FIRST DIVISION G.R. No. L-32811 March 31, 1980 FELIPE C. ROQUE, petitioner, vs.

NICANOR LAPUZ and THE COURT OF APPEALS, respondents. Taada, Sanchez, Taada, Taada for petitioner. N.M. Lapuz for respondent.

GUERRERO, J.: Appeal by certiorari from the Resolution of the respondent court 1 dated October 12, 1970 in CA-G.R. No. L-33998-R entitled "Felipe C. Roque, plaintiff-appellee, versus Nicanor Lapuz, defendantappellant" amending its original decision of April 23, 1970 which affirmed the decision of the Court of First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and the Resolution of the respondent court denying petitioner's motion for reconsideration. The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court of Appeals: Sometime in 1964, prior to the approval by the National Planning Commission of the consolidation and subdivision plan of plaintiff's property known as the Rockville Subdivision, situated in Balintawak, Quezon City, plaintiff and defendant entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate area of 1,200 square meters, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and the further sum of P740.56 to complete the payment of four monthly installments covering the months of July, August, September, and October, 1954. (Exhs. A and B). When the document Exhibit "A" was executed on June 25, 1954, the plan covering plaintiff's property was merely tentative, and the plaintiff referred to the proposed lots appearing in the tentative plan. After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant requested plaintiff that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter of their previous agreement, with Lots 4 and 12, Block 2 of the approved subdivision plan, of the Rockville Subdivision, with a total area of 725 square meters, which are corner lots, to which request plaintiff graciously acceded. The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the uniform rate of P17.00 per square (meter) payable in 120 equal monthly installments, with interest at 8% annually on the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of the approved subdivision plan, and enclosed them, including the portion where his house now stands, with barbed wires and adobe walls. However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their previous agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated

monthly installments in arrears, but also to make up-to-date his payments, but defendant, instead of complying with the demands, kept on asking for extensions, promising at first that he would pay not only the installments in arrears but also make up-to-date his payment, but later on refused altogether to comply with plaintiff's demands. Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in accordance with his previous commitment. Again, defendant promised that he would sign the required contract to sell when he shall have made up-to-date the stipulated monthly installments on the lots in question, but subsequently backed out of his promise and refused to sign any contract in noncompliance with what he had represented on several occasions. And plaintiff relied on the good faith of defendant to make good his promise because defendant is a professional and had been rather good to him (plaintiff). On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the lots in question and to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. (Exh. "B"). Notwithstanding the receipt of said letter, defendant did not deem it wise nor proper to answer the same. In reference to the mode of payment, the Honorable Court of Appeals found Both parties are agreed that the period within which to pay the lots in question is ten years. They however, disagree on the mode of payment. While the appellant claims that he could pay the purchase price at any time within a period of ten years with a gradual proportionate discount on the price, the appellee maintains that the appellant was bound to pay monthly installments. On this point, the trial court correctly held that It is further argued by defendant that under the agreement to sell in question, he has the right or option to pay the purchase price at anytime within a period of ten years from 1954, he being entitled, at the same time, to a graduated reduction of the price. The Court is constrained to reject this version not only because it is contradicted by the weight of evidence but also because it is not consistent with what is reasonable, plausible and credible. It is highly improbable to expect plaintiff, or any real estate subdivision owner for that matter, to agree to a sale of his land which would be payable anytime in ten years at the exclusive option of the purchaser. There is no showing that defendant is a friend, a relative, or someone to whom plaintiff had to be grateful, as would justify an assumption that he would have agreed to extend to defendant such an extra- ordinary concession. Furthermore, the context of the document, Exhibit "B", not to mention the other evidences on records is indicative that the real intention of the parties is for the payment of the purchase price of the lot in question on an equal monthly installment basis for a period of ten years (Exhibits "A", "II", "J" and "K"). On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor Lapuz (private respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and cancellation of the agreement of sale between them involving the two lots in question and prayed that judgment be rendered ordering the rescission and cancellation of the agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the reasonable rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and to pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and equitable in the premises. Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was denied by the court. Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff containing an aggregate area of 1,200 sq. meters and previously known as Lots

1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00, respectively, payable at any time within ten years. Defendant admits having occupied the lots in question. As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present action for rescission has prescribed; that no demand for payment of the balance was ever made; and that the action being based on reciprocal obligations, before one party may compel performance, he must first comply what is incumbent upon him. As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800 sq. meters and as a consequence, he suffered moral damages in the amount of P200.000.00; that due to the filing of the present action, he suffered moral damages amounting to P100,000.00 and incurred expenses for attorney's fees in the sum of P5,000.00. Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof. After due hearing, the trial court rendered judgment, the dispositive portion of which reads: WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the defendant, as follows: (a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled; (b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated the premises; and (c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit. (Record on Appeal, p. 118) (a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12, Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled; (b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated premises; and (c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit. (Record on Appeal. p. 118) Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding the judgment appealed from being in accordance with law and evidence, affirmed the same. In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the evidence, found and held that the real intention of the parties is for the payment of the purchase price of the lots in question on an equal monthly installment basis for the period of ten years; that there was modification of the original agreement when defendant actually occupied Lots Nos. 4 and 12 of Block 2 which were corner lots that commanded a better price instead of the original Lots Nos. 1, 2 and 9, Block I of the Rockville Subdivision; that appellant's bare assertion that the agreement is not rescindable because the appellee did not comply with his obligation to put up the requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been obeyed by the appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing rescission in reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation to Article 1149 of the New Civil Code; and that the present action was filed within five years from the time the right of action accrued.

Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds: First Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify the conclusion as to the existence of an alleged subsequent agreement novatory of the original contract admittedly entered into between the parties: Second There is nothing so unusual or extraordinary, as would render improbable the fixing of ten ears as the period within which payment of the stipulated price was to be payable by appellant; Third Appellee has no right, under the circumstances on the case at bar, to demand and be entitled to the rescission of the contract had with appellant; Fourth Assuming that any action for rescission is availability to appellee, the same, contrary to the findings of the decision herein, has prescribed; Fifth Assumming further that appellee's action for rescission, if any, has not yet prescribed, the same is at least barred by laches; Sixth Assuming furthermore that a cause of action for rescission exists, appellant should nevertheless be entitled to tile fixing of a period within which to comply with his obligation; and Seventh At all events, the affirmance of the judgment for the payment of rentals on the premises from August, 1955 and he taxing of attorney's fees against appellant are not warranted b the circumstances at bar. (Rollo, pp. 87-88) Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant, that assuming that a cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period within which to comply with his obligation. The Court of Appeals, therefore, amended its original decision in the following wise and manner: WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant Nicanor Lapuz is hereby granted a period of ninety (90) days from entry hereof within which to pay the balance of the purchase price in the amount of P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955 until fully paid. In the event that the defendant fails to comply with his obligation as above stated within the period fixed herein, our original judgment stands. Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He now comes and appeals to this Court on a writ of certiorari. The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected on the land subject of the contract is worth P45,000.00, which improvements introduced by defendant on the lots subject of the contract are very substantial, and thus being the case, "as a matter of justice and equity, considering that the removal of defendant's house would amount to a virtual forfeiture of the value of the house, the defendant should be granted a period within which to fulfill his obligations under the agreement." Cited as authorities are the cases of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is held that the discretionary power of the court to allow a period within which a person in default may be permitted to perform the stipulation upon which the claim for resolution of the contract is based should be exercised without hesitation in a case where a virtual forfeiture of valuable rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to submit to a usurious charge, and the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without giving him a chance to recover what his father and he himself had spent may amount to a virtual forfeiture of valuable rights.

As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held that there exists good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs. Blas, 51 O.G. 1920); that after appellant had testified that plaintiff failed to comply with his part of the contract to put up the requisite facilities in the subdivision, plaintiff did not introduce any evidence to rebut defendant's testimony but simply relied. upon the presumption that the law has been obeyed, thus said presumption had been successfully rebutted as Exhibit "5-D" shows that the road therein shown is not paved The Court, however, concedes that plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him from asking f r the rescission of the agreement since this obligation is not correlative with defendant's obligation to buy the property. Petitioner assails the decision of the Court of Appeals for the following alleged errors: I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code which refers to reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz a period of ninety (90) days from entry of judgment within which to pay the balance of the purchase price. II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which specifically covers sales of immovable property and which constitutes an exception to the third paragraph of Article 1191 of said Code, is applicable to the present case. III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the provisions of Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his answer or in any of the pleadings he filed in the trial court the question of whether or not he is entitled, by reason of a just cause, to a fixing of a new period. IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent Lapuz was a mere promise to sell or contract to sell, under which title to the lots in question did not pass from petitioner to respondent, still the Honorable Court of Appeals erred in not holding that aforesaid respondent is not entitled to a new period within which to pay petitioner the balance of P11,434.44 interest due on the purchase price of P12.325.00 of the lots. V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be availed of by respondent, the Honorable Court of Appeals nonetheless erred in not declaring that aid respondent has not shown the existence of a just cause which would authorize said Court to fix a new period within which to pay the balance aforesaid. VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April 23, 1970 which affirmed the decision of the trial court. The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to the Benefits of the third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should comply with what is incumbent upon him, and that is to pay the balance of P11,434,44 with interest thereon at the rate of 8% 1et annum from August 17, 1955 until fully paid since private respondent had paid only P150.00 as deposit and 4 months intallments amounting to P740.46, or a total of P890.46, the total price of the two lots agreed upon being P12,325.00. For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC and that instead, Article 1592 of the New Civil Code which specifically covers sales of immovable property and which constitute an exception to the third paragraph of Art. 1191 of aid Code, is the applicable law to the case at bar. In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of the Supreme Court bearing on the crucial issue of whether Art. 1191, paragraph 3

of the New Civil Code applies to the case at Bar as held by the appellate court and supported by the private respondent, or Art. 1592 of the same Code which petitioner strongly argues in view of the peculiar facts and circumstances attending this case. Article 1191, New Civil Code, provides: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at the obligors should not comply with hat is incumbent upon him The injured partner may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law. Article 1592 also provides: Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act. After the demand, the court may not grant him a new term. The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on Second Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which once more denied Maritimes Second Motion for Reconsideration of October 7, 1972. In the original decision, the Supreme Court speaking thru Justice J.B.L. Reyes said: Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was a breach of contract tainted with fraud or malice (dolo), as distinguished from mere negligence (culpa), "dolo" being succinctly defined as a "conscious and intention design to evade the normal fulfillment of existing obligations" (Capistrano, Civil Code of the Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed., Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116). Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make payment and thereby erase the default or breach that it had deliberately incurred. Thus the lower court committed no error in refusing to extend the periods for payment. To do otherwise would be to sanction a deliberate and reiterated infringement of the contractual obligations incurred by Maritime, an attitude repugnant to the stability and obligatory force of contracts. The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that: In contracts to sell, where ownership is retained by the seller and is not to pass until the fun payment of the price, such payment, as we said is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding i force in accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of

absolute sale, where non-payment is a resolutory condition, which is not the case." Continuing, the Supreme Court declared: ... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged by Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d], ante page 5). In suing to recover possession of the building from Maritime appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to the status quo ante as contemplated by Article 1592, but precisely enforcing the Provisions of the agreement that it is no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with the specific condition precedent, which is to pay the installments as they fell due. The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar. In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice J.B.L. Reyes, reiterated the rule that in a contract to sell, the full payment of the price through the punctual performance of the monthly payments is a condition precedent to the execution of the final sale 4nd to the transfer of the property from the owner to the proposed buyer; so that there will be no actual sale until and unless full payment is made. The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its suit, Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What is sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. The decision also stressed that "there can be no rescission or resolution of an obligation as yet nonexistent, because the suspensive condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code) requiring demand by suit or notarial act in case the vendor of realty wants to rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor until fulfillment to a positive condition, such as full payment of the price." (Manuel vs, Rodriguez, 109 Phil. 9) Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978, 86 SCRA 305, where the governing law and precedents were briefly summarized in the strong and emphatic language of Justice Teehankee, thus: (a) The contract between the parties was a contract to sell or conditional sale with title expressly reserved in the vendor Myers Building Co., Inc. Myers until the suspensive condition of full and punctual payment of the full price shall have been met on pain of automatic cancellation of the contract upon failure to pay any of the monthly installments when due and retention of the sums theretofore paid as rentals. When the vendee, appellant Maritime, willfully and in bad faith failed since March, 1961 to pay the P5,000. monthly installments notwithstanding that it was punctually collecting P10,000. monthly rentals from the lessee Luzon Brokerage Co., Myers

was entitled, as it did in law and fact, to enforce the terms of the contract to sell and to declare the same terminated and cancelled. (b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to self or conditional sales and no error was committed by the trial court in refusing to extend the periods for payment. (c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of its contract was casual or serious" for as pointed out in Manuel vs. Rodriguez, '(I)n contracts to self. whether ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force ... (d) It should be noted, however, that Maritimes breach was far from casual but a most serious breach of contract ... (e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code could be deemed applicable, Myers' answer to the complaint for interpleaded in the court below constituted a judicial demand for rescission of the contract and by the very provision of the cited codal article, 'after the demand, the court may not grant him a new term for payment; and (f) Assumming further that Article 1191 of the new Civil Code governing rescission of reciprocal obligations could be applied (although Article 1592 of the same Code is controlling since it deals specifically with sales of real property), said article provides that '(T)he court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period' and there exists to "just cause" as shown above for the fixing of a further period. ... Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement entered into between him and the respondent is a perfected contract of purchase and sale within the meaning of Article 1475 of the New Civil Code which provides that "the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contract." Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property remained with plaintiff for so long as the installments have not been fully paid. Which yields the conclusion that, by the delivery of the lots to defendant, ownership likewise was transferred to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was consummated by the delivery of the two lots, the subject thereof, by him to the respondent. Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the parties herein were delivered by the petitioner to the private respondent who took possession thereof and occupied the same and thereafter built his house thereon, enclosing the lots with adobe stone walls and barbed wires. But the property being registered under the Land Registration Act, it is the act of registration of the Deed of Sale which could legally effect the transfer of title of ownership to the transferee, pursuant to Section 50 of Act 496. (Manuel vs. Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635: Worcestor vs. Ocampo, 34 Phil. 646). Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. In the case at bar, there is no writing or document evidencing the agreement originally entered into between petitioner and private respondent except the receipt showing the initial deposit of P150.00 as

shown in Exh. "A" and the payment of the 4- months installment made by respondent corresponding to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exh. "B". Neither is there any writing or document evidencing the modified agreement when the 3 lots were changed to Lots 4 and 12 with a reduced area of 725 sq. meters, which are corner lots. This absence of a formal deed of conveyance is a very strong indication that the parties did not intend immediate transfer of ownership and title, but only a transfer after full payment of the price. Parenthetically, We must say that the standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing the terms and conditions thereof are immaterial to the case at bar since they have not been signed by either of the parties to this case. Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement between petitioner and respondent which We affirm and sustain to be a contract to sell, the following resolutions of petitioner's assignment of errors necessarily arise, and so We hold that: 1. The first and second assignments of errors are without merit. The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule that Article 1592 of the New Civil Code does not apply to a contract to sell where title remains with the vendor until full payment of the price as in the case at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision, Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated in Manuel vs. Rodriguez, et al. 109 Phil. 1, L13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the New Civil Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver the ownership of the two lots in question for failure of the respondent to pay in fun the purchase price on the basis of 120 monthly equal installments, promptly and punctually for a period of 10 years. 2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in default, he is not entitled to the new period of 90 days from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due on the purchase price of P12,325.00 for the two lots. Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to the months of July to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent was under the obligation to pay the purchase price of the lots m question on an equal monthly installment basis for a period of ten years, or 120 equal monthly installments. Beginning November, 1954, respondent began to default in complying with his obligation and continued to do so for the remaining 116 monthly interest. His refusal to pay further installments on the purchase price, his insistence that he had the option to pay the purchase price any time in ten years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further by the receipt, Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the pretext that he will sign later when he shall have updated his monthly payments in arrears but which he never attempted to update, and his failure to deposit or make available any amount since the execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all unreasonable and unjustified which altogether manifest clear bad faith and malice on the part of respondent puzzle making inapplicable and unwarranted the benefits of paragraph 3, Art. 1191, N.C.C. To allow and grant respondent an additional period for him to pay the balance of the purchase price, which balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts. Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial and material breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art. 1191, N.C.C. At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the price through the punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective and, therefore, petitioner was entitled to repossess the property object of the contract, possession being a mere incident to his right of ownership (Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., et al. 46 SCRA 381).

3. We further rule that there exists no just cause authorizing the fixing of a new period within which private respondent may pay the balance of the purchase price. The equitable grounds or considerations which are the basis of the respondent court in the fixing of an additional period because respondent had constructed valuable improvements on the land, that he has built his house on the property worth P45,000.00 and placed adobe stone walls with barbed wires around, do not warrant the fixing of an additional period. We cannot sanction this claim for equity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to rescind the contract by reason of the vendee's default or deliberate refusal to pay or continue paying the purchase price of the land. Under this design, strategem or scheme, the vendee can cleverly and easily "improve out" the vendor of his land. More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair and reasonable to the petitioner to apply a solution that affords greater reciprocity of rights which the appealed decision tried to effect between the parties. As matters stand, respondent has been enjoying the possession and occupancy of the land without paying the other 116 monthly installments as they fall due. The scales of justice are already tipped in respondent,s favor under the amended decision of the respondent court. It is only right that We strive and search for the application of the law whereby every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19, New Civil Code) In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear import of his agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay the land he had enjoyed for the last 26 years, more than twice the period of ten years that he obliged himself to complete payment of the price. 4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in the Rockville Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional period of 90 days from entry of judgment within which respondent may pay the balance of the purchase price agreed upon. The Judgment of the appellate court concedes that petitioner's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him from asking for the rescission of the agreement since his obligation is not correlative with respondent's obligation to buy the property. Since this is so conceded, then the right of the petitioner to rescind the agreement upon the happening or in the event that respondent fails or defaults in any of the monthly installments would be rendered nugatory and ineffective. The right of rescission would then depend upon an extraneous consideration which the law does not contemplate. Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform price of P17.00 per sq. meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside from his obligation to deliver title and transfer ownership to the respondent as a reciprocal obligation to that of the respondent in paying the price in full and promptly as the installments fall due, petitioner would have assumed the additional obligation "to provide the subdivision with streets ... provide said streets with street pavements concrete curbs and gutters, fillings as required by regulations, adequate drainage facilities, tree plantings, adequate water facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant, Record on Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54. The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the alleged failure of petitioner to put up and provide such facilities in the subdivision because he knew too well that he has paid only the aggregate sum of P890.56 which represents more or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes assessed by the government on his house erected on the property under litigation. Neither has respondent made any allegation in his Answer and in all his pleadings before the court up to the promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the effect that he was entitled to a new period within which to comply with his obligation, hence the Court could not proceed to do so unless the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co.,

Ltd., G.R. No. L-22558, May 31, 1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for respondent to claim an additional period within which to comply with his obligation. Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property additional period within which to complete payment of the purchase price on grounds of equity and justice as in (1)J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA 829 where the vendee religiously satisfied the monthly installments for eight years and paid a total of P4,134.08 including interests on the principal obligation of only P3,691.20, the price of the land; after default, the vendee was willing to pay all arrears, in fact offered the same to the vendor; the court granted an additional period of 60 days -from receipt of judgment for the vendee to make all installment in arrears plus interest; (2) in Legarda Hermanos vs. Saldaa, 55 SCRA 324, the Court ruled that where one purchase, from a subdivision owner two lots and has paid more than the value of one lot, the former is entitled to a certificate of title to one lot in case of default. On the other hand there are also cases where rescission was not granted and no new or additional period was authorized. Thus, in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of the purchase price of P30,000.00 for the three lots involved and when the vendor demanded revocation upon the vendee's default two years after, the vendee offered to pay the arears in check which the vendor refused; and the Court sustained the revocation and ordered the vendee ousted from the possession of the land. In Ayala y Cia vs. Arcache, 98 Phil. 273, the total price of the land was P457,404.00 payable in installments; the buyer initially paid P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and granted no extension to the vendee to comply with his obligation. The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so substantial and fundamental to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-2886, August 22, 1962; Villanueva vs. Yulo, L-12985, Dec. 29,1959); that "where time is not of the essence of t 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"( Biando vs. Embestro L11919, July 27, 1959; cases cited in Notes appended to Universal Foods Corporation vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar where the breach, delay or default was committed as early as in the payment of the fifth monthly installment for November, 1954, that such failure continued and persisted the next month and every month thereafter in 1955, 1956, 1957 and year after year to the end of the ten-year period in 1964 (10 years is respondent's contention) and even to this time, now more than twice as long a time as the original period without respondent adding, or even offering to add a single centavo to the sum he had originally paid in 1954 which represents a mere 7% of the total price agreed upon, equity and justice may not be invoked and applied. One who seeks equity and justice must come to court with clean hands, which can hardly be said of the private respondent. One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the period to the respondent because of the substantial value of his house is to make the land an accessory to the house. This is unjust and unconscionable since it is a rule in Our Law that buildings and constructions are regarded as mere accessories to the land which is the principal, following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the soil yields to the soil). Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court and the appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month from August, 1955 until respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. We affirm the same to be fair and reasonable. We also sustain the right of the petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove his house therefrom. WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby REVERSED. The decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED, with costs against private respondent. SO ORDERED.

SECOND DIVISION G.R. No. 84751 June 6, 1990 SPOUSES EDUARDO and ANN AGUSTIN, petitioners, vs. HON. COURT OF APPEALS and LABRADOR DEVELOPMENT CORPORATION, respondents. Victor D. Cruz for petitioners. Singson, Mamaril & Associates for private respondent.

REGALADO, J.: This petition for review on certiorari impugns the decision of the Court of Appeals, dated March 28, 1988, with the following decretal portion: WHEREFORE, the present appeal is accordingly resolved deleting the adjudicated award of P20,000.00 as exemplary damages, and otherwise by AFFIRMING the Decision dated October 10, 1985 in Civil Case No. Q-42390 entitled "Labrador Development Corporation vs. Sps. Eduardo Agustin, et al." in all other respects. Without pronouncement as to costs. 1 Said judgment of respondent court is based on the findings of fact set out in its decision thus: Plaintiff-appellee, being a subdivision developer, owned Lot 14, Block 1 of the San Pedro Compound IV at Tandang Sora, Quezon City, under Transfer Certificate of Title No. 277209. On November 7, 1981, plaintiff-appellee agreed to sell said parcel of land to defendants-appellants on a package deal together with a residential house per House Plan Model B-203 to be constructed thereon for the sum of P202,980.00 (Exh. 'B'). As therein stipulated, the defendants-appellants were to pay P42,980.00 as equity-P30,133.00 as down payment and the balance of P12,847.00 upon completion and de very of the property, the other P160,000.00 to have been funded through a Pag-Ibig Fund loan to be applied for by defendants-appellants. Central to the above was a stipulation that in the event the housing loan be insufficient to pay the full contract price owing, they shall pay the same in cash on or before occupancy and acceptance of the housing unit (ref. Exh. 'B', para. [e]). The agreement further provided (f) Failure of the Vendee to comply with any or all of the above stipulations shall ipso facto cancel this contract to sell; and thereupon, this contract to sell or any other contract executed in connection thereof, shall be of no further force and effect; and the title to the property, if already transferred in the name of the Vendee, shall automatically revert to the Vendor. The foregoing stipulation encompassed the necessity of transferring title to the lot to defendants-appellants as an accommodation to enable their application for a housing loan in their names. Hence, plaintiff-appellee executed a deed of sale over the lot (Exh. 'C') in favor of defendants-appellants, without additional consideration beyond the P30,133.00 down payment adverted to, and the issuance to said defendants-appellants of Transfer Certificate of title No. 29435 * (Exh. 'D'). Thusly accommodated, defendants-

appellants applied for a P160,000.00 housing loan with the First Summa Savings and Mortgage Bank as an accredited financing institution. After initial approval in the amount applied for, the Pag-ibig housing loan was downgraded to P128,000.00 after reassessment. Under date of December 18, 1982, plaintiff-appellee apprised defendants-appellants of said development (Exh. 'F') enclosing the formal bank December 16, 1982 letter (Exh. 'E') requiring a co-borrower related within the fourth degree of consanguinity should the defendants-appellants desire approval of an increased loan amount. Defendants-appellants appear to have disdained a reply to plaintiff-appellee's said letter. Thus, under date of December 28, 1982, plaintiff-appellee again wrote a followup letter to defendants-appellants (Exh. 'G') affording the latter time to decide on their options, on pain of enforcement of the terms of the contract to sell. Failing reaction from defendants-appellants thereto, plaintiff-appellee resorted to enforcement of the contractual stipulations under date of March 1, 1983 (Exh. 'H') and remitted an enclosed check for P30,133.00 (Exh. 'I') representing the equity paid in by defendants-appellants. The latter accepted said check and deposited same into their account. Instead of reconveyance of title to the lot, defendants-appellants however sought time to buy the property; plaintiff-appellee agreed provided that payment be effected in cash. Defendants-appellants failed to make such payment in cash, despite the lapse of a second 30-day period afforded therefor. Thereupon, plaintiff-appellee demanded anew for reconveyance in a July 27, 1984 letter (Exh. 'J'). On August 8, 1984, plaintiff-appellee filed Civil Case No. Q42390 for reconveyance and damage. In answer, defendants-appellants maintained inter alia that approval of a P160,000.00 housing loan had been assured upon completion of the house with proof of its delivery and acceptance, but that acceptance could not be reasonably given by them in that certain specifications for the housing unit had not been complied with. 2 After trial on the merits, the lower court rendered judgment in favor of private respondent, the dispositive part whereof reads: WHEREFORE, judgment is hereby rendered ordering defendants, jointly and severally: a) to reconvey to plaintiff the parcel of land covered by Transfer Certificate of Title No. 284735 ** of the Register of Deeds, Quezon City; b) to pay plaintiff the sum of P20,000.00 as exemplary damages; c) to pay plaintiff the sum of P5,000.00 as attorney's fees, plus costs of the suit. 3 which judgment, as earlier stated, was affirmed by respondent court but with the deletion of the award of exemplary damages. On August 22, 1988, respondent court denied petitioners' motion for reconsideration, hence this present petition raising the following issues: I The 'Contract to Sell' dated November 7, 1981 creates a reciprocal obligation between Labrador Development Corporation, as seller, and spouses Eduardo and Ann Agustin, as buyer, of the questioned house and lot.

II The failure of Labrador Development Corporation (LADECO) to complete construction of the housing unit pursuant to the 'Contract to Sell' constitutes a substantial and serious breach thereof as would bar LADECO from executing the option of cancellation (rescission) of the 'Contract to Sell' under Article 1191 of the Civil Code. III The justifiable refusal of Spouses Agustin to sign the 'House Acceptance Form' certifying that they accept the house as 100% complete constitutes merely a slight or casual breach of the 'Contract to Sell' which does not warrant the unilateral cancellation (rescission,) of the contract under par. 4 (f) thereof and Article 1191 of the Civil Code. IV The remedy of reconveyance of title of the property in question cannot be availed of by LADECO as there was no valid, binding and effective cancellation (rescission) of the 'Contract to Sell'. V Private respondent LADECO is not entitled to attorney's fees of P5,000.00 under the facts and circumstances of the case. 4 We agree with the Court of Appeals that reconveyance is proper in this case. Herein petitioners are already barred from questioning the validity of the cancellation of the contract to sell by their acquiescence thereto. Their acceptance and encashment of the checks representing the total amount paid by them to private respondent as equity, coupled by their failure to object or file an action, despite due notice, to question the validity of the extrajudicial cancellation of said contract and to ask for specific performance for more than one year, clearly show that they assented to the same. Furthermore, after receiving the check refunding their equity payment incident to the reconveyance desired by private respondents, petitioners, disregarding the original agreement of the parties, offered to purchase anew the property in question to which private respondent agreed. This novatory agreement, however, was not consummated as petitioners again failed to raise and pay the purchase price despite two 30-day extensions. They never at that juncture questioned the propriety of the rescission and reconveyance desired by private respondent. Obviously, extrajudicial rescission produces legal effects where the other party does not oppose it. 5 Moreover, even assuming that there was no implied assent to the cancellation of the contract to sell, reconveyance is still proper. The non-fulfillment by petitioners of their obligation to pay, which is a suspensive condition to the obligation of private respondent to sell and deliver the house and lot, rendered the contract to sell and the subsequent contract executed pursuant thereto ineffective and without force and effect. The contract between petitioners and private respondent is not an absolute sale but a conditional sale or contract to sell, whereby ownership is retained by the vender until full payment of the purchase price. Without such full payment, there is no obligation to sell and deliver. The subsequent execution of the deed of absolute sale and the transfer and registration of the title of the lot in the name of petitioners is of no moment, considering that the same, by mutual agreement of the parties, was made without consideration and solely for the purpose of facilitating the approval and release of the PAGIBIG loan and not for the purpose of actually transferring ownership.

Under the contract to sell, the obligation of petitioners to completely pay the purchase price is a condition precedent to the obligation of private respondent to sell and deliver the house as provided in the contract to sell, which specifically states: 5. Upon complete payment of the VENDEE/S of the purchase price herein above stated, and faithful compliance with all his obligations stipulated therein, the VENDOR, agrees to execute a valid deed of sale in favor of the VENDEE/S and cause the issuance of the Certificate of Title in the name of the latter, free from all liens and encumbrances except those provided for in the Land Registration Act and other laws, Presidential Decrees, General Orders, Letters of Instruction, Zoning Ordinances, and the attached Deed of Restrictions, which form part of this Contract; ... 6 The repeated failure and refusal of petitioners, despite due notice, to look for a co- borrower related to them within the fourth degree of consanguinity as required by the bank in order to prevent the downgrading of the loan, nor to communicate to private respondent the arrangement they intended to make regarding the difference between the approved loan of P128,000.00 and the unpaid amount of P160,000.00, clearly indicate their intention not to perform their obligations under the contract. This constituted not only a substantial or serious breach, but prevented the happening of the condition precedent which would give rise to the obligation of private respondent to sell and transfer ownership of the house and lot to petitioners. We have repeatedly ruled that: In contracts to sell, where ownership is retained by the seller and is not to pass until the full payment of the price, such payment, as we said is a positive suspensive condition, the failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force, in accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not the case. ... appellant overlooks that its contract with appellee Myers is not the ordinary sale envisaged by Article 1592, transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied with the terms of the contract (see paragraph [d], ante, page 5). In suing to recover possession of the building from Maritime, appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to the status quo ante, as contemplated by Article 1592, but precisely enforcing the provisions of the agreement that it is no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with the specific condition precedent, which is to pay the installment as they fell due. The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promissors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar. 7 We repeat, the obligation of petitioners to fully comply with their undertakings was necessarily determinative of the obligation of private respondent to complete the construction of the house. Where one of the parties to a contract did not perform the undertaking which he was bound by the terms of the agreement to perform, he is not entitled to insist upon the performance of the other party. 8 For failure of one party to assume and perform the obligation imposed on him, the other patty does not incur in delay. 9 Correspondingly, we reject the argument of petitioners that the failure of private respondent to complete the construction of the house constitutes a substantial breach as would bar the latter from

cancelling the contract. Instead, the facts of this case persuade us to hold that petitioners were merely posturing when, after being required to reconvey the premises, they came up with belated complaints about the imperfections or incompleteness of the house involved, in the same manner that they also pretended to be interested in purchasing the property but failed to do so after importuning private respondents to grant them extensions of time for that purpose. With the foregoing circumstances, reconveyance is proper and exigible pursuant to Paragraph 4 (f) of the contract to sell quoted in the decision of respondent court, supra, and on the basic principle that when an obligation has been extinguished or resolved, it is the duty of the court to require the parties to surrender whatever they may have received from the other, and the parties must be restored, as far as practicable, to their original situation. 10 The award to private respondent of attorney's fees, however, must be disallowed considering that the award of exemplary damages was eliminated by respondent court and the text of the decision of the trial court, which was aimed by the Court of Appeals, is bereft of any findings of fact and law to justify such award. The accepted rule is that the reason for the award of attorney's fees must be stated in the text of the court's decision; otherwise, if it is stated only in the dispositive portion of the decision, the same must be disallowed on appeal. The award of attorney's fees being an exception rather than the general rule, it is necessary for the court to make findings of facts and law that would bring the case within the exception and justify the grant of such award. 11 WHEREFORE, except for the award of attorney's fees which is hereby deleted, the decision of respondent Court of Appeals is hereby AFFIRMED. SO ORDERED. FIRST DIVISION

G.R. No. 92171 March 13, 1991 SPOUSES ALFREDO E. GIMENEZ and PACITA GIMENEZ, petitioners, vs. THE HONORABLE COURT OF APPEALS and JOSE T. MERCADO, JR., respondents. Ricardo J.M. Rivera Law Office for petitioners. E.G. Ferry Law Offices for private respondent.

GRIO-AQUINO, J.:p This is a petition for review of the decision dated November 16, 1989 of the Court of Appeals in CAG.R. CV No. 18664 ordering: 1. the appellee to pay the appellants the sum of P156,800.00 with interest thereon at 1% a month from October 16, 1983, the date of the first demand until full payment; 2. the appellee to pay the appellants the sum of P10,000.00 as attorney's fees; 3. the appellants to execute to the appellee a deed of sale of the property and improvements described in Transfer Certificate of Title No. 68259 of the Registry of Deeds of Quezon City immediately after payment of the sums mentioned in No. 1 above, with the assumption by the appellee of the balance due the GSIS on appellants' Accounts Nos. 25869 and 25869-A. (pp. 102-103, Rollo.)

On July 5, 1975, the petitioners as sellers, and the private respondent, Jose T. Mercado, as buyer, entered into a conditional contract of sale of a house and lot with an area of 1,200 square meters at No. 34 Hillside Drive, Blue Ridge, Quezon City, for the price of FIVE HUNDRED THOUSAND (P500,000.00) PESOS, subject to the following conditions: 1. A downpayment of the ONE HUNDRED THOUSAND (P100,000.00) PESOS in cash will be paid by Mr. Jose Mercado to Mr. Alfredo Gimenez upon signing of this agreement. 2. The premises shall be ready for occupancy on July 6, 1975, furnished. 3. The balance less the GSIS loan on said property shall be paid by the buyer in two or more equal installments but not later than one year. 4. A deed of absolute sale shall be executed in favor of Mr. Jose Mercado, Jr. upon payment of the 40% of the total selling price. The cost of the preparation of the deed of sale and the cost of the necessary documentary stamps shall be borne by the seller while the cost of the registration fees to be borne by the buyer. 5. However, if the balance is not fully paid within one year period, the total payments received by the seller shall be considered as advance payments to the rental of the house in the amount of FIVE THOUSAND (P5,000 .00) PESOS, per month. (p. 4, Rollo.) Petitioners contend that from July 5, 1975 up to July 5, 1976, the private respondent, instead of completing payment of the entire balance of P400,000 on the purchase price of the house and lot, was able to pay Twenty Thousand Pesos (P20,000.00) only. On November 7, 1976, private respondent paid petitioners an additional Ten Thousand (P10,000.00) Pesos. On September 7, 1977, more than two (2) years after the execution of the conditional contract of sale, the parties executed another agreement wherein the buyer, Mercado, Jr., promised to pay the balance of Three Hundred Seventy Thousand ( P370,000.00) Pesos on or before October 6, 1977 plus 1% interest on the balance from July 6, 1976 to September 6, 1977, and also the unpaid interest on the GSIS mortgage for July 6, 1975 to September 4, 1977. In case of default, he promised to voluntarily vacate the premises and leave the furnishings belonging to the sellers. Upon execution of the supplemental agreement, private respondent also paid P5,000 to petitioners deductible from his account. The new period expired on October 6, 1977 with the private respondent paying only P25,000 on his balance of P370,000.00. The sum of P5,000 was considered as rental of the house subject of the sale, for one month or until November 6, 1977 and another P5,000 would be applied as rental until December 6, 1977 (p. 138, Rollo). The amount of P15,000 would be forfeited in favor of petitioners (p. 9, Rollo). Foreseeing his inability to pay, private respondent wrote the petitioners on December 5, 1977 requesting for an extension up to December 19, 1977 which the latter granted. On December 7, 1977, private respondent sent to petitioners P15,000 and another amount of P35,000 on December 19, 1977 and requested for an extension of two (2) months or up to February 19, 1978. In their acknowledgment, petitioners advised private respondent that he should pay P50,000 on or before January 3, 1978, otherwise he should vacate the premises. On January 3, 1978, private respondent was able to pay only the sum of P25,000, but promised to pay the other P 25,000 on or before January 17, 1978. On January 30, 1978, he paid P15,000. He made other partial payments so that as of May 28, 1990 or five (5) years after the parties executed the contract to sell, Mercado had paid only P343,000 on the price of the Gimenez property. The unpaid balance on the contract was P156,800.

