favor of Caram was

acknowledged before Atty.Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys.

Abelardo Aportadera and Gumercindo Arcilla,filed with the Court of First Instance of Davao a

petition for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019,

alleging as ground therefore the loss of said title in the evacuation place of defendant

MarcosMata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao

issued an order directing the Register of Deeds of Davao to issue a new Owner's Duplicate

Certificate of Title No. 3019 in favor of Marcos Mata and declaring the lost title as null and void.

On December 9, 1947, the second sale between Marcos Mata and Fermin Caram, Jr. was

registered with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140was

issued in favor of Fermin Caram Jr.On August 29, 1959, the defendants Marcos Mataand Codidi

Mata filed their answer with counter claim admitting the existence of a private absolute deed of

sale of his only property in favor of Claro L. Laureta but alleging that it was subjected to duress,

threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP

operating in the unoccupied areas of Northern Davao with its headquarters at Project No. 7

(Km.60, Davao Agusan Highways), in the Municipality of Tagum,Province of Davao; that

Laureta's words and requests were laws; that although the defendant Mata did not like to sell his

property or sign the document without even understanding the same, he was ordered to accept

P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will happen

to him or to his family, if he refused he hadno other alternative but to sign the document. The

defendants Marcos Mata and Codidi Mata also admitted the existence of a record in the Registry

of Deeds regarding a document allegedly signed by him in favor of his co-defendant Fermin

Caram, Jr. but denies that he ever signed the document for he knew before hand that he had

signed a deed of sale in favor of the plaintiff and that the plaintiff was in possession of the

certificate of title; that if ever his thumb mark appeared in the document purportedly alienating

the property to Fermin Caram, did his consent was obtained through fraud and misrepresentation

for thedefendant Mata is illiterate and ignorant and did not know what he was signing; and that he

did not receive a consideration for the said sale. The defendant Fermin Caram Jr. filed his answer

on October23, 1959 alleging that he has no knowledge or information about the previous

encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints.

The trial court rendered a decision declaring that the deed of sale, Exhibit A, executed by Marcos

Mata in favor of Claro L. Laureta stands and prevails over the deed of sale, in favor of Fermin

Caram, Jr. The defendants appealed from the judgment to the Court of Appeals which

promulgated its decision affirming the judgment of the trial court.

ISSUE:

Whether there is a valid sale of the property wasmade through his representatives, Pedro Irespe

and Atty.Abelardo Aportadera.

HELD:

The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and

Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows

Atty. Aportadera but did not knowCaram. Thus, the sale of the property could have only been

through Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted

that Atty. Aportadera acted as his notary public and attorney-in-fact at the sametime in the

purchase of the property.

The petitioner contends that he cannot be considered to have acted in bad faith because there is no

direct proof showing that Irespe and Aportadera, his allegedagents, had knowledge of the first

sale to Laureta. This contention is also without merit.

Even if Irespe and Aportadera did not have actual knowledgeof the first sale, still their actions

have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a

vendee had knowledge of the defect or lack of title of his vendor. In the instant case, Irespe and

Aportadera had knowledge of circumstances which ought to have put theman inquiry. Both of

them knew that Mata's certificate of title together with other papers pertaining to the land was

taken by soldiers under the command of Col. Claro L. Laureta.

Added to this is the fact that at the time of the second sale Laureta was already in possession of

the land. Irespe and Aportadera should have investigated the nature of Laureta's possession. If

they failed to exercise the ordinary care expected of a buyer of real estate they must suffer the

consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title

of the vendor and one who buys without checking the vendor's title takes all the risks and losses

consequent to such failure. The principle that a person dealing with the owner of the registered

land is not bound to go behind the certificate and inquire into transactions the existence of which

is not there intimated should not apply in this case. It was of common knowledge that at the time

the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not

yet established and that there were no officials to ratify contracts of sale and make them

registerable. Obviously, Aportadera and Irespe knew thateven if Mata previously had sold t he

Disputed such sale could not have been registered. There is no doubt then that Irespe and

Aportadera, acting asagents of Caram, purchased the property of Mata in bad faith. Applying the

principle of agency, Caram as principal, should also be deemed to have acted in bad faith. Since

Caram was a registrant in bad faith, the situation is as if there was no registration at all. A

possessor in good faith is one who is not aware that there exists in his title or mode of acquisition

any flaw which invalidates it. Laureta was first in possession of the property. He is also a

possessor in good faith. It is true that Mata had alleged that the deed of sale infavor of Laureta

was procured by force. Such defect, however, was cured when, after the lapse of four years from

the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment

or to set up nullity of the contract as a defense in an action to enforce the same.