On September 12, 1984, petitioners, through counsel, demanded that Mercado pay his rents in arrears and vacate the premises. When he did not comply, they filed an ejectment complaint against him. On August 1, 1986, the Metropolitan Trial Court rendered a decision in petitioners' favor, but on appeal by the private respondent, the Regional Trial Court (Q-48670) dismissed the complaint on November 10, 1986 on the ground of prematurity, because "the conflict arising from the conditional Contract of Sale . . . and subsequent agreements relative thereto entered into between the parties" should first be resolved "to determine whether or not a cause of action for ejectment exists" (p. 20, Rollo). On March 20, 1987, the petitioners filed this action (Civil Case No. Q-50391) for annulment/cancellation of contract, recovery of possession, and damages based on Article 1191 of the New Civil Code on account of private respondent's failure to pay the balance of the purchase price of petitioners' house and lot. By then the private respondent had been occupying the property for some twelve (12) years. The private respondent, on the other hand, contended that he had fully paid the purchase price and that his only remaining obligation was to redeem the property from the GSIS. He demanded that the petitioners be ordered to execute a deed of absolute sale in his favor. On June 20, 1988, the trial court dismissed the complaint for lack of merit and ordered the plaintiffs (now petitioners) to execute within thirty (30) days from the finality of the judgment, a Deed of Sale with Assumption of Mortgage over the property in question in favor of Mercado. Upon appeal to the Court of Appeals, the appellate court on November 16, 1989 affirmed with modification the trial court's decision. The Court of Appeals ruled that petitioners could no longer rescind the contract to sell because they had granted several extensions of time to the respondent buyer, and accepted late partial payments from him. It cited the following ruling in Angeles vs. Calasanz (135 SCRA 323): . . . when the defendants-appellants, instead of availing of their alleged right to rescind, have accepted and received delayed payments of installments, though the plaintiffs-appellees have been in arrears beyond the grace period mentioned in paragraph 6 of the contract, the defendants-appellants have waived and are now estopped from exercising their alleged right of rescission. In this petition for review, the petitioners argue that the Court of Appeals erred in applying Angeles vs. Calasanz(135 SCRA 323) and in failing to consider the basic rule on rescission of contracts and the guiding principles laid down by this Court in Siy vs. Court of Appeals (138 SCRA 536). The petition for review is meritorious. Indeed, Angeles vs. Calasanz bears no factual similarity to this case, hence, was erroneously applied by the Court of Appeals. In Angeles vs. Calasanz, supra, a small subdivision lot was sold for the price of P 3,920.00 payable in monthly installments. The buyer made a 10% downpayment of P 392 upon the execution of the contract to sell on December 19, 1957 with 7% interest per annum on the balance until fully paid. The plaintiffs paid the monthly installments until July, 1966 when their aggregate payments already amounted to P 4,533.38. In other words, the buyer appeared to have already "overpaid" the seller. If anything more was due the seller, it could not be substantial. For that reason, this Court held that: "the breach of contract adverted to by the defendants is so slight and casual" that "to sanction the rescission made by the defendants-appellants will work injustice to the plaintiffs-appellees (See J.M. Tuazon & Co., Inc. vs. Javier, 31 SCRA 829). It would unjustly enrich the defendants-appellants." It allowed the plaintiffs to pay whatever installments remained unpaid. In the present case, the subject of the 1975 contract to sell was a house and lot, of 1,200 square meters, in the Blue Ridge Subdivision in Quezon City which the buyer occupied upon the execution of the contract. The price was P500,000. After making a downpayment of P 100,000, the buyer was supposed to pay the balance of P 400,000 "not later than one year." The contract provided that "if the balance is not fully paid within [the] one year period, the total payments received by the seller shall be considered as advance payments to (sic) the rental of the house in the amount of P5,000.00 a month." The one-year period and the extensions sought by the buyer and granted by the seller, expired without

full payment of the price. As of May 24, 1980, the unpaid balance of the price was still P156,800. In September, 1984, the sellers (Gimenez) demanded that the buyer (Mercado) pay his rental arrears as provided in the contract and vacate the premises. Since he did not heed their demand, they filed an ejectment suit against him. As of the date of the sellers' demand to vacate, Mercado had been occupying their house and lot for 9 years and 2 months (110 months). At P5,000 per month, his rentals should have amounted to P550,000.00. Having paid P343,200 only, his rental arrears amounted to P206,800 as of September, 1984. Under the circumstances, and considering how much real estate prices have jumped since 1975, it would be a travesty of justice to deny the sellers' right to cancel the sale under Art. 1191 of the Civil Code. There is no gainsaying Mercado's breach of the contract to sell. He failed to pay the stipulated purchase price of P500,000, within the one-year period originally fixed in the agreement which expired on July 5, 1976, nor within the extended period fixed in their supplemental agreement which expired on October 6, 1977, nor within the other extensions he sought thereafter. His breaches of the contract justly entitled the sellers to ask for the cancellation of the contract to sell with damages (Art. 1191, Civil Code; Siy vs. Court of Appeals, 138 SCRA 536; Nagarmull vs. Binalbagan-Isabela Sugar Co., Inc., 33 SCRA 52). Requiring the sellers to execute a deed of absolute sale in favor of Mercado would penalize the former for their magnanimity in granting the latter extensions of time to complete payment of the price of the sale (which he never did), and reward his defaults and contractual breaches, while continuing to enjoy the petitioners' property. WHEREFORE, the petition for review is granted. The decision of the Court of Appeals in CA-G.R. CV No. 18664 is hereby annulled and set aside. The contract to sell of July 7, 1975 and the supplemental agreement of September 7, 1977 are cancelled and annulled and the private respondent, Jose T. Mercado, Jr., is ordered to vacate the petitioners' property and restore its possession to the petitioners. He is further ordered to pay reasonable compensation for his use and occupancy of the petitioners' property, which the Court determines to be in the sum of P5,000 per month from September 1984 (date of demand) until he vacates the same, plus reasonable attorney's fees of P20,000 and the costs. SO ORDERED. THIRD DIVISION G.R. No. L-59266 February 29, 1988 SILVESTRE DIGNOS and ISABEL LUMUNGSOD, petitioners, vs. HON. COURT OF APPEALS and ATILANO G. JABIL, respondents.

BIDIN, J.: This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the 9th Division, Court of Appeals dated July 31,1981, affirming with modification the Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and (2) its Resolution dated December 16, 1981, denying defendantappellant's (Petitioner's) motion for reconsideration, for lack of merit. The undisputed facts as found by the Court of Appeals are as follows: The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners) Dignos spouses sold the said parcel of land to plaintiff-appellant (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, which was paid and acknowledged by the vendors in the deed of sale (Exh. C) 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 (Exh. J, also marked Exh. 3) 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. (Rollo, pp. 27-28) After due trial, the Court of first Instance of Cebu rendered its Decision on August 25,1972, the decretal portion of which reads: WHEREFORE, the Court hereby declares the deed of sale executed on November 25, 1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen of the United States of America, null and void ab initio, and the deed of sale executed by defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen Thousand Pesos (P16,000.00) to the defendants-spouses upon the execution of the Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this case becomes final and executory. The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount corresponding to the expenses or costs of the hollow block fence, so far constructed. It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas the sum of P35,000.00, as equity demands that nobody shall enrich himself at the expense of another. The writ of preliminary injunction issued on September 23, 1966, automatically becomes permanent in virtue of this decision. With costs against the defendants. From the foregoing, the plaintiff (respondent herein) and defendants-spouss (petitioners herein) appealed to the Court of Appeals, which appeal was docketed therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al." On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses for the building of a fence upon the land in question. The disposive portion of said decision of the Court of Appeals reads: IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the judgment as pertains to plaintiff-appellant above indicated, the judgment appealed from is hereby AFFIRMED in all other respects. With costs against defendants-appellants.

SO ORDERED. Judgment MODIFIED. A motion for reconsideration of said decision was filed by the defendants- appellants (petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by the Court of Appeals denying the motion for lack of merit. Hence, this petition. In the resolution of February 10, 1982, the Second Division of this Court denied the petition for lack of merit. A motion for reconsideration of said resolution was filed on March 16, 1982. In the resolution dated April 26,1982, respondents were required to comment thereon, which comment was filed on May 11, 1982 and a reply thereto was filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed, this Court resolved to reconsider its resolution of February 10, 1982 and to give due course to the instant petition. On September 6, 1982, respondents filed a rejoinder to reply of petitioners which was noted on the resolution of September 20, 1982. Petitioners raised the following assignment of errors: I THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW IN GROSSLY, INCORRECTLY INTERPRETING THE TERMS OF THE CONTRACT, EXHIBIT C, HOLDING IT AS AN ABSOLUTE SALE, EFFECTIVE TO TRANSFER OWNERSHIP OVER THE PROPERTY IN QUESTION TO THE RESPONDENT AND NOT MERELY A CONTRACT TO SELL OR PROMISE TO SELL; THE COURT ALSO ERRED IN MISAPPLYING ARTICLE 1371 AS WARRANTING READING OF THE AGREEMENT, EXHIBIT C, AS ONE OF ABSOLUTE SALE, DESPITE THE CLARITY OF THE TERMS THEREOF SHOWING IT IS A CONTRACT OF PROMISE TO SELL. II THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN INCORRECTLY APPLYING AND OR IN MISAPPLYING ARTICLE 1592 OF THE NEW CIVIL CODE AS WARRANTING THE ERRONEOUS CONCLUSION THAT THE NOTICE OF RESCISSION, EXHIBIT G, IS INEFFECTIVE SINCE IT HAS NOT BEEN JUDICIALLY DEMANDED NOR IS IT A NOTARIAL ACT. III THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REJECTING THE APPLICABILITY OF ARTICLES 2208,2217 and 2219 OF THE NEW CIVIL CODE AND ESTABLISHED JURISPRUDENCE AS TO WARRANT THE AWARD OF DAMAGES AND ATTORNEY'S FEES TO PETITIONERS. IV PLAINTIFF'S COMPLAINT FOR SPECIFIC PERFORMANCE SHOULD HAVE BEEN DISMISSED, HE HAVING COME TO COURT WITH UNCLEAN HANDS. V BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE QUESTIONED CONTRACT AND THE LAW APPLICABLE THERETO.

The foregoing assignment of errors may be synthesized into two main issues, to wit: I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell. II. Whether or not there was a valid rescission thereof. There is no merit in this petition. It is significant to note that this petition was denied by the Second Division of this Court in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for reconsideration and on the basis of all subsequent pleadings filed, the petition was given due course. I. The contract in question (Exhibit C) is a Deed of Sale, with the following conditions: 1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil. Philippine Currency as advance payment; 2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00) Loan from the First Insular Bank of Cebu; 3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos (P4,000.00) on or before September 15,1965; 4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on the said property; 5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil over the above-mentioned property upon the payment of the balance of Four Thousand Pesos. (Original Record, pp. 10-11) In their motion for reconsideration, petitioners reiterated their contention that the Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the same is subject to two (2) positive suspensive conditions, namely: the payment of the balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further contended that in said contract, title or ownership over the property was expressly reserved in the vendor, the Dignos spouses until the suspensive condition of full and punctual payment of the balance of the purchase price shall have been met. So that there is no actual sale until full payment is made (Rollo, pp. 51-52). In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of conveyance is a very strong indication that the parties did not intend "transfer of ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, petitioners anchored their contention on the very terms and conditions of the contract, more particularly paragraph four which reads, "that said spouses has agreed to sell the herein mentioned property to Atilano G. Jabil ..." and condition number five which reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned property upon the payment of the balance of four thousand pesos." Such contention is untenable. By and large, the issues in this case have already been settled by this Court in analogous cases.

Thus, it has been held 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 Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 86 SCRA 305). 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 nonpayment 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, such as: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477 of the same Code provides that "The ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof." As applied in the case of Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon actual or constructive delivery thereof. 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 15,1966 and Bevirlyn's Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses (Decision, Civil Case No. 23-L; Record on Appeal, p. 108). Moreover, the Court of Appeals in its resolution dated December 16,1981 found that the acts of petitioners, contemporaneous with the contract, clearly show that an absolute deed of sale was intended by the parties and not a contract to sell. Be that as it may, it is evident that when petitioners sold said land to the Cabigas spouses, they were no longer owners of the same and the sale is null and void. II. Petitioners claim that when they sold the land to the Cabigas spouses, the contract of sale was already rescinded. Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours with the case at bar, 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. The most that they were able to show is a letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos spouses not to go to the house of Jabil because the latter had no money and further advised petitioners to sell the land in litigation to another party (Record on Appeal, p. 23). As correctly found by the Court of Appeals, there is no showing that Amistad was properly authorized by Jabil to make such extra-judicial rescission for the latter who, 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 the 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" (Taguba v. Vda. de Leon, supra). Considering that private respondent has only a

balance of P4,000.00 and was delayed in payment only for one month, equity and justice mandate as in the aforecited case that Jabil be given an additional period within which to complete payment of the purchase price. WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed decision of the Court of Appeals is Affirmed in toto. SO ORDERED. THIRD DIVISION G.R. No. L-69259 January 26, 1988 DELPHER TRADES CORPORATION, and DELPHIN PACHECO, petitioners, vs. INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC., respondents.

GUTIERREZ, JR., J.: The petitioners question the decision of the Intermediate Appellate Court which sustained the private respondent's contention that the deed of exchange whereby Delfin Pacheco and Pelagia Pacheco conveyed a parcel of land to Delpher Trades Corporation in exchange for 2,500 shares of stock was actually a deed of sale which violated a right of first refusal under a lease contract. Briefly, the facts of the case are summarized as follows: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters of real estate Identified as Lot. No. 1095, Malinta Estate, in the Municipality of Polo (now Valenzuela), Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. T-4240 of the Bulacan land registry. On April 3, 1974, the said co-owners leased to Construction Components International Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions (Exhibits A to A-5) On August 3, 1974, lessee Construction Components International, Inc. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco (Exhs. B to B-6 inclusive) The contract of lease, as well as the assignment of lease were annotated at he back of the title, as per stipulation of the parties (Exhs. A to D-3 inclusive) On January 3, 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property (TCT No.T-4240) together with another parcel of land also located in Malinta Estate, Valenzuela, Metro Manila (TCT No. 4273) for 2,500 shares of stock of defendant corporation with a total value of P1,500,000.00 (Exhs. C to C-5, inclusive) (pp. 44-45, Rollo)

On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance of Lot. No. 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and Delphin Pacheco. After trial, the Court of First Instance of Bulacan ruled in favor of the plaintiff. The dispositive portion of the decision reads: ACCORDINGLY, the judgment is hereby rendered declaring the valid existence of the plaintiffs preferential right to acquire the subject property (right of first refusal) and ordering the defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer to acquire the same at the rate of P14.00 per square meter, more or less, for Lot 1095 whose area is 27,169 square meters only. Without pronouncement as to attorney's fees and costs. (Appendix I; Rec., pp. 246247). (Appellant's Brief, pp. 1-2; p. 134, Rollo) The lower court's decision was affirmed on appeal by the Intermediate Appellate Court. The defendants-appellants, now the petitioners, filed a petition for certiorari to review the appellate court's decision. We initially denied the petition but upon motion for reconsideration, we set aside the resolution denying the petition and gave it due course. The petitioners allege that: The denial of the petition will work great injustice to the petitioners, in that: 1. Respondent Hydro Pipes Philippines, Inc, ("private respondent") will acquire from petitioners a parcel of industrial land consisting of 27,169 square meters or 2.7 hectares (located right after the Valenzuela, Bulacan exit of the toll expressway) for only P14/sq. meter, or a total of P380,366, although the prevailing value thereof is approximately P300/sq. meter or P8.1 Million; 2. Private respondent is allowed to exercise its right of first refusal even if there is no "sale" or transfer of actual ownership interests by petitioners to third parties; and 3. Assuming arguendo that there has been a transfer of actual ownership interests, private respondent will acquire the land not under "similar conditions" by which it was transferred to petitioner Delpher Trades Corporation, as provided in the same contractual provision invoked by private respondent. (pp. 251-252, Rollo) The resolution of the case hinges on whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange." Eduardo Neria, a certified public accountant and son-in-law of the late Pelagia Pacheco testified that Delpher Trades Corporation is a family corporation; that the corporation was organized by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes; that in order to accomplish this end, two pieces of real estate, including Lot No. 1095 which had been leased to Hydro Pipes Philippines, were transferred to the corporation; that the leased property was transferred to the corporation by virtue of a deed of exchange of property; that in exchange for these properties, Pelagia and Delfin acquired 2,500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the other owners only owned 2,000 shares; and that at the time of incorporation, he knew all about the contract of lease of Lot. No. 1095 to Hydro

Pipes Philippines. In the petitioners' motion for reconsideration, they refer to this scheme as "estate planning." (p. 252, Rollo) Under this factual backdrop, the petitioners contend that there was actually no transfer of ownership of the subject parcel of land since the Pachecos remained in control of the property. Thus, the petitioners allege: "Considering that the beneficial ownership and control of petitioner corporation remained in the hands of the original co-owners, there was no transfer of actual ownership interests over the land when the same was transferred to petitioner corporation in exchange for the latter's shares of stock. The transfer of ownership, if anything, was merely in form but not in substance. In reality, petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners; hence the corporation and the co-owners should be deemed to be the same, there being in substance and in effect an Identity of interest." (p. 254, Rollo) The petitioners maintain that the Pachecos did not sell the property. They argue that there was no sale and that they exchanged the land for shares of stocks in their own corporation. "Hence, such transfer is not within the letter, or even spirit of the contract. There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. 1468, Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. 1638, Civil Code)." (pp. 254-255, Rollo) On the other hand, the private respondent argues that Delpher Trades Corporation is a corporate entity separate and distinct from the Pachecos. Thus, it contends that it cannot be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit; that petitioner Delfin Pacheco, having treated Delpher Trades Corporation as such a separate and distinct corporate entity, is not a party who may allege that this separate corporate existence should be disregarded. It maintains that there was actual transfer of ownership interests over the leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of stock. We rule for the petitioners. After incorporation, one becomes a stockholder of a corporation by subscription or by purchasing stock directly from the corporation or from individual owners thereof (Salmon, Dexter & Co. v. Unson, 47 Phil, 649, citing Bole v. Fulton [1912], 233 Pa., 609). In the case at bar, in exchange for their properties, the Pachecos acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades Corporation. Consequently, the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation, formed or to be formed." (Rohrlich 243, cited in Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. III, 1980 Edition, p. 430) It is significant that the Pachecos took no par value shares in exchange for their properties. A no-par value share does not purport to represent any stated proportionate interest in the capital stock measured by value, but only an aliquot part of the whole number of such shares of the issuing corporation. The holder of no-par shares may see from the certificate itself that he is only an aliquot sharer in the assets of the corporation. But this character of proportionate interest is not hidden beneath a false appearance of a given sum in money, as in the case of par value shares. The capital stock of a corporation issuing only no-par value shares is not set forth by a stated amount of money, but instead is expressed to be divided into a stated number of shares, such as, 1,000 shares. This indicates that a shareholder of 100 such shares is an aliquot sharer in the assets of the corporation, no matter what value they may have, to the extent of 100/1,000 or 1/10. Thus, by removing the par value of shares, the attention of persons interested in the financial condition of a corporation is focused upon the value of assets and the amount of its debts. (Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. III, 1980 Edition, p. 107). Moreover, there was no attempt to state the true or current market value of the real estate. Land valued at P300.00 a square meter was turned over to the family's corporation for only P14.00 a square meter.

It is to be stressed that by their ownership of the 2,500 no par shares of stock, the Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the same family group. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. As explained by Eduardo Neria: xxx xxx xxx ATTY. LINSANGAN: Q Mr. Neria, from the point of view of taxation, is there any benefit to the spouses Hernandez and Pacheco in connection with their execution of a deed of exchange on the properties for no par value shares of the defendant corporation? A Yes, sir. COURT: Q What do you mean by "point of view"? A To take advantage for both spouses and corporation in entering in the deed of exchange. ATTY. LINSANGAN: Q (What do you mean by "point of view"?) What are these benefits to the spouses of this deed of exchange? A Continuous control of the property, tax exemption benefits, and other inherent benefits in a corporation. Q What are these advantages to the said spouses from the point of view of taxation in entering in the deed of exchange? A Having fulfilled the conditions in the income tax law, providing for tax free exchange of property, they were able to execute the deed of exchange free from income tax and acquire a corporation. Q What provision in the income tax law are you referring to? A I refer to Section 35 of the National Internal Revenue Code under par. C-sub-par. (2) Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized if a person exchanges his property for stock in a corporation of which as a result of such exchange said person alone or together with others not exceeding four persons gains control of said corporation." Q Did you explain to the spouses this benefit at the time you executed the deed of exchange? A Yes, sir

Q You also, testified during the last hearing that the decision to have no par value share in the defendant corporation was for the purpose of flexibility. Can you explain flexibility in connection with the ownership of the property in question? A There is flexibility in using no par value shares as the value is determined by the board of directors in increasing capitalization. The board can fix the value of the shares equivalent to the capital requirements of the corporation. Q Now also from the point of taxation, is there any flexibility in the holding by the corporation of the property in question? A Yes, since a corporation does not die it can continue to hold on to the property indefinitely for a period of at least 50 years. On the other hand, if the property is held by the spouse the property will be tied up in succession proceedings and the consequential payments of estate and inheritance taxes when an owner dies. Q Now what advantage is this continuity in relation to ownership by a particular person of certain properties in respect to taxation? A The property is not subjected to taxes on succession as the corporation does not die. Q So the benefit you are talking about are inheritance taxes? A Yes, sir. (pp. 3-5, tsn., December 15, 1981) The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted." (Liddell & Co., Inc. v. The collector of Internal Revenue, 2 SCRA 632 citing Gregory v. Helvering, 293 U.S. 465, 7 L. ed. 596). The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract. WHEREFORE, the instant petition is hereby GRANTED, The questioned decision and resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE. The amended complaint in Civil Case No. 885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. No costs. SO ORDERED.

THIRD DIVISION G.R. No. L-69259 January 26, 1988 DELPHER TRADES CORPORATION, and DELPHIN PACHECO, petitioners, vs. INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES, INC., respondents.

GUTIERREZ, JR., J.: The petitioners question the decision of the Intermediate Appellate Court which sustained the private respondent's contention that the deed of exchange whereby Delfin Pacheco and Pelagia Pacheco conveyed a parcel of land to Delpher Trades Corporation in exchange for 2,500 shares of stock was actually a deed of sale which violated a right of first refusal under a lease contract. Briefly, the facts of the case are summarized as follows: In 1974, Delfin Pacheco and his sister, Pelagia Pacheco, were the owners of 27,169 square meters of real estate Identified as Lot. No. 1095, Malinta Estate, in the Municipality of Polo (now Valenzuela), Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No. T-4240 of the Bulacan land registry. On April 3, 1974, the said co-owners leased to Construction Components International Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions (Exhibits A to A-5) On August 3, 1974, lessee Construction Components International, Inc. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines, Inc. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco (Exhs. B to B-6 inclusive) The contract of lease, as well as the assignment of lease were annotated at he back of the title, as per stipulation of the parties (Exhs. A to D-3 inclusive) On January 3, 1976, a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property (TCT No.T-4240) together with another parcel of land also located in Malinta Estate, Valenzuela, Metro Manila (TCT No. 4273) for 2,500 shares of stock of defendant corporation with a total value of P1,500,000.00 (Exhs. C to C-5, inclusive) (pp. 44-45, Rollo) On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease agreement, respondent Hydro Pipes Philippines, Inc., filed an amended complaint for reconveyance of Lot. No. 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and Delphin Pacheco. After trial, the Court of First Instance of Bulacan ruled in favor of the plaintiff. The dispositive portion of the decision reads: ACCORDINGLY, the judgment is hereby rendered declaring the valid existence of the plaintiffs preferential right to acquire the subject property (right of first refusal) and ordering the defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer to acquire the same at the rate of P14.00 per square meter, more or less, for Lot 1095 whose area is 27,169 square meters only. Without pronouncement as to attorney's fees and costs. (Appendix I; Rec., pp. 246247). (Appellant's Brief, pp. 1-2; p. 134, Rollo) The lower court's decision was affirmed on appeal by the Intermediate Appellate Court. The defendants-appellants, now the petitioners, filed a petition for certiorari to review the appellate court's decision.

We initially denied the petition but upon motion for reconsideration, we set aside the resolution denying the petition and gave it due course. The petitioners allege that: The denial of the petition will work great injustice to the petitioners, in that: 1. Respondent Hydro Pipes Philippines, Inc, ("private respondent") will acquire from petitioners a parcel of industrial land consisting of 27,169 square meters or 2.7 hectares (located right after the Valenzuela, Bulacan exit of the toll expressway) for only P14/sq. meter, or a total of P380,366, although the prevailing value thereof is approximately P300/sq. meter or P8.1 Million; 2. Private respondent is allowed to exercise its right of first refusal even if there is no "sale" or transfer of actual ownership interests by petitioners to third parties; and 3. Assuming arguendo that there has been a transfer of actual ownership interests, private respondent will acquire the land not under "similar conditions" by which it was transferred to petitioner Delpher Trades Corporation, as provided in the same contractual provision invoked by private respondent. (pp. 251-252, Rollo) The resolution of the case hinges on whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which, in effect, prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange." Eduardo Neria, a certified public accountant and son-in-law of the late Pelagia Pacheco testified that Delpher Trades Corporation is a family corporation; that the corporation was organized by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes; that in order to accomplish this end, two pieces of real estate, including Lot No. 1095 which had been leased to Hydro Pipes Philippines, were transferred to the corporation; that the leased property was transferred to the corporation by virtue of a deed of exchange of property; that in exchange for these properties, Pelagia and Delfin acquired 2,500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the other owners only owned 2,000 shares; and that at the time of incorporation, he knew all about the contract of lease of Lot. No. 1095 to Hydro Pipes Philippines. In the petitioners' motion for reconsideration, they refer to this scheme as "estate planning." (p. 252, Rollo) Under this factual backdrop, the petitioners contend that there was actually no transfer of ownership of the subject parcel of land since the Pachecos remained in control of the property. Thus, the petitioners allege: "Considering that the beneficial ownership and control of petitioner corporation remained in the hands of the original co-owners, there was no transfer of actual ownership interests over the land when the same was transferred to petitioner corporation in exchange for the latter's shares of stock. The transfer of ownership, if anything, was merely in form but not in substance. In reality, petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners; hence the corporation and the co-owners should be deemed to be the same, there being in substance and in effect an Identity of interest." (p. 254, Rollo) The petitioners maintain that the Pachecos did not sell the property. They argue that there was no sale and that they exchanged the land for shares of stocks in their own corporation. "Hence, such transfer is not within the letter, or even spirit of the contract. There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. 1468, Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. 1638, Civil Code)." (pp. 254-255, Rollo) On the other hand, the private respondent argues that Delpher Trades Corporation is a corporate entity separate and distinct from the Pachecos. Thus, it contends that it cannot be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit; that petitioner Delfin Pacheco, having

treated Delpher Trades Corporation as such a separate and distinct corporate entity, is not a party who may allege that this separate corporate existence should be disregarded. It maintains that there was actual transfer of ownership interests over the leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of stock. We rule for the petitioners. After incorporation, one becomes a stockholder of a corporation by subscription or by purchasing stock directly from the corporation or from individual owners thereof (Salmon, Dexter & Co. v. Unson, 47 Phil, 649, citing Bole v. Fulton [1912], 233 Pa., 609). In the case at bar, in exchange for their properties, the Pachecos acquired 2,500 original unissued no par value shares of stocks of the Delpher Trades Corporation. Consequently, the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation, formed or to be formed." (Rohrlich 243, cited in Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. III, 1980 Edition, p. 430) It is significant that the Pachecos took no par value shares in exchange for their properties. A no-par value share does not purport to represent any stated proportionate interest in the capital stock measured by value, but only an aliquot part of the whole number of such shares of the issuing corporation. The holder of no-par shares may see from the certificate itself that he is only an aliquot sharer in the assets of the corporation. But this character of proportionate interest is not hidden beneath a false appearance of a given sum in money, as in the case of par value shares. The capital stock of a corporation issuing only no-par value shares is not set forth by a stated amount of money, but instead is expressed to be divided into a stated number of shares, such as, 1,000 shares. This indicates that a shareholder of 100 such shares is an aliquot sharer in the assets of the corporation, no matter what value they may have, to the extent of 100/1,000 or 1/10. Thus, by removing the par value of shares, the attention of persons interested in the financial condition of a corporation is focused upon the value of assets and the amount of its debts. (Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, Vol. III, 1980 Edition, p. 107). Moreover, there was no attempt to state the true or current market value of the real estate. Land valued at P300.00 a square meter was turned over to the family's corporation for only P14.00 a square meter. It is to be stressed that by their ownership of the 2,500 no par shares of stock, the Pachecos have control of the corporation. Their equity capital is 55% as against 45% of the other stockholders, who also belong to the same family group. In effect, the Delpher Trades Corporation is a business conduit of the Pachecos. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes. As explained by Eduardo Neria: xxx xxx xxx ATTY. LINSANGAN: Q Mr. Neria, from the point of view of taxation, is there any benefit to the spouses Hernandez and Pacheco in connection with their execution of a deed of exchange on the properties for no par value shares of the defendant corporation? A Yes, sir.

COURT: Q What do you mean by "point of view"? A To take advantage for both spouses and corporation in entering in the deed of exchange. ATTY. LINSANGAN: Q (What do you mean by "point of view"?) What are these benefits to the spouses of this deed of exchange? A Continuous control of the property, tax exemption benefits, and other inherent benefits in a corporation. Q What are these advantages to the said spouses from the point of view of taxation in entering in the deed of exchange? A Having fulfilled the conditions in the income tax law, providing for tax free exchange of property, they were able to execute the deed of exchange free from income tax and acquire a corporation. Q What provision in the income tax law are you referring to? A I refer to Section 35 of the National Internal Revenue Code under par. C-sub-par. (2) Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized if a person exchanges his property for stock in a corporation of which as a result of such exchange said person alone or together with others not exceeding four persons gains control of said corporation." Q Did you explain to the spouses this benefit at the time you executed the deed of exchange? A Yes, sir Q You also, testified during the last hearing that the decision to have no par value share in the defendant corporation was for the purpose of flexibility. Can you explain flexibility in connection with the ownership of the property in question? A There is flexibility in using no par value shares as the value is determined by the board of directors in increasing capitalization. The board can fix the value of the shares equivalent to the capital requirements of the corporation. Q Now also from the point of taxation, is there any flexibility in the holding by the corporation of the property in question? A Yes, since a corporation does not die it can continue to hold on to the property indefinitely for a period of at least 50 years. On the other hand, if the property is held by the spouse the property will be tied up in succession proceedings and the consequential payments of estate and inheritance taxes when an owner dies. Q Now what advantage is this continuity in relation to ownership by a particular person of certain properties in respect to taxation?

A The property is not subjected to taxes on succession as the corporation does not die. Q So the benefit you are talking about are inheritance taxes? A Yes, sir. (pp. 3-5, tsn., December 15, 1981) The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them, by means which the law permits, cannot be doubted." (Liddell & Co., Inc. v. The collector of Internal Revenue, 2 SCRA 632 citing Gregory v. Helvering, 293 U.S. 465, 7 L. ed. 596). The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. There was no transfer of actual ownership interests by the Pachecos to a third party. The Pacheco family merely changed their ownership from one form to another. The ownership remained in the same hands. Hence, the private respondent has no basis for its claim of a light of first refusal under the lease contract. WHEREFORE, the instant petition is hereby GRANTED, The questioned decision and resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE. The amended complaint in Civil Case No. 885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. No costs. SO ORDERED. Olegario Clarin vs Alberto Rulona and the Court of Appeals on February 27, 2012 20 February 1984, 127 scra 512 Civil Law Law on Sales Perfected Contract of Sale Clarin was the owner of a 10 hectare land in Carmen, Bohol. The same was said to be his share from the other co-owners. In 1959, he executed a Contract of Sale with Rulona as he was selling his 10 hectare land. It was agreed that the purchase price would be P2500.00. Down payment would be P1000.00 and the remaining balance would be paid monthly at P100.00 per month. Rulona paid the down payment as well as the 1st installment but then later on Clarin returned the P1100.00 against Rulonas will. Clarin said he could not convince the other co -owners about the selling of his share. Clarin also said there was no perfected sale between him and Rulona as he said that the sale was subject to the condition that the other co-owners should give their consent to the sale. ISSUE: Whether or not there was a perfected contract of sale. HELD: Yes there is. During trial there were 3 documents shown. Exhibit A shows that upon payment of P800.00 by Rulona, a survey of the land was authorized. Exhibit B shows that P200.00, part of the down payment was paid to Clarin and that the 1stinstallment of P100.00 was also made. Though these exhibits are not the Contract of Sale, they show that there was a contract of sale between Rulona and Clarin.

Construing Exhibits A and B together, it can be seen that the Clarin agreed to sell and Rulona agreed to buy a definite object, that is, 10 hectares of land which is part and parcel of Lot 20 PLD No. 4, owned in common by the Clarin and his sisters although the boundaries of the 10 hectares would be delineated at a later date. The parties also agreed on a definite price which is P2,500.00. Exhibit B further shows that Clarin has received from Rulona as initial payment, the amount of P800.00. Hence, it cannot be denied that there was a perfected contract of sale between the parties and that such contract was already partially executed when the petitioner received the initial payment of P800.00. The latters acceptance of the payment clearly showed his consent to the contract thereby precluding him from rejecting its binding effect. Further, Clarins letter to Rulona marked Exhibit C stated; My dear Mr. Rulona: Replying to your letter of recent date, I deeply regret to inform you that my daughter, Alice, who is now in Manila, could not be convinced by me to sell the land in question, that is, the ten (10) hectares of land referred to in our tentative agreement. It is for this reason that I hereby authorize the bearer, Mr. Paciano Parmisano, to return to you in person the sum of One Thousand and One Hundred (P1,100.00) Pesos which you have paid in advance for the proposed sale of the land in question. The reasons given by the Clarin cannot operate against the validity of the contract in question. A contract is valid even though one of the parties entered into it against his better judgment. FIRST DIVISION OLEGARIO B. CLARIN, petitioner, vs. ALBERTO L. RULONA and THE HONORABLE COURT OF APPEALS, respondents., G.R. No. L-30786 1984 Feb 20 DECISION GUTIERREZ, JR., J.: This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed the finding of the trial court that there was a perfected contract of sale between the petitioner and the respondent with regard to the ten (10) hectares of land constituting the petitioners share of Lot 20 PLD No. 4, Carmen Cadastre in Carmen, Bohol. On May 31, 1959 the petitioner executed two documents, namely, Exhibits A and B which respectively provide: TO WHOM THIS MAY CONCERN: This is to authorize Mr. Gustavo Decasa, surveyor from Batuan, Bohol to survey on behalf of Mr. & Mrs. Alberto L. Rulona of Suba, Katipunan, Carmen, Bohol, a portion of the share of the undersigned

of Lot 20 PLD No. 4 (Carmen Cadastre) from the CLARIN HERMANOS of which the undersigned is one of the heirs in a decision rendered in Cad. Case No. 20, Reg. Rec. No. 200 promulgated by Judge Hipolito Alo of the Court of First Instance of this province dated January 6, 1956; of the ten hectares (10) awarded to Mr. & Mrs. Alberto L. Rulona which the couple purchased from the undersigned for TWO THOUSAND FIVE HUNDRED PESOS (P2,500.00). The portion of land to be surveyed is situated where the house and vicinity of Mr. & Mrs. A. Rulona are located in said lot. (SGD.) OLEGARIO B. CLARIN (SGD.) ZOILA L. CLARIN Received from Mr. Alberto Rulona of Carmen, Bohol, the sum of Eight Hundred (P800.00) Pesos as an initial payment for the ten hectares of land in Carmen, Bohol which he is going to purchase from the undersigned. The value of the land in question is P2,500.00. Respondent Rulona filed a complaint for specific performance and recovery of improvements on the ground that the petitioner and his wife violated the terms of the agreement of sale by returning by their own volition and without the consent of plaintiff, the amount of P1,100.00 in six postal money orders, covering the downpayment of P1,000.00 and first installment of P100.00. In his complaint, the respondent alleged that the petitioner sold ten hectares of his share of the disputed lot to him for P2,500.00. The conditions of the sale were that a downpayment of P1,000.00 was to be made and then the balance of P1,500.00 was to be paid in monthly installment of P100.00. As shown by Exhibit B, the respondent delivered to the petitioner a downpayment of P800.00 and on the first week of June the amount of P200.00 was also delivered thereby completing the downpayment of P1,000.00. On the first week of August, another delivery was made by the respondent in the amount of P100.00 as payment for the first installment. Respondent further alleged that despite repeated demands to let the sale continue and for the petitioner to take back the six postal money orders, the latter refused to comply. In his answer, the petitioner alleged that while it is true that he had a projected contract of sale of a portion of land with the respondent, such was subject to the following conditions: (1) that the contract would be realized only if his co-heirs would give their consent to the sale of a specific portion of their common inheritance from the late Aniceto Clarin before partition of the said common property and (2) that should his co-heirs refuse to give their consent, the projected contract would be discontinued or would not be realized. Petitioner further contended that the respondent knew fully well the above terms and accepted them as conditions precedent to the perfection or consummation of the contract; that respondent delivered the amount of P1,000.00 as earnest money, subject to the above conditions and that the amount was returned by the petitioner upon his learning definitely that his co-heirs and co-owners refused to give their consent to the projected sale. The trial court rendered judgment in favor of the respondent on the ground that the contract of sale, Exhibit A, is a pure sale of a portion of Lot No. 20, containing an area of ten hectares for the sum of P2,500.00, and that the sale is not subject to any condition nor is it vitiated by any flaw. Therefore, it declared the same binding upon the parties under Articles 1356 and 1458 of the Civil Code. The trial court also ruled that the fact that petitioner returned the sum of P1,100.00 paid by the respondent indicated an intention to rescind the contract. The court stated, however, that rescission under Article 1191 of the Civil Code can be authorized by the court only if either party violates his obligation. Since there had been no violation, the court ruled that the petitioner could not rescind the contract. Lastly, the court held that although as co-owner the petitioner could not dispose of a specific portion of the land, nevertheless, his share was bound by the effect of the sale. On appeal, the Court of Appeals sustained the findings of the trial court, stating that: xxx xxx xxx

. . . We believe that the trial court did not incur any error when it arrived at the conclusion that there was a perfected contract of sale between the plaintiff and the defendant, for indeed the terms of the agreement (Exh. A) were clearly drafted in an equivocal manner that leaves no room for interpretation other than those terms contained therein, the real substance of which satisfied all the elements and

requisites of a contract. Appellant, however, argues that Exhibit A was a mere authority to survey. It is not addressed to any definite party, it does not contain the proper heading, there is no statement of the manner of paying the purchase price, no personal circumstances of the parties, and it is not notarized. All these grounds relied upon to suit the theory of appellant, anchored as it were on a weak foundation, deserve scant consideration. Suffice it to state that a contract to be binding upon the contracting parties need not be notarized. Neither should it specify the manner of payment of the consideration nor should it specify the manner of payment of the consideration nor should it contain the proper heading. (sic) It is maintained in this petition that the appellate court erred in holding there was a perfected contract of sale between the petitioner and the respondent, principally relying on Exhibit A and that even assuming that the latter were a perfected contract of sale, such was subject to a condition precedent with which there was no compliance. The petitioner alleges that the two documents introduced in evidence could not effectively convey title to the land because they were not public documents. Lastly, the petitioner contends that he could not have validly disposed of a definite portion of the community property and therefore, there arose a legal impossibility for him and the respondent to agree on a definite object. The petitioners contentions are without merit. While it is true that Exhibits A and B are, in themselves, not contracts of sale, they are, however, clear evidence that a contract of sale was perfected between the petitioner and the respondent and that such contract had already been partially fulfilled and executed. A contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. (Article 1475, Civil Code; Phil. Virginia Tobacco Administration v. De los Angeles, 87 SCRA 210). Such contract is binding in whatever form it may have been entered into. (Lopez v. Auditor General, 20 SCRA 655). Construing Exhibits A and B together, it can be seen that the petitioner agreed to sell and the respondent agreed to buy a definite object, that is, ten hectares of land which is part and parcel of Lot 20 PLD No. 4, owned in common by the petitioner and his sisters although the boundaries of the ten hectares would be delineated at a later date. The parties also agreed on a definite price which is P2,500.00. Exhibit B further shows that the petitioner has received from the respondent as initial payment, the amount of P800.00. Hence, it cannot be denied that there was a perfected contract of sale between the parties and that such contract was already partially executed when the petitioner received the initial payment of P800.00. The latters acceptance of the payme nt clearly showed his consent to the contract thereby precluding him from rejecting its binding effect. (See Federation of United Namarco Distributors, Inc. v. National Marketing Corporation, 4 SCRA 884). With the contract being partially executed, the same is no longer covered by the requirements of the Statute of Frauds in order to be enforceable. (See Khan v. Asuncion, 19 SCRA 996). Therefore, with the contract being valid and enforceable, the petitioner cannot avoid his obligation by interposing that Exhibit A is not a public document. On the contrary, under Article 1357 of the Civil Code, the petitioner can even be compelled by the respondent to execute a public document to embody their valid and enforceable contract. The petitioners contention that he was only forced to receive money from the respondent due to the insistence of the latter merits little consideration. It is highly improbable that the respondent would give different sums on separate dates to the petitioner with no apparent reason, without a binding assurance from the latter that the disputed lot would be sold to him. We agree with the trial court and the appellate court that the payments were made in fulfillment of the conditions of the sale, namely, a downpayment of P1,000.00 and the balance of P1,500.00, to be paid in monthly installments of P100.00 each. We, therefore, find no error in the lower courts holding that a contract of sale was perfected between the petitioner and the respondent and that the sale did not depend on a condition that the petitioners co-owners would have to agree to the sale. The latter finding is strengthened by the fact that although the petitioner has been stressing that he made it clear to the respondent that the consent of his sisters as co-owners was necessary in order for the sale to push through, his letter to respondent marked Exhibit C stated another reason, to wit: My dear Mr. Rulona:

Replying to your letter of recent date, I deeply regret to inform you that my daughter, Alice, who is now in Manila, could not be convinced by me to sell the land in question, that is, the ten (10) hectares of land referred to in our tentative agreement. It is for this reason that I hereby authorize the bearer, Mr. Paciano Parmisano, to return to you in person the sum of One Thousand and One Hundred (P1,100.00) Pesos which you have paid in advance for the proposed sale of the land in question. xxx xxx xxx

The reasons given by the petitioner cannot operate against the validity of the contract in question. A contract is valid even though one of the parties entered into it against his better judgment. (See Lagunzad v. Vda. de Gonzales, 92 SCRA 476; citing Martinez v. Hongkong and Shanghai Bank, 15 Phil. 252). Finally, we agree with the lower courts holding that although as a co -owner, the petitioner cannot dispose of a specific portion of the land, his share shall be bound by the effect of the sale. This is anchored in Article 493 of the Civil Code which provides: Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be alloted to him in the division upon the termination of the co-ownership. WHEREFORE, the petition is hereby DISMISSED for lack of merit. Costs against the petitioner. SO ORDERED. THIRD DIVISION

G.R. No. 73573 May 23, 1991 SPOUSES TRINIDAD AND EPIFANIO NATINO, petitioners, vs. THE INTERMEDIATE APPELLATE COURT, THE RURAL BANK OF AGUILAR, INC. AND THE PROVINCIAL SHERIFF EX-OFFICIO OF PANGASINAN, respondents. Jose P. Villamor for petitioners. Oscar A. Benzon for private respondents. Bitty G. Viliran for Rural Bank of Aguilar, Inc.

DAVIDE, JR., J.:p Unsatisfied with the decision of 4 June 1985 and the resolution of 23 December 1985 of the then Intermediate Appellate Court (IAC) in A.C.-G.R. CV No. 69539 1 which, respectively, reversed the decision of the then Court of First Instance of Pangasinan, Branch II, of 1 December 1981 in Civil Case No. 15573, and denied the motion for the reconsideration of the 4 June 1985 decision, petitioners filed with this Court the instant petition to seek reversal thereof. They submit one principal issue: whether or not the conclusion drawn by the Intermediate Appellate Court from proven facts is correct. 2 The following facts are not disputed:

On 12 October 1970 petitioners executed a real estate mortgage in favor of respondent bank as security for a loan of P2,000.00. Petitioners failed to pay the loan on due date. The bank applied for the extrajudicial foreclosure of the mortgage. At the foreclosure sale on 11 December 1974 the respondent bank was the highest and winning bidder with a bid of P2,945.11. A certificate of sale was executed in its favor by the sheriff and the same was registered with the Office of the Register of Deeds on 29 January 1975. The certificate of sale, a copy of which was furnished the petitioners by registered mail, expressly provided that the redemption period shall be two years from the registration thereof. Since no redemption was made by petitioners within the two-year period, which expired on 29 January 1977, the sheriff issued a Final Deed of Sale on 15 February 1977. Petitioners, however, claimed that they were granted by respondent bank an extension of the redemption period; but the latter denied it. On 22 November 1979 respondent bank file a petition for a writ of possession, which petitioners later opposed on the ground that they had consigned the redemption money of P4,000.00 on 12 December 1979. The court rejected the opposition and issued the writ of possession. However, to prevent its execution, petitioners instituted with the then Court of First Instance of Pangasinan a complaint against respondent bank and the Ex-Officio Provincial Sheriff for the annulment of the aforementioned final deed of sale and for the issuance of a writ of preliminary injunction. The case was docketed as Civil Case No. 15573 which was raffled to Branch II thereof. In their complaint petitioners alleged that the final deed of sale was prematurely issued since they were granted an extension of time to redeem the property. In resolving the issue of extension of the redemption period, the trial court, in its Decision of 1 December 1981, made the following findings and conclusion: xxx xxx xxx From the bank's evidence, it is difficult to believe that the plaintiffs who are personally known to the president and manager herself, and from whom she had to hire trucks, would not have made any move or offer to redeem the property within the redemption period. The presumption is that they exercised ordinary care of their concerns (Sc. 5 (d), Rule 131, Rules of Court, Cabigao vs. Lim 50 Phil. 844). If indeed, the plaintiffs made no such offer during the redemption period, the defendant bank should have presented evidence rebutting the plaintiffs' evidence. But it did not. While the plaintiff testified that the tender was made to Mr. Salgado, loan clerk, and Mr. Madrid, Acting Manager of the Bank and also board members Dr. Jing Zarate and Mr. Rosario, none of them were presented to rebut plaintiffs' evidence. Hence, the presumption that if their testimony were produced, it would be adverse to the defendant bank under Sec. 5(e) Rule 131 of the Rules of Court, would apply. Furthermore, the very evidence of the defendant bank shows that there was indeed an extension of the period to redeem the property. The statutory period of redemption granted the mortgagor in the certificate of sale registered on January 29, 1975 was 2 years. The period should have terminated on January 29, 1977. However, the Sheriff's Certificate of Final sale was only executed on February 15, 1977 and registered only on November 14, 1979 which registration date is the effective date of the confirmation of the sale which cuts off redemption. Such extension of nearly 3 years strengthens the plaintiffs' claim that indeed, there was an agreement to extend the redemption date. The plaintiffs' evidence has shown that there was an agreement between them and the defendant bank through its personnel and its president and manager, acting as its agents to extend the period for redemption for the plaintiffs. However, the plaintiffs were not given a specific time to pay and redeem but were given by the President and Manager of the bank such time when their means permit them to do so. This created an obligation with a period under Art. 1180 of the Civil Code of the Philippines, which provides:

Art. 1180. When the debtor binds himself to pay when his means permit him to do so, the obligation shall be deemed to be one with a period, subject to the provisions of Article 1197. This does not mean that the condition was exclusively dependent of the will of the plaintiffs, for they had already promised payment. If therefore became necessary, under Article 1197 for the Court to fix the term in order that the condition may be fulfilled. Any action to recover before this is done is considered premature (Patents vs. Omega, 93 Phil. 218). That agreement or contract entered into between the President and Manager of the bank was not in writing is of no moment since under Article 1315 of the Civil Code, "contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which according to their nature, may be in keeping with good faith, usage and law." The defendant's claim that the agreement must be in writing citing the ruling in the case of Pornellosa vs. Land Tenure Administration, 1 SCRA 375, only applies to executory contracts, not to those either totally or partially performed, (Inigo vs. Estate of Maloto, 21 SCRA 246). In this case, the bank had already partially performed its obligation thereunder by extending the period redemption from January 29, 1977 to November 14, 1979. The agreement does not novate the original contract of mortgage but only changes one of its conditions, that which concerns the period of redemption. The period of redemption may be extended by the parties under special circumstances (Lichauco vs. Olegario, 43 Phil. 540, 542). This the parties may do, since the right of the mortgagee to demand compliance within the 2 year period of redemption maybe waived, unless the waiver is contrary to the public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law." None of the inhibitions enumerated are present in this case. Hence, the action of the defendant bank in securing the Sheriffs Final Sale prior to the fixing of the period within which the plaintiffs had to pay was not in order by reason of the extension of the period of redemption without a term. Not being in order, the period for redemption by the plaintiffs still exists but has to be set. 3 and on the basis thereof, decreed to (a) annul the Sheriffs Final Deed of Sale, dated 15 February 1977 and its registration of 17 March 1979, (b) fix the period of redemption to ninety (90) days from receipt of the decision by petitioners, (c) order petitioners to pay the respondent bank, within ninety (90) days from receipt of the decision the amount of P2,945.11, the purchase price, with 1% interest per month from 11 December 1974 to 14 December 1979, together with any amount representing assessment or taxes which the bank may have paid after 11 December 1974, with interest thereon at 1% per month up to 14 December 1979, (d) order the Bank to receive and credit the petitioners with such amounts, restore petitioners to the property and to deliver to them a certificate of redemption, and to pay petitioners the sum of P2,000.00 as attorney's fees and the costs. 4 Respondent bank appealed from said Decision to the then Intermediate Appellate Court which docketed the appeal as C.A.-G.R. CV No. 69539. In support of its appeal, respondent bank assigned the following errors: -ITHE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE APPELLEES TO THE APPELLANTS WERE MADE AFTER THE PERIOD OF REDEMPTION HAD ALREADY EXPIRED AND AS A MATTER OF FACT, WERE MADE ONLY AFTER THE EXECUTION OF THE DEED OF FINAL SALE BY THE SHERIFF.

-IITHE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED THE APPELLEES AN EXTENSION OF THE PERIOD FOR THE REDEMPTION OF THE PROPERTY WHICH WAS SOLD DURING THE FORECLOSURE SALE. -IIITHE LOWER COURT ERRED IN HOLDING THAT THE PREPONDERANCE OF EVIDENCE FAVORS THE APPELLEES DESPITE THE FACT THAT THE ONLY EVIDENCE PRESENTED BY THEM IS THE SOLE TESTIMONY OF EPIFANIO NATINO, WHICH IS NOT ONLY UNCORROBORATED, BUT IS EVEN CONTRARY TO THE IMPORT OF HIS DECLARATIONS AND ADMISSIONS MADE IN OPEN COURT; AS AGAINST THE TESTIMONY OF THE APPELLANTS' WITNESS WHICH IS CORROBORATED, NOT ONLY BY DOCUMENTARY EVIDENCE, BUT EVEN BY THE IMPORT OF PLAINTIFF-APPELLEES' TESTIMONY. -IVTHE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFF-APPELLEE WHICH DID NOT PROVE AN OFFER TO REDEEM WITHIN THE REGLEMENTARY PERIOD IN AN AUTHENTIC MANNER AS REQUIRED BY THE LAW, RULES AND JURISPRUDENCE. -VTHE LOWER COURT ERRED IN NOT REJECTING THE TESTIMONY OF PLAINTIFF-APPELLEE ON THE ALLEGED EXTENSION OF THE REDEMPTION PERIOD INASMUCH AS IT IS NOT IN A PUBLIC DOCUMENT OR AT LEAST IN AN AUTHENTIC WRITING. -VITHE LOWER COURT ERRED IN APPLYING ARTICLES 1180 AND 1197 OF THE CIVIL CODE, BOTH OF WHICH HAS NO RELEVANCE OR MATERIALITY TO THE CASE AT BAR. -VIIASSUMING ARGUENDO THAT SOME OFFICERS OR EMPLOYEES OF THE APPELLANT BANK MANIFESTED TO THE PLAINTIFF-APPELLEE THAT THEY CAN RECOVER THE LAND IN QUESTION, AS TESTIFIED BY THE PLAINTIFFAPPELLEE, THE LOWER COURT ERRED IN HOLDING THAT SUCH OFFICERS ACTED AS AGENTS OF THE APPELLANT-BANK. CONSEQUENTLY, THE LOWER COURT ERRED IN NOT HOLDING THAT ONLY THE ACTION BY THE BOARD OF DIRECTORS OF THE BANK CAN BIND THE LATTER. -VIIITHE LOWER COURT ERRED IN HOLDING THAT THE EXECUTION OF THE DEED OF FINAL SALE WAS NOT IN ORDER AND IN HOLDING THAT THE APPELLEES MAY STILL REDEEM THE PROPERTY BY PAYING THE PURCHASE PRICE PLUS 1% INTEREST PER MONTH, DESPITE THE LAPSE OF THE PERIOD OF REDEMPTION.

-IXTHE LOWER COURT ERRED IN NOT DECIDING THE CASE IN FAVOR OF THE APPELLANTS AND CONSEQUENTLY ERRED IN NOT AWARDING DAMAGES TO THE APPELLANTS HEREIN. 5 Herein petitioners, as appellees, did not file their Brief. In its Decision of 4 June 1985, the Intermediate Appellate Court disposed of the assigned errors as follows: xxx xxx xxx The bank has assigned eight (8) errors in the decision but the determinants are the first and the second. But before going into their merits We must take note of the failure of the appellees to file their brief. Appellees did not file any motion for reconsideration. It has to be stated there that, generally, appellee's failure to file brief is considered as equivalent to a confession of error, warranting, although not necessarily requiring a reversal, but any doubt entertained by the appellate court as to what disposition should be made of the case will be resolved against the appellee (4 CJS 1832, cited in Francisco, the Revised Rules of Court Civil Procedure, Vol. III, p. 638) Re the first error THE LOWER COURT ERRED IN NOT HOLDING THAT THE OFFERS BY THE APPELLEES TO THE APPELLANTS WERE MADE AFTER THE PERIOD OF REDEMPTION HAD ALREADY EXPIRED AND AS A MATTER OF FACT, WERE MADE ONLY AFTER THE EXECUTION OF THE DEED OF FINAL SALE BY THE SHERIFF. It will take better proofs than appellees' mere declaration for the Court to believe that they had tendered the redemption money within the redemption period which was refused by the bank. There would have been no valid reason for a refusal; it is an obligation imposed by law on every purchaser at public auction that admits of redemption, to accept tender of redemption money. And should there be refusal, the correlative duty of the mortgagor is clear: he must deposit the money with the sheriff. The evidence does not show that appellees complied with this duty. All that was shown by way of compliance was the deposit made with the Clerk of Court of the sum of P4,000.00. This deposit is a belated and last ditch attempt to exercise a right that had long expired. It was made only on December 12, 1979, or after the redemption period of two (2) years from January 29, 1977 when the sheriffs certificate of sale was registered and after sheriff's final sale which was registered on November 14, 1979. And, it is clear that the late deposit was utilized to defeat the bank's vested right which it sought to enforce by its petition for a writ of possession. The lower court correctly ruled against any validity to it. The right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is not really one of redemption but a repurchase. Distinction must be made because redemption is by force of law; the purchaser at public auction is bound to accept redemption. Repurchase however of foreclosed property, after redemption period, imposes no such obligation. After expiry, the purchaser may or may not re-sell the property but no law will compel him to do so, And, he is not bound by the bid price; it is entirely within his discretion to set a higher price, for after all, the property already belongs to him as owner. This brings Us to the second error

THE LOWER COURT ERRED IN HOLDING THAT THE APPELLANTS GRANTED THE APPELLEES AN EXTENSION OF THE PERIOD FOR THE REDEMPTION OF THE PROPERTY WHICH WAS SOLD DURING THE FORECLOSURE SALE. Appellees' main premise is the alleged assurances of the bank's officers that they could redeem the property. From the testimony of Epifanio Natino, however, it is clear that these assurances were given before expiry of redemption (tsn, pp. 15 & 16). Such assurances were not at all necessary since the right to redeem was still in existence. Those assurances however could not and did not extend beyond the redemption period. It seems clear from testimony elicited on cross-examination of the president and manager of the bank that the latter offered to re-sell the property for P30,000.00 but after the petition for a writ of possession had already been filed, and well after expiry of the period to redeem. Appellants failed to accept the offer; they deposited only P4,000.00. There was therefore no meeting of the minds, and accordingly, appellants may no longer be heard. 6 and in the light thereof, REVERSED and SET ASIDE the appealed decision. Their motion to reconsider the same having been denied in the resolution of 23 December 1985, 7 petitioners have come to Us on appeal by certiorari raising the sole issue stated in the beginning of this decision. We find the petition to be devoid of merit. Petitioners have failed to demonstrate that the conclusion made by the respondent Intermediate Appellate Court from the proven facts is wrong. We agree with said Court, and, therefore, set aside the contrary conclusion of the trial court, that the attempts to redeem the property were done after the expiration of the redemption period and that no extension of that period was granted to petitioners. The contrary conclusion made by the trial court is drawn from inferences which are not supported by adequate or sufficient facts or is based on erroneous assumptions. We note that its decision is remarkably silent as to the dates when petitioner Epifanio Natino went to the respondent bank to talk with a bank personnel to offer to pay the loan. If indeed the offer was made within the redemption period, but the Bank refused to accept the redemption money, petitioners should have made the tender to the sheriff who made the sale and who then had the duty to accept the tender and execute the certificate of redemption. (Enage vs. Vda. de Hijos de Escano, 38 Phil. 657, cited in II MORAN, Comments on the Rules of Court, 1979 Ed., pp. 326-327). There was no such tender to the Sheriff. Again, if indeed this occurred during the redemption period, then, as correctly pointed out by respondent IAC, it was not necessary to ask for extension of the period to redeem. In respect to the alleged assurance given by Mrs. Brodeth, the President and Manager of the Bank, sometime in May of 1978 to the effect that petitioners can redeem the property as soon as they have the money, it is obvious that this took place after the expiration of the redemption period. As correctly pointed out by the respondent IAC, this could only relate to the matter of resale of the property, not redemption. Furthermore, even assuming for the sake of argument that Mrs. Brodeth gave the assurance, the same could bind the bank only if its Board of Directors approved or ratified it. No evidence was offered to prove such action by the Board. Moreover, Mrs. Brodeth denied that during that meeting in May 1978 she made the assurance; according to her petitioner Epifanio neither mentioned the loan nor offered to redeem, although earlier he was told that to 'redeem" the property he should pay P30,000.00. The latter statement supports the conclusion of respondent IAC that this was the Bank's offer for the resell (not redemption of the property), which, logically took place after the expiration of the redemption period.

Even if Mrs. Brodeth is to be understood to have promised to allow the petitioners to buy the property at any time they have the money, the Bank was not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price. The second paragraph of Article 1479 of the Civil Code expressly provides: xxx xxx xxx An accepted unilateral. promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price. Thus in Rural Bank of Paraaque Inc. vs. Remolado, et al., 8 a commitment by the bank to resell a property, within a specified period, although accepted by the party in whose favor it was made, was considered an option not supported by a consideration distinct from the price and, therefore, not binding upon the promissor. Pursuant toSouthwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, 9 it was void. WHEREFORE, the instant petition is DISMISSED, with costs against the Petitioners. SO ORDERED EN BANC

G.R. No. L-35702 May 29, 1973 DOMINGO D. RUBIAS, plaintiff-appellant, vs. ISAIAS BATILLER, defendant-appellee. Gregorio M. Rubias for plaintiff-appellant. Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.: In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent documentary exhibits. Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there was no title or right to the land that could be transmitted by the purported sale to plaintiff. As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final judgment defendant's "better right to possess the land in question . having been in the actual possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff."

Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the very land in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's application for registration) was properly declared inexistent and void by the lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code. The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the appeal at bar: On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions in 1945 and in 1959. Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim defendant claims the complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his predecessors-ininterest have always been in actual, open and continuous possession since time immemorial under claim of ownership of the portions of the lot in question and for the alleged malicious institution of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ... On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the parties and their counsel which order reads as follows.. 'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay. A. During the pre-trial conference, the parties have agreed that the following facts are attendant in this case and that they will no longer introduced any evidence, testimonial or documentary to prove them: 1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561 hectares.) 2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an application for the registration of the title of the land technically described in psu-99791 (Exh. "B")opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First Instance heard the land registration case on November 14, 1952, and after the trial this court dismissed the application for registration . The appellant, Francisco Militante, appealed from the decision of this Court to the Court of Appeals where the case was docketed as CA-GR No. 13497-R.. 3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1").

(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiffappellant, his son-in-law, for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land Registration Case No. R695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These exclusions referred to portions of the original area of over 171 hectares originally claimed by Militante as applicant, but which he expressly recognized during the trial to pertain to some oppositors, such as the Bureau of Public Works and Bureau of Forestry and several other individual occupants and accordingly withdrew his application over the same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of 22 September 1958 confirming the land registration court's dismissal of Militante's application for registration.) 4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the application for Registration filed by Francisco Militante (Exh. "I"). 5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6"). 6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5"). 7. Tax Declaration No. 2434 in the name of Liberato Demontao for the land described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontao paid the land tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H"). 8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may present to the Court other land taxes receipts for the payment of taxes for this lot. 9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a planapproved by Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh. "5"). 10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964, in favor of the defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November 1964dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant, Isaias Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual physical possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees ....") B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following: 1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by Liberato Demontao but that on September 6, 1919 the land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontao Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1"). 2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1"). 3. That plaintiff suffered damages alleged in his complaint. C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts: 1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since then up to the present, the land remains in the possession of the defendant, his possession being actual, open, public, peaceful and continuous in the concept of an owner, exclusive of any other rights and adverse to all other claimants. 2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land and that they never had any title thereto. 3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has beenapproved. 4. The damages suffered by the defendant, as alleged in his counterclaim."' 1 The appellate court further related the developments of the case, as follows: On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-

in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code which reads: 'Art. 1409. The following contracts are inexistent and void from the beginning: xxx xxx xxx (7) Those expressly prohibited by law. 'ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: . xxx xxx xxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring an assignment and shall apply tolawyers, 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.' defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-35 Record on Appeal). On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record on Appeal). Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966. Plaintiff-appellant imputes to the lower court the following errors: '1. The lower court erred in holding that the contract of sale between the plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property covered by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made when plaintiff-appellant was the counsel of the latter in the Land Registration case. '2. The lower court erred in holding that the defendant-appellee is an interested person to question the validity of the contract of sale between plaintiff-appellant and the deceased, Francisco Militante, Sr. '3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee after he had already filed his answer, and after the termination of the pre-trial, when the said motion to dismiss raised a collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiffappellant.' The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute; and (2) whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as involving pure questions of law. It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the parties with their counsel agreed and stipulated on the material and relevant facts and submitted their respective documentary exhibits as referred to in the pre-trial order, supra, 2 practically amounted to a fulldress trial which placed on record all the facts and exhibits necessary for adjudication of the case. The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the source of the alleged right and title of Francisco Militante's predecessors, supra, 3 actually are already made of record in thestipulated facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to Liberato Demontao was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration case and rejected by the Iloilo land registration court which dismissedMilitante's application for registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in 1958 of the Court of Appeals. 4 The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his and his ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the Director of Lands' approval of his survey plan thereof, supra, 5 are likewise already duly established facts of record, in the land registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of defendant's right to the land as against plaintiff. No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion after the pre-trial. 1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's application for registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of Appeals. With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration, the lack of any rightful claim or title of Militante to the land was conclusively and decisively judicially determined. Hence, there was no right or title to the land that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff. Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be restored to possession thereof with damages was bereft of any factual or legal basis. 2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to have been superseded by the later 1929 case of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court expressly cited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the vendorclient but by the adverse parties against whom the lawyer was to enforce his rights as vendee thus acquired. These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous ruling in Wolfson: The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application for the registration of the land in the deed. After hearing, the Court of First Instance declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors from purchasing property rights involved in any litigation in which they take part by virtue of their profession. The application for registration was consequently denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.) In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this court by the administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed and the land adjudicated to the two estates as conjugal property of the deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.) 9 In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement of the price paid by him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith." As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is Article 1491. Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on "whether or not the judgment in question actually falls within the prohibition of the article" and held only that the sale's "voidability can not be asserted by one not a party to the transaction or his representative," citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred to must be asserted by the person having the necessary legal capacity to do so and decreed by a competent court." 11 The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void "that the Code does not recognize such nullity de pleno derecho" is no longer true and applicable to our own Philippine Civil Code whichdoes recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law " and declares such contracts "inexistent and void from the beginning." 12 The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by confirmation or ratification, holding that: ... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y prohibicion legal, afectante orden publico, no cabe con efecto alguno la aludida retification ... 13 The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents in its above cited decision should certainly apply with greater reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal article. Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:. Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico. 14 Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la infraccion es la nulidad radical y ex lege." 15 Castan, quoting Manresa's own observation that. "El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito de la institucion ." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and employees of government property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." 18 Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract." 19 As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendantappellant. The principles governing the nullity of such prohibited contracts and judicial declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as follows: Parties Affected. Any person may invoke the in existence of the contract whenever juridical effects founded thereon are asserted against him. Thus, if there has been a void transfer of property, the transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the assignee. Action On Contract. Even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the restitution of what has been given under it. The judgment, however, will retroact to the very day when the contract was entered into. If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20 ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against plaintiff-appellant. So ordered. EN BANC G.R. No. L-24732 April 30, 1968

PIO SIAN MELLIZA, petitioner, vs. CITY OF ILOILO, UNIVERSITY OF THE PHILIPPINES and THE COURT APPEALS, respondents.

Cornelio P. Ravena for petitioner. Office of the Solicitor General for respondents. BENGZON, J.P., J.: Juliana Melliza during her lifetime owned, among other properties, three parcels of residential land in Iloilo City registered in her name under Original Certificate of Title No. 3462. Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot No. 1214 was 29,073 square meters. On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square meters of Lot 1214, to serve as site for the municipal hall. 1 The donation was however revoked by the parties for the reason that the area donated was found inadequate to meet the requirements of the development plan of the municipality, the so-called "Arellano Plan". 2 Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214-B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 square meters, became known as Lot 1214B; Lot 1214-B-2, with 6,653 square meters, was designated as Lot 1214-C; and Lot 1214-B-13, with 4,135 square meters, became Lot 1214-D. On November 15, 1932 Juliana Melliza executed an instrument without any caption containing the following: Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS PESOS (P6,422.00), moneda filipina que por la presente declaro haber recibido a mi entera satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en venta real y difinitiva a dicho Gobierno Municipal de Iloilo los lotes y porciones de los mismos que a continuacion se especifican a saber: el lote No. 5 en toda su extension; una porcion de 7669 metros cuadrados del lote No. 2, cuya porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de subdivision de dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de 10,788 metros cuadrados del lote No. 1214 cuya porcion esta designada como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de subdivision. Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de venta difinitiva, y que para la mejor identificacion de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno Municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center de iloilo, segun el plano Arellano. On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios Sian Villanueva who thereafter obtained her own registered title thereto, under Transfer Certificate of Title No. 18178. Remedios in turn on November 4, 1946 transferred her rights to said portion of land to Pio Sian Melliza, who obtained Transfer Certificate of Title No. 2492 thereover in his name. Annotated at the back of Pio Sian Melliza's title certificate was the following: ... (a) that a portion of 10,788 square meters of Lot 1214 now designated as Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision plan belongs to the Municipality of Iloilo as per instrument dated November 15, 1932.... On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo, donated the city hall site together with the building thereon, to the University of the Philippines (Iloilo branch). The site donated consisted of Lots Nos. 1214-B, 1214-C and 1214-D, with a total area of 15,350 square meters, more or less. Sometime in 1952, the University of the Philippines enclosed the site donated with a wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the city authorities for payment of the value of the lot (Lot 1214-B). No recovery was obtained, because as alleged by plaintiff, the City did not have funds (p. 9, Appellant's Brief.)

The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. 7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B or of its value. The defendants answered, contending that Lot 1214-B was included in the public instrument executed by Juliana Melliza in favor of Iloilo municipality in 1932. After stipulation of facts and trial, the Court of First Instance rendered its decision on August 15, 1957, dismissing the complaint. Said court ruled that the instrument executed by Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B. In support of this conclusion, it referred to the portion of the instrument stating: Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de venta difinitiva, y que para la major identificacion de los lotes y porciones de los mismos que son objeto de la presente, hago constar que dichos lotes y porciones son los que necesita el Gobierno municipal de Iloilo para la construccion de avenidas, parques y City Hall site del Municipal Government Center de Iloilo, segun el plano Arellano. and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but also such other portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. And thus it held that Iloilo City had the right to donate Lot 1214-B to the U.P. Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the Court of Appeals affirmed the interpretation of the Court of First Instance, that the portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters specifically mentioned but included whatever was needed for the construction of avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for reception of evidence to determine the area actually taken by Iloilo City for the construction of avenues, parks and for city hall site. The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant maintains that the public instrument is clear that only Lots Nos. 1214-C and 1214-D with a total area of 10,788 square meters were the portions of Lot 1214 included in the sale; that the purpose of the second paragraph, relied upon for a contrary interpretation, was only to better identify the lots sold and none other; and that to follow the interpretation accorded the deed of sale by the Court of Appeals and the Court of First Instance would render the contract invalid because the law requires as an essential element of sale, a "determinate" object (Art. 1445, now 1448, Civil Code). Appellees, on the other hand, contend that the present appeal improperly raises only questions of fact. And, further, they argue that the parties to the document in question really intended to include Lot 1214-B therein, as shown by the silence of the vendor after Iloilo City exercised ownership thereover; that not to include it would have been absurd, because said lot is contiguous to the others admittedly included in the conveyance, lying directly in front of the city hall, separating that building from Lots 1214-C and 1214-D, which were included therein. And, finally, appellees argue that the sale's object was determinate, because it could be ascertained, at the time of the execution of the contract, what lots were needed by Iloilo municipality for avenues, parks and city hall site "according to the Arellano Plan", since the Arellano plan was then already in existence. The appeal before Us calls for the interpretation of the public instrument dated November 15, 1932. And interpretation of such contract involves a question of law, since the contract is in the nature of law as between the parties and their successors-in-interest. At the outset, it is well to mark that the issue is whether or not the conveyance by Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known as Lot 1214-B. If not, then the same was included, in the instrument subsequently executed by Juliana Melliza of her remaining interest in Lot 1214 to Remedios Sian Villanueva, who in turn sold what she thereunder had acquired, to Pio Sian Melliza. It should be stressed, also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived title did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5, Record on

Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian Villanueva and, later, to Pio Sian Melliza. The point at issue here is then the true intention of the parties as to the object of the public instrument Exhibit "D". Said issue revolves on the paragraph of the public instrument aforequoted and its purpose, i.e., whether it was intended merely to further describe the lots already specifically mentioned, or whether it was intended to cover other lots not yet specifically mentioned. First of all, there is no question that the paramount intention of the parties was to provide Iloilo municipality with lots sufficient or adequate in area for the construction of the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation for this purpose between the same parties was revoked by them, because of inadequacy of the area of the lot donated. Secondly, reading the public instrument in toto, with special reference to the paragraphs describing the lots included in the sale, shows that said instrument describes four parcels of land by their lot numbers and area; and then it goes on to further describe, not only those lots already mentioned, but the lots object of the sale, by stating that said lots are the ones needed for the construction of the city hall site, avenues and parks according to the Arellano plan. If the parties intended merely to cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been any need for the next paragraph, since these lots are already plainly and very clearly described by their respective lot number and area. Said next paragraph does not really add to the clear description that was already given to them in the previous one. It is therefore the more reasonable interpretation, to view it as describing those other portions of land contiguous to the lots aforementioned that, by reference to the Arellano plan, will be found needed for the purpose at hand, the construction of the city hall site. Appellant however challenges this view on the ground that the description of said other lots in the aforequoted second paragraph of the public instrument would thereby be legally insufficient, because the object would allegedly not be determinate as required by law. Such contention fails on several counts. The requirement of the law that a sale must have for its object a determinate thing, is fulfilled as long as, at the time the contract is entered into, the object of the sale is capable of being made determinate without the necessity of a new or further agreement between the parties (Art. 1273, old Civil Code; Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement that the lots object of the sale are the ones needed for city hall site, avenues and parks, according to the Arellano plan, sufficiently provides a basis, as of the time of the execution of the contract, for rendering determinate said lots without the need of a new and further agreement of the parties. The Arellano plan was in existence as early as 1928. As stated, the previous donation of land for city hall site on November 27, 1931 was revoked on March 6, 1932 for being inadequate in area under said Arellano plan. Appellant claims that although said plan existed, its metes and bounds were not fixed until 1935, and thus it could not be a basis for determining the lots sold on November 15, 1932. Appellant however fails to consider that thearea needed under that plan for city hall site was then already known; that the specific mention of some of the lots covered by the sale in effect fixed the corresponding location of the city hall site under the plan; that, therefore, considering the said lots specifically mentioned in the public instrument Exhibit "D", and the projected city hall site, with its area, as then shown in the Arellano plan (Exhibit 2), it could be determined which, and how much of the portions of land contiguous to those specifically named, were needed for the construction of the city hall site. And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C and 1214-D, admittedly covered by the public instrument. It is stipulated that, after execution of the contract Exhibit "D", the Municipality of Iloilo possessed it together with the other lots sold. It sits practically in the heart of the city hall site. Furthermore, Pio Sian Melliza, from the stipulation of facts, was the notary public of the public instrument. As such, he was aware of its terms. Said instrument was also registered with the Register of Deeds and such registration was annotated at the back of the

corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is chargeable with knowledge of them; that knowing so, he should have examined the Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he should have taken notice of the possession first by the Municipality of Iloilo, then by the City of Iloilo and later by the University of the Philippines of Lot 1214-B as part of the city hall site conveyed under that public instrument, and raised proper objections thereto if it was his position that the same was not included in the same. The fact remains that, instead, for twenty long years, Pio Sian Melliza and his predecessors-in-interest, did not object to said possession, nor exercise any act of possession over Lot 1214-B. Applying, therefore, principles of civil law, as well as laches, estoppel, and equity, said lot must necessarily be deemed included in the conveyance in favor of Iloilo municipality, now Iloilo City. WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the Court of First Instance, and the complaint in this case is dismissed. No costs. So ordered. EN BANC G.R. No. L-15605 October 31, 1962

URSULA FRANCISCO, plaintiff-appellee, vs. JULIAN RODRIGUEZ, ET AL., defendants-appellants. Suazo, Viola and Buagas and Claro M. Recto for defendants-appellants. Tesorero, Quitain and Vega and Jose A. Cusi for plaintiff-appellee. REGALA, J.: This is the second time that this case is brought before us on appeal. The antecedent facts are not disputed and are stated in Our decision dated May 21, 1956, in G.R. No. L-8263, as follows: Plaintiff was born a Mora with the name of "Silipot" who was baptized as a Christian at the age of thirty-five. She was an illiterate. She applied in Sales Application No. 157 for the purchase of Lot No. 595, Cadastral No. 102, situated in barrio Bunawan, Davao City, and thereafter cultivated it, planting thereon abaca, coconuts, cacao, lanzones, nanca and durian, and declared it for purposes of taxation in 1932, assessed value at the time was P4,280. On August 10, 1935, her sales application was rejected because she had permitted herself to be a dummy, though she continued in the possession of the property. On September 2, 1935, she filed a motion for reconsideration by means of an affidavit signed and subscribed before her lawyer, defendant Julian A. Rodriguez. A year afterwards, or on April 27, 1936, this lawyer sent a letter to the Bureau of Lands at Davao, enclosing an affidavit of Ursula Francisco, stating that the aliens had already left the place, and on August 12, 1939, or two years later again sent a letter to the Bureau of Lands, this time at Manila, urging that 'in view of the fact that this case is now pending for nearly three years, may I ask now that action be expedited?' There was no reply to this letter, but in June, 1940, Ursula Francisco, being in need of a money because of the impending foreclosure of another parcel of land and of the recent death of her son-in-law, husband of Casiana, and because of the expenses needed by her grandson Jose who was in Manila, approached her lawyer Rodriguez asking him for a loan of P1,000, and while Julian did not consent at first, he finally agreed, though insisting on an absolute conveyance of the property, less four hectares which should be segregated for the vendor. To this end the land was surveyed for subdivision in May, 1940, and the following month a document was executed on June 10, 1940 conveying 29 hectares of the land to Rodriguez for the sum of P2,000, which was thumbmarked by Ursula who received the first payment of P500.00.

It appears, however, that Ursula was of the belief that the document she signed was one of antichresis, and when she discovered that the document she thumb-marked was a deed of absolute sale, she filed an action in the Court of First Instance of Davao against the now defendant Rodriguez and her daughter Monina seeking the annulment of said document (Civil Case No. 9-R), and although the document, marked Exhibit D-1, was declared null and void, she lost the case because the land in question was then not considered her property but of the Government. On October 30, 1947, or two months after the decision in said case was rendered, the Bureau of Lands reinstated Ursula's application, but Rodriguez asked for reconsideration on the ground that he was the owner of 29 hectares. His motion was denied by order of the Bureau of Lands on June 17, 1948. A supplemental motion filed by Rodriguez was also denied on November 18, 1948 though upon the latter's application, the Bureau of Lands stayed on December 4, 1948, the execution of the reinstatement. Finally, on February 17, 1949, the Secretary of Agriculture remanded the case to the Bureau of Lands for a formal investigation, which had not yet been completed at the time the present case was decided in the lower court. In view of this state of affairs, on August 27, 1948, Ursula Francisco instituted this action which was decided by the trial court as stated in the early part of this decision. On the basis of the above facts, the trial court, on April 28, 1949, rendered a decision declaring both plaintiff Ursula Francisco and defendants, herein appellants, not entitled to the possession of the land in litigation and leaving the disposition of said land to the officials of the Department of Agriculture. On appeal, this Court affirmed the said decision, making the following pronouncements: . . ., there is no doubt that the deed of conveyance executed by plaintiff in favor of defendant on June 10, 1940 is null and void not only because the rights of plaintiff under her sales application had been cancelled by the Bureau of Lands in the belief that she permitted herself to be a dummy of the Japanese but especially because the conveyance was made without previous approval of the Secretary of Agriculture as required by law (Section 29, Commonwealth Act No. 141). . . . It is therefore clear that the conveyance is null and void and produced as a consequence the reversion of the property with all rights thereto to the State. xxx xxx xxx

There is however a redeeming feature that may throw light on the present controversy. We know that the sales application of plaintiff has been reinstated by the Bureau of Lands but the effect of which were stayed upon petition of defendant. And because of his conflict, the Secretary of Agriculture has ordered a formal investigation apparently in an effort to determine once and for all the rights and equities of the parties. Unfortunately, the investigation has not yet been completed when this case was initiated and from a recent correspondence received by this Court from the Bureau of Lands the same is still pending, awaiting the outcome of the present case. Considering that under the provisions of Sections 3, 4 and 5 of Commonwealth Act No. 141 of the Director of Lands, subject to the control of Secretary of Agriculture, is given direct executive control of any disposition of lands of the public domain and his decision as to questions of fact, if approved, are deemed conclusive upon this Court, we believe that this matter may well be left to whatever action may be taken by said officials with regard to the land in litigation. This is especially so because the root cause which emanates the nullity of the transaction hinges merely the lack of approval of the Secretary of Agriculture and Natural Resources. Viewing the controversy in this light, we are of the opinion that the trial court did not err when it concluded that "Plaintiff must wait until the Department of Agriculture finally brings down the hammer. If she wants auxiliary relief, that department shall grant it." Believing that the aforequoted decision of this Court restored them to their status ante litem motam, both parties filed with Us separate motions for reconsideration with a view of obtaining possession of the property in litigation and the fruits thereof pendente lite. The motions were denied, and after the record of the case had been returned to the lower court, the parties there again attempted to get possession of the property by filing the corresponding motions. The trial court, however, denied their motions on the ground that it is either the Secretary of Agriculture or the Director of Lands who should ask for possession of the property.

In the meantime, or on October 22, 1956, the investigation mentioned in the decision of this Court being conducted by the Bureau of Lands in connection with the property in litigation having been finally accomplished, decision was rendered by the Secretary of Agriculture, the dispositive part of which reads: In view hereof, the instant appeal by Julian Rodriguez and Monina Rodriguez is hereby dismissed; their claims to the portion of 29.3298 hectares involved herein and its improvements, denied; and whatever rights or interests appellee Ursula Francisco may have in said lands and improvements, declared vacant; and steps leading to its sale including the improvements, in a public bidding shall forthwith be taken. The Office of the President has affirmed this decision in toto. Pursuant thereto, the Director of Lands, on December 8, 1958, filed in the trial court a motion to intervene in Civil Case No. 268, praying that the receiver (who was appointed at the outset of the case before it was brought to Us on appeal for the first time) be required to give an accounting and that thereafter the receivership be dissolved. The motion was granted and the receiver was ordered to deposit any cash in his possession with the Philippine National Bank and submit his report for its approval. In compliance with this last mentioned order, the said receiver submitted his statement of accounts and on September 12, 1958, his final accounts were approved. On October 12, 1958, defendants filed a motion asking for possession of property and discharge or receiver, and on October 28, 1958, said defendants, together with plaintiff, filed a joint motion praying that the proceeds of the property be delivered to and divided between them equally. In denying these two motions, the trial court, on November 14, 1958 ordered . . . the receiver to turn over the property and deliver to the Bureau of Lands all accountability of said receiver and thereafter the receivership is considered dissolved. Upon submission and approval of this Court of the accounts of the receiver from the last date of the approved accounting up to the present time, this case shall be considered closed. The defendants moved to have this order reconsidered but having been denied, they interposed the present appeal with the following assignment of errors: THE TRIAL COURT ERRED IN DECLARING THAT THE LAND IN LITIGATION IS ALREADY REVERTED TO THE STATE, AND AS SUCH, THE PROPERTY MUST BE TURNED OVER TO THE GOVERNMENT. THE LOWER COURT ERRED IN DECLARING THAT THE OWNERSHIP OF THE LAND IN QUESTION BY STATE CARRIES WITH IT THE RIGHT TO POSSESS. THE LOWER COURT ERRED IN NOT DECLARING DEFENDANTS ENTITLED TO THE MATERIALS AND PHYSICAL POSSESSION OF THE LAND IN QUESTION AND IN NOT TERMINATING THE RECEIVERSHIP IN THIS CASE. The appeal is without merit. This Court in G.R. No. L-8263 has expressed in no certain terms that the conveyance of the land in quest from Ursula Francisco to the Rodriguezes is "null and void and produced as a consequence the reversion of the property with all rights thereto to the State." This pronoucement is well in accordance with the following wording of Section 29 of Commonwealth Act 141: . . . Any sale and encumbrance made without the previous approval of the Secretary of Agriculture and Commerce shall be null and void and shall produce the effect of annulling the acquisition and reverting the property and all rights thereto to the State, and all payments on the purchase price therefore made to the Government shall be forfeited. . . .

The reversion referred to is self-operative and no separate action need be instituted by the Government for that purpose. The parties, however, insist on a formal action for reversion, citing Section 101 of the Public Land Law (Commonwealth Act 141), which provides that "all actions for the reversion to the Government of lands of the public domain or improvements thereof shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the Commonwealth of the Philippines." But the aforequoted section does not apply here. The same may be invoked only when title has already vested in the individual, e.g., when a patent or a certificate of title has already been issued. As already stated, no new separate action is necessary for the reversion of the property in question and futile for the parties to ask for possession of the same. Neither may the parties claim for the proceeds of the property during the pendency of this case because "all rights in and interest to, and the improvements and crops upon, land for which an application has been denied or cancelled or a patent or grant refused, or a contract or concession rescinded or annulled, shall be forfeited to the Government" (Section 98, Public Land Law). It is, however, contended that the property as well as the fruit thereof pendente lite cannot be delivered to the Director of Lands, because he is not a party to the case. We do not think the contention is tenable. One of the purposes for which a receivership is established is to preserve the property during the pendency of the litigation or to dispose of it according to the judgment when the judgment is finally rendered or otherwise to carry the judgment into effect. This Court has already made the pronouncement in G.R. No. L-8263 that the land in question reverted to the State, and directed the officials of the Department of Agriculture to take whatever action is necessary with regard to said land. In accordance therewith, the Director of Lands filed a motion to intervene in the proceedings and the same was granted by the lower court. It cannot be argued, therefore, that the Director of Lands is not a party to this case. Of course, We have taken note that the intervention by the Director of Lands was not strictly in accordance with Rule 13 of the Rules of Court. But the motion was not so filed as to have unduly delayed the disposition of the case and substantially impaired the rights of the original parties. On the other hand, the circumstances obtaining in the proceedings pointed to the advisability, even necessity, of having the intervenor take part therein. An examination of the record shows that this case has pending since 1948 and that the parties have patently no right whatsoever to the land in question. To require a strict compliance with the Rules would only further delay the proceedings and subject both parties as well as government to additional unnecessary expense. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration. (Alonso v. Villamor, 16 Phil. 315). IN VIEW OF THE FOREGOING, the order appealed from is hereby affirmed, without special pronouncement as to costs. SECOND DIVISION G.R. No. 73564 March 25, 1988 CORNELIA CLANOR VDA. DE PORTUGAL, FRANCISCO C. PORTUGAL, PETRONA C. PORTUGAL, CLARITA PORTUGAL, LETICIA PORTUGAL, and BENEDICTO PORTUGAL, JR., petitioners, vs. INTERMEDIATE APPELLATE COURT and HUGO C. PORTUGAL, respondents.

SARMIENTO, J.: Seeking the reversal of the decision 1 dated October 21, 1985 of the former Intermediate Appellate Court in CA-G.R. CV No. 70247, entitled "Cornelia Clanor Vda. de Portugal, et al. vs. Hugo Portugal,

and the reinstatement of the decision 2 in their favor, dated June 30, 1980, of the Court of First Instance of Cavite in Civil Case No. NC-699 entitled "Cornelia Vda. de Portugal, et al. vs. Hugo Portugal," the petitioners now come to us by way of this petition for review by certiorari. The factual background that gave rise to the present controversy is summarized as follows: Petitioner Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were able to accumulate several parcels of real property. Among these were a parcel of residential land situated in Poblacion, Gen. Trias, Cavite, designated as Lot No. 3201, consisting of 2,069 square meters, more or less, and covered by T.C.T. No. RT-9355, in their names, and an agricultural land located at Pasong Kawayan, Gen. Trias, Cavite, with an area of 43,587 square meters, more or less, known as Lot No. 2337, and also registered in their names under T.C.T. No. RT-9356 of the Registry of Deeds for the Province of Cavite. Sometime in January, 1967, the private respondent Hugo Portugal, a son of the spouses, borrowed from his mother, Cornelia, the certificates of title to the above-mentioned parcels of land on the pretext that he had to use them in securing a loan that he was negotiating. Cornelia, the loving and helpful mother that she was, assented and delivered the titles to her son. The matter was never again brought up until after Pascual Portugal died on November 17, 1974. (Cornelia herself died on November 12, 1987.) When the other heirs of the deceased Pascual Portugal, the petitioners herein, for the purposes of executing an extra-judicial partition of Pascual's estate, wished to have all the properties of the spouses collated, Cornelia asked the private respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no longer exist. When further questioned, Hugo showed the petitioners Transfer Certificate of Title T.C.T. No. 23539 registered in his and his brother Emiliano Portugal's names, and which new T.C.T. cancelled the two previous ones. This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons, Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand, refused to make the necessary restitution thus compelling the petitioners, his mother and his other brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the reconveyance of the title over Lot No. 3201 (the residential land). After hearing, the trial court rendered its decision, the dispositive portion of which reads: xxx xxx xxx WHEREFORE, under our present perspectives, judgment is hereby rendered; and the Court hereby declares inoperative the Deed of Sale (Exhibit A and Exhibit 1) and all its appertaining and subsequent documents corresponding with Transfer Certificate of Title No. T-23539 of the Register of Deeds for the Province of Cavite, as well as all subsequent Transfer Certificates of Title which may have been produced corresponding to the parcels of land, subject matter hereof. SO ORDERED. 3 From this decision, Hugo Portugal, the private respondent herein and the defendant in the trial court, appealed to the respondent appellate court which reversed, hence the present petition. The issues raised by the petitioners are: 1. Whether or not the present action has prescribed; 2. Whether or not the respondent court was justified in disturbing the trial court's findings on the credibility of the witnesses presented during the trial; and 3. Whether or not the appellate court could entertain the defense of prescription which was not raised by the private respondents in their answer to the complaint nor in a motion to dismiss.

We find the petition meritorious. There is really nothing novel in this case as an the issues raised had been, on several occasions, ruled upon by the Court. Apropos the first issue, which is the timeliness of the action, the trial court correctly ruled that the action instituted by the petitioners has not yet prescribed. Be that as it may, the conclusion was reached through an erroneous rationalization, i.e., the case is purely for reconveyance based on an implied or constructive trust. Obviously, the trial court failed to consider the lack of consideration or cause in the purported deed of sale by which the residential lot was allegedly transferred to the private respondent by his parents. On the other hand, the respondent Intermediate Appellate Court held that since the action for reconveyance was fathered by a fraudulent deed of sale, Article 1391 of the Civil Code which lays down the rule that an action to annul a contract based on fraud prescribes in four years, applies. Hence, according to the respondent court, as more than four years had elapsed from January 23, 1967 when the assailed deed was registered and the petitioners' cause of action supposedly accrued, the suit has already become stale when it was commenced on October 26, 1976, in the Court of First Instance of Cavite. For reasons shortly to be shown, we can not give our imprimatur to either view. The case at bar is not purely an action for reconveyance based on an implied or constructive trust. Neither is it one for the annullment of a fraudulent contract. A closer scrutiny of the records of the case readily supports a finding that fraud and mistake are not the only vices present in the assailed contract of sale as held by the trial court. More than these, the alleged contract of sale is vitiated by the total absence of a valid cause or consideration. The petitioners in their complaint, assert that they, particularly Cornelia, never knew of the existence of the questioned deed of sale. They claim that they came to know of the supposed sale only after the private respondent, upon their repeated entreaties to produce and return the owner's duplicate copy of the transfer certificate of title covering the two parcels of land, showed to them the controversial deed. And their claim was immeasurably bolstered when the private respondent's co-defendant below, his brother Emiliano Portugal, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein. If this is so, and this is not contradicted by the decisions of the courts below, the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed, no consideration was ever paid at all by the private respondent. Applying the provisions of Articles 1350, 1352, and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. And it is provided in Article 1410 of the Civil Code, that '(T)he action or defense for the declaration of the inexistence of a contract does not prescribe. But even if the action of the petitioners is for reconveyance of the parcel of land based on an implied or constructive trust, still it has been seasonably filed. For as heretofore stated, it is now settled that actions of this nature prescribe in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of titIe over the property. 4 In this case, the petitioner commenced the instant action for reconveyance in the trial court on October 26, 1976, or less than ten years from January 23, 1967 when the deed of sale was registered with the Register of Deeds. 5 Clearly, even on this basis alone, the present action has not yet prescribed. On the credibility of witnesses presented in court, there is no doubt that the trial court's findings on this score deserves full respect and we do not have any reason to disturb it here now. 6 After all, the trial court judge is in a better position to make that appreciation for having heard personally the witnesses and observed their deportment and manner of testifying during the trial. 7 The exceptions to this time honored policy are: when the trial court plainly overlooked certain facts of substantial import and value which if only correctly considered by the court might change the outcome of the case; 8 and, if the judge who rendered the decision was not the one who heard the evidence. 9 Neither of these exceptions is present here. Therefore, the respondent appellate court's ruling questioning the credibility of petitioner Cornelia Clanor Vda. de Portugal must be reversed. Anent the last issue raised by the petitioner, we have already ruled that the defense of prescription although not raised by the defendant may nevertheless be passed upon by the court when its presence is plainly apparent on the face of the complaint itself. 10 At any rate, in view of our earlier finding that the deed of sale in controversy is not simply fraudulent but void ab initio or inexistent our ruling on this third issue would not have any material bearing on the overall outcome of this petition. The petitioner's action remains to be seasonably instituted.

WHEREFORE, the petition is hereby GRANTED; the Decision dated October 21, 1985 and the Resolution dated January 24, 1986 of the Intermediate Appellate Court are hereby REVERSED and SET ASIDE; the deed of sale dated January 23, 1967 evidencing the sale of Lot No. 3201 to private respondent Hugo Portugal is declared VOID AB INITIO; and the private respondent is ORDERED to reconvey to petitioners the title over the said Lot No. 3201 which is now under TCT No. T-23539. Costs against the private respondent. SO ORDERED. SECOND DIVISION G.R. No. L-25777 November 26, 1976 ASUNCION MENESES VDA. DE CATINDIG, petitioner-appellant, vs. The Heirs of CATALINA ROQUE, namely, ESCOLASTICO CERVANTES, LEONCIA CERVANTES and EMERENCIANA CERVANTES, represented by her guardian ad litem, DAMASO SANTOS; CARLOS KATIPUNAN; Heirs of JORGE KATIPUNAN; Heirs of ROBERTO ROQUE, namely, MAGDALENA, GORGONIA and ELISA, all surnamed ROQUE; INES ROQUE; Heirs of BARBARA ROQUE VILLANUEVA, namely, MERCEDES VILLANUEVA FAJARDO, VENANCIA VILLANUEVA, LIGAYA VILLANUEVA, PEDRO VILLANUEVA, PABLO VILLANUEVA, LEONILA VILLANUEVA, MARCIAL VILLANUEVA; Heirs of APOLONIO ROQUE, namely, DOLORES, AURELIA, CONSTANCIO, GUILLERMO, JOSEFINA, all surnamed ROQUE, DEMETRIA RAMIREZ; ENCARNACION CAMINGAL, as guardian ad litem of RENATO and ERNESTO, both surnamed ROQUE; Heirs of IRENE BOLORAN, namely, HERMOGENA, CIRIACO, VICENTE and DOMINADOR, all surnamed TOLENTINO; Heirs of LEONILA DE GUZMAN, namely, PETRONILA, MARCELINA and PEAFRANCIA, (all surnamed SANTIAGO, CIPRIANA) and PASTORA, both surnamed SANTIAGO, both minors, represented by PETRONILA SANTIAGO, as guardian ad litem; GERMAN RAMIREZ; Heirs of CONCORDIA ROQUE, namely, BELEN and GUILLERMO, both surnamed PAGSANJAN, respondents-appellees. Tansinsin & Tansinsin for petitioner-appellant. Pablo, Diaz, Agosto & Palacio for respondent-appellees.

AQUINO, J.: Asuncion Meneses Vda. de Catindig seeks the review of the decision of the Court of Appeals dated December 31, 1965 which affirmed the judgment of the Court of First Instance Bulacan. The lower court declared void certain documents of sale regarding portions of the fishpond in litigation, ordered Mrs. Catindig to deliver to the respondents (except German Ramirez) the possession of the said fishpond, to pay to them, as the reasonable compensation for the use and enjoyment of the fishpond, the sum of P6,000 per annum from October 1, 1951 until the possession of the fishpond is restored to the respondents, plus P1,000 as attorney's fees, and allowed the respondents to redeem from Mrs. Catindig the 2/16 portion of the fishpond which German Ramirez had sold to her. The facts are as follows: The said fishpond, known as Lot No. 4626 of the Malolos Cadastre, has an area of more than thirteen hectares. As shown in Original Certificate of Title No. 7937, it is registered in the names of the following persons: 1. Catalina Roque, married to Anastacio Katipunan 6/16

2. Roberto Roque, married to Gregoria Borlongan 2/16 3. Ines Roque, married to Lucio Adriano 1/16 4. Barbara Roque, married to Eusebio Villanueva 1/16 5. Apolonio Roque, married to Isabel Borlongan 1/16 6. Concordia Roque, single 2/16 7. German Ramirez 1/16 8. Irene Boloran, married to Faustino Panganiban 1/16 9. Leonila de Guzman, 12 years old, single 1/16 The co-owners of the fishpond leased it to Mrs. Catindig for a term of ten years counted from October 1, 1941 for a total rental of six thousand pesos (Exh. C-1; Amendment to Decision, per Resolution of February 22, 1966). After the termination of the lease on September 30, 1951, Mrs. Catindig remained in possession of the fishpond because she was negotiating with the co-owners for the purchase thereof. She wanted to buy it for P52,000. On October 18, 1960 German Ramirez, one of the co-owners, executed a deed wherein he sold his 2/16 share to Mrs. Catindig for P6,500 (Exh. E). The sale was annotated on the title on October 19, 1960. Two weeks later, Pedro Villanueva, one of the co-owners, learned of the sale executed by German Ramirez. That sale retroacted to April 13, 1950. On November 18, 1960 the respondents filed this action against Mrs. Catindig to compel her to allow them to redeem the portion sold by German Ramirez. In April, 1962 the respondents amended their complaint by including,inter alia, a prayer for the recovery of the possession of the fishpond. The Court of Appeals found that: 1. The consideration of P52,000 was not paid by Mrs. Catindig to the co-owners because she was not able to obtain a loan, the proceeds of which would have been used to pay the co-owners who had executed simulated sales of their shares, as shown in the private documents, Exhibits 6 to 26. (The originals of those documents were allegedly lost. Only photostatic copies thereof were presented in evidence). 2. Because Mrs. Catindig did not pay the price of P52,000, the projected sale, "which was in truth a simulated one so as to enable her just to mortgage the property in order to secure the necessary amount with which to pay the consideration" was void ab initio. There was no notarized deed of sale because Mrs. Catindig did not pay the price to the co-owners except German Ramirez. 3. Ines Roque and the heirs of Roberto Roque did not barter their shares for the two parcels of land owned by Mrs. Catindig. What the said co-owners did was to possess the lands of Mrs. Catindig in exchange for the latter's possession of their shares in the fishpond. 4. Considering the area of the fishpond and the upward trend in values, the amount of P6,000 a year is the reasonable compensation for its use and enjoyment (Resolution amending the decision). The fourteen assignments of error of Mrs. Catindig in this appeal are overlapping and repetitious She argues that the Court of Appeals erred in holding (1) that the sale of the fishpond to her is void for nonpayment of the price; (2) that the price was not paid because she did not obtain any loan; (3) that the annual rental value is P6,000; (4) that the transaction between Mrs. Catindig, on one hand, and

Ines Roque and the heirs of Roberto Roque, on the other, was an exchange of possession and not "land for land", and (5) that German Ramirez sold his share on October 18, 1960 and not on April 13, 1950 Those assignments of error involve factual issues which cannot be ventilated in a review of the decision of the Court of Appeals. Only legal questions may be raised (Sec. 29, Judiciary Law; Sec. 2, Rule 45, Rules of Court). As a rule, the factual findings of the Court of Appeals are conclusive on this Court. The conclusive factual finding of the Appellate Court that the alleged sales on April 13 or 14, 1950 of respondents' shares are simulated and void ab initio (See Onglengco vs. Ozaeta, 70 Phil. 43) renders untenable appellant Catindig's contentions that the remedies available to the respondents, such as an action for annulment, rescission or reformation, are barred by prescription or laches. The alleged sales were absolutely simulated, fictitious or inexistent contracts (Arts. 1346 and 1409[2], Civil Code). "The action or defense for the declaration of the inexistence of a contract does not prescribe" (Art. 1410, Ibid; Eugenio vs. Perdido, 97 Phil. 41). Mere lapse of time cannot give efficacy to a void contract (Tipton vs. Velasco, 6 Phil. 67). The Appellate Court's finding that the price was not paid or that the statement in the supposed contracts of sale (Exh. 6 to 26) as to the payment of the price was simulated fortifies the view that the alleged sales were void. "If the price is simulated, the sale is void ..." (Art. 1471, Civil Code). A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor (Ocejo, Perez & Co. vs. Flores and Bas, 40 Phil. 921; Mapalo vs. Mapalo, L-21489, May 19, 1966, 64 O. G. 331, 17 SCRA 114, 122). Such a sale is non-existent (Borromeo vs. Borromeo, 98 Phil. 432) or cannot be considered consummated (Cruzado vs. Bustos and Escaler, 34 Phil. 17; Garanciang vs. Garanciang, L-22351, May 21, 1969, 28 SCRA 229). The foregoing discussion disposes of whatever legal issues were raised by appellant Catindig which are interwoven with her factual contentions, including the issue as to whether she is entitled to demand the execution of a notarized deed of sale for the 14/16 pro indiviso portion of the fishpond. She is not entitled because, as already held, the alleged sales in her favor are void. And in view of the result arrived at in this case, the trial court and the Court of Appeals did not err in awarding to the respondents the sum of one thousand pesos as attorney's fees (See art. 2208, Civil Code). Mrs. Catindig, in her thirteenth assignment of error, which is partly a reproduction of her ninth assignment of error in the Appellate Court, injected new matters not raised in that Court. She contends that inasmuch as the fishpond was placed under receivership by virtue of the trial court's order of January 15, 1964 (Annex D of her brief not included in the Record on Appeal), she should not answer for the reasonable value of the use and compensation of the fishpond from the time it was placed in the receiver's possession. She also contends that she is entitled to the rental value of the 2/16 portion sold to her by German Ramirez and the 3/16 share of Ines Roque and the heirs of Roberto Roque and that the latter should restore to her the possession of the two parcels of riceland located at Barrio Pitpitan, Bulacan, Bulacan, the possession of which was provisionally exchanged for Mrs. Catindig's possession of their 3/16 share. She further contends that the land taxes paid by her should be deducted from the annual rental of P6,000 (not P600 as erroneously stated on page 88 of her brief). The respondents, in their reply brief and rejoinder, did not answer those contentions. That silence or omission may be construed as an admission of their merit.

To do justice in this case, we have to resolve those alternative points raised by the appellant. "It is a cherished rule of procedure that a court should always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation" (Marquez vs. Marquez, 73 Phil. 74, 78). We hold that, as a matter of fairness and equity or to avoid unjust enrichment, the liability of Mrs. Catindig for the reasonable value of the use and occupation of the fishpond should be limited to the period from October 1, 1951 up to the time in January, 1964 when she turned over the fishpond to the receiver, namely, the deputy clerk of court of the Court of First Instance of Bulacan, Malolos Branch I. It is the receiver who should deliver to the respondents the possession of the fishpond which apparently has been in custodia legis. From the compensation of P6,000 per annum which Mrs. Catindig is obligated to pay to the respondents, should be deducted the 2/16 portion of said compensation, corresponding to the share of German Ramirez, from October 1, 1951 to January, 1964. Thereafter, Mrs. Catindig is entitled to demand the 2/16 share in the net fruits or earnings of the fishpond from the receiver until the said share is redeemed by the respondents. Ines Roque and the heirs of Roberto Roque should deliver to Mrs. Catindig the possession of the two parcels of riceland already mentioned and account for the fruits thereof beginning January, 1964 when Mrs. Catindig ceased to have possession of their 3/16 share. The trial court should hold a hearing to determine the amount of the net fruits which Mrs. Catindig is entitled to receive from the said co-owners. She has the right to retain the 3/16 portion of the annual rental of P6,000 corresponding to the shares of Ines Roque and the heirs of Roberto Roque. Moreover, the respondents (except German Ramirez), as owners of the fishpond, should reimburse Mrs. Catindig for the amount of the land taxes advanced by her (See Exh. 27; Par. II [iii], Lease Contract, Exh. C-1). "Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter" (Art. 2175, Civil Code; See art. 597). One situation envisaged in that provision is when the possessor of land under lease or otherwise has to pay the taxes to prevent a seizure of the property by the government, the owner having become delinquent in the payment of the land tax (p. 72, Report of the Code Commission). One last point should be resolved. The Court of Appeals and the trial court, in sanctioning the respondents' right to redeem from Mrs. Catindig the 2/16 share sold to her by German Ramirez, relied on article 1088 of the Civil Code which refers to the sale by any of the heirs of his hereditary rights to a stranger. That article has no relevant application to this case. Inasmuch as the fishpond is under co-ownership, not co-heirship, and what are involved herein are the shares of co-owners, not the hereditary rights of co-heirs, it is article 1620 of the Civil Code that is applicable. Article 1620 provides that "a co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person." The period for exercising the right of legal redemption is that fixed in article 1623 of the Civil Code, not the period fixed in article 1524 of the Spanish Civil Code. WHEREFORE, the judgment of the trial court and the Court of Appeals is affirmed with the following modifications: 1. The receiver (not Asuncion Meneses Vda. de Catindig) should deliver the possession of the fishpond to the respondents or their duly authorized representative, together with 14/16 of the net earnings of the fishpond from January 15, 1964 up to the time the possession is delivered to the respondents. 2. The receiver should deliver to Mrs. Catindig a 2/16 share of the net earnings of the fishpond, corresponding to the share of German Ramirez, from January 15, 1964 up to the time the said share is redeemed from her.

3. From the annual compensation of P6,000 a year due from Mrs. Catindig for the use and enjoyment of the fishpond from October 1, 1951 up to January 15, 1964 (when the fishpond was placed under receivership) should be deducted (a) 2/16 which correspond to the share of German Ramirez, (b) 3/16 which correspond to the shares of Ines Roque and the heirs of Roberto Roque, and (c) 14/16 of the realty taxes on the fishpond paid by Mrs. Catindig (See Exh. 27). 4. Ines Roque and the heirs of Roberto Roque should deliver to Mrs. Catindig the possession of her two parcels of riceland located at Barrio Pitpitan, Bulacan, Bulacan, render an accounting of the fruits thereof from January 15, 1964 up to the time the possession is delivered and pay to her the value of the net fruits thereof. For that purpose, the trial court should hold the appropriate hearing. No costs. SO ORDERED. FIRST DIVISION G.R. No. L-59952 August 31, 1984 RUBY H. GARDNER and FRANK GARDNER, JR., petitioners, vs. COURT OF APPEALS, DEOGRACIAS R. NATIVIDAD and JUANITA A. SANCHEZ, respondents. Mayor, Manalang, Reyes & Associates for petitioners. Joanes Caacbay for private respondents.

MELENCIO-HERRERA, J.: This is a Petition for the review of the Resolutions, dated April 24, 1980 and December 24, 1980, respectively, of the then Court of Appeals in CA-G.R. No. 52729-R entitled "Ruby H. Gardner, et al. versus Deogracias R. Natividad, et al," whereby the original Decision of said Court, promulgated on January 11, 1979, affirming in toto the judgment of the Court of First Instance of Laguna, Branch I, Bian in Civil Case No. B-774, was reconsidered and the appealed judgment reversed in so far as private respondents herein are concerned. A chain of successive transfers of real property, five in all, is involved. Petitioner Ruby H. GARDNER, married to Frank Gardner, Jr. an American (the GARDNERS, for short), was the registered owner of two adjoining parcels of agricultural land situated at Calamba, Laguna, designated as Lot No. 1426-new and Lot No. 4748- new, with an aggregate area of 93,688 square meters more or less, and covered by TCT Nos. T-20571 and T-20573, respectively, of the Registry of Property of Laguna (Exhibits "A" & "B", Folio of Exhibits). On November 27, 1961, the GARDNERS and the spouses Ariosto C. SANTOS and Cirila Serrano (the SANTOSES) entered into an agreement for the subdivision of the two parcels, with the SANTOSES binding themselves to advance to the GARDNERS the amount of P93,000.00 in installments. For the protection of both parties they executed the following documents all on the same date and referring to the same parcels of land: (1) Absolute Deed of Sale in favor of the SANTOSES (the First Transfer, considering the nature of the document); (2) Subdivision Joint Venture Agreement; and (3) Supplemental Agreement (Exhibits "C", "D" and "E", Ibid.). Despite the "sale,", the GARDNERS were still denominated in the Subdivision Joint Venture Agreement and in the Supplemental Agreement as "owners" and Ariosto SANTOS merely as "broker". It appears from the evidence that the sale to the SANTOSES was one "in trust" for the protection of the SANTOSES who had obligated themselves to give cash advances to the GARDNERS from time to time (Exhibits "E-2" to "E-88" incl.) On December 5, 1961, new titles were issued in favor of the SANTOSES ( Exhibits " F " & " G ", Ibid.).

Unknown to the GARDNERS, on June 10, 1964, the SANTOSES transferred Lot No. 1426-New to Jose Cuenca, married to Amanda Relova (the JOSE CUENCAS) (Exhibit "H", Ibid .), and on June 15, 1964, Lot No. 4748-New to Juan Cuenca, married to Soledad Advincula (the JUAN CUENCAS) (Exhibit "I", Ibid.) (jointly, the Second Transfer). Titles were thereafter issued in their respective names (Exhibits "L" & "M", Ibid.). Upon learning of the Transfer of the properties to the CUENCAS, petitioner 'Ruby GARDNER, caused the inscription of an Adverse Claim on the titles of the CUENCAS with the Register of Deeds of Laguna on December 2, 1965, Her Affidavit stated in part: 2. My adverse claim arose from the facts that sometime in the middle part of 1961, I and Mr. Ariosto Santos of 2162 Apolinario, Bangkal St., Makati, Rizal had an understanding and have agreed that we would subdivide my aforedescribed properties then covered by TCT Nos. T-20571 and T-20573 for Lot No. 1426-New and 4748-New, respectively, under the condition that he would advance to me a total amount of P93,000.00, which I could withdraw little by little and from time to time; that he would improve the aforesaid land by constructing paved roads sewers, water, other facilities that may be required by the authorities concerned and other requirements of the subdivision laws until he shall have invested for these purposes the sum of P234,220.00; that he assured me that the construction of these paved roads, etc. would commence immediately; 3. We (I and Mr. Ariosto Santos) have agreed that in order to protect his (Mr. Santos) interest to the sum of P93,000.00, to be withdrawn by me little by little and from time to time, I would transfer to his name my aforementioned titles in trust; xxx xxx xxx 5. In the absolute Deed of Sale it was stated that I received from Mr. Santos the sum of P70,266.00 and in consideration of said amount, I have sold, transferred and conveyed my aforedescribed parcels of land to Mr. Santos; but these statements were and are not true, that is why we have the other two more documents the Subdivision Joint Venture Agreement and the Supplemental Agreement. It is stated in the Subdivision Joint Venture Agreement, which contains our true agreement that Mr. Ariosto Santos is only my Broker, so far as the aforedescribed parcels of land are concerned, as can be gleaned from Page 2, paragraphs 2 and 3 of the said Subdivision Joint Venture Agreement, ... On October 19, 1966 and November 4, 1966, the JUAN CUENCAS and the JOSE CUENCAS, respectively, transferred the lots to Michael C. VERROYA (Exhibits "P" & Ibid.) an office assistant of Ariosto SANTOS (the Third transfer). Titles were issued in VERROYA's name with the adverse Claim carried over. On March 29, 1967, VERROYA constituted a mortgage on both lots in favor of Anita Nolasco and Rosario Dalina, which encumbrance was registered on the existing titles. On June 29, 1967, VERROYA ARROYA executed a deed of transfer of the properties to respondent Deogracias Natividad, married to Juanita Sanchez (the NATIVIDADS) (Exhibits "V", "V-4", Ibid.) (the Fourth Transfer). On September 30, 1967, the NATIVIDADS transferred the lots to Ignacio Bautista and Encarnacion de los Santos (the BAUTISTAS) (Exhibits "14", "15" [Natividad], "JJ-2", Ibid.) (the Fifth Transfer). No titles were issued to the BAUTISTAS. It should be noted that from the titles of the CUENCAS (the Second Transferees) to the titles of the NATIVIDADS (the Fourth Transferee), the Adverse Claim of the GARDNERS continued to be carried, and that throughout the successive transfers, or over a span of approximately six years, the GARDNERS continued to remain in possession, cultivation and occupation of the disputed properties.

Aggrieved by the series of transfers, the GARDNERS filed suit on July 8, 1969 for "Declaration of Nullity, Rescission and Damages" against the Five Transferees, including the mortgagees, Anita Nolasco and Rosario Dalina, before the Court of First Instance of Laguna, Branch I (Civil Case No. B774), praying for the declaration of nullity of all the Five Transfers and the cancellation of all titles issued pursuant thereto on the ground that they were all simulated, fictitious, and without consideration. In their Answer, the SANTOSES claimed, in brief, that the sale to them was conditional in the sense that the properties were to be considered as the investment of the GARDNERS in the subdivision venture and that in the event that this did not materialize they were to reconvey the lots to the GARDNERS upon reimbursement by the latter of all sums advanced to them; and that the deed of sale was to be registered for the protection of the SANTOSES considering the moneys that the latter would be advancing. For their part, respondents NATIVIDADS contended that they were purchasers in good faith notwithstanding the adverse claim as the titles were not shown to them by VERROYA at the time of the sale, and that they had paid good and valuable consideration. The mortgagees, Anita Nolasco and Rosario Dalima, denied the allegations in the Complaint and counterclaimed for damages, which the GARDNERS answered. After the lifting of the Order of default against them, the CUENCAS filed their Answer contending that their transfer to VERROYA of the properties in question was not simulated and was supported by valuable consideration. VERROYA, Juanita Sanchez (wife of Deogracias Natividad), and the BAUTISTAS were declared in default for their failure to seasonably file their responsive pleadings. 1 The GARDNERS, aside from their documentary evidence, adduced in their favor the testimonies of Ruby GARDNER herself, Jose Infante, an employee of the Register of Deeds of Laguna, and defendant Ariosto SANTOS who was presented as an adverse witness. Of the eight answering defendants, only respondent Deogracias NATIVIDAD testified on his behalf. Defendant Ariosto SANTOS merely adopted as his own evidence the declaration he had given as an adverse witness. The JOSE CUENCAS and the JUAN CUENCAS neither presented any testimonial evidence but just adopted the testimony of Ariosto SANTOS. Defendants Anita Nolasco and Rosario Dalima, the mortgagees, submitted their case after the genuineness of the deed of mortgage executed in their favor by VERROYA was admitted by the parties. 2 On January 15, 1972, the Trial Court rendered judgment in favor of the GARDNERS declaring as null and void the five Transfers; rescinding the Subdivision Joint Venture Agreement (Exhibit "D") as well as the Supplemental Agreement (Exhibits "E"; ordering the GARDNERS to reimburse the SANTOSES the total cash advances of P36,712.80 which theGARDNERS had received; authorizing the cancellation of the corresponding titles issued pursuant to the deeds of sale and the issuance of new ones in favor of the GARDNERS; ordering the deletion from the titles of the mortgage executed by VERROYA; and requiring the Five Transferees but not mortgagees, Anita Nolasco and Rosario Dalima, to pay the GARDNERS P90,000.00 actual damages, P5,000.00 exemplary damages, and to pay the costs. The respondents NATIVIDADS appealed (notwithstanding that the wife was declared in default) to the then Court of Appeals, which, on January 11, 1979 affirmed in toto the judgment of the Trial Court. 3 The NATIVIDADS received the Decision of affirmance on January 16, 1979. On January 29, 1979, the NATIVIDADS asked for a 30-day extension from January 31, 1979 or up to March 2, 1979, within which to file a Motion for Reconsideration, which was granted by respondent Court. 4 On March 2, 1979, the NATIVIDADS filed their Motion for Reconsideration but the same was denied on November 7, 1979. 5 On December 4, 1979, a "Very Urgent Manifestation and Motion for Leave to File a Second Motion for Reconsideration" was filed by the NATIVIDADS. The pleading was signed by Deogracias NATIVIDAD

himself. Respondent Court denied leave on December 28, 1979. 6 However, on the same date of December 28, 1979, the NATIVIDADS filed their Second Motion for Reconsideration. On April 24, 1980, respondent Court reconsidered its Resolution of "January 7, 1980" denying respondents' "Motion for Leave to File Second Motion for Reconsideration', and admitted said second Motion 7 (The resolution of January 7,1980 refers to the resolution of December 28, 1979 which was released on January 7, 1980). On December 24, 1980, respondent Court 8 issued the questioned Resolution reversing its Decision of January 11, 1979 insofar as the NATIVIDADS are concerned, declaring as valid the sale of the land to them as well as the titles issued pursuant thereto. On January 20, 1981, the GARDNERS sought to set aside the questioned Resolution and moved for entry of judgment averring that said Resolution was null and void for having been issued without jurisdiction as the Decision of January 11, 1979 had already become final and executory. The Motion was denied for lack of merit on March 4, 1982. 9 Petitioners now seek to set aside the Appellate Court's Resolutions of April 24, 1980 (granting leave to file a 2nd Motion for Reconsideration) and December 24, 1980 (reversing the original judgment), and assigning to respondent Court the following errors: I The Court of Appeals erred in promulgating its resolution of April 24, 1980, because it has already lost jurisdiction to act on the case since the decision of January 11, 1979 had already become then final and executory. II The Court of Appeals erred in promulgating its resolution of December 24, 1980, because it had already then lost jurisdiction to act on the case, much more so, to reverse through its resolution of December 24, 1980 its decision of January 11, 1979 that has already become final and executory. III Assuming arguendo that it has still jurisdiction to promulgate its resolution of December 24, 1980, the Court of Appeals erred in not holding that the defendantappellant Deogracias Natividad's second motion for reconsideration, just like the first motion for reconsideration, is unquestionably pro-forma, hence did not suspend the running of the reglementary period of time. IV Assuming arguendo that it has still jurisdiction to promulgate its resolution of December 24, 1980, the Court of Appeals erred in holding that the testimonies of Ariosto Santos under oath on the witness stand cannot prevail over the allegations in Santos' answer (not verified and only signed by Ariosto Santos' counsel) and, regarding which there is no substantial conflict or variance. V Assuming arguendo, it has still jurisdiction to promulgate its resolution of December 24, 1980, the Court of Appeals erred in reversing absolutely without valid justification, its findings in its decision of January 11, 1979 and resolution of November 7, 1979, both holding that defendant-appellant Deogracias Natividad was not a buyer in good faith and for value. VI

Assuming arguendo that it has still jurisdiction to promulgate its resolution of December 24, 1980, the Court of Appeals erred in reversing, absolutely without valid justification, its findings in its decision of January 11, 1979 and resolution of November 7, 1979 both holding that the sales of the questioned properties from Ruby Gardner and spouse Frank Gardner, Jr., to Ariosto Santos and spouse Cirila Serrano, to Jose Cuenca and Juan Cuenca and their spouses Amanda Relova and Soledad Advincula, respectively, to Michael Verroya, to Deogracias Natividad and spouse Juanita Sanchez, to Ignacio Bautista and spouse Encarnacion delos Santos are null and void ab initio. VII The Court of Appeals erred in holding that it will not hesitate to consider and hear defendant-appellant Deogracias Natividad's second motion for reconsideration (even if it was received when the decision of January 11, 1979 was already final and executory) upon the groundless claim that Deogracias Natividad was abandoned by his counsel, who received the resolution denying Natividad's first motion for reconsideration. Upon the facts and the evidence, we rule that respondent Court had lost jurisdiction to entertain the second Motion for Reconsideration because its Decision of January 11, 1979 had already become final and executory as the following chronological data before respondent Court will show: Jan 16, 1979 Receipt by respondents of CA Decision dated Jan. 11, 1979. Jan. 29, 1979 Private respondents filed motion for extension of 30 days from Jan, 31, 1979 to file motion for reconsideration. This was granted. Due Mar. 2, 1979. Mar. 2, 1979 Motion for Reconsideration filed (on the last day). Nov. 7, 1979 Reconsideration was denied. Nov. 19, 1979 Receipt by private respondents of above resolution. Dec. 28, 1979 Motion for Leave to file Second Motion for Reconsideration denied. Dec. 28, 1979 Second Motion for Reconsideration filed by private respondent. Jan. 8, 1980 Motion for Reconsideration of Resolution of Dec. 28, 1979 filed by private respondents. April 24, 1980 Resolution reconsidering denial of Motion for Leave, and Second Motion for Reconsideration admitted. This is one of the admitted. This is one of the disputed Resolutions. Dec. 24, 1980 Resolution reversing Decision of January 11, 1979. This is other Resolution assailed. Section 1, Rule 52 of the Rules of Court, provides: Section 1. Motion for re-hearing. A motion for re- hearing or reconsideration shall be made ex-parteand filed within fifteen (15) days from notice of final order or judgment. No more than one motion for re-hearing or reconsideration shall be filed

without express leave of court. A second motion for reconsideration may be presented within fifteen (15) days from notice of the order or judgment deducting the time in which the first motion has been pending. Evidently, the Second Motion for Reconsideration was filed beyond the reglementary, period. The NATIVIDADS erroneously thought that they had another 15-day period from the date of receipt of denial of the first Motion for Reconsideration on November 7, 1979 within which to file a second Motion for Reconsideration. That would be the rule for appeals by certiorari to the Supreme Court from an Appellate Court judgment pursuant to Section 1 of Rule 45.10 However, under the aforequoted provision, which is the applicable rule, the time in which the first Motion has been pending has to be deducted. As it was, all of the fifteen days had been used up when the first Motion for Reconsideration was filed on March 2, 1979. The Decision of January 11, 1979, therefore, had already attained finality on March 3, 1979 so that respondent Court no longer had jurisdiction to act on the "Very Urgent Motion for Leave to File Second Motion for Reconsideration" submitted by the NATIVIDADS on November 28, 1979, much less to grant the same. It is well settled that once a Decision has become final and executory, it is removed from the power and jurisdiction of the Court which rendered it to further alter or amend it, much less to revoke it. The subsequent filing of a motion for reconsideration cannot disturb the finality of the judgment, nor restore jurisdiction to the court. 11 Although the granting or denial of a motion for reconsideration involves the exercise of discretion, 12 the same should not be exercise whimsically, capriciously or arbitrarily, but prudently in conformity with law, justice, reason and equity. We likewise find reversible error in the reversal of respondent Court's original Decision of January 11, 1979. In its Resolution of reversal, dated December 24, 1980, respondent Court had stated in part: The presence of the adverse claim in appellant's (Deogracias Natividad) title does not make him a buyer in bad faith The validity of the adverse claim has to be determined by the Court. Until the validity of such claim is determined judicially, the same cannot be considered as a flaw in his vendor's title. The adverse claim first appearance in the titles of the Cuencas, the second buyers. It was carried on to the titles of subsequent transferees. The title of Santos appeared clean This makes the title of Santos' vendee clean. The subsequent annotation of the adverse claim therein would not make the Cuencas buyers in bad faith. If the Cuencas were buyers in good faith, we do not see any reason why subsequent buyers could not enjoy the same status. Good faith is presumed while bad faith must be proved. ... 13 However, as set forth in the original Decision of the Appellate Court, upholding the findings of the Trial Court, the evidence preponderantly shows that all Five Transfer were null and void for having been simulated and fictitious. The First Transfer in favor of the SANTOSES was "indubitably established" to have been without consideration and is, therefore, void and inexistent. 14 That sale was executed merely as a means of protection to the SANTOSES for their promised cash advances to the GARDNERS in one year in the sum of P93,000.00. Added to this is the admission against his own interest by Ariosto SANTOS that the GARDNERS did not receive from him any consideration, 15 thereby corroborating the declarations of the GARDNERS. The Subdivision Joint Venture Agreement (Exhibit "D") and the Supplemental Agreement (Exhibit "E") eloquently express that the true and real nature of the agreement between the GARDNERS and the SANTOSES was for a subdivision and not a sale transaction. The evidence also establishes that the Second Transfer to the CUENCAS was fictitious and simulated for not having been supported with any consideration. By his own admission, Ariosto SANTOS transferred to the CUENCAS, who are his "compadres", the disputed properties, together with others that he owned, merely to conceal his ownership and "to protect them from persons who had filed suits against him and were running after the properties registered in his name." It was SANTOS who had caused the execution of those deeds of sale (Exhibits "H" & "I") and had them notarized by his own

counsel. 16 No wonder then that the CUENCAS did not even dispute the validity of the adverse claim pursuant to Section 110 of the Land Registration Act, and during the trial they merely adopted SANTOS' testimony. Under the circumstances surrounding their transaction they knew that their title was flawed and they were not, and cannot be considered, buyers in good faith, having paid no consideration for the sale. The subsequent registration of the adverse claim on their titles, therefore, could not but serve as notice and warning to all subsequent buyers that someone was claiming an interest in the properties or a better right than the registered owners. The Third Transfer in favor of VERROYA was similarly without consideration and, therefore, void ab initio. The evidence on record shows that Ariosto SANTOS himself caused the execution of the deeds of sale (Exhibits "P" & "Q") in favor of VERROYA, who is SANTOS' office manager in his brokerage business. The only purpose of the transfer was to enable VERROYA to secure for SANTOS a loan with the Veterans Bank so much so that when the documents of sale were signed by the CUENCAS in their respective houses in favor of VERROYA, the latter was not even present. 17 Also significant is the ' fact that Verroya was declared in default and had not even bothered to resist the suit, which he would have done if the sale transaction were genuine. On equal footing is the Fourth Transfer from VERROYA VERROYA to private respondents NATIVIDADS. It was SANTOS who had caused the preparation of the deed of sale in favor of the NATIVIDADS after sensing that VERROYA was not inclined to return the title to the properties. Deogracias NATIVIDAD was SANTOS' close and trusted I 6 compadre who agreed to put the titles in his (NATIVIDAD's) name because of the pending cases against SANTOS. The amount of P 80,000.00 stated in the document of sale was not actually paid by the NATIVIDADS to VERROYA, according to SANTOS' own testimony. The latter further declared that VERROYA was only coerced to sign the deeds (Exhibits "V" & ("V-4") after he was boxed by NATIVIDAD in SANTOS' office at the Escolta. That coercion did exist is shown by VERROYA's telegram to the Register of Deeds of Laguna to dishonor any transaction involving the subject properties. 18 The Fifth Transfer to the BAUTISTAS partook of the same nature a simulated and fictitious transaction, for being without consideration, as shown by the evidence. They too, were declared in default and made no attempt to answer or dispute the allegations in the Complaint against them. The mortgage of the properties by VERROYA in favor of Anita Nolasco and Rosario Dalima was executed after the inscription of the adverse claim on the titles so that they can neither be considered as innocent mortgagees for value. Added proof of the fictitiousness of the chain of transfers is that fact that, notwithstanding the same, the GARDNERS remained in actual possession, cultivation and occupation of the disputed lots throughout the entire series of transactions. As concluded in the original Decision of respondent Court, all Five Transfers starting from that of the SANTOSES down to the NATIVIDADS, were absolutely simulated and fictitious and were, therefore, void ab initio and inexistent.19 Contracts of sale are void and produce no effect whatsoever where the price, which appears therein as paid, has, in fact, never been paid by the purchaser to the vendor. 20 Such sales are inexistent and cannot be considered consummated. 21 In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto SANTOS for being at variance with the allegations in his Answer. The fact, however, that the allegations made by Ariosto SANTOS in his pleadings and in his declarations in open Court differed win not militate against the findings herein made nor support the reversal by respondent Court. As a general rule, facts alleged in a party's pleading are deemed admissions of that party and binding upon it, but this is not an absolute and inflexible rule. 22 An Answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence. 23 As Ariosto SANTOS himself, in open Court, had repudiated the defenses he had raised in his Answer and against his own interest, his testimony is deserving of weight and credence. Both the Trial Court and the Appellate Court believed in his credibility and we find no reason to overturn their findings thereon. Lastly, the statement of respondent Court in its Resolution of reversal that "until the validity of an adverse claim is determined judicially it cannot be considered a flaw in the vendor's title, contradicts

the very essence of adverse claims. The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or has a better right than the registered owner thereof.24 A subsequent sale of the property cannot prevail over the adverse claim which was previously annotated in the certificate of title of the property. 25 While one who buys from the registered owner need not have to look behind the certificate of title, 26 he is nevertheless bound by the liens and encumbrances annotated thereon. 27 One who buys without checking the vendor's title takes all the risks and losses consequent to such failure. 28 WHEREFORE, the assailed Resolutions of respondent Court of Appeals (now the Intermediate Appellate Court), dated April 24, 1980 and December 24, 1980, respectively, are hereby REVERSED and SET ASIDE, and its Decision of January 11, 1979 affirming in toto the judgment of the then Court of First Instance of Laguna, Branch 1, in Civil Case No. B-774, is hereby reinstated. Costs against private respondents. SO ORDERED. EN BANC

G.R. No. L-20871 April 30, 1971 KER & CO., LTD., petitioner, vs. JOSE B. LINGAD, as Acting Commissioner of Internal Revenue, respondent. Ross, Selph and Carrascoso for petitioner. Office of the Solicitor General Arturo A. Alafriz, Solicitor Alejandro B. Afurong and Special Atty. Balbino Gatdula, Jr. for respondent.

FERNANDO, J.: Petitioner Ker & Co., Ltd. would have us reverse a decision of the Court of Tax Appeals, holding it liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code. Its plea, notwithstanding the vigorous effort of its counsel, is not sufficiently persuasive. An obstacle, well-nigh insuperable stands in the way. The decision under review conforms to and is in accordance with the controlling doctrine announced in the recent case of Commissioner of Internal Revenue v. Constantino. 1 The decisive test, as therein set forth, is the retention of the ownership of the goods delivered to the possession of the dealer, like herein petitioner, for resale to customers, the price and terms remaining subject to the control of the firm consigning such goods. The facts, as found by respondent Court, to which we defer, unmistakably indicate that such a situation does exist. The juridical consequences must inevitably follow. We affirm. It was shown that petitioner was assessed by the then Commissioner of Internal Revenue Melecio R. Domingo the sum of P20,272.33 as the commercial broker's percentage tax, surcharge, and compromise penalty for the period from July 1, 1949 to December 31, 1953. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. In its answer, the then Commissioner Domingo maintained his stand that petitioner should be taxed in such amount as a commercial broker. In the decision now under review, promulgated on October 19, 1962, the Court of Tax Appeals held petitioner taxable except as to the compromise penalty of P500.00, the amount due from it being fixed at P19,772.33.

Such liability arose from a contract of petitioner with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. The contract was to apply to transactions between the former and petitioner, as Distributor, from July 1, 1948 to continue in force until terminated by either party giving to the other sixty days' notice. 2 The shipments would cover products "for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the] province of Davao", petitioner, as Distributor, being precluded from disposing such products elsewhere than in the above places unless written consent would first be obtained from the Company. 3 Petitioner, as Distributor, is required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. 4 The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of the Company. 5 Then came this crucial stipulation: "The Company shall from time to time consign to the Distributor and the Distributor will receive, accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in the judgment of the Company may be necessary for the successful solicitation and maintenance of business in the territory, and the Distributor agrees that responsibility for the final sole of all goods delivered shall rest with him. All goods on consignment shall remain the property of the Company until sold by the Distributor to the purchaser or purchasers, but all sales made by the Distributor shall be in his name, in which the sale price of all goods sold less the discount given to the Distributor by the Company in accordance with the provision of paragraph 13 of this agreement, whether or not such sale price shall have been collected by the Distributor from the purchaser or purchasers, shall immediately be paid and remitted by the Distributor to the Company. It is further agreed that this agreement does not constitute Distributor the agent or legal representative 4 of the Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create any obligation or responsibility, express or implied, in behalf of or in the name of the Company, or to bind the Company in any manner or thing whatsoever." 6 All specifications for the goods ordered were subject to acceptance by the Company with petitioner, as Distributor, required to accept such goods shipped as well as to clear the same through customs and to arrange for delivery in its warehouse in Cebu City. Moreover, orders are to be filled in whole or in part from the stocks carried by the Company's neighboring branches, subsidiaries or other sources of Company's brands. 7 Shipments were to be invoiced at prices to be agreed upon, with the customs duties being paid by petitioner, as Distributor, for account of the Company. 8 Moreover, all resale prices, lists, discounts and general terms and conditions of local resale were to be subject to the approval of the Company and to change from time to time in its discretion. 9 The dealer, as Distributor, is allowed a discount of ten percent on the net amount of sales of merchandise made under such agreement. 10 On a date to be determined by the Company, the petitioner, as Distributor, was required to report to it data showing in detail all sales during the month immediately preceding, specifying therein the quantities, sizes and types together with such information as may be required for accounting purposes, with the Company rendering an invoice on sales as described to be dated as of the date of inventory and sales report. As Distributor, petitioner had to make payment on such invoice or invoices on due date with the Company being privileged at its option to terminate and cancel the agreement forthwith upon the failure to comply with this obligation. 11 The Company, at its own expense, was to keep the consigned stock fully insured against loss or damage by fire or as a result of fire, the policy of such insurance to be payable to it in the event of loss. Petitioner, as Distributor, assumed full responsibility with reference to the stock and its safety at all times; and upon request of the Company at any time, it was to render inventory of the existing stock which could be subject to change. 12 There was furthermore this equally tell-tale covenant: "Upon the termination or any cancellation of this agreement all goods held on consignment shall be held by the Distributor for the account of the Company, without expense to the Company, until such time as provision can be made by the Company for disposition." 13 The issue with the Court of Tax Appeals, as with us now, is whether the relationship thus created is one of vendor and vendee or of broker and principal. Not that there would have been the slightest doubt were it not for the categorical denial in the contract that petitioner was not constituted as "the agent or legal representative of the Company for any purpose whatsoever." It would be, however, to impart to such an express disclaimer a meaning it should not possess to ignore what is manifestly the role assigned to petitioner considering the instrument as a whole. That would be to lose sight altogether of what has been agreed upon. The Court of Tax Appeals was not misled in the language of

the decision now on appeal: "That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2); that it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company (Par. 8); that every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company (Par. 12); that on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month (Par. 14); that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss (Par. 15); that upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former (Par. 15); and that upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter (Par. 19). All these circumstances are irreconcilably antagonistic to the idea of an independent merchant." 14 Hence its conclusion: "However, upon analysis of the contract, as a whole, together with the actual conduct of the parties in respect thereto, we have arrived at the conclusion that the relationship between them is one of brokerage or agency." 15 We find ourselves in agreement, notwithstanding the able brief filed on behalf of petitioner by its counsel. As noted at the outset, we cannot heed petitioner's plea for reversal. 1. According to the National Internal Revenue Code, a commercial broker "includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants." 16 The controlling decision as to the test to be followed as to who falls within the above definition of a commercial broker is that of Commissioner of Internal Revenue v. Constantino. 17 In the language of Justice J. B. L. Reyes, who penned the opinion: "Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of which were subject to the company's control, the relationship between the company and the dealer is one of agency, ... ." 18 An excerpt from Salisbury v. Brooks 19 cited in support of such a view follows: " 'The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made.' "20 The opinion relied on the work of Mechem on Sales as well as Mechem on Agency. Williston and Tiedman both of whom wrote treatises on Sales, were likewise referred to. Equally relevant is this portion of the Salisbury opinion: "It is difficult to understand or appreciate the necessity or presence of these mutual requirements and obligations on any theory other than that of a contract of agency. Salisbury was to furnish the mill and put the timber owned by him into a marketable condition in the form of lumber; Brooks was to furnish the funds necessary for that purpose, sell the manufactured product, and account therefor to Salisbury upon the specific terms of the agreement, less the compensation fixed by the parties in lieu of interest on the money advanced and for services as agent. These requirements and stipulations are in tent with any other conception of the contract. If it constitutes an agreement to sell, they are meaningless. But they cannot be ignored. They were placed there for some purpose, doubtless as the result of definite antecedent negotiations therefore, consummated by the final written expression of the agreement." 21 Hence the Constantino opinion could categorically affirm that the mere disclaimer in a contract that an entity like petitioner is not "the agent or legal representative for any purpose whatsoever" does not suffice to yield the conclusion that it is an independent merchant if the control over the goods for resale of the goods consigned is pervasive in character. The Court of Tax Appeals decision now under review pays fealty to such an applicable doctrine.

2. No merit therefore attaches to the first error imputed by petitioner to the Court of Tax Appeals. Neither did such Court fail to appreciate in its true significance the act and conduct pursued in the implementation of the contract by both the United States Rubber International and petitioner, as was contended in the second assignment of error. Petitioner ought to have been aware that there was no need for such an inquiry. The terms of the contract, as noted, speak quite clearly. There is lacking that degree of ambiguity sufficient to give rise to serious doubt as to what was contemplated by the parties. A reading thereof discloses that the relationship arising therefrom was not one of seller and purchaser. If it were thus intended, then it would not have included covenants which in their totality would negate the concept of a firm acquiring as vendee goods from another. Instead, the stipulations were so worded as to lead to no other conclusion than that the control by the United States Rubber International over the goods in question is, in the language of the Constantino opinion, "pervasive". The insistence on a relationship opposed to that apparent from the language employed might even yield the impression that such a mode of construction was resorted to in order that the applicability of a taxing statute might be rendered nugatory. Certainly, such a result is to be avoided. Nor is it to be lost sight of that on a matter left to the discretion of the Court of Tax Appeals which has developed an expertise in view of its function being limited solely to the interpretation of revenue laws, this Court is not prepared to substitute its own judgment unless a grave abuse of discretion is manifest. It would be to frustrate the objective for which administrative tribunals are created if the judiciary, absent such a showing, is to ignore their appraisal on a matter that forms the staple of their specialized competence. While it is to be admitted that counsel for petitioner did scrutinize with care the decision under review with a view to exposing what was considered its flaws, it cannot be said that there was such a failure to apply what the law commands as to call for its reversal. Instead, what cannot be denied is that the Court of Tax Appeals reached a result to which the Court in the recent Constantino decision gave the imprimatur of its approval. WHEREFORE, the Court of Tax Appeals decision of October 19, 1962 is affirmed. With costs against petitioner. FIRST DIVISION G.R. No. 80298 April 26, 1990 EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents. Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner. Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.: The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when a person may be deemed to have been "unlawfully deprived" of movable property in the hands of another. The article runs in full as follows: Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it to the private respondents. Ownership of the books was recognized in the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to declare that all these courts have erred and should be reversed. This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company for 406 books, payable on delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. 5 On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00. 6 Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of the books he had ordered from EDCA to the private respondents. 8 On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner. 9 Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally surrendered the books to the private respondents. 10 As previously stated, the petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us. To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own hands and forcibly recovering the disputed books from the private respondents. The circumstance that it did so with the assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges and with the use not of brute force but of lawful writs. Now to the merits It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559 provides that "the possession of movable property acquired in good faith is equivalent to a title," thus dispensing with further proof. The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them for a profit. But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully deprived of the books. The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz. The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to the Civil Code: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. xxx xxx xxx Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals declared: Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that "one who has been unlawfully deprived of personal property may recover it from any person possessing it." We do not believe that the plaintiff has been unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that the price was not subsequently paid did not render illegal a transaction which was valid and legal at the beginning. In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this "unlawful deprivation" come within the scope of Article 559 of the New Civil Code? xxx xxx xxx . . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398, N.C.C.). However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. When plaintiffappellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith. The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us. Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books. One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it. It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious in fact, too trusting in dealing with the impostor. Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer. Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz. While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Pea, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain. WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner. EN BANC G.R. No. L-24069 June 28, 1968

LA FUERZA, INC., petitioner, vs. THE HON. COURT OF APPEALS and ASSOCIATED ENGINEERING CO., INC., respondents. Sycip, Salazar, Luna and Associates for respondent Associated Engineering Co., Inc. De Santos and Delfino for petitioner. CONCEPCION, C.J.: Ordinary action for the recovery of a sum of money. In due course, the Court of First Instance of Manila rendered judgment for defendant, La Fuerza, Inc. hereinafter referred to as La Fuerza which was at first affirmed by the Court of Appeals. On motion for reconsideration, the latter, however, set aside its original decision and sentenced La Fuerza to pay to the plaintiff, Associated Engineering Co., hereinafter referred to as the Plaintiff the sum of P8,250.00, with interest at the rate of 1% per month, from July, 1960 until fully paid, plus P500 as attorney's fees and the costs. Hence, this Petition for review on certiorari. The facts, as found by the Court of First Instance and adopted by the Court of Appeals, are: The plaintiff (Associated Engineering, Co., Inc.) is a corporation engaged in the manufacture and installation of flat belt conveyors. The defendant (La Fuerza, Inc.) is also a corporation engaged in the manufacture of wines. Sometime in the month of January, 1960, Antonio Co, the manager of the plaintiff corporation, who is an engineer, called the office of the defendant located at 399 Muelle de Binondo, Manila and told Mariano Lim, the President and general manager of the defendant that he had just visited the defendant's plant at Pasong Tamo, Makati, Rizal and was impressed by its size and beauty but he believed it needed a conveyor system to convey empty bottles from the storage room in the plant to the bottle washers in the production room thereof. He therefore offered his services to manufacture and install a conveyor system which, according to him, would increase production and efficiency of his business. The president of the defendant corporation did not make up his mind then but suggested to Antonio Co to put down his offer in writing. Effectively, on February 4, 1960, marked as Exhibit A in this case. Mariano Lim did not act on the said offer until February 11, 1960, when Antonio Co returned to inquire about the action of the defendant on his said offer. The defendants president and general manager then expressed his conformity to the offer made in Exhibit A by writing at the foot thereof under the word "confirmation" his signature. He caused, however, to be added to this offer at the foot a note which reads: "All specifications shall be in strict accordance with the approved plan made part of this agreement hereof." A few days later, Antonio Co made the demand for the down payment of P5,000.00 which was readily delivered by the defendant in the form of a check for the said amount. After that agreement, the plaintiff started to prepare the premises for the installations of the conveyor system by digging holes in the cement floor of the plant and on April 18, 1960, they delivered

one unit of 110' 26" wide flat belt conveyor, valued at P3,750.00, and another unit measuring 190' and 4" wide flat conveyor, valued at P4,500.00, or a total of P13,250.00. Deducting the down payment of P5,000.00 from this value, there is a balance, of P8,250.00 to be paid by the defendant upon the completion of the installation, Exhibit B. The work went under way during the months of March and April, during which time the president and general manager of the defendant corporation was duly apprised of the progress of the same because his plant mechanic, one Mr. Santos, had kept him informed of the installation for which he gave the go signal. It seems that the work was completed during the month of May, 1960. Trial runs were made in the presence of the president and general manager of the defendant corporation, Antonio Co, the technical manager of the plaintiff, and some other people. Several trial runs were made then totalling about five. These runs were continued during the month of June where about three trial runs were made and, lastly, during the month of July, 1960. As a result of this trial or experimental runs, it was discovered, according to the defendant's general manager, that the conveyor system did not function to their satisfaction as represented by the technical manager of the plaintiff Antonio Co for the reason that, when operated several bottles collided with each other, some jumping off the conveyor belt and were broken, causing considerable damage. It was further observed that the flow of the system was so sluggish that in the opinion of the said general manager of the defendant their old system of carrying the bottles from the storage room to the washers by hand carrying them was even more efficient and faster. After the last trial run made in the month of July and after the plaintiff's technical manager had been advised several times to make the necessary and proper adjustments or corrections in order to improve the efficiency of the conveyor system, it seems that the defects indicated by the said president and general manager of the defendant had not been remedied so that they came to the parting of the ways with the result that when the plaintiff billed the defendant for the balance of the contract price, the latter refused to pay for the reason that according to the defendant the conveyor system installed by the plaintiff did not serve the purpose for which the same was manufactured and installed at such a heavy expense. The flat belt conveyors installed in the factory of the defendant are still there.... xxx xxx xxx

On March 22, 1961, the contractor commenced the present action to recover the sums of P8,250, balance of the stipulated price of the aforementioned conveyors, and P2,000, as attorney's fees, in addition to the costs. In its answer to the complaint, La Fuerza alleged that the "conveyors furnished and installed by the plaintiff do not meet the conditions and warrantings" (warranties?) of the latter, and set up a counterclaim for the P5,000 advanced by La Fuerza, which prayed that the complaint be dismissed; that its contract with the plaintiff be rescinded; and that plaintiff be sentenced to refund said sum of P5,000 to La Fuerza, as well as to pay thereto P1,000 as attorney's fees, apart from the costs. After appropriate proceedings, the Court of First Instance of Manila rendered a decision the dispositive part of which reads: WHEREFORE, judgment is hereby rendered rescinding the contract entered into by the parties in this case, marked as Exhibit A, and ordering the plaintiff to refund or return to the defendant the amount of P5,000.00 which they had received as down payment, and the costs of this action. On the other hand, defendant is ordered to permit the plaintiff to remove the flat belt conveyors installed in their premises. As above indicated, this decision was affirmed by the Court of Appeals, which, on motion for reconsideration of the plaintiff, later set aside its original decision and rendered another in plaintiff's favor, as stated in the opening paragraph hereof.

The appealed resolution of the Court of Appeals was, in effect, based upon the theory of prescription of La Fuerza's right of action for rescission of its contract with the plaintiff, for in the language of said resolution "Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six months from delivery of the thing sold'", and, in the case at bar, La Fuerza did not avail of the right to demand rescission until the filing of its answer in the Court of First Instance, on April 17, 1961, or over ten (10) months after the installation of the conveyors in question had been completed on May 30, 1960. La Fuerza assails the view taken by the Court of Appeals, upon the ground: 1) that there has been, in contemplation of law, no delivery of the conveyors by the plaintiff; and 2) that, assuming that there has been such delivery, the period of six (6) months prescribed in said Art. 1571 refers to the "period within which" La Fuerza may "bring an action to demand compliance of the warranty against hidden defects", not the action for rescission of the contract. Both grounds are untenable. With respect to the first point, La Fuerza maintains that plaintiff is deemed not to have delivered the conveyors, within the purview of Art. 1571, until it shall have complied with the conditions or requirements of the contract between them that is to say, until the conveyors shall meet La Fuerza's "need of a conveyor system that would mechanically transport empty bottles from the storage room to the bottle workers in the production room thus increasing the production and efficiency" of its business-and La Fuerza had accepted said conveyors. On this point, the Court of Appeals had the following to say: Article 1571 of the Civil Code provides that an action to rescind 'shall be barred after six months, from delivery of the thing sold". This article is made applicable to the case at bar by Article 1714 which provides that "the pertinent provisions on warranty of title against hidden defect in a contract of sale" shall be applicable to a contract for a piece of work. Considering that Article 1571 is a provision on sales, the delivery mentioned therein should be construed in the light of the provisions on sales. Article 1497 provides that the thing sold shall be understood as delivered when it is placed in the control and possession of the vendee. Therefore, when the thing subject of the sale is placed in the control and possession of the vendee, delivery is complete. Delivery is an act of the vendor. Thus, one of the obligations of the vendor is the delivery of the thing sold (Art. 1495). The vendee has nothing to do with the act of delivery by the vendor. On the other hand, acceptance is an obligation on the part of the vendee (Art. 1582). Delivery and acceptance are two distinct and separate acts of different parties. Consequently, acceptance cannot be regarded as a condition to complete delivery. xxx xxx xxx

We find no plausible reason to disagree with this view. Upon the completion of the installation of the conveyors, in May, 1960, particularly after the last trial run, in July 1960, La Fuerza was in a position to decide whether or not it was satisfied with said conveyors, and, hence, to state whether the same were a accepted or rejected. The failure of La Fuerza to express categorically whether they accepted or rejected the conveyors does not detract from the fact that the same were actually in its possession and control; that, accordingly, the conveyors had already been delivered by the plaintiff; and that, the period prescribed in said Art. 1571 had begun to run. With respect to the second point raised by La Fuerza, Art. 1571 of the Civil Code provides: Actions arising from the provisions of the preceding ten articles shall be barred after six months, from the delivery of the thing sold. xxx xxx xxx

Among the "ten articles" referred to in this provision, are Articles 1566 and 1567, reading:

Art. 1566. The vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof. ."This provision shall not apply if the contrary has been stipulated, and the vendor was not aware of the hidden faults or defects in the thing sold. Art. 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566, the vendee may elect between withdrawing from the contract and demanding a proportionate reduction of the price, with damages in either case. xxx xxx xxx

Pursuant to these two (2) articles, if the thing sold has hidden faults or defects as the conveyors are claimed to have the vendor in the case at bar, the plaintiff shall be responsible therefor and the vendee or La Fuerza, in the present case "may elect between withdrawing from the contract and demanding a proportional reduction of the price, with damages in either case." In the exercise of this right of election, La Fuerza had chosen to withdraw from the contract, by praying for its rescission; but the action therefor in the language of Art. 1571 "shall be barred after six months, from the delivery of the thing sold." The period of four (4) years, provided in Art. 1389 of said Code, for "the action to claim rescission," applies to contracts, in general, and must yields, in the instant case, to said Art. 1571, which refers to sales in particular. Indeed, in contracts of the latter type, especially when goods, merchandise, machinery or parts or equipment thereof are involved, it is obviously wise to require the parties to define their position, in relation thereto, within the shortest possible time. Public interest demands that the status of the relations between the vendor and the vendee be not left in a condition of uncertainty for an unreasonable length of time, which would be the case, if the lifetime of the vendee's right of rescission were four (4) years. WHEREFORE, the appealed resolution of the Court of Appeals is hereby affirmed, with costs against appellant, La Fuerza, Inc. It is so ordered. EN BANC

G.R. No. L-29831 March 29, 1972 GUILLERMO VIACRUCIS, LUISA DE VIACRUCIS, CLAROS MARQUEZ, and RUSTICA AREVALO MARQUEZ,petitioners, vs. THE COURT OF APPEALS, ANASTACIO ORAIS and CELESTINA MALAZARTE, respondents. Carlos Monzon Ortega for petitioners. Leonardo C. Dejao for respondents.

CONCEPCION, C.J.:p Private respondents, Anastacio Orais and his wife Celestina Malazarte brought this action, in the Court of First Instance of Leyte, to establish their title to a land of about four (4) hectares, located in the sitio of Candilomot, barrio of Santo Rosario, formerly Palompon, now Matag-ob Leyte, and more particularly described in the complaint alleging that it is part of a bigger lot sold to them, on June 8, 1936, by its registered owner, Pedro Sanchez, by virtue of a deed of sale, copy of which was attached to said pleading, as Annex A and later marked as Exhibit B as well as to recover, from petitioners herein defendants in the aforesaid court Guillermo Viacrucis and Luisa de Viacrucis the possession of said land and damages.

In their answer to said complaint, Mr. and Mrs. Viacrucis averred that they are the owners of said 4hectare land; that the deed of sale, Exhibit B, in favor of Anastacio Orais, on which private respondents plaintiffs in the court of first instance rely, attests merely to a simulated transaction; and that this action is barred by the statute of limitations. Alleging that the rights of Mr. and Mrs. Viacrucis had been assigned to them, Claros Marquez and his wife Rustica Arevalo subsequently intervened in the case, reiterating, in a way, the stand taken by Mr. and Mrs. Viacrucis although with a variation to be pointed out later on. After appropriate proceedings, the trial court rendered a decision, in favor of the plaintiffs therein respondent herein and against the defendants and the intervenors petitioners herein rejecting their defenses of prescription of action and simulation of contract (Exhibit B), and declaring that the whole land conveyed thereby belongs to Mr. and Mrs. Orais, as well as ordering Mr. and Mrs. Viacrucis to vacate said land and awarding damages to Mr. and Mrs. Orais. The dispositive part of said decision reads: WHEREFORE, decision is hereby rendered in favor of the plaintiffs and against the defendants and intervenors: (1) declaring the following parcel of land to wit: "A tract of agricultural land situated in the Sitio of Barrio of Balagtas (now Santo Rosario), Municipality of Palompon (now Matag-ob), Province of Leyte. Bounded on the North, by property claimed by Serapio Dicio; on the East, by property claimed by Bartolome Asayas; on the South, by property claimed by Pablo Sanchez; on the West by properties claimed by Borgas Merin and Canuto Loreo, containing an area of 14 hectares, 63 ares and 03 centares, embraced and covered by Original Certificate of Title No. 243, Patent No. 7335, Bu. of Lands No. H-11803." as the property of the plaintiffs and hereby ordering the defendants to immediately vacate the premises; (2) to jointly and severally pay the plaintiffs the sum of Five Thousand Pesos (P5,000.00) for and as moral damages, plus Three Thousand Five Hundred Ten Pesos (P3,510.00) for and as actual damages from 1947 up to 1960; plus the further sum of Two Hundred Seventy Pesos (P270.00) annually from November 15, 1960 until the land in question shall have been delivered to the plaintiffs and the further sum of One Thousand Pesos (P1,000.00) for and as attorney's fees, with costs against the defendants and intervenors. On appeal taken by Mr. and Mrs. Viacrucis and Mr. and Mrs. Marquez, said decision, against them and in favor of Mr. and Mrs. Orais, was affirmed by the Court of Appeals, with the following "modifications": ...; the portion of four (4) hectares claimed in the complaint and described in paragraph 3 thereof is declared to belong to plaintiffs-appellees; defendants and intervenors are condemned to surrender the same unto plaintiffs; and to account for their possession, defendants from 26 January, 1959 and intervenors from 3 September, 1962 until the property should have been finally delivered to the plaintiffs; costs against defendants and intervenors. Hence the present petition, for review on certiorari, of Mr. and Mrs. Viacrucis and Mr. and Mrs. Marquez, against the Court of Appeals and Mr. and Mrs. Orais, to which petition We gave due course. Thereafter, Mr. and Mrs. Orais moved to dismiss said petition upon the ground that the questions raised therein "are of facts and not of law and/or too unsubstantial to require consideration" and that "the petition is prosecuted manifestly for delay." Upon consideration of the motion and the opposition thereto of petitioners herein, the Court resolved to defer action thereon until the case is taken up on the merits. It appears that the land of about four (4) hectares involved in this case is part of a bigger lot of about 14.6303 hectares, covered by Original Certificate of Title No. 243 (Exhibit A) 1 in the name of Pedro Sanchez; that, on June 8, 1936, Sanchez executed the deed, Exhibit B, selling said lot of 14.6303

hectares to Anastacio Orais; that said Exhibit B was, on September 10, 1936, filed with the Office of the Register of Deeds of Leyte, and recorded in the memorandum of incumbrances of Homestead OCT No. 243; that, on July 7, 1941, Sanchez executed another deed, Exhibit 10, conveying the disputed portion, of four (4) hectares to Balentin Ruizo who, in turn, sold it, on October 10, 1945, to Guillermo Viacrucis (Exhibit II); that, on January 12, 1959, Anastacio Orais who claimed to have made oral demands formally demanded from Viacrucis that he vacate said portion and surrender its possession to him (Orais) that this demand was not heeded by Viacrucis who, instead, executed, on March 19, 1959, the deed, Exhibit 9, confirming the sale of said portion, allegedly made by him, on January 12, 1954, in favor of his brother-in-law Claros Marquez; and that the deeds of sale, Exhibits 10, 11 and 9, in favor of Ruizo, Viacrucis and Marquez, respectively, have not been registered in the Office of the Register of Deeds of Leyte. Petitioners herein maintained in the court of first instance and the Court of Appeals that, although the deed of sale, Exhibit B, in favor of Orais is earlier, by over five (5) years, than that executed, in favor of their predecessor in interest, Balentin, Ruizo, by the original owner, Pedro Sanchez, they (petitioners) have a better right to the land in question, said Exhibit B having been executed merely to simulate a sale, in order that Orais could "secure a loan from a bank"; but this pretense was overruled by said courts, which, likewise, rejected petitioners' plea; of prescription of action. In their brief before Us, petitioners do not assail the findings of fact and the conclusions reached by the Court of Appeals in connection with the aforementioned defenses of simulation of Exhibit B and prescription of action. They merely contend that the Court of Appeals has erred: (1) "in confusing the doctrine of laches with estoppel" and in considering "misrepresentation as of the essence thereof"; (2) in "confusing laches with estoppel" and "rejecting the defense of laches in this case where all essential requisites thereof are fully met and (3) in deciding this case in violation of sections 22, 23 and 25, Rule 130 of the New Rules of Court. In support of the first assignment of error, petitioners maintain that the Court of Appeals had disposed of their plea of laches "without the least reference to the legal requisites of laches in relation to the uncontroverted facts of this case," whereas, under their second assignment of error, it is urged that the essential elements of the equitable defense of laches are present in the case at bar. Regardless of the merits of these two (2) assignments of error, well settled is the rule that laches is a defense that must be pleaded especially, and that, otherwise, it is deemed waived, so that it can not be set up for the first time on appeal. The record discloses that the defenses of laches and prescription are being raised for the first time in this appeal. They were not invoked in the proceedings before the Hearing Officer nor later on before Associate Commissioner Sanchez and the Workmen's Compensation Commission. As said defenses do not affect the jurisdiction of the latter, they cannot now be entertained and must be deemed to have been waived (Regalado vs. Visayan Shipping Company, Inc., G.R. No. L-42855, May 21, 1939; Victorias Milling Company, Inc. vs. Compensation Commissioner, et al., G.R. No. L-10533, May 31, 1957; Manila Yatch Club, Inc. vs. Workmen's Compensation Commission, et al., G.R. No. L-19258, May 31, 1963). 2 Laches not having been invoked as a defense in the court below, the same can not be gone into at this stage of the proceedings, ... 3 ... Neither prescription of appellee's claim or bar of the action for recovery due to laches was averred in appellant's defenses. Appellant cannot raise them now for the first time on appeal. Verily the failure to raise the issue of prescription and laches, amounts to a waiver of such defenses (Sec. 10, Rule 9; Maxilim v. Tabotabo, 9 Phil. 390; Domingo v. Osorio, 7 Phil. 405). Moreover, the right of the appellee to file an action to recover possession based on its Torrens Title is imprescriptible and not barred under doctrine of laches (Art. 348, Civil Code; Francisco, et al. v. Cruz, et al., 43 O.G. 5105). ... 4

Petitioners Mr. and Mrs. Viacrucis, as defendants in the court of first instance, and petitioners Mr. and Mrs. Marquez as intervenors therein, filed their respective answer and answer in intervention alleging no other defenses than that of prescription of action and that the deed of conveyance Exhibit B merely simulated a sale. Laches was invoked by herein petitioners for the first time in the Court of Appeals, which could not properly entertain it, said, defense having been deemed waived in consequence of petitioner's failure to allege it in the trial court. The first and second assignments of error are, therefore, clearly untenable. With respect to the third assignment of error, petitioners maintain that the Court of Appeals had erred in considering that the failure of Orais to bring the present action earlier was mere "laziness," instead of an omission that "may be given in evidence against him," as provided in section 22 of Rule 130 of the Rules of Court and as "strongly persuasive of lack of merit" of the claim of said respondent, and that when he tried to obtain a loan from the Philippine National Bank in 1936 and offered OCT No. 243 as collateral security, the bank did not accept said offer upon the ground that the land in question is not his property, in reply to which Orais said nothing, which is an admission by silence, pursuant to section 23 of the same Rule 130. Moreover, petitioners bewail that the Court of Appeals, like the trial court, considered in favor of Orais allegedly in violation of section 25 of said Rule 130 the admission of Mrs. Beatriz Costelo, to the effect that, although the land in dispute was physically in the possession of her now deceased husband, Pelagio Costelo, he and she recognized Orais as the owner of said land. It should be noted, however, that said testimony of Mrs. Costelo and this recognition by the now deceased Pelagio Castelo which were confirmed by the public document Exh. G constitute a declaration of Mr. and Mrs. Castelo adverse to their interest, which is admissible in evidence, pursuant to section 32 of said Rule 130. Petitioners have no reason whatsoever to object to the consideration in favor of Orais of said admission, the same having been made in 1936, more than five (5) years before their (petitioners) predecessor in interest, Balentin Ruizo, had entered into the picture, when Orais and Castelo were the only parties who had any interest in the object of said admission. Pursuant to said legal provision, such admission "may be received in evidence," not only against the party who made it "or his successors in interest," but, also, "against third persons." 5 As regards the alleged failure of Orais to say anything when the bank refused to accept OCT No. 243 as collateral for the loan applied for by Orais, upon the ground that the land covered by said certificate of title was not his property, there is no competent evidence on whether or not Orais had said anything in response to said statement. Moreover, OCT No. 243 was in the name of Pedro Sanchez, and no matter how real the sale by the latter to Orais may be, the bank would not accept the land in question as security for said loan, unless and until OCT No. 243 shall have been cancelled and a transfer certificate of title issued to Orais. This, however, could not take place before the filing of his loan application, because the owner's duplicate of said certificate of title admittedly delivered by Sanchez to Orais had been lost in the possession of the latter's counsel, to whom he (Orais) had turned it over in connection with a given criminal case. As regards the effect or import of the failure of Orais to file the present action until November 15, 1960, this is a matter relevant to the issue whether the sale attested to by Exh. B is simulated, as contended by petitioners herein, or a true and authentic sale, as Orais maintains. The decision of the Court of Appeals, affirming that of the trial court and sustaining the claim of Orais, constitutes a finding of fact, which is final in this proceeding for reviewon certiorari. 6 In any event, said finding is fully borne out by the record. Indeed, petitioners' main argument, apart from the aforementioned inaction of Orais, is that he had never been in possession of the land in question, and that the same had remained in the name of Pedro Sanchez for tax purposes. It should be noted, however, that, although the disputed land was actually held by Pelagio Costelo, from 1936 to 1941, Costelo executed, on July 30, 1936, Exh. G, whereby he, in effect, acknowledged Orais as owner of the land an Orais granted him (Costelo) the right to possess it until the year 1941. And this was confirmed by Mrs. Costelo on the witness stand. As a consequence, Orais came to be in constructive possession of said land, from July 30, 1936. As a matter of fact, petitioners eventually admitted that Orais had been in actual possession, although they claim of another portion of the land covered by OCT No. 243.

Then, again, the following circumstances militate agains the simulation alleged by petitioners herein, namely: 1. Exhibit B was not only notarized on the very date of its execution. It was, also, filed, soon thereafter or on September 10, 1936 with the Office of the Register of Deeds of Leyte and recorded in the memorandum of incumbrances of Homestead OCT No. 243. It is noteworthy that according to Viacrucis' deposition, 7 and the testimony of Calixta Suganub, widow of Balentin Ruizo, as witness for petitioners herein, Pedro Sanchez delivered his owner's duplicate of said OCT No. 243 to Anastacio Orais, which is clearly indicative of the intent of Sanchez to give full force and effect to said deed of sale. Upon the other hand, Exhibits 9, 10 and 11, on which herein petitioners rely, have not been registered either under the provisions of the Land Registration Act or under those of Act No. 3344 despite the provision in said deeds to the effect that the same should be or would be registered, by agreement of the parties. Likewise significant is a provision, in the deed Exhibit 10, in favor of Ruizo, that the land thus conveyed is part of a lotcovered by a (certificate of) title, the space intended for the number of which was left blank, and that, this notwithstanding, it was stipulated in said instrument that it would be registered pursuant to Act No. 3344, which refers to lands not registered under the provisions of Act No. 496. Worse still, apart from including the latter stipulation, 8 Mr. and Mrs. Viacrucis declared in the deed, Exhibit 9, in favor of Claros Marquez, that said land is not registered under the Land Registration Act, which is not true. Apparently, petitioners knew they could not register Exhibits 9, 10 and 11, under the provisions of the Land Registration Act, without their rights under said instruments becoming officially subordinated to those of Anastacio Orais. In fact, Viacrucis stated, in his aforementioned deposition, that he had "lost no time in going to Tacloban, Leyte, to have the Deed of Sale" presumably Exhibit 11, in his favor "registered with the office of the Register of Deeds." We have every reason to believe, therefore, that petitioners had actual knowledge of the existence of Exhibit B and of the fact that it had been filed with the office of the register of deeds, and entered in the memorandum of incumbrances of Homestead OCT No. 243. 2. In their "Amended Answer in Intervention," dated December 10, 1962, Mr. and Mrs. Marquez admitted that Sanchez had really made a sale in favor of Orais, although said intervenors alleged that the land thus acquired by him was only 6.6303 hectares; but, petitioners have not even tried to explain why Exhibit B the only deed executed by Pedro Sanchez in favor of Anastacio Orais conveys the entire lot of 14.6303 covered by OCT No. 243. Petitioners make much of a deed marked as Exhibit 4, 9 executed by Anastacio Orais, on May 25, 1939, whereby he sold one-half (1/2) of a lot of 6.6303 hectares, covered by OCT No. 243, to Alfredo Parrilla, Pastor Zaragoza, Pedro Gorumba and Eugenio A. Evangelista. Said Exhibit 4 does not say, however, that the land sold by Pedro Sanchez to Anastacio Orais was limited to said area of 6.6303 hectares. What is more, it contains an indication to the contrary, for, in describing the object of the sale, Exhibit 4 states that it is one-half (1/2) of a lotbounded on the South by a land of Anastacio Orais. In other words, said lot of 6.6303 was not all that he owned. This might explain why petitioners after producing, marking and identifying Exhibit 4 did not introduce the same in evidence, although copy thereof is attached to the Amended Answer in Intervention of Mr. and Mrs. Claros Marquez as Annex 5. It should be noted, also, that, at the time of the execution of said Exhibit 4, on May 25, 1939, a portion of about four (4) hectares of the land of 14.6303 hectares sold by Sanchez to Orais, was still held by Pelagio Costelo, to guarantee the payment of a debt of Sanchez, in view of which Orais conceded in Exhibit G Costelo's right to possess the land from 1936 to 1941 evidently, so that he could apply the fruits or products thereof to the satisfaction of his credit and Costelo acknowledged the dominical rights of Orais. Furthermore, it appears that on July 10, 1936, or over a month after the sale by Sanchez to Orais, a deed, Exhibit 1, dated April 19, 1934, and bearing the signature of Sanchez, was notarized. Exhibit 1 purports to convey to one Crecente Marquez a portion, of about four (4) hectares, of the lot covered by OCT No. 243, which portion is notinvolved in the case at bar. There is evidence to the effect that

Exhibit 1 was filed with the Office of the Register of Deeds of Leyte, on August 3, 1936, and recorded in the Memorandum of the Incumbrances of OCT No. 243. This must have been made without producing the owner's duplicate of said OCT No. 243, inasmuch as the same was in the possession of Orais, according to the above-mentioned deposition of Viacrucis, since, apparently the execution of Exhibit B, on June 8, 1936. Under the circumstances, Orais may have felt that it was neither necessary nor advisable to make any reference, in Exhibit 4, either to said portion of four (4) hectares, ostensibly conveyed to Crecente Marquez by virtue of Exhibit 1, or to the similar area held by Pelagio Costelo an aggregate of eight (8) hectares, which, deducted from the land of 14.6303 hectares covered by OCT No. 243, left approximately the 6.6303 hectares mentioned in said deed Exhibit 1. 3. Although the entire lot of 14.6303 hectares purchased by Orais from Sanchez, pursuant to Exhibit B, remained for tax purposes in the latter's name, Orais paid the taxes due thereon." 10 At this juncture, it may not be amiss to advert to the fact that, since Exhibit B had filed with the office of the register of deeds and recorded therein as above stated, Ruizo Viacrucis and Marquez are deemed to have constructive notice of the sale in favor of Orais, apart from the circumstances heretofore adverted to that, since Viacrucis had gone to said office soon after the execution in his favor, on October 10, 1945, of the deed of sale Exhibit 11 for the purpose of registering the same, said petitioner must have had actual knowledge of the previous sale to Orais. And this explains why, despite the fact that Viacrucis had gone to the office of the register of deeds for the aforementioned purpose, he did not carry out the same. Viacrucis did not even try to explain why he failed to do so. Petitioners herein, likewise, failed to explain why neither Ruizo nor Claros Marquez had filed with said office the deeds of sale Exhibits 10 and 9 in their favor, respectively, despite the provision in both documents for the registration thereof. Indeed, the parties in Exh. 10 Sanchez and Ruizo had stipulated therein: Que el terreno objeto de esta venta es parte del titulo No. , del vendedor y que es nuestro deseo sin embargo que la presente se register bajo la Ley No. 3344. 11 What is more, as witness for petitioners herein, Jose R. Pastor the notary public who prepared Exh. 10 and before whom it was acknowledged testified positively that Sanchez had explicitly told him, on that occasion, andin the presence of Ruizo, that the 4-hectare land thereby conveyed to Ruizo is covered by a certificate of title, which was not produced then. Likewise, the deed of sale Exh. 11, executed by Ruizo in favor of Viacrucis, provides: That ... it is our will that this document be registered under the provisions of Act 3344. Similarly, the deed Exh. 9, executed by Mr. and Mrs. Viacrucis in favor of Claros Marquez, states: The the above-mentioned parcel is not registered under Act No. 496, otherwise known as the Land Registration Act nor under the Spanish Mortgage Law; and the parties hereto agree to register this instrument in the office of the Registry of Deeds of the Province of Leyte in accordance with the provisions of the Revised Administrative Code, as amended by Act No. 3344 . 12 Considering that Exhibit 10 had been delivered by Ruizo to Viacrucis, who, later, turned over Exhibits 10 and 11 to Claros Marquez, We are fully persuaded that, aware of the registered status of the land in question, petitioners herein had advisedly chosen to treat the same as an unregistered land. None of them claims to have relied upon OCT No. 243 in the name of Pedro Sanchez. They cannot invoke, therefore, the rights of a purchaser for value in good faith under the provisions of the Land Registration Act.

Upon the other hand, Orais had purchased said land, and taken possession thereof at first, constructively, in consequence of the deed of sale in his favor, incorporated in the public document, Exhibit B, and, also, of the agreement Exh. G, between Orais and Costelo, and, then, actually, upon the expiration of Castelo's right of possession, under said Exh. G apart from filing said Exh. B with the office of the Register of Deeds and having it recorded therein. As between Pedro Sanchez, Orais and petitioners herein, the title to said land if treated as an unregistered one passed, therefore, to Orais either on June 8, 1936, the date of Exhibit B, or, on July 30, 1936, the date of Exhibit G, or, at the latest, on September 10, 1936, when Exhibit B was recorded in the office of the register of deeds. 13 Accordingly, Sanchez was no longer its owner when he sold it, on July 7, 1941, to Balentin Ruizo who, as a consequence, acquired no title to said land, and conveyed none, on October 10, 1945, to Viacrucis, who, in turn, could not have transmitted any to Claros Marquez. 14 Furthermore, petitioners could not possibly have acquired title to said land, as one registered under Act No. 496, inasmuch as the deeds of conveyance Exhibits 9, 10 and 11 in their favor and in that of their predecessor in interest, Balentin Ruizo have not been registered, and, pursuant to the provisions of said Act, "the act of registration shall be the operative act to convey and affect the land ...." 15 Neither could the petitioners have acquired title by prescription, for "no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession." 16 Hence, petitioners have given up the plea of prescription, on which they relied heavily in the court of first instance and the Court of Appeals, and now merely press the defense of laches, belatedly invoked, for the first time, in the Court of Appeals and properly rejected by the same. In short, whether the property in question is treated as a registered land or as one not registered under the provisions of Act No. 496, Orais has, therefore, a better right than petitioners herein, and the third assignment of error cannot be sustained. WHEREFORE, the appealed decision of the Court of Appeals should be, as it is hereby affirmed, with costs against herein petitioners Mr. and Mrs. Viacrucis and Mr. and Mrs. Marquez. It is so ordered. EN BANC

G.R. No. L-56294 May 20, 1991 SMITH BELL AND COMPANY (PHILIPPINES), INC. and TOKYO MARINE AND FIRE INSURANCE CO., INC.,petitioners, vs. THE COURT OF APPEALS and CARLOS A. GO THONG AND CO., respondents. Bito, Misa & Lozada for petitioners. Rodriguez, Relova & Associates for private respondent.

FELICIANO, J.:p In the early morning of 3 May 1970at exactly 0350 hours, on the approaches to the port of Manila near Caballo Island, a collision took place between the M/V " Don Carlos," an inter-island vessel owned and operated by private respondent Carlos A. Go Thong and Company ("Go Thong"), and the M/S "Yotai Maru," a merchant vessel of Japanese registry. The "Don Carlos" was then sailing south bound leaving the port of Manila for Cebu, while the " Yotai Maru" was approaching the port of Manila, coming in from Kobe, Japan. The bow of the " Don Carlos" rammed the portside (left side) of the "Yotai Maru" inflicting a three (3) cm. gaping hole on her portside near Hatch No. 3, through

which seawater rushed in and flooded that hatch and her bottom tanks, damaging all the cargo stowed therein. The consignees of the damaged cargo got paid by their insurance companies. The insurance companies in turn, having been subrogated to the interests of the consignees of the damaged cargo, commenced actions against private respondent Go Thong for damages sustained by the various shipments in the then Court of First Instance of Manila. Two (2) cases were filed in the Court of First Instance of Manila. The first case, Civil Case No. 82567, was commenced on 13 March 1971 by petitioner Smith Bell and Company (Philippines), Inc. and Sumitomo Marine and Fire Insurance Company Ltd., against private respondent Go Thong, in Branch 3, which was presided over by Judge Bernardo P. Fernandez. The second case, Civil Case No. 82556, was filed on 15 March 1971 by petitioners Smith Bell and Company (Philippines), Inc. and Tokyo Marine and Fire Insurance Company, Inc. against private respondent Go Thong in Branch 4, which was presided over by then Judge, later Associate Justice of this Court, Serafin R. Cuevas. Civil Cases Nos. 82567 (Judge Fernandez) and 82556 (Judge Cuevas) were tried under the same issues and evidence relating to the collision between the " Don Carlos" and the "Yotai Maru" the parties in both cases having agreed that the evidence on the collision presented in one case would be simply adopted in the other. In both cases, the Manila Court of First Instance held that the officers and crew of the "Don Carlos" had been negligent that such negligence was the proximate cause of the collision and accordingly held respondent Go Thong liable for damages to the plaintiff insurance companies. Judge Fernandez awarded the insurance companies P19,889.79 with legal interest plus P3,000.00 as attorney's fees; while Judge Cuevas awarded the plaintiff insurance companies on two (2) claims US $ 68,640.00 or its equivalent in Philippine currency plus attorney's fees of P30,000.00, and P19,163.02 plus P5,000.00 as attorney's fees, respectively. The decision of Judge Fernandez in Civil Case No. 82567 was appealed by respondent Go Thong to the Court of Appeals, and the appeal was there docketed as C.A.-G.R. No. 61320-R. The decision of Judge Cuevas in Civil Case No. 82556 was also appealed by Go Thong to the Court of Appeals, the appeal being docketed as C.A.-G.R. No. 61206-R. Substantially identical assignments of errors were made by Go Thong in the two (2) appealed cases before the Court of Appeals. In C.A.-G.R. No. 61320-R, the Court of Appeals through Reyes, L.B., J., rendered a Decision on 8 August 1978 affirming the Decision of Judge Fernandez. Private respondent Go Thong moved for reconsideration, without success. Go Thong then went to the Supreme Court on Petition for Review, the Petition being docketed as G.R. No. L-48839 ("Carlos A. Go Thong and Company v. Smith Bell and Company [Philippines], Inc., et al."). In its Resolution dated 6 December 1978, this Court, having considered "the allegations, issues and arguments adduced in the Petition for Review on Certiorari, of the Decision of the Court of Appeals as well as respondent's comment", denied the Petition for lack of merit. Go Thong filed a Motion for Reconsideration; the Motion was denied by this Court on 24 January 1979. In the other (Cuevas) case, C.A.-G.R. No. 61206-R, the Court of Appeals, on 26 November 1980 (or almost two [2] years after the Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had been affirmed by the Supreme Court on Petition for Review) through Sison, P.V., J., reversed the Cuevas Decision and held the officers of the "Yotai Maru" at fault in the collision with the "Don Carlos," and dismissed the insurance companies' complaint. Herein petitioners asked for reconsideration, to no avail. The insurance companies are now before us on Petition for Review on Certiorari, assailing the Decision of Sison, P.V., J., in C.A.-G.R. No. 61206-R. Petitioners' principal contentions are: a. that the Sison Decision had disregarded the rule of res judicata; b. that Sison P.V., J., was in serious and reversible error in accepting Go Thong's defense that the question of fault on the part of the "Yotai Maru" had been settled by the compromise agreement between the owner of the " Yotai Maru" and Go Thong as owner of the "Don Carlos;" and

c. that Sison, P. V. J., was in serious and reversible error in holding that the " Yotai Maru" had been negligent and at fault in the collision with the "Don Carlos." I The first contention of petitioners is that Sison, P. V. J. in rendering his questioned Decision, failed to apply the rule of res judicata. Petitioners maintain that the Resolution of the Supreme Court dated 6 December 1978 in G.R. No. 48839 which dismissed Go Thong's Petition for Review of the Decision of Reyes, L.B., J., in C.A.-G.R. No. 61320-R, had effectively settled the question of liability on the part of the "Don Carlos." Under the doctrine of res judicata, petitioners contend, Sison, P. V. J. should have followed the Reyes, L.B., J. Decision since the latter had been affirmed by the Supreme Court and had become final and executory long before the Sison Decision was rendered. Private respondent Go Thong, upon the other hand, argues that the Supreme Court, in rendering its minute Resolution in G.R. No. L- 48839, had merely dismissed Go Thong's Petition for Review of the Reyes, L.B., J. Decision for lack of merit but had not affirmed in toto that Decision. Private respondent, in other words, purports to distinguish between denial of a Petition for Review for lack of merit and affirmance of the Court of Appeals' Decision. Thus, Go Thong concludes, this Court did not hold that the "Don Carlos" had been negligent in the collision. Private respondent's argument must be rejected. That this Court denied Go Thong's Petition for Review in a minute Resolution did not in any way diminish the legal significance of the denial so decreed by this Court. The Supreme Court is not compelled to adopt a definite and stringent rule on how its judgment shall be framed. 1 It has long been settled that this Court has discretion to decide whether a "minute resolution" should be used in lieu of a full-blown decision in any particular case and that a minute Resolution of dismissal of a Petition for Review on certiorari constitutes an adjudication on the merits of the controversy or subject matter of the Petition. 2 It has been stressed by the Court that the grant of due course to a Petition for Review is "not a matter of right, but of sound judicial discretion; and so there is no need to fully explain the Court's denial. For one thing, the facts and law are already mentioned in the Court of Appeals' opinion." 3 A minute Resolution denying a Petition for Review of a Decision of the Court of Appeals can only mean that the Supreme Court agrees with or adopts the findings and conclusions of the Court of Appeals, in other words, that the Decision sought to be reviewed and set aside is correct. 4 Private respondent Go Thong argues also that the rule of res judicata cannot be invoked in the instant case whether in respect of the Decision of Reyes, L.B., J. or in respect of the Resolution of the Supreme Court in G.R. No. L-48839, for the reason that there was no identity of parties and no identity of cause of action between C.A.-G.R. No. 61206-R and C.A.-G.R. No. 61320-R. The parties in C.A.-G.R. No. 61320-R Where the decision of Judge Fernandez was affirmed, involved Smith Bell and Company (Philippines), Inc., and Sumitomo Marine and Fire Insurance Co., Ltd. while the petitioners in the instant case (plaintiffs below) are Smith Bell and Co. (Philippines), Inc. and Tokyo Marine and Fire Insurance Co., Ltd. In other words, there was a common petitioner in the two (2) cases, although the co-petitioner in one was an insurance company different from the insurance company co-petitioner in the other case. It should be noted, moreover, that the co-petitioner in both cases was an insurance company arid that both petitioners in the two (2) cases represented the same interest, i.e., the cargo owner's interest as against the hull interest or the interest of the shipowner. More importantly, both cases had been brought against the same defendant, private respondent Go Thong, the owner of the vessel "Don Carlos." In sum, C.A.-G.R. No. 61320R and C.A-G.R. No. 61206R exhibited substantial identity of parties. It is conceded by petitioners that the subject matters of the two (2) suits were not identical, in the sense that the cargo which had been damaged in the one case and for which indemnity was sought, was not the very same cargo which had been damaged in the other case indemnity for which was also sought. The cause of action was, however, the same in the two (2) cases, i.e., the same right of the cargo owners to the safety and integrity of their cargo had been violated by the same casualty, the ramming of the "Yotai Maru" by the "Don Carlos." The judgments in both cases were final judgments on the merits rendered by the two (2) divisions of the Court of Appeals and by the Supreme Court, the jurisdiction of which has not been questioned.

Under the circumstances, we believe that the absence of identity of subject matter, there being substantial identity of parties and identity of cause of action, will not preclude the application of res judicata. 5 In Tingson v. Court of Appeals, 6 the Court distinguished one from the other the two (2) concepts embraced in the principle of res judicata, i.e., "bar by former judgment" and "conclusiveness of judgment:" There is no question that where as between the first case Where the judgment is rendered and the second case where such judgment is invoked, there is identity of parties, subject-matter and cause of action, the judgment on the merits in the first case constitutes an absolute bar to the subsequent action not only as to every matter which was offered and received to sustain or defeat the claim or demand, but also as to any other admissible matter which might have been offered for that purpose and to all matters that could have been adjudged in that case. This is designated as " bar by former judgment." But where the second action between the same parties is upon a different claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or judgment was rendered. In fine, the previous judgment is conclusive in the second case, only as those matters actually and directly controverted and determined and not as to matters merely involved therein. This is the rule on 'conclusiveness of judgment' embodied in subdivision (c) of Section 49 of Rule 39 of the Revised Rules of' Court. 7 (Citations omitted) (Emphases supplied) In Lopez v. Reyes, 8 the Court elaborated further the distinction between bar by former judgment which bars the prosecution of a second action upon the same claim, demand or cause of action, and conclusiveness of judgment which bars the relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action: The doctrine of res judicata has two aspects. The first is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second aspect is that it precludes the relitigation of a particular fact or issues in another action between the same parties on a different claim or cause of action. The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of the litigation . Thus, it extends to questions "necessarily involved in an issue, and necessarily adjudicated, or necessarily implied in the final judgment, although no specific finding may have been made in reference thereto, and although such matters were directly referred to in the pleadings and were not actually or formally presented. Under this rule, if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter it will be considered as having settled that matter as to all future actions between the parties, and if a judgment necessarily presupposes certain premises, they are as conclusive as the judgment itself. Reasons for the rule are that a judgment is an adjudication on all the matters which are essential to support it, and that every proposition assumed or decided by the court leading up to the final conclusion and upon which such conclusion is based is as effectually passed upon as the ultimate question which is finally solved . 9 (Citations omitted) (Emphases supplied) In the case at bar, the issue of which vessel ("Don Carlos" or "Yotai Maru") had been negligent, or so negligent as to have proximately caused the collision between them, was an issue that was actually, directly and expressly raised, controverted and litigated in C.A.-G.R. No. 61320-R. Reyes, L.B., J., resolved that issue in his Decision and held the "Don Carlos" to have been negligent rather than the "Yotai Maru" and, as already noted, that Decision was affirmed by this Court in G.R. No. L-48839 in a

Resolution dated 6 December 1978. The Reyes Decision thus became final and executory approximately two (2) years before the Sison Decision, which is assailed in the case at bar, was promulgated. Applying the rule of conclusiveness of judgment, the question of which vessel had been negligent in the collision between the two (2) vessels, had long been settled by this Court and could no longer be relitigated in C.A.-G.R. No. 61206- R. Private respondent Go Thong was certainly bound by the ruling or judgment of Reyes, L.B., J. and that of this Court. The Court of Appeals fell into clear and reversible error When it disregarded the Decision of this Court affirming the Reyes Decision. 10 Private respondent Go Thong also argues that a compromise agreement entered into between Sanyo Shipping Company as owner of the "Yotai Maru" and Go Thong as owner of the "Don Carlos," under which the former paid P268,000.00 to the latter, effectively settled that the " Yotai Maru" had been at fault. This argument is wanting in both factual basis and legal substance. True it is that by virtue of the compromise agreement, the owner of the "Yotai Maru" paid a sum of money to the owner of the "Don Carlos." Nowhere, however, in the compromise agreement did the owner of the " Yotai Maru " admit or concede that the "Yotai Maru" had been at fault in the collision. The familiar rule is that "an offer of compromise is not an admission that anything is due, and is not admissible in evidence against the person making the offer." 11 A compromise is an agreement between two (2) or more persons who, in order to forestall or put an end to a law suit, adjust their differences by mutual consent, an adjustment which everyone of them prefers to the hope of gaining more, balanced by the danger of losing more.12 An offer to compromise does not, in legal contemplation, involve an admission on the part of a defendant that he is legally liable, nor on the part of a plaintiff that his claim or demand is groundless or even doubtful, since the compromise is arrived at precisely with a view to avoiding further controversy and saving the expenses of litigation.13 It is of the very nature of an offer of compromise that it is made tentatively, hypothetically and in contemplation of mutual concessions. 14 The above rule on compromises is anchored on public policy of the most insistent and basic kind; that the incidence of litigation should be reduced and its duration shortened to the maximum extent feasible. The collision between the "Yotai Maru" and the "Don Carlos" spawned not only sets of litigations but also administrative proceedings before the Board of Marine Inquiry ("BMI"). The collision was the subject matter of an investigation by the BMI in BMI Case No. 228. On 12 July 1971, the BMI through Commodore Leovegildo L. Gantioki, found both vessels to have been negligent in the collision. Both parties moved for reconsideration of the BMI's decision. The Motions for Reconsideration were resolved by the Philippine Coast Guard ("PCG") nine (9) years later, in an order dated 19 May 1980 issued by PCG Commandant, Commodore Simeon M. Alejandro. The dispositive portion of the PCG decision read as follows: Premises considered, the Decision dated July 12, 1971 is hereby reconsidered and amended absolving the officers of "YOTAI MARU" from responsibility for the collision. This Headquarters finds no reason to modify the penalties imposed upon the officers of Don Carlos. (Annex "C", Reply, September 5, 1981). 15 Go Thong filed a second Motion for Reconsideration; this was denied by the PCG in an order dated September 1980. Go Thong sought to appeal to the then Ministry of National Defense from the orders of the PCG by filing with the PCG on 6 January 1981 a motion for a 30-day extension from 7 January 1981 within which to submit its record on appeal. On 4 February 1981, Go Thong filed a second urgent motion for another extension of thirty (30) days from 7 February 1981. On 12 March 1981, Go Thong filed a motion for a final extension of time and filed its record on appeal on 17 March 1981. The PCG noted that Go Thong's record on appeal was filed late, that is, seven (7) days after the last extension granted by the PCG had expired. Nevertheless, on 1 July 1981 (after the Petition for Review on Certiorari in the case at bar had been filed with this Court), the Ministry of Defense rendered a decision reversing and setting aside the 19 May 1980 decision of the PCG The owners of the "Yotai Maru" then filed with the Office of the President a Motion for Reconsideration of the Defense Ministry's decision. The Office of the President rendered a decision dated 17 April 1986 denying the Motion for Reconsideration. The decision of the Office of the President correctly recognized that Go Thong had failed to appeal in a seasonable manner:

MV "DON CARLOS" filed her Notice of Appeal on January 5, 1981. However, the records also show beyond peradventure of doubt that the PCG Commandant's decision of May 19, 1980, had already become final and executory When MV "DON CARLOS" filed her Record on Appeal on March 17,1981, and When the motion for third extension was filed after the expiry date . Under Paragraphs (c), (d), (e) and (f), Chapter XVI, of the Philippine Merchant Marine Rules and Regulations, decisions of the PCG Commandant shall be final unless, within thirty (30) days after receipt of a copy thereof, an appeal to the Minister of National Defense is filed and perfected by the filing of a notice of appeal and a record on appeal. Such administrative regulation has the force and effect of law, and the failure of MV "DON CARLOS" to comply therewith rendered the PCG Commandant's decision on May 19, 1980, as final and executory, (Antique Sawmills, Inc. vs. Zayco, 17 SCRA 316; Deslata vs. Executive Secretary, 19 SCRA 487; Macailing vs. Andrada, 31 SCRA 126.) (Annex "A", Go Thong's Manifestation and Motion for Early Resolution, November 24, 1986). 16 (Emphases supplied) Nonetheless, acting under the misapprehension that certain "supervening" events had taken place, the Office of the President held that the Minister of National Defense could validly modify or alter the PCG Commandant's decision: However, the records likewise show that, on November 26, 1980, the Court of Appeals rendered a decision in CA-G.R. No. 61206-R (Smith Bell & Co., Inc., et al. vs. Carlos A. Go Thong & Co.) holding that the proximate cause of the collision between MV "DON CARLOS" AND MS "YOTAI MARU" was the negligence, failure and error of judgment of the officers of MS "YOTAI MARU". Earlier, or on February 27, 1976, the Court of First Instance of Cebu rendered a decision in Civil Case No. R-11973 (Carlos A. Go Thong vs. San-yo Marine Co.) holding that MS "YOTAI MARU" was solely responsible for the collision, which decision was upheld by the Court of Appeals. The foregoing judicial pronouncements rendered after the finality of the PCG Commandant's decision of May 19, 1980, were supervening causes or reasons that rendered the PCG Commandant's decision as no longer enforceable and entitled MV "DON CARLOS" to request the Minister of National Defense to modify or alter the questioned decision to harmonize the same with justice and tile facts . (De la Costa vs. Cleofas, 67 Phil. 686; City of Bututan vs. Ortiz, 3 SCRA 659; Candelario vs. Canizares, 4 SCRA 738; Abellana vs. Dosdos, 13 SCRA 244). Under such precise circumstances, the Minister of National Defense may validly modify or alter the PCG commandant's decision. (Sec. 37, Act 4007; Secs. 79(c) and 550, Revised Administrative Code; Province of Pangasinan vs. Secretary of Public Works and Communications, 30 SCRA 134; Estrelia vs. Orendain, 37 SCRA 640). 17 (Emphasis supplied) The multiple misapprehensions under which the Office of the President labored, were the following: It took account of the Decision of Sison, P.V., J. in C.A.-G.R. No. 61206-R, the very decision that is the subject of review in the Petition at bar and therefore not final. At the same time, the Office of the President either ignored or was unaware of the Reyes, L.B., J., Decision in C.A.-G.R. No 61320-R finding the "Don Carlos" solely liable for the collision, and of the fact that that Decision had been affirmed by the Supreme Court and had long ago become final and executory. A third misapprehension of the Office of the President related to a decision in a Cebu Court of First Instance litigation which had been settled by the compromise agreement between the Sanyo Marine Company and Go Thong. The Office of the President mistakenly believed that the Cebu Court of First Instance had rendered a decision holding the "Yotai Maru" solely responsible for the collision, When in truth the Cebu court had rendered a judgment of dismissal on the basis of the compromise agreement. The Cebu decision was not, of course, appealed to the Court of Appeals. It thus appears that the decision of the Office of the President upholding the belated reversal by the Ministry of National Defense of the PCG'S decision holding the "Don Carlos" solely liable for the

collision, is so deeply flawed as not to warrant any further examination. Upon the other hand, the basic decision of the PCG holding the "Don Carlos" solely negligent in the collision remains in effect. II In their Petition for Review, petitioners assail the finding and conclusion of the Sison Decision, that the "Yotai Maru" was negligent and at fault in the collision, rather than the "Don Carlos." In view of the conclusions reached in Part I above, it may not be strictly necessary to deal with the issue of the correctness of the Sison Decision in this respect. The Court considers, nonetheless, that in view of the conflicting conclusions reached by Reyes, L.B.,J., on the one hand, and Sison, P.V., J., on the other, and since in affirming the Reyes Decision, the Court did not engage in a detailed written examination of the question of which vessel had been negligent, and in view of the importance of the issues of admiralty law involved, the Court should undertake a careful review of the record of the case at bar and discuss those issues in extenso. The decision of Judge Cuevas in Civil Case No. 82556 is marked by careful analysis of the evidence concerning the collision. It is worth underscoring that the findings of fact of Judge Fernandez in Civil Case No. 82567 (which was affirmed by the Court of Appeals in the Reyes Decision and by this Court in G.R. No. L-48839) are just about identical with the findings of Judge Cuevas. Examining the facts as found by Judge Cuevas, the Court believes that there are three (3) principal factors which are constitutive of negligence on the part of the "Don Carlos," which negligence was the proximate cause of the collision. The first of these factors was the failure of the "Don Carlos" to comply with the requirements of Rule 18 (a) of the International Rules of the Road ("Rules")," which provides as follows (a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve risk of collision, each shall alter her course to starboard, so that each may pass on the port side of the other. This Rule only applies to cases where vessels are meeting end on or nearly end on, in such a manner as to involve risk of collision, and does not apply to two vessels which must, if both keep on their respective course, pass clear of each other. The only cases to which it does apply are when each of two vessels is end on, or nearly end on, to the other; in other words, to cases in which, by day, each vessel sees the masts of the other in a line or nearly in a line with her own; and by night to cases in which each vessel is in such a position as to see both the sidelights of the other. It does not apply, by day, to cases in which a vessel sees another ahead crossing her own course; or, by night, to cases where the red light of one vessel is opposed to the red light of the other or where the green light of one vessel is opposed to the green light of the other or where a red light without a green light or a green light without a red light is seen ahead, or Where both green and red lights are seen anywhere but ahead. (Emphasis supplied) The evidence on this factor was summarized by Judge Cuevas in the following manner: Plaintiff's and defendant's evidence seem to agree that each vessel made a visual sighting of each other ten minute before the collision which occurred at 0350. German's version of the incident that followed, was that "Don Carlos" was proceeding directly to [a] meeting [on an] "end-on or nearly end-on situation" (Exh. S, page 8). He also testified that "Yotai Maru's' headlights were "nearly in line at 0340 A.M." (t.s.n., June 6, 1974) clearly indicating that both vessels were sailing on exactly opposite paths (t.s.n. June 6, 1974, page 56). Rule 18 (a) of the International Rules of the Road provides as follows: xxx xxx xxx And yet German altered "Don Carlos" course by five degrees to the left at 0343 hours instead of to the right (t.s.n. June 6, 1974, pages 4445) which maneuver was the error that caused the collision in question. Why German did so is likewise explained by the evidence on record. "Don Carlos" was overtaking another

vessel, the "Don Francisco", and was then at the starboard (right side) of the aforesaid vessel at 3:40 a.m. It was in the process of overtaking "Don Francisco" that "Don Carlos' was finally brought into a situation where he was meeting end-on or nearly end-on "Yotai Maru, thus involving risk of collision. Hence, German in his testimony before the Board of Marine inquiry stated: Atty. Chung: You said in answer to the cross-examination that you took a change of course to the left. Why did you not take a course to the right instead? German: I did not take any course to the right because the other vessel was in my mind at the starboard side following me. Besides, I don't want to get risk of the Caballo Island (Exh. 2, pages 209 and 210). 19 (Emphasis supplied) For her part, the "Yotai Maru" did comply with its obligations under Rule 18 (a). As the "Yotai Maru" found herself on an "end-on" or a "nearly end-on" situation vis-a-vis the "Don Carlos, " and as the distance between them was rapidly shrinking, the " Yotai Maru" turned starboard (to its right) and at the same time gave the required signal consisting of one short horn blast. The " Don Carlos" turned to portside (to its left), instead of turning to starboard as demanded by Rule 18 (a). The " Don Carlos" also violated Rule 28 (c) for it failed to give the required signal of two (2) short horn blasts meaning "I am altering my course to port." When the "Yotai Maru" saw that the "Don Carlos" was turning to port, the master of the "Yotai Maru" ordered the vessel turned "hard starboard" at 3:45 a.m. and stopped her engines; at about 3:46 a.m. the "Yotai Maru" went "full astern engine." 20 The collision occurred at exactly 3:50 a.m. The second circumstance constitutive of negligence on the part of the " Don Carlos" was its failure to have on board that night a "proper look-out" as required by Rule I (B) Under Rule 29 of the same set of Rules, all consequences arising from the failure of the "Don Carlos" to keep a "proper look-out" must be borne by the "Don Carlos." Judge Cuevas' summary of the evidence said: The evidence on record likewise discloses very convincingly that "Don Carlos" did not have "look-out" whose sole and only duty is only to act as Such. . . . 21 A "proper look-out" is one who has been trained as such and who is given no other duty save to act as a look-out and who is stationed where he can see and hear best and maintain good communication with the officer in charge of the vessel, and who must, of course, be vigilant. Judge Cuevas wrote: The "look-out" should have no other duty to perform. (Chamberlain v. Ward, 21, N.O.W. 62, U.S. 548, 571). He has only one duty, that which its name implies to keep "look-out". So a deckhand who has other duties, is not a proper "look-out" (Brooklyn Perry Co. v. U.S., 122, Fed. 696). The navigating officer is not a sufficient "look-out" (Larcen B. Myrtle, 44 Fed. 779)Griffin on Collision, pages 277-278). Neither the captain nor the [helmsman] in the pilothouse can be considered to be a "lookout"within the meaning of the maritime law. Nor should he be stationed in the bridge. He should be as near as practicable to the surface of the water so as to be able to see low-lying lights (Griffin on Collision, page 273). On the strength of the foregoing authorities, which do not appear to be disputed even by the defendant, it is hardly probable that neither German or Leo Enriquez may qualify as "look-out" in the real sense of the word. 22(Emphasis supplied)

In the case at bar, the failure of the "Don Carlos" to recognize in a timely manner the risk of collision with the "Yotai Maru" coming in from the opposite direction, was at least in part due to the failure of the "Don Carlos" to maintain a proper look-out. The third factor constitutive of negligence on the part of the " Don Carlos" relates to the fact that Second Mate Benito German was, immediately before and during the collision, in command of the "Don Carlos." Judge Cuevas summed up the evidence on this point in the following manner: The evidence on record clearly discloses that "Don Carlos" was, at the time of the collision and immediately prior thereto, under the command of Benito German, a second mate although its captain,Captain Rivera, was very much in the said vessel at the time. The defendant's evidence appears bereft of any explanation as to why second mate German was at the helm of the aforesaid vessel when Captain Rivera did not appear to be under any disability at the time. In this connection, Article [633] of the Code of Commerce provides: Art. [633] The second mate shall take command of the vessel in case of the inability or disqualification of the captain and sailing mate, assuming, in such case, their powers and liability. The fact that second mate German was allowed to be in command of "Don Carlos" and not the chief or the sailing mate in the absence of Captain Rivera, gives rise to no other conclusion except that said vessel [had] no chief mate. Otherwise, the defense evidence should have at least explained why it was German, only a second mate, who was at the helm of the vessel "Don Carlos" at the time of the fatal collision. But that is not all. Worst still, aside from German's being only a second mate, is his apparent lack of sufficient knowledge of the basic and generally established rules of navigation. For instance, he appeared unaware of the necessity of employing a "look- out" (t.s.n. June 6, 1974, page 27) which is manifest even in his testimony before the Board of Marine Inquiry on the same subject (Exh. 2, page 209). There is, therefore, every reasonable ground to believe that his inability to grasp actual situation and the implication brought about by inadequacy of experience and technical know-how was mainly responsible and decidedly accounted for the collision of the vessels involved in this case.. . . 23 (Emphasis supplied) Second Mate German simply did not have the level of experience, judgment and skill essential for recognizing and coping with the risk of collision as it presented itself that early morning when the "Don Carlos," running at maximum speed and having just overtaken the "Don Francisco" then approximately one mile behind to the starboard side of the " Don Carlos," found itself head-on or nearly head on vis-a-vis the "Yotai Maru. " It is essential to point out that this situation was created by the "Don Carlos" itself. The Court of Appeals in C.A.-G.R. No. 61206-R did not make any findings of fact which contradicted the findings of fact made by Judge Cuevas. What Sison, P.V., J. actually did was to disregard all the facts found by Judge Cuevas, and discussed above and, astonishingly, found a duty on the "Yotai Maru" alone to avoid collision with and to give way to the " Don Carlos ". Sison, P.V., J., wrote: At a distance of eight (8) miles and with ten (10) minutes before the impact, [Katoh] and Chonabayashi had ample time to adopt effective precautionary measures to steer away from the Philippine vessel, particularly because both [Katoh] and Chonabayashi also deposed that at the time they had first eyesight of the "Don Carlos" there was still "no danger at all" of a collision. Having sighted the "Don Carlos" at a comparatively safe distance"no danger at all" of a collisionthe Japanese ship should have observed with the highest diligence the course and movements of the Philippine interisland vessel as to enable the former to adopt such precautions as will necessarily present a collision, or give way, and in case of a collision, the former is prima facie at fault. In G.Urrutia & Co. vs. Baco River Plantation Co., 26 Phil. 632, the Supreme Court held:

Nautical rules require that where a steamship and sailing vessel are approaching each other from opposite directions, or on intersecting lines, the steamship, from the moment the sailing vessel is seen, shall watch with the highest diligence her course and movements so as to enable it to adopt such timely means of precaution as will necessarily prevent the two boats from coming in contact.' (Underscoring in the original) At 3:44 p.m., or 4 minutes after first sighting the "Don Carlos", or 6 minutes before contact time, Chonabayashi revealed that the "Yotai Maru" gave a one-blast whistle to inform the Philippine vessel that the Japanese ship was turning to starboard or to the right and that there was no blast or a proper signal from the "Don Carlos" (pp. 67-68. Deposition of Chonabayashi, List of Exhibits). The absence of a reply signal from the "Don Carlos"placed the "Yotai Maru" in a situation of doubt as to the course the "Don Carlos" would take. Such being the case, it was the duty of the Japanese officers "to stop, reverse or come to a standstill until the course of the"Don Carlos" has been determined and the risk of a collision removed (The Sabine, 21 F (2d) 121, 124, cited in Standard Vacuum, etc. vs. Cebu Stevedoring, etc., 5 C.A.R. 2d 853, 861-862).. . . . 24 (Emphasis supplied) The Court is unable to agree with the view thus taken by Sison, P.V., J. By imposing an exclusive obligation uponone of the vessels, the "Yotai Maru, " to avoid the collision, the Court of Appeals not only chose to overlook all the above facts constitutive of negligence on the part of the "Don Carlos;" it also in effect used the very negligence on the part of the "Don Carlos" to absolve it from responsibility and to shift that responsibility exclusively onto the " Yotai Maru" the vessel which had observed carefully the mandate of Rule 18 (a). Moreover, G. Urrutia and Company v. Baco River Plantation Company 25 invoked by the Court of Appeals seems simply inappropriate and inapplicable. For the collision in the Urrutia case was between a sailing vessel, on the one hand, and a powerdriven vessel, on the other; the Rules, of course, imposed a special duty on the power-driven vessel to watch the movements of a sailing vessel, the latter being necessarily much slower and much less maneuverable than the power-driven one. In the case at bar, both the "Don Carlos" and the "Yotai Maru" were power-driven and both were equipped with radar; the maximum speed of the " Yotai Maru" was thirteen (13) knots while that of the "Don Carlos" was eleven (11) knots. Moreover, as already noted, the "Yotai Maru" precisely took last minute measures to avert collision as it saw the "Don Carlos" turning to portside: the "Yotai Maru" turned "hard starboard" and stopped its engines and then put its engines "full astern." Thus, the Court agrees with Judge Cuevas (just as it had agreed with Reyes, L.B., J.), with Judge Fernandez and Nocon, J., 26 that the "Don Carlos" had been negligent and that its negligence was the sole proximate cause of the collision and of the resulting damages. FOR ALL THE FOREGOING, the Decision of the Court of Appeals dated 26 November 1980 in C.A.G.R. No. 61206-R is hereby REVERSED and SET ASIDE. The decision of the trial court dated 22 September 1975 is hereby REINSTATED and AFFIRMED in its entirety. Costs against private respondent. SO ORDERED. SECOND DIVISION

G.R. No. 91029 February 7, 1991 NORKIS DISTRIBUTORS, INC., petitioner, vs. THE COURT OF APPEALS & ALBERTO NEPALES, respondents. Jose D. Palma for petitioner.

Public Attorney's Office for private respondent.

GRIO-AQUINO, J.:p Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CAG.R. No. 09149, affirming with modification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific performance of a contract of sale with damages against petitioner Norkis Distributors, Inc. The facts borne out by the record are as follows: Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No. L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the motorcycle remained in Norkis' possession. On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on November 6, 1979 (Exh. 2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3. 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 (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The motorcycle met an accident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), 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 (p. 13, Rollo) and demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis in the Regional Trial Court of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him damages. Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or damage had to be borne by him as owner of the unit. After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private respondent (p. 28, Rollo.) thus: WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The defendants are ordered to pay solidarity to the plaintiff the present

value of the motorcycle which was totally destroyed, plus interest equivalent to what the Kabankalan Sub-Branch of the Development Bank of the Philippines will have to charge the plaintiff on fits account, plus P50.00 per day from February 3, 1980 until full payment of the said present value of the motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation. In lieu of paying the present value of the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the one which was totally destroyed in their possession last February 3, 1980. (pp. 28-29,Rollo.) On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the present value of the damaged vehicle" (p35, Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review. The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question would depend on whether there had already been a transfer of ownership of the motorcycle to private respondent at the time it was destroyed. Norkis' theory is that: . . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even before the ownership is transferred to the vendee, the risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the obligation of the vendor to deliver a determinate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174), that is, without the fault or fraud of the vendor and before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or destruction does not extinguish the obligation (Art. 1263). A thing is determinate when it is particularly designated or physically segregated from all others of the same class (Art. 1460). Thus, the vendor becomes released from his obligation to deliver the determinate thing sold while the vendee's obligation to pay the price subsists. If the vendee had paid the price in advance the vendor may retain the same. The legal effect, therefore, is that the vendee assumes the risk of loss by fortuitous event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.) Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was constructive delivery of the unit upon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of his signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land Transportation Commission in private respondent's name (Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo). That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of the thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378). In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of delivering the thing. The act, without the intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing Manresa, p. 94). When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title or ownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would not approve private respondent's loan application and, consequently, there would be no sale.

In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759). In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held: The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is "placed in the hands and possession of the vendee." (Civil Code, Art. 1462). It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to reality-the delivery has riot been effects .(Emphasis supplied.) The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979 (Exh. B) and the registration of the vehicle in the name of plaintiff-appellee (private respondent) with the Land Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with the requirements of the Development Bank of the Philippines for processing private respondent's motorcycle loan. On March 20, 1980, before private respondent's loan was released and before he even paid Norkis, the motorcycle had already figured in an accident while driven by one Zacarias Payba. Payba was not shown by Norkis to be a representative or relative of private respondent. The latter's supposed relative, who allegedly took possession of the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis' claim that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enter into any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6, 1985). This circumstances more than amply rebut the disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo). 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 to this case, for there was neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino. WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we deny the petition for review and hereby affirm the appealed decision, with costs against the petitioner. SO ORDERED. EN BANC G.R. No. L-18536 March 31, 1965

JOSE B. AZNAR, plaintiff-appellant, vs.

RAFAEL YAPDIANGCO, defendant-appellee; TEODORO SANTOS, intervenor-appellee. Florentino M. Guanlao for plaintiff-appellant. Rafael Yapdiangco in his own behalf as defendant-appellee. Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee. REGALA, J.: This is an appeal, on purely legal questions, from a decision of the Court of First Instance of Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the possession of the car in dispute. The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to answer the ad. However, Teodoro Santos was out during this call and only the latter's son, Irineo Santos, received and talked with De Dios. The latter told the young Santos that he had come in behalf of his uncle, Vicente Marella, who was interested to buy the advertised car. On being informed of the above, Teodoro Santos instructed his son to see the said Vicente Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name. Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where the registration of the car in Marella's name was effected. Up to this stage of the transaction, the purchased price had not been paid. From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the payment from Vicente Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo Santos go with him. At the same time, he requested the registration papers and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to the alleged house of Marella's sister. At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him. For, after a considerable length of time waiting in vain for De Dios to return, Irineo went down to discover that neither the car nor their unidentified companion was there anymore. Going back to the house, he inquired from a woman he saw for L. De Dios and he was told that no such name lived or was even known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported the matter to his father who promptly advised the police authorities. That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was attending to its registration in his name, agents of the Philippine Constabulary seized and confiscated the same in consequence of the report to them by Teodoro Santos that the said car was unlawfully taken from him. In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the car in question Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved and was allowed to intervene by the lower court. At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had been unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiff-appellant traced his right. Consequently, although the plaintiff-appellant acquired the car in good faith and for a valuable consideration from Vicente Marella, the said decision concluded, still the intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides: ART. 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. From this decision, Jose B. Aznar appeals. The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better right to the possession of the disputed automobile? We find for the intervenor-appellee, Teodoro Santos. The plaintiff-appellant accepts that the car in question originally belonged to and was owned by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same by Vicente Marella. However, the appellant contends that upon the facts of this case, the applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the decision under review. Article 1506 provides: ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title. The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller had no title at all. Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him. Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.) So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51) In the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the subject matter thereof by stealing the same while it was in the custody of the latter's son. There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with him and L. De Dios to the place on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo Santos and De Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of delivering the thing. (10 Manresa 132) The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. The said article establishes two exceptions to the general rule of irrevindicability, to wit, when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.) In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled that Under Article 559 of the new Civil Code, a person illegally deprived of any movable may recover it from the person in possession of the same and the only defense the latter may have is if he has acquired it in good faith at a public sale, in which case, the owner cannot obtain its return without reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived of his car through the ingenious scheme of defendant B to enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if it is in the possession of a third party who had acquired it in good faith from defendant B. The maxim that "no man can transfer to another a better title than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28 Phil. 147) Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the intervenorappellee, should be made to suffer the consequences arising therefrom, following the equitable principle to that effect. Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz v. Pahati, supra)

UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower court affirmed in full. Costs against the appellant. SECOND DIVISION G.R. No. L-34500 March 18, 1988 MOISES OLIVARES and JUANITA T. OLIVARES, petitioners-appellants, vs. THE HONORABLE CARLOS V. GONZALES as Judge of the Court of First Instance of Iloilo (Branch VI), respondent and JACINTO TUVILLA, CEFERINO TUVILLA, and JUAN TUMABINI, respondents-appellees. Mario Guarina III for petitioners-appellants. Enrique Arguelles for respondents-appellees.

MELENCIO-HERRERA, J.: The Disputed Property is a piece of unregistered land located at Tigbauan, Iloilo Identified as Assessor's Lot No. 343. It was previously owned by respondents-appellees Jacinto Tuvilla and Ceferino Tuvilla (the Tuvillas, for short) both of Tigbauan, Iloilo. Sometime in 1955, the Tuvillas executed a "Deed of Sale with Right to Repurchase" in favor of respondent-appellee Juan Tumabini over the Disputed Property in consideration of the sum of P1,350.00. The document was duly acknowledged before a Notary Public but was not recorded in the Registry of Property. Sometime in 1959, the Tuvillas executed a "Deed of Sale with Pacto de Retro" over the Disputed Property in favor of petitioners- appellants, Moises Olivares and Juanita T. Olivares (the Olivareses, for short). This document was acknowledged before a Notary Public and registered with the Registry of Deeds. In 1966, the Tuvillas also executed in favor of the Olivareses a "Deed of Absolute Sale" covering the Disputed Property. Petitioners-appellants have been in possession of the Disputed Property since 1959. On October 11, 1967, respondent-appellee, Juan Tumabini filed Civil Case No. 7410 before Branch I of the then Court of First Instance of Iloilo against the Tuvillas for the consolidation of ownership over the Disputed Property by reason of the alleged failure of the Tuvillas to redeem the property from Tumabini (hereinafter referred to as the Consolidation Case). The Olivareses, however, were not included as parties to the said case. During the pre-trial of the Consolidation Case, counsel for the parties agreed to consider the pacto de retro sale as one of equitable mortgage. Thus, the Trial Court rendered judgment in favor of Tumabini in the amount of P 1,350.00, pursuant to which, the Court subsequently issued a Writ of Execution on October 23, 1968. On November 23, 1968, the Olivareses instituted Civil Case No. 7777 before Branch VI of the former Court of First Instance of Iloilo, for Quieting of Title, against the Tuvillas, Juan Tumabini the Provincial Sheriff and Pyramid Surety (hereinafter, the Quieting of Title Case). The said Court issued a Restraining Order to stop the sale in the Consolidation Case (No. 7410) pending in Branch 1, but the said order was lifted on February 6, 1969. Subsequently, the Consolidation Case (No. 7410), the Disputed Property was sold at public auction and a Writ of Possession was issued in Tumabinis favor. However, the tenant of the Olivareses refused to surrender possession, prompting a citation for contempt. Action thereon was deferred, however, pending termination of Civil Case No. 7777.

On July 7, 1970, in the Quieting of Title Case (No. 7777), the Trial Court issued an Order dismissing said case, as follows: Acting upon the motion for dismissal of this case filed by Atty. Enrique Arguelles, counsel for the defendants, it appearing that the instant action has been filed since November 23, 1968 and up to this time plaintiffs failed to exert effort to have the defendants summoned, for failure to prosecute and lack of interest on the part of the plaintiffs for such unreasonable length of time, as prayed, let this case be dismissed No reconsideration was sought nor any appeal taken by the Olivareses. On July 14, 1971, the same case was refiled, also in Branch VI, docketed as Civil Case No. 8698 (the Refiled Case) which, however, was dismissed by the Court on September 6, 1971 "it appearing that Civil Case No. 7777 previously filed and dismissed by the Court embraces the same subject matter and the same party litigants as the case at bar." On September 20, 1971, the Court denied the Motion for Reconsideration filed by the Olivareses. Hence, this appeal by certiorari. The question posed is whether the dismissal of the Quieting of Title Case (No. 7777) "for failure to prosecute" barred the institution of a subsequent suit, Civil Case No. 8698, by the same plaintiff against the same defendants on the same cause of action. Section 3, Rule 17 of the Rules of Court specifically provides: Sec. 3. Failure to prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the court. Procedurally speaking, therefore, since the dismissal by the Trial Court was unqualified, it had the effect of an adjudication upon the merits. However, the equities of the case are with the Olivareses. The first sale with pacto de retro by the Tuvillas to Tumabini was unregistered; in contrast, the sale in favor of the Olivareses was duly recorded. The Consolidation Case (Case No. 7410) instituted by Tumabini against the Tuvillas for consolidation of his ownership did not include the Olivareses as parties defendants even though they were then in possession of the Disputed Property. Justice and equity demand, therefore, that their side be heard in the Refiled Case (No. 8698). Then, too, the contempt incident and the matter of the Writ of Possession in the Consolidation Case (No. 7410) were left unresolved pending the outcome of the Quieting of Title Case (No. 7777). In other words, it would be more in keeping with substantial justice if the controversy between the parties to be resolved on the merits rather than on a procedural technicality in the light of the express mandate of the Rules that they be "liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding." The dismissal of actions is based on sound judicial discretion and such discretion "must be exercised wisely and prudently never capriciously, with a view to substantial justice." For having failed to meet that standard it will have to be held that respondent Judge acted with grave abuse of discretion (see Tandoc vs. Tensuan, I, 50835, October 30, 1979, 93 SCRA 880). WHEREFORE, the questioned Order of dismissal, dated September 6, 1971, in Civil Case No. 8698, is hereby SET ASIDE and the said case REMANDED for prompt hearing and determination on the merits. This Decision shag be immediately executory upon promulgation. No costs. SO ORDERED. FIRST DIVISION

G.R. No. L-56232 June 22, 1984 ABELARDO CRUZ (deceased) substituted by Heirs Consuelo C. Cruz, Claro C. Cruz and Stephen C. Cruz, per Resolution, petitioners, vs. LEODEGARIA CABANA, TEOFILO LEGASPI , ILUMINADA CABANA and THE HONORABLE COURT OF APPEALS,* respondents. Nazareno, Azada, Sabado & Dizon for petitioners. Felixberto N. Boquiren for respondents.

TEEHANKEE, J.: The Court affirms the questioned decision of the now defunct Court of Appeals which affirmed that of the Court of First Instance of Quezon Province, but directs that the seller, respondent Leodegaria Cabana who sold the property in question twice, first to her co-respondents Teofilo Legaspi and Iluminada Cabana and later to petitioner Abelardo Cruz (now deceased), should reimburse to petitioner's heirs the amounts of P2,352.50, which the late petitioner Abelardo Cruz paid to the Philippine National Bank to discharge the mortgage obligation of said respondent Leodegaria Cabana in favor of said bank, and of P3,397.50, representing the amount paid by said Abelardo Cruz to her as consideration of the sale with pacto de retro of the subject property. This is a simple case of double sale of real property. Respondent appellate court in its decision of August 13, 1980 stated the background facts and resolved the issue in favor of defendants- appellees, first buyers- respondents herein, and against plaintiff-appellant Abelardo Cruz, petitioner herein (substituted by his heirs), as follows: Defendants' evidence shows that on October 21, 1968, defendant Leodegaria Cabana sold the land in question to defendants-spouses Teofilo Legaspi and Iluminada Cabana (Exh. 1). The said defendants-spouses attempted to register the deed of sale but said registration was not accomplished because they could not present the owner's duplicate of title which was at that time in the possession of the PNB as mortgage. Likewise, when plaintiff tried to register the deed of sale executed by Leodegaria Cabana on September 3, 1970, said plaintiff was informed that the owner thereof had sold the land to defendants-spouses on October 21, 1968. Plaintiff was able to register the land in his name on February 9, 1971 (Exh. A). With the admission of both parties that the land in question was sold to two persons, the main issue to be resolved in this appeal is as to who of said vendees has a better title to said land. There is no dispute that the land in question was sold with right of repurchase on June 1, 1965 to defendants- spouses Teofilo Legaspi and Iluminada Cabana (Exh. 1). The said document 'Bilihang Muling Mabibili' stipulated that the land can be repurchased by the vendor within one year from December 31, 1966 (see par. 5, Exh. 1).lwphl@it Said land was not repurchased and in the meantime, however, said defendants-spouses took possession of the land. Upon request of Leodegaria Cabana, the title of the land was lent to her in order to mortgage the property to the Philippine National Bank. Said title was, forthwith, deposited with the PNB. On October 21, 1968, defendant Leodegaria Cabana sold the land by way of absolute sale to the defendants- spouses (Exh. 2). However, on November 29, 1968 defendant sold the same property to herein plaintiff and the latter was able to register it in his name.

The transaction in question is governed by Article 1544 of the Civil Code. True it is that the plaintiff was able to register the sale in his name but was he in good faith in doing so? While the title was registered in plaintiff- appellant's name on February 9, 1971 (Exh. A), it appears that he knew of the sale of the land to defendants-spouses Legaspi as he was informed in the Office of the Register of Deeds of Quezon. It appears that the defendants-spouses registered their document of sale on May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds (Exh. 2). Under the foregoing circumstances, the right of ownership and title to the land must be resolved in favor of the defendants- spouses Legaspi on three counts. First, the plaintiff-appellant was not in good faith in registering the title in his name. Consistent is the jurisprudence in this jurisdiction that in order that the provisions of Article 1544 of the new Civil Code may be invoked, 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 of it (10 Manresa 170, 171). It cannot be set up by a second purchaser who comes into possession of the property that has already been acquired by the first purchaser in full dominion (Bautista vs. Sison, 39 Phil. 615), this not withstanding that the second purchaser records his title in the public registry, if the registration be done in bad faith, the philosophy underlying this rule being that the public records cannot be covered into instruments of fraud and oppression by one who secures an inscription therein in bad faith (Chupinghong vs. Borreros, 7 CA Rep. 699). A purchaser who has knowledge of fact which would put him upon inquiry and investigation as to possible defects of the title of the vendor and fails to make such inquiry and investigation, cannot claim that he is a purchaser in good faith. Knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of conveyance which creates no right as against the first purchaser (Reylago vs. Jarabe, L-20046, March 27, 1968, 22 SCRA 1247). In the second place, the defendants-spouses registered the deed of absolute sale ahead of plaintiff- appellant. Said spouses were not only able to obtain the title because at that time, the owner's duplicate certificate was still with the Philippine National Bank. In the third place, defendants-spouses have been in possession all along of the land in question. If immovable property is sold to different vendees, the ownership shall belong to the person acquiring it who in good faith first recorded it in the registry of property; and should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession (Soriano, et al. vs. The Heirs of Domingo Magali et al., L-15133 , July 31, 1963, 8 SCRA 489). Priority of possession stands good in favor of herein defendants-spouses (Evangelista vs. Abad, [CA] 36 O.G. 2913; Sanchez vs. Ramos, 40 Phil. 614, Quimson vs, Rosete, 87 Phil. 159). The Court finds that in this case of double sale of real property, respondent appellate court, on the basis of the undisputed facts, correctly applied the provisions of Article 1544 of the Civil Code that Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. There is no question that respondents-spouses Teofilo Legaspi and Iluminada Cabana were the first buyers, first on June 1, 1965 under a sale with right of repurchase and later on October 21, 1968 under a deed of absolute sale and that they had taken possession of the land sold to them; that petitioner was the second buyer under a deed of sale dated November 29, 1968, which to all indications, contrary to the text, was a sale with right of repurchase for ninety (90) days. 1 There is no question either that respondents legaspi spouses were the first and the only ones to be in possession of the subject property. Said respondents spouses were likewise the first to register the sale with right of repurchase in their favor on May 13, 1965 under Primary Entry No. 210113 of the Register of Deeds. They could not register the absolute deed of sale in their favor and obtain the corresponding transfer certificate of title because at that time the seller's duplicate certificate was still with the bank. But there is no question, and the lower courts so found conclusively as a matter of fact, that when petitioner Cruz succeeded in registering the later sale in his favor, he knew and he was informed of the prior sale in favor of respondents-spouses. Respondent appellate court correctly held that such "knowledge of a prior transfer of a registered property by a subsequent purchaser makes him a purchaser in bad faith and his knowledge of such transfer vitiates his title acquired by virtue of the latter instrument of conveyance which creates no right as against the first purchaser." As the Court held in Carbonell vs. Court of Appeals 2 "it is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of [the above quoted] Article 1544." As the writer stressed in his concurring opinion therein, "(T)he governing principle here is prius 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 only as provided by the Civil Code and that is where the second buyer first registers in good faith the second sale ahead of the first. Such knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register first her purchase as against the second buyer. But in conversoknowledge gained by the second buyer of the first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior registration with bad faith. This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first buyer; that before the second buyer can obtain priority over the first, he must show that he acted in good faith throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens into full ownership through prior registration as provided by law." Petitioner's prayer for alternative relief for reimbursement of the amount of P2,352.50 paid by him to the bank to discharge the existing mortgage on the property and of the amount of P3,397.50 representing the price of the second sale are well taken insofar as the seller Leodegaria Cabana is concerned. These amounts have been received by the said seller Leodegaria Cabana on account of a void second sale and must be duly reimbursed by her to petitioner's heirs, but the Legaspi spouses cannot be held liable therefor since they had nothing to do with the said second sale nor did they receive any benefit therefrom. Petitioner's claim for reimbursement of the amount of P102.58 as real estate taxes paid on the property is not well taken because the respondents Legaspi spouses had been paying the real estate taxes on the same property since June 1, 1969. 4 ACCORDINGLY, the appealed judgment of respondent appellate court, upholding respondentsspouses Teofilo Legaspi and Iluminada Cabana as the true and rightful owners of the property in litigation and ordering the issuance of a new title with the cancellation as null and void of Title No. T99140 obtained by petitioner Abelardo C. Cruz, is hereby affirmed in toto. In accordance with the partial grant of petitioner's prayer for alternative relief as stated in the preceding paragraph hereof, the Court hereby orders and sentences respondent Leodegaria Cabana to reimburse and pay to petitioner's heirs the total sum of P5,750.00. FIRST DIVISION

G.R. No. L-29972 January 26, 1976 ROSARIO CARBONELL, petitioner, vs. HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON INFANTE, respondents.

MAKASIAR, J. Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division), and its resolution of December 6, 1968 denying petitioner's motion for reconsideration. The dispositive part of the challenged resolution reads: Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is hereby granted and the decision of November 2, 1967, is hereby annulled and set aside. Another judgement shall be entered affirming in toto that of the court a quo, dated January 20, 1965, which dismisses the plaintiff's complaint and defendant's counterclaim. Without costs. The facts of the case as follows: Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel of land herein involve with improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more or less, covered by TCT No. 5040 and subject to mortgage in favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor of respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. Agan Street. Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal). Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one day and offered to sell to the latter the said lot, excluding the house wherein respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square meter. Respondent Poncio, after having secured the consent of his wife and parents, accepted the price proposed by petitioner, on the condition that from the purchase price would come the money to be paid to the bank. Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the President thereof for her to pay the arrears on the mortgage and to continue the payment of the installments as they fall due. The amount in arrears reached a total sum of P247.26. But because respondent Poncio had previously told her that the money, needed was only P200.00, only the latter amount was brought by petitioner constraining respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit with Republic Savings Bank. But the next day, petitioner refunded to Poncio the sum of P47.00. On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a document in the Batanes dialect, which, translated into English, reads: CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me, Rosario Carbonell, until after one year during which time he will not pa anything. Then if after said one can he could not find an place where to move his house, he could still continue occupying the site but he should pay a rent that man, be agreed. (Sg d) JOS E PO NCI O (Sg d.) RO SA RIO CA RB ON ELL (Sg d) CO NS TA NCI O ME ON AD A Wit nes s (Pp. 6-7 rec. on appeal). Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of sale, which she brought to respondent Poncio together with the amount of some P400.00, the balance she still had to pay in addition to her assuming the mortgaged obligation to Republic Savings Bank. Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed any more with the sale, because he had already given the lot to respondent Emma Infants; and that he could not withdraw from his deal with respondent Mrs. Infante, even if he were to go to jail. Petitioner then sought to contact respondent Mrs. Infante but the latter refused to see her. On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate. Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register of Deeds and demand letters to private respondents Jose Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and he agreed to sell the land and its improvements to her for P3,535.00" (pp. 38-40, ROA). In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell to his corespondent Emma Infante, the property for the sum of P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives just behind the houses of Poncio and Rosario Carbonell. On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter paid Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot was eventually discharged. Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared an adverse claim for petitioner, who signed and swore to an registered the same on February 8, 1955. The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a consequence thereof, a Transfer Certificate of Title was issued to her but with the annotation of the adverse claim of petitioner Rosario Carbonell. Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic meters of garden soil and built therein a wall and gate, spending the sum of P1,500.00. She further contracted the services of an architect to build a house; but the construction of the same started only in 1959 years after the litigation actually began and during its pendency. Respondent Mrs. Infante spent for the house the total amount of P11,929.00. On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private respondents, praying that she be declared the lawful owner of the questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante and Emma L. Infante be declared null and void, and that respondent Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.). Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her favor not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied without prejudice to passing on the question raised therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.). During the trial, when petitioner started presenting evidence of the sale of the land in question to her by respondent Poncio, part of which evidence was the agreement written in the Batanes dialect aforementioned, respondent Infantes objected to the presentation by petitioner of parole evidence to prove the alleged sale between her and respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection and dismissed the complaint on the ground that the memorandum presented by petitioner to prove said sale does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.). From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being applicable only to executory contracts, does not apply to the alleged sale between petitioner and respondent Poncio, which petitioner claimed to have been partially performed, so that petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as the contract itself." The order appealed from was thus reversed, and the case remanded to the court a quo for further proceedings (pp. 26-49, ROA in the C.A.). After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma Infante of the land in question null and void and ordering respondent Poncio to execute the proper deed of conveyance of

said land in favor of petitioner after compliance by the latter of her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.). On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce evidence for the proper implementation of the court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial could be resolved, respondent Infantes, this time through their former counsel, filed another motion for new trial, claiming that the decision of the trial court is contrary to the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA in the C.A.). The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents introduced additional evidence consisting principally of the cost of improvements they introduced on the land in question (p. 9, ROA in the C.A.). After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the ground that the claim of the respondents was superior to the claim of petitioner, and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed to the respondent Court of Appeals (p. 96, ROA in the C.A.). On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner therein, to have a superior right to the land in question, and condemning the defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00 plus legal interest, the land in question and all its improvements (Appendix "A" of Petition). Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of Special Division of Five, granted said motion, annulled and set aside its decision of November 2, 1967, and entered another judgment affirming in toto the decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition). Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion was denied by Minute Resolution of December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition]. Hence, this appeal by certiorari. Article 1544, New Civil Code, which is decisive of this case, recites: 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 movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith (emphasis supplied). It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection of the second paragraph of said Article 1544. Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes possession in good faith of personal or real property, the second paragraph directs that ownership of immovable property should be recognized in favor of one "who in good faith first

recorded" his right. Under the first and third paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489). If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case at bar, prior registration in good faith is a pre-condition to superior title. When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was not aware and she could not have been aware of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and continued to exist when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed of sale. Carbonell's good faith did not cease after Poncio told her on January 31, 1955 of his second sale of the same lot to Infante. Because of that information, Carbonell wanted an audience with Infante, which desire underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a good Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So Carbonell did the next best thing to protect her right she registered her adversed claim on February 8, 1955. Under the circumstances, this recording of her adverse claim should be deemed to have been done in good faith and should emphasize Infante's bad faith when she registered her deed of sale four (4) days later on February 12, 1955. Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following facts, the vital significance and evidenciary effect of which the respondent Court of Appeals either overlooked of failed to appreciate: (1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he sold the lot to Infante but several days before Infante registered her deed of sale. This indicates that Infante knew from Poncio and from the bank of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only mean that she did not want to listen to Carbonell's story that she (Carbonell) had previously bought the lot from Poncio. (2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgaged indebtedness to the bank, which in the normal course of business must have necessarily informed Infante about the said assumption by Carbonell of the mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante naturally must have demanded from Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage contract so that the fact of full payment of his bank mortgage will be entered therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage passbook could not be given to her because it was already delivered to Carbonell. If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time he executed a deed of sale in favor of the Infantes and when the Infantes redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his mortgage passbook and his copy of the mortgage contract to the Infantes, who could have presented the same as exhibits during the trial, in much the same way that the Infantes were able to present as evidence Exhibit "1" Infantes, Poncio's savings deposit passbook, of which Poncio necessarily remained in possession as the said deposit passbook was never involved in the contract of sale with assumption of mortgage. Said savings deposit passbook merely proves that Poncio had to withdraw P47.26, which amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization arrearages in favor of the bank on January 27, 1955; because Carbonell on that day brought with her only P200.00, as Poncio told her that was the amount of his arrearages to the bank. But the next day Carbonell refunded to Poncio the sum of P47.26. (3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage passbook was already in possession of Carbonell, should have compelled Infante to inquire

from Poncio why he was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of the same (Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did not bother anymore to make such injury , w because in the ordinary course of business the bank must have told her that Poncio already sold the lot to Carbonell who thereby assumed the mortgage indebtedness of Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a semblance of truth to her pretended good faith, Infante snubbed Carbonell's request to talk to her about the prior sale to her b Poncio of the lot. As aforestated, this is not the attitude expected of a good neighbor imbued with Christian charity and good will as well as a clear conscience. (4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955 her deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51). (5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00 per square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per square meter. It is therefore logical to presume that Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put her on her guard and should have compelled her to inquire from Poncio whether or not he had already sold the property to Carbonell. As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer: ... that he had consistently turned down several offers, made by plaintiff, to buy the land in question, at P15 a square meter, for he believes that it is worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that, on or about January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the property at P20 a square meter, she would allow him to remain in the property for one year; that plaintiff then induced Poncio to sign a document, copy of which if probably the one appended to the second amended complaint; that Poncio signed it 'relying upon the statement of the plaintiff that the document was a permit for him to remain in the premises in the event defendant decided to sell the property to the plaintiff at P20.00 a square meter'; that on January 30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his property, worth at least P4,000, for the paltry sum P1,177.48, the amount of his obligation to the Republic Saving s Bank; and that plaintiff's action is barred by the Statute of Frauds. ... (pp. 3840, ROA, emphasis supplied). II EXISTENCE OF THE PRIOR SALE TO CARBONELL DULY ESTABLISHED (1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit "A" executed by Poncio and Carbonell and witnessed by Constancio Meonada captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not such a memorandum in writing within the purview of the Statute of Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he stated that "the memorandum in question merely states that Poncio is allowed to stay in the property which he had sold to the plaintiff. There is no mention of the reconsideration, a description of the property and such other essential elements of the contract of sale. There is nothing in the memorandum which would tend to show even in the slightest manner that it was intended to be an evidence of contract sale. On the contrary, from the terms of the memorandum, it tends to show that the sale of the property in favor of the plaintiff is already an accomplished act.By the very contents of the memorandum itself, it cannot therefore, be considered to be the

memorandum which would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the property which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already an accomplished act..." (2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court, reversed the aforesaid order of the trial court dismissing the complaint, holding that because the complaint alleges and the plaintiff claims that the contract of sale was partly performed, the same is removed from the application of the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of her allegation of partial performance of the contract of sale, and further stated: Apart from the foregoing, there are in the case at bar several circumstances indicating that plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance, Poncio admitted in his answer that plaintiff had offered several times to purchase his land. Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect, which, according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he being a native of said region. Exhibit A states that Poncio would stay in the land sold by him to plaintiff for one year, from January 27, 1955, free of charge, and that, if he cannot find a place where to transfer his house thereon, he may remain upon. Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that it "was a permit for him to remain in the premises in the" that "he decided to sell the property" to the plaintiff at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell the land to plaintiff, who had never increased her offer of P15 a square meter, there was no reason for Poncio to get said permit from her. Upon the other hand, if plaintiff intended to mislead Poncio, she would have caused Exhibit A to be drafted, probably, in English , instead of taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign document without reading its contents, apart from the fact that Meonada had read Exhibit A to him and given him a copy thereof, before he signed thereon, according to Meonada's uncontradicted testimony. Then, also, defendants say in their brief: The only allegation in plaintiff's complaint that bears any relation to her claim that there has been partial performance of the supposed contract of sale, is the notation of the sum of P247.26 in the bank book of defendant Jose Poncio. The noting or jotting down of the sum of P247.26 in the bank book of Jose Poncio does not prove the fact that the said amount was the purchase price of the property in question. For all we knew, the sum of P247.26 which plaintiff claims to have paid to the Republic Savings Bank for the account of the defendant, assuming that the money paid to the Republic Savings Bank came from the plaintiff, was the result of some usurious loan or accomodation, rather than earnest money or part payment of the land. Neither is it competent or satisfactory evidence to prove the conveyance of the land in question the fact that the bank book account of Jose Poncio happens to be in the possession of the plaintiff. (Defendants-Appellees' brief, pp. 25-26). How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether there is any relation between the P247.26 entry therein and the partial payment of P247.26 allegedly made by plaintiff to Poncio on account of the price of his land, if we do not allow the plaintiff to explain it on the witness stand? Without

expressing any opinion on the merits of plaintiff's claim, it is clear, therefore, that she is entitled , legally as well as from the viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations of her second amended complaint. (pp. 46-49, ROA, emphasis supplied). (3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell, the trial judge found: ... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that the sale of the parcel of land in question by the defendant Poncio in favor of the plaintiff was covered therein and that the said Exh. "a' was also executed to allow the defendant to continue staying in the premises for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to me' and having been written originally in a dialect well understood by the defendant Poncio, he signed the said Exh. 'A' with a full knowledge and consciousness of the terms and consequences thereof. This therefore, corroborates the testimony of the plaintiff Carbonell that the sale of the land was made by Poncio. It is further pointed out that there was a partial performance of the verbal sale executed by Poncio in favor of the plaintiff, when the latter paid P247.26 to the Republic Savings Bank on account of Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of the defendant Poncio's passbook of the Republic Savings Bank also adds credibility to her testimony. The defendant contends on the other hand that the testimony of the plaintiff, as well as her witnesses, regarding the sale of the land made by Poncio in favor of the plaintiff is inadmissible under the provision of the Statute of Fraud based on the argument that the note Exh. "A" is not the note or memorandum referred to in the to in the Statute of Fraud. The defendants argue that Exh. "A" fails to comply with the requirements of the Statute of Fraud to qualify it as the note or memorandum referred to therein and open the way for the presentation of parole evidence to prove the fact contained in the note or memorandum. The defendant argues that there is even no description of the lot referred to in the note, especially when the note refers to only one half lot. With respect to the latter argument of the Exhibit 'A', the court has arrived at the conclusion that there is a sufficient description of the lot referred to in Exh. 'A' as none other than the parcel of land occupied by the defendant Poncio and where he has his improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. "A". For a while, this court had that similar impression but after a more and thorough consideration of the context in Exh. 'A' and for the reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied). (4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision dismissing the complaint, although he found 1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of land with an area of 195 square meters, more or less, covered by TCT No. 5040 of the Province of Rizal, located at San Juan del Monte, Rizal, for the price of P6.50 per square meter; 2. That the purchase made by the plaintiff was not reduced to writing except for a short note or memorandum Exh. A, which also recited that the defendant Poncio would be allowed to continue his stay in the premises, among other things, ... (pp. 9192, ROA, emphasis supplied). From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA). (5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices Esguerra (now Associate Justice of the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be disproved by defendants, particularly Jose Poncio, and corroborated as it is by the private document in Batanes dialect, Exhibit A, the testimony being to the effect that between herself and Jose there had been celebrated a sale of the property excluding the house for the price of P9.50 per square meter, so much so that on faith of that, Rosario had advanced the sum of P247.26 and binding herself to pay unto Jose the balance of the purchase price after deducting the indebtedness to the Bank and since the wording of Exhibit A, the private document goes so far as to describe their transaction as one of sale, already consummated between them, note the part tense used in the phrase, "the lot sold by him to me" and going so far even as to state that from that day onwards, vendor would continue to live therein, for one year, 'during which time he will not pay anything' this can only mean that between Rosario and Jose, there had been a true contract of sale, consummated by delivery constitutum possession, Art. 1500, New Civil Code; vendor's possession having become converted from then on, as a mere tenant of vendee, with the special privilege of not paying rental for one year, it is true that the sale by Jose Poncio to Rosario Carbonell corroborated documentarily only by Exhibit A could not have been registered at all, but it was a valid contract nonetheless, since under our law, a contract sale is consensual, perfected by mere consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil Code, while a sale of an immovable is ordered to be reduced to a public document, Art. 1358, that mandate does not render an oral sale of realty invalid, but merely incapable of proof, where still executory and action is brought and resisted for its performance, 1403, par. 2, 3; but where already wholly or partly executed or where even if not yet, it is evidenced by a memorandum, in any case where evidence to further demonstrate is presented and admitted as the case was here, then the oral sale becomes perfectly good, and becomes a good cause of action not only to reduce it to the form of a public document, but even to enforce the contract in its entirety, Art. 1357; and thus it is that what we now have is a case wherein on the one hand Rosario Carbonell has proved that she had an anterior sale, celebrated in her favor on 27 January, 1955, Exhibit A, annotated as an adverse claim on 8 February, 1955, and on other, a sale is due form in favor of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and registered in due form with title unto her issued on 12 February, 1955; the vital question must now come on which of these two sales should prevail; ... (pp. 74-76, rec., emphasis supplied). (6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco, constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of the Infantes, while reversing the decision of November 2, 1967 and affirming the decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not consider the same as satisfying "the essential elements of a contract of sale," because it "neither specifically describes the property and its boundaries, nor mention its certificate of title number, nor states the price certain to be paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code. (7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2, 1967 as well as his findings of facts therein, and reiterated that the private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and consummated by mere consent, and is binding on and effective between the parties. This statement of the principle is correct [pp. 89-92, rec.]. III ADEQUATE CONSIDERATION OR PRICE FOR THE SALE IN FAVOR OF CARBONELL It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the part of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at P9.50 per square meter, on condition that Carbonell [1] should pay (a) the amount of P400.00 to

Poncio and 9b) the arrears in the amount of P247.26 to the bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the said sale with assumption of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount that Poncio told her as his arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him by Carbonell the following day. This conveyance was confirmed that same day, January 27, 1955, by the private document, Exhibit "A", which was prepared in the Batanes dialect by the witness Constancio Meonada, who is also from Batanes like Poncio and Carbonell. The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the land without paying any rental for one year, after which he should pay rent if he could not still find a place to transfer his house. All these terms are part of the consideration of the sale to Carbonell. It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of Poncio to Carbonell of the lot in question. But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and told Carbonell, who confronted him about it, that he would not withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of injustice and outrage is the widow Carbonell and not the Infantes, who without moral compunction exploited the greed and treacherous nature of Poncio, who, for love of money and without remorse of conscience, dishonored his own plighted word to Carbonell, his own cousin. Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold the same to Carbonell. Being guilty of bad faith, both in taking physical possession of the lot and in recording their deed of sale, the Infantes cannot recover the value of the improvements they introduced in the lot. And after the filing by Carbonell of the complaint in June, 1955, the Infantes had less justification to erect a building thereon since their title to said lot is seriously disputed by Carbonell on the basis of a prior sale to her. With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit for him to remain in the premises in ease he decides to sell the property to Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating: ... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under the belief that it 'was a permit for him to remain in the premises in the event that 'he decided to sell the property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he had not decided as yet to sell that land to plaintiff, who had never increased her offer of P15 a square meter, there as no reason for Poncio to get said permit from her. Upon the they if plaintiff intended to mislead Poncio, she would have Exhibit A to be drafted, probably, in English, instead of taking the trouble of seeing to it that it was written precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither illiterate nor so ignorant as to sign a document without reading its contents, apart from the fact that Meonada had read Exhibit A to him-and given him a copy thereof, before he signed thereon, according to Meonada's uncontradicted testimony. (pp. 4647, ROA). As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent from the resolution of the majority of the Special Division. of Five on October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between the parties, since sale is a consensual contract and is perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the parties and accords to the vendee the right to compel the vendor to execute the proper public document As a matter of fact, Exhibit A, while merely a private document, can be fully or partially performed, to it from the operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively transferred the possession of the lot to the vendee

Carbonell by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor Poncio continued to retain physical possession of the lot as tenant of the vendee and no longer as knew thereof. More than just the signing of Exhibit A by Poncio and Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio agreed to the actual payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his mortgage passbook to' Carbonell. IV IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A" The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter of the sale, was correctly disposed of in the first decision of the trial court of December 5, 1962, thus: "The defendant argues that there is even no description of the lot referred to in the note (or memorandum), especially when the note refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff points out that one- half lot was mentioned in Exhibit 'A' because the original description carried in the title states that it was formerly part of a bigger lot and only segregated later. The explanation is tenable, in (sic) considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion that there is sufficient description of the lot referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio and where he has his improvements erected. The Identity of the parcel of land involved herein is sufficiently established by the contents of the note Exh. 'A'. For a while, this court had that similar impression but after a more and through consideration of the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic) the conclusion stated earlier" (pp. 53-54, ROA). Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank. The transaction therefore between Poncio and Carbonell can only refer and does refer to the lot involved herein. If Poncio had another lot to remove his house, Exhibit A would not have stipulated to allow him to stay in the sold lot without paying any rent for one year and thereafter to pay rental in case he cannot find another place to transfer his house. While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic Savings Bank to redeem the mortgage. It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op the disputed lot are governed by Articles 546 and 547 of the New Civil Code. Their expenses consisting of P1,500.00 for draining the property, filling it with 500 cubic meters of garden soil, building a wall around it and installing a gate and P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45). Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements unless the person who defeated him in his possession refunds him the amount of such useful expenses or pay him the increased value the land may have acquired by reason thereof. Under Article 547, the possessor in good faith has also the right to remove the useful improvements if such removal can be done without damage to the land, unless the person with the superior right elects to pay for the useful improvements or reimburse the expenses therefor under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad faith has neither the right of retention of useful improvements nor the right to a refund for useful expenses. But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors in bad faith, should be allowed to remove the aforesaid improvements, unless petitioner Carbonell chooses to pay for their value at the time the Infantes introduced said useful improvements in 1955 and 1959. The Infantes

cannot claim reimbursement for the current value of the said useful improvements; because they have been enjoying such improvements for about two decades without paying any rent on the land and during which period herein petitioner Carbonell was deprived of its possession and use. WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00). PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED PERIOD OF THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS WITHIN WHICH THE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL IMPROVEMENTS. WITH COSTS AGAINST PRIVATE RESPONDENTS. EN BANC

G.R. No. L-27587 February 18, 1970 AMADO CARUMBA, petitioner, vs. THE COURT OF APPEALS, SANTIAGO BALBUENA and ANGELES BOAQUIA as Deputy Provincial Sheriff,respondents. Luis N. de Leon for petitioner. Reno R. Gonzales for respondents.

REYES, J.B.L., J.: Amado Carumba petitions this Supreme Court for a certiorari to review a decision of the Court of Appeals, rendered in its Case No. 36094-R, that reversed the judgment in his favor rendered by the Court of First Instance of Camarines Sur (Civil Case 4646). The factual background and history of these proceedings is thus stated by the Court of Appeals (pages 1-2):

On April 12, 1955, the spouses Amado Canuto and Nemesia Ibasco, by virtue of a "Deed of Sale of Unregistered Land with Covenants of Warranty" (Exh. A), sold a parcel of land, partly residential and partly coconut land with a periphery (area) of 359.09 square meters, more or less, located in the barrio of Santo Domingo, Iriga, Camarines Sur, to the spouses Amado Carumba and Benita Canuto, for the sum of P350.00. The referred deed of sale was never registered in the Office of the Register of Deeds of Camarines Sur, and the Notary, Mr. Vicente Malaya, was not then an authorized notary public in the place, as shown by Exh. 5. Besides, it has been expressly admitted by appellee that he is the brother-in-law of Amado Canuto, the alleged vendor of the property sold to him. Amado Canuto is the older brother of the wife of the herein appellee, Amado Carumba. On January 21, 1957, a complaint (Exh. B) for a sum or money was filed by Santiago Balbuena against Amado Canuto and Nemesia Ibasco before the Justice of the Peace Court of Iriga, Camarines Sur, known as Civil Case No. 139 and on April 15, 1967, a decision (Exh. C) was rendered in favor of the plaintiff and against the defendants. On October 1, 1968, the ex-officio Sheriff, Justo V. Imperial, of Camarines Sur, issued a "Definite Deed of Sale (Exh. D) of the property now in question in favor of Santiago Balbuena, which instrument of sale was registered before the Office of the Register of Deeds of Camarines Sur, on October 3, 1958. The aforesaid property was declared for taxation purposes (Exh. 1) in the name of Santiago Balbuena in 1958. The Court of First instance, finding that after execution of the document Carumba had taken possession of the land, planting bananas, coffee and other vegetables thereon, declared him to be the owner of the property under a consummated sale; held void the execution levy made by the sheriff, pursuant to a judgment against Carumba's vendor, Amado Canuto; and nullified the sale in favor of the judgment creditor, Santiago Balbuena. The Court, therefore, declared Carumba the owner of the litigated property and ordered Balbuena to pay P30.00, as damages, plus the costs. The Court of Appeals, without altering the findings of fact made by the court of origin, declared that there having been a double sale of the land subject of the suit Balbuena's title was superior to that of his adversary under Article 1544 of the Civil Code of the Philippines, since the execution sale had been properly registered in good faith and the sale to Carumba was not recorded. We disagree. While under the invoked Article 1544 registration in good faith prevails over possession in the event of a double sale by the vendor of the same piece of land to different vendees, said article is of no application to the case at bar, even if Balbuena, the later vendee, was ignorant of the prior sale made by his judgment debtor in favor of petitioner Carumba. The reason is that the purchaser of unregistered land at a sheriff's execution sale only steps into the shoes of the judgment debtor, and merely acquires the latter's interest in the property sold as of the time the property was levied upon. This is specifically provided by section 35 of Rule 39 of the Revised Rules of Court, the second paragraph of said section specifically providing that: Upon the execution and delivery of said (final) deed the purchaser, redemptioner, or his assignee shall be substituted to and acquire all the right, title, interest, and claim of the judgment debtor to the property as of the time of the levy, except as against the judgment debtor in possession, in which case the substitution shall be effective as of the time of the deed ... (Emphasis supplied) While the time of the levy does not clearly appear, it could not have been made prior to 15 April 1957, when the decision against the former owners of the land was rendered in favor of Balbuena. But the deed of sale in favor of Canuto had been executed two years before, on 12 April 1955, and while only embodied in a private document, the same, coupled with the fact that the buyer (petitioner Carumba) had taken possession of the unregistered land sold, sufficed to vest ownership on the said buyer. When the levy was made by the Sheriff, therefore, the judgment debtor no longer had dominical interest nor any real right over the land that could pass to the purchaser at the execution sale. 1 Hence, the latter must yield the land to petitioner Carumba. The rule is different in case of lands covered by Torrens titles, where the prior sale is neither recorded nor known to the execution purchaser prior to the levy;2 but the land here in question is admittedly not registered under Act No. 496.

WHEREFORE, the decision of the Court of Appeals is reversed and that of the Court of First Instance affirmed. Costs against respondent Santiago Balbuena SECOND DIVISION G.R. No. 180665 August 11, 2010

HEIRS OF PAULINO ATIENZA, namely, RUFINA L. ATIENZA, ANICIA A. IGNACIO, ROBERTO ATIENZA, MAURA A. DOMINGO, AMBROCIO ATIENZA, MAXIMA ATIENZA, LUISITO ATIENZA, CELESTINA A. GONZALES, REGALADO ATIENZA and MELITA A. DELA CRUZ Petitioners, vs. DOMINGO P. ESPIDOL, Respondent. DECISION ABAD, J.: This case is about the legal consequences when a buyer in a contract to sell on installment fails to make the next payments that he promised. The Facts and the Case Petitioner Heirs of Paulino Atienza, namely, Rufina L. Atienza, Anicia A. Ignacio, Roberto Atienza, Maura A. Domingo, Ambrocio Atienza, Maxima Atienza, Luisito Atienza, Celestina A. Gonzales, Regalado Atienza and Melita A. Dela Cruz (collectively, the Atienzas)1 own a 21,959 square meters of registered agricultural land at Valle Cruz, Cabanatuan City.2 They acquired the land under an emancipation patent3 through the governments land reform program.4 On August 12, 2002 the Atienzas and respondent Domingo P. Espidol entered into a contract called Kasunduan sa Pagbibili ng Lupa na may Paunang-Bayad (contract to sell land with a down payment) covering the property.5They agreed on a price of P130.00 per square meter or a total of P2,854,670.00, payable in three installments:P100,000.00 upon the signing of the contract; P1,750,000.00 in December 2002, and the remaining P974,670.00 in June 2003. Respondent Espidol paid the Atienzas P100,000.00 upon the execution of the contract and paidP30,000.00 in commission to the brokers. When the Atienzas demanded payment of the second installment of P1,750,000.00 in December 2002, however, respondent Espidol could not pay it. He offered to pay the Atienzas P500.000.00 in the meantime,6 which they did not accept. Claiming that Espidol breached his obligation, on February 21, 2003 the Atienzas filed a complaint7 for the annulment of their agreement with damages before the Regional Trial Court (RTC) of Cabanatuan City in Civil Case 4451. In his answer,8 respondent Espidol admitted that he was unable to pay the December 2002 second installment, explaining that he lost access to the money which he shared with his wife because of an injunction order issued by an American court in connection with a domestic violence case that she filed against him.9 In his desire to abide by his obligation, however, Espidol took time to travel to the Philippines to offer P800,000.00 to the Atienzas. Respondent Espidol also argued that, since their contract was one of sale on installment, his failure to pay the installment due in December 2002 did not amount to a breach. It was merely an event that justified the Atienzas not to convey the title to the property to him. The non -payment of an installment is not a legal ground for annulling a perfected contract of sale. Their remedy was to bring an action for specific performance. Moreover, Espidol contended that the action was premature since the last payment was not due until June 2003. In a decision10 dated January 24, 2005, the RTC ruled that, inasmuch as the non-payment of the purchase price was not considered a breach in a contract to sell on installment but only an event that

authorized the vendor not to convey title, the proper issue was whether the Atienzas were justified in refusing to accept respondent Espidols offer of an amount lesser than that agreed upon on the second installment. The trial court held that, although respondents legal problems abroad cannot justify his failure to comply with his contractual obligation to pay an installment, it could not be denied that he made an honest effort to pay at least a portion of it. His traveling to the Philippines from America showed his willingness and desire to make good on his obligation. His good faith negated any notion that he intended to renege on what he owed. The Atienzas brought the case to court prematurely considering that the last installment was not then due. Furthermore, said the RTC, any attempt by the Atienzas to cancel the contract would have to comply with the provisions of Republic Act (R.A.) 6552 or the Realty Installment Buyer Protection Act (R.A. 6552), particularly the giving of the required notice of cancellation, that they omitted in this case. The RTC thus declared the contract between the parties valid and subsisting and ordered the parties to comply with its terms and conditions. On appeal,11 the Court of Appeals (CA) affirmed the decision of the trial court.12 Not satisfied, the Atienzas moved for reconsideration.13 They argued that R.A. 6552 did not apply to the case because the land was agricultural and respondent Espidol had not paid two years worth of installment that the law required for coverage. And, in an apparent shift of theory, the Atienzas now also impugn the validity of their contract to sell, claiming that, since the property was covered by an emancipation patent, its sale was prohibited and void. But the CA denied the motion for reconsideration, hence, the present petition.14 Questions Presented The questions presented for resolution are: 1. Whether or not the Atienzas could validly sell to respondent Espidol the subject land which they acquired through land reform under Presidential Decree 27 15 (P.D. 27); 2. Whether or not the Atienzas were entitled to the cancellation of the contract to sell they entered into with respondent Espidol on the ground of the latters failure to pay the second installment when it fell due; and 3. Whether or not the Atienzas action for cancellation of title was premature absent the notarial notice of cancellation required by R.A. 6552. The Courts Rulings One. That the Atienzas brought up the illegality of their sale of subject land only when they filed their motion for reconsideration of the CA decision is not lost on this Court. As a rule, no question will be entertained on appeal unless it was raised before the court below. This is but a rule of fairness. 16 Nonetheless, in order to settle a matter that would apparently undermine a significant policy adopted under the land reform program, the Court cannot simply shirk from the issue. The Atienzas title shows on its face that the government granted title to them on January 9, 1990 by virtue of P.D. 27. This law explicitly prohibits any form of transfer of the land granted under it except to the government or by hereditary succession to the successors of the farmer beneficiary. Upon the enactment of Executive Order 22817 in 1987, however, the restriction ceased to be absolute. Land reform beneficiaries were allowed to transfer ownership of their lands provided that their amortizations with the Land Bank of the Philippines (Land Bank) have been paid in full. 18 In this case, the Atienzas title categorically states that they have fully complied with the requirements for the final grant of title under P.D. 27. This means that they have completed payment of their amortization with Land Bank. Consequently, they could already legally transfer their title to another.

Two. Regarding the right to cancel the contract for non-payment of an installment, there is need to initially determine if what the parties had was a contract of sale or a contract to sell. In a contract of sale, the title to the property passes to the buyer upon the delivery of the thing sold. In a contract to sell, on the other hand, the ownership is, by agreement, retained by the seller and is not to pass to the vendee until full payment of the purchase price. In the contract of sale, t he buyers non-payment of the price is a negative resolutory condition; in the contract to sell, the buyers full payment of the price is a positive suspensive condition to the coming into effect of the agreement. In the first case, the seller has lost and cannot recover the ownership of the property unless he takes action to set aside the contract of sale. In the second case, the title simply remains in the seller if the buyer does not comply with the condition precedent of making payment at the time specified in the contract.19 Here, it is quite evident that the contract involved was one of a contract to sell since the Atienzas, as sellers, were to retain title of ownership to the land until respondent Espidol, the buyer, has paid the agreed price. Indeed, there seems no question that the parties understood this to be the case. 20 Admittedly, Espidol was unable to pay the second installment of P1,750,000.00 that fell due in December 2002.1awph!1That payment, said both the RTC and the CA, was a positive suspensive condition failure of which was not regarded a breach in the sense that there can be no rescission of an obligation (to turn over title) that did not yet exist since the suspensive condition had not taken place. And this is correct so far. Unfortunately, the RTC and the CA concluded that should Espidol eventually pay the price of the land, though not on time, the Atienzas were bound to comply with their obligation to sell the same to him. But this is error. In the first place, since Espidol failed to pay the installment on a day certain fixed in their agreement, the Atienzas can afterwards validly cancel and ignore the contract to sell because their obligation to sell under it did not arise. Since the suspensive condition did not arise, the parties stood as if the conditional obligation had never existed. 21 Secondly, it was not a pure suspensive condition in the sense that the Atienzas made no undertaking while the installments were not yet due. Mr. Justice Edgardo L. Paras gave a fitting example of suspensive condition: "Ill buy your land for P1,000.00 if you pass the last bar examinations." This he said was suspensive for the bar examinations results will be awaited. Meantime the buyer is placed under no immediate obligation to the person who took the examinations.22 Here, however, although the Atienzas had no obligation as yet to turn over title pending the occurrence of the suspensive condition, it was implicit that they were under immediate obligation not to sell the land to another in the meantime. When Espidol failed to pay within the period provided in their agreement, the Atienzas were relieved of any obligation to hold the property in reserve for him. The ruling of the RTC and the CA that, despite the default in payment, the Atienzas remained bound to this day to sell the property to Espidol once he is able to raise the money and pay is quite unjustified. The total price wasP2,854,670.00. The Atienzas decided to sell the land because petitioner Paulino Atienza urgently needed money for the treatment of his daughter who was suffering from leukemia.23 Espidol paid a measly P100,000.00 in down payment or about 3.5% of the total price, just about the minimum size of a brokers commission. Espidol failed to pay the bulk of the price, P1,750,000.00, when it fell due four months later in December 2002. Thus, it was not such a small default as to justify the RTC and the CAs decision to continue to tie up the Atienzas to the contract to sell upon the excuse that Espidol tried his honest best to pay. Although the Atienzas filed their action with the RTC on February 21, 2003, four months before the last installment of P974,670.00 fell due in June 2003, it cannot be said that the action was premature. Given Espidols failure to pay the second installment of P1,750,000.00 in December 2002 when it was due, the Atienzas obligation to turn over ownership of the property to him may be regarded as no longer existing.24 The Atienzas had the right to seek judicial declaration of such non-existent status of that contract to relieve themselves of any liability should they decide to sell the property to someone else. Parenthetically, Espidol never offered to settle the full amount of the price in June 2003, when the last installment fell due, or during the whole time the case was pending before the RTC. Three. Notice of cancellation by notarial act need not be given before the contract between the Atienzas and respondent Espidol may be validly declare non-existent. R.A. 6552 which mandated the

giving of such notice does not apply to this case. The cancellation envisioned in that law pertains to extrajudicial cancellation or one done outside of court,25 which is not the mode availed of here. The Atienzas came to court to seek the declaration of its obligation under the contract to sell cancelled. Thus, the absence of that notice does not bar the filing of their action. Since the contract has ceased to exist, equity would, of course, demand that, in the absence of stipulation, the amount paid by respondent Espidol be returned, the purpose for which it was given not having been attained;26and considering that the Atienzas have consistently expressed their desire to refund the P130,000.00 that Espidol paid.27 WHEREFORE, the Court GRANTS the petition and REVERSES and SETS ASIDE the August 31, 2007 decision and November 5, 2007 resolution of the Court of Appeals in CA-G.R. CV 84953. The Court declares theKasunduan sa Pagbibili ng Lupa na may Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs obligation under it non-existent. The Court directs petitioner Heirs of Atienza to reimburse the P130,000.00 down payment to respondent Espidol. SO ORDERED. G.R. No. 153788 November 27, 2009

ROGER V. NAVARRO, Petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES, Respondents. DECISION BRION, J.: This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro) motion to dismiss. BACKGROUND FACTS On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98599 (first complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros possession. The first complaint stated: 1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO; 2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-51680 Motor No. 6D15-338735 Plate No. GHK-378 as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx 4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff; xxx 8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not been properly issued. The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows: Make/Type FUSO WITH MOUNTED CRANE Serial No. FK416K-510528 Motor No. 6D14-423403 The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment.8 On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) the actionable documents on which the complaints were based. On Navarros motion, both cases were duly consolidated on December 13, 1999. In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action. In response to the motion for reconsideration Karen Go filed dated May 26, 2000, 11 the RTC issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Gos leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.1avvphi1 When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading. On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order. 13 The CA also denied Navarros motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition. THE PETITION Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real partyin-interest and the complaints failed to state a cause of action. Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints. Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff. Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules. Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed. Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints lack of cause of action. THE COURTS RULING We find the petition devoid of merit. Karen Go is the real party-in-interest The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. 15 Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go. As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none. We do not find Navarros arguments persuasive. The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides: This agreement, made and entered into by and between: GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager, xxx thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements. As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code: Art. 44. The following are juridical persons:

(1) The State and its political subdivisions; (2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law; (3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member. Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises? We faced a similar question in Juasing Hardware v. Mendoza,17 where we said: Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court. Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as is customarily done.18 [Emphasis supplied.] This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states: SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits. Glenn Gos Role in the Case We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES." 20 That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties positions, Navarro alleges that Kargo Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is registered sol ely in Karen Gos name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property. The registration of the trade name in the name of one person a woman does not necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is

married. By law, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22 Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that the property was acquired with funds of the partnership.The presumption applies even when the manner in which the property was acquired does not appear.23[Emphasis supplied.] Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property. Article 124 of the Family Code, on the administration of the conjugal property, provides: Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision. xxx This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property. Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses marriage settlement and by the rules on partnersh ip under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance. A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code, which states: Art. 1811. A partner is a co-owner with the other partners of specific partnership property. The incidents of this co-ownership are such that: (1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; xxx Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title," we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property. While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De

Guzman.24 In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said: Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3. Article 108 of the Family Code provides: Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. This provision is practically the same as the Civil Code provision it superseded: Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter. In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit. Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the coowners may bring an action for ejectment, covers all kinds of action for the recovery of possession. In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.25[Emphasis supplied.] Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouses consent. On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states: Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by law. Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27 Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus: Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately. In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed. In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order. Demand not required prior to filing of replevin action In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer. For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states: Sec. 2. Affidavit and bond. The applicant must show by his own affidavit or that of some other person who personally knows the facts: (a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof; (b) That the property is wrongfully detained by the adverse party , alleging the cause of detention thereof according to the best of his knowledge, information, and belief; (c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and (d) The actual market value of the property. The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action. We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarros position that a demand is necessary and has not been made is therefore totally unmeritorious. WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V. Navarro. SO ORDERED. FIRST DIVISION G.R. No. 143573 January 30, 2009

ADORACION ROSALES RUFLOE, ALFREDO RUFLOE and RODRIGO RUFLOE, Petitioners, vs. LEONARDA BURGOS, ANITA BURGOS, ANGELITO BURGOS, AMY BURGOS, ELVIRA DELOS REYES and JULIAN C. TUBIG, Respondents. DECISION LEONARDO-DE CASTRO, J.: Under consideration is this petition for review under Rule 45 of the Rules of Court seeking the reversal and setting aside of the Decision1 dated January 17, 2000 of the Court of Appeals (CA) in CA-G.R. CV. No. 49939, and its Resolution2 dated June 9, 2000, denying petitioners motion for reconsideration. The assailed decision reversed and set aside the February 10, 1995 decision 3 of the Regional Trial Court (RTC) at Muntinlupa, Metro Manila, Branch 276,4 in its Civil Case No. 90-359, an action for Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles and Damages, commenced by the petitioners against herein respondents. The factual antecedents are as follows: Petitioner Adoracion Rufloe is the wife of Angel Rufloe, now deceased, while co-petitioners Alfredo and Rodrigo are their children. During the marriage of Adoracion and Angel, they acquired a 371square meter parcel of land located at Barangay Bagbagan, Muntinlupa, and covered by Transfer Certificate of Title (TCT) No. 406851 which is the subject of the present controversy. Sometime in 1978, respondent Elvira Delos Reyes forged the signatures of Adoracion and Angel in a Deed of Sale dated September 8, 1978 to make it appear that the disputed property was sold to her by the spouses Rufloe. On the basis of the said deed of sale, Delos Reyes succeeded in obtaining a title in her name, TCT No. S-74933. Thus, in November 1979, the Rufloes filed a complaint for damages against Delos Reyes with the RTC of Pasay City alleging that the Deed of Sale was falsified as the signatures appearing thereon were forged because Angel Rufloe died in 1974, which was four (4) years before the alleged sale in favor of Delos Reyes. The complaint was docketed as Civil Case No. M-7690.5 They also filed a notice of adverse claim on November 5, 1979. On December 4, 1984, during the pendency of Civil Case No. M-7690, Delos Reyes sold the subject property to respondent siblings Anita, Angelina, Angelito and Amy (Burgos siblings). A new title, TCT No. 135860, was then issued in their names. On December 12, 1985, the Burgos siblings, in turn, sold the same property to their aunt, Leonarda Burgos. However, the sale in favor of Leonarda was not registered. Thus, no title was issued in her

name. The subject property remained in the name of the Burgos siblings who also continued paying the real estate taxes thereon. On February 6, 1989, the RTC of Pasay City, Branch 108,6 rendered its decision in Civil Case No. M7690 declaring that the Deed of Sale in favor of Delos Reyes was falsified as the signatures of the spouses Rufloe had been forged. The trial court ruled that Delos Reyes did not acquire ownership over the subject property. Said decision had become final and executory. Such was the state of things when, on February 8, 1990, in the RTC of Muntinlupa, the Rufloes filed their complaint for Declaration of Nullity of Contract and Cancellation of Transfer Certificate of Titles against respondents Leonarda and the Burgos siblings, and Delos Reyes. In their complaint, docketed as Civil Case No. 90-359, the Rufloes basically alleged that inasmuch as the Deed of Sale in favor of Delos Reyes was falsified, no valid title was ever conveyed to the Burgos siblings. 7 The Burgos siblings executed a simulated deed of sale in favor of Leonarda knowing fully well that their title was a nullity. In their common "Answer," respondents maintained that they bought the property in good faith after they were shown a genuine copy of the title of the disputed property by Delos Reyes. They also insisted that they were innocent purchasers in good faith and for value.8 On February 10, 1995, the trial court rendered a decision declaring that Leonarda and the Burgos siblings were not innocent purchasers for value and did not have a better right to the property in question than the true and legal owners, the Rufloes. The trial court also held that the subsequent conveyance of the disputed property to Leonarda by the Burgos siblings was simulated to make it appear that Leonarda was a buyer in good faith. The trial court then directed the Register of Deeds of Makati, Rizal to reinstate the title of the spouses Rufloe, and to cancel all other titles subsequent to the said title particularly TCT No. S-74933 issued to Delos Reyes and TCT No. 135860 issued to the Burgos siblings.9 Respondents interposed an appeal to the CA, whereat the appellate recourse was docketed as CA-G.R. CV. No. 49939. As stated at the threshold hereof, the CA, in its decision dated January 17, 2000, reversed and set aside that of the trial court, declaring in the process that respondents were purchasers in good faith and for value. In so ruling, the CA explained: Measured by this yardstick, defendants-appellants [herein respondents] are purchasers in good faith and for value. Amado Burgos bought the subject property (for his children Anita, Angelina, Angelito and Amy) free from any lien or encumbrance or any notice of adverse claim annotated thereto. He was presented with a clean title already in the name of the seller. If a person purchases a piece of land on the assurance that the sellers title thereto is valid, he should not run the risk of being told later that his acquisition was ineffectual after all. If we were to void a sale of property covered by a clean and unencumbered torrens title, public confidence in the Torrens System would be eroded and transactions would have to be attended by complicated and inconclusive investigations and uncertain proof of ownership. The consequences would be that land conflicts could proliferate and become more abrasive, if not violent. (Words in bracket ours).10 Their motion for reconsideration having been denied by the CA in its equally challenged resolution of June 9, 2000, petitioners are now with us via the present recourse, faulting the CA as follows: A. THE HONORABLE COURT OF APPEALS DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THE HONORABLE SUPREME COURT. B. THERE ARE SPECIAL AND IMPORTANT REASONS THAT REQUIRE A REVIEW OF THE CA DECISION. C. THE HONORABLE CA ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT COUNTERMANDED THE FINDINGS OF THE REGIONAL TRIAL COURT EVEN ON POINTS AND QUESTIONS OF CREDIBILITY.

D. THE CA JUDGMENT THAT REVERSED THE RTC DECISION IS NOT SUPPORTED BY THE EVIDENCE ON RECORD AND IS CONTRARY TO ESTABLISHED PRECEDENTS LAID DOWN BY THE HONORABLE SUPREME COURT. E. THE CA ERRED IN LAW IN PRACTICALLY HOLDING THAT A DEAD MAN ANGEL RUFLOE (ANGEL NEVER SIGNED) VALIDLY DISPOSED OF HIS PROPERTY (A HOUSE AND LOT COVERED BY A TCT THROUGH A FALSIFIED DEED OF SALE) AFTER HIS DEATH FOUR (4) YEARS BEFORE THE EXECUTION OF THE DEED. F. THE CA ERRED IN LAW IN HOLDING ANITA, ANGELINA, AMY AND ANGELITO BURGOS AND THEIR SUCCESOR-IN-INTEREST (THEIR AUNT) LEONARDA BURGOS ARE BUYERS IN GOOD FAITH. G. THE CA IGNORED THE PLAIN PROVISIONS OF THE CIVIL CODE THAT "IN ALL CONTRACTUAL, PROPERTY OR OTHER RELATIONS, WHEN ONE OF THE PARTIES IS AT A DISADVANTAGE ON ACCOUNT OF HIS MORAL DEPENDENCE, IGNORANCE, INDIGENCE, MENTAL WEAKNESS, TENDER AGE OR OTHER HANDICAP, THE COURT MUST BE VIGILANT FOR HIS PROTECTION."11 In a gist, the issues to be resolved are (1) whether the sale of the subject property by Delos Reyes to the Burgos siblings and the subsequent sale by the siblings to Leonarda were valid and binding; and (2) whether respondents were innocent purchasers in good faith and for value despite the forged deed of sale of their transferor Delos Reyes. The issues necessitate an inquiry into the facts. While, as a rule, factual issues are not within the province of this Court, nonetheless, in light of the conflicting factual findings of the two (2) courts below, an examination of the facts obtaining in this case is in order. The Rufloes aver that inasmuch as the Deed of Sale purportedly executed by them in favor of Delos Reyes was a forgery, she could not pass any valid right or title to the Burgos siblings and Leonarda. The Rufloes also contend that since the Burgos siblings and Leonarda acquired the subject property with notice that another person has a right to or interest in such property, they cannot be considered innocent purchasers in good faith and for value. For their part, the Burgos siblings and Leonarda insist that their title is valid and binding. They maintain that under the Torrens System, a person dealing with registered land may safely rely on the correctness on the certificate of title without the need of further inquiry. For this reason, the Court cannot disregard the right of an innocent third person who relies on the correctness of the certificate of title even if the sale is void. We find merit in the petition. The issue concerning the validity of the deed of sale between the Rufloes and Delos Reyes had already been resolved with finality in Civil Case No. M-7690 by the RTC of Pasay City which declared that the signatures of the alleged vendors, Angel and Adoracion Rufloe, had been forged.12 It is undisputed that the forged deed of sale was null and void and conveyed no title. It is a well-settled 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 right than what the seller can transfer legally.13 Due to the forged deed of sale, Delos Reyes acquired no right over the subject property which she could convey to the Burgos siblings. All the transactions subsequent to the falsified sale between the spouses Rufloe and Delos Reyes are likewise void, including the sale made by the Burgos siblings to their aunt, Leonarda. We now determine whether respondents Burgos siblings and Leonarda Burgos were purchasers in good faith. It has been consistently ruled that a forged deed can legally be the root of a valid title when an innocent purchaser for value intervenes.14

An innocent purchaser for value is one who buys the property of another without notice that some other person has a right to or interest in it, and who pays a full and fair price at the time of the purchase or before receiving any notice of another persons claim.15 The burden of proving the status of a purchaser in good faith and for value lies upon one who asserts that status. This onus probandi cannot be discharged by mere invocation of the ordinary presumption of good faith.16 As a general rule, every person dealing with registered land, as in this case, may safely rely on the correctness of the certificate of title issued therefor and will in no way oblige him to go beyond the certificate to determine the condition of the property. However, this rule admits of an unchallenged exception: a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of inquiring further except 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. The presence of anything which excites or arouses suspicion should then prompt the vendee to look beyond the certificate and investigate the title of the vendor appearing on the face of said certificate. One who falls within the exception can neither be denominated an innocent purchaser for value nor a purchaser in good faith and, hence, does not merit the protection of the law.17 The circumstances surrounding this case point to the absolute lack of good faith on the part of respondents. The evidence shows that the Rufloes caused a notice of adverse claim to be annotated on the title of Delos Reyes as early as November 5, 1979. 18 The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or may have a better right than the registered owner thereof. Despite the notice of adverse claim, the Burgos siblings still purchased the property in question. Too, at the time the Burgos siblings bought the subject property on December 4, 1984, Civil Case No. M-7690,19an action for damages, and Criminal Case No. 10914-P,20 for estafa, filed by the Rufloes against Delos Reyes, were both pending before the RTC of Pasay City. This circumstance should have alerted the Burgos siblings as to the validity of Delos Reyes title and her authority and legal right to sell the property. Equally significant is the fact that Delos Reyes was not in possession of the subject property when she sold the same to the Burgos siblings. It was Amado Burgos who bought the property for his children, the Burgos siblings. Amado was not personally acquainted with Delos Reyes prior to the sale because he bought the property through a real estate broker, a certain Jose Anias, and not from Delos Reyes herself. There was no showing that Amado or any of the Burgos siblings exerted any effort to personally verify with the Register of Deeds if Delos Reyes certificate of title was clean and authentic. They merely relied on the title as shown to them by the real estate broker. An ordinarily prudent man would have inquired into the authenticity of the certificate of title, the p ropertys location and its owners. Although it is a recognized principle that a person dealing with registered land need not go beyond its certificate of title, it is also a firmly established rule that where circumstances exist which would put a purchaser on guard and prompt him to investigate further, such as the presence of occupants/tenants on the property offered for sale, it is expected that the purchaser would inquire first into the nature of possession of the occupants, i.e., whether or not the occupants possess the land in the concept of an owner. Settled is the rule that a buyer of real property that is in the possession of a person other than the seller must be wary and should investigate the rights of those in possession. Otherwise, without such inquiry, the buyer can hardly be regarded as a buyer in good faith.21 In the same vein, Leonarda cannot be categorized as a purchaser in good faith. Since it was the Rufloes who continued to have actual possession of the property, Leonarda should have investigated the nature of their possession. We cannot ascribe good faith to those who have not shown any diligence in protecting their rights. Respondents had knowledge of facts that should have led them to inquire and investigate in order to acquaint themselves with possible defects in the title of the seller of the

property.1avvphi1.zw+ However, they failed to do so. Thus, Leonarda, as well as the Burgos siblings, cannot take cover under the protection the law accords to purchasers in good faith and for value. They cannot claim valid title to the property. Moreover, the defense of indefeasibility of a Torrens title does not extend to a transferee who takes it with notice of a flaw in the title of his transferor. To be effective, the inscription in the registry must have been made in good faith. A holder in bad faith of a certificate of title is not entitled to the protection of the law, for the law cannot be used as a shield for fraud.22 We quote with approval the following findings of the trial court showing that the sale between the Burgos siblings and Leonarda is simulated: 1. The sale was not registered, a circumstance which is inconceivable in a legitimate transfer. A true vendee would not brook any delay in registering the sale in his favor. Not only because registration is the operative act that effects property covered by the Torrens System, but also because registration and issuance of new title to the transferee, enable this transferee to assume domiciliary and possessory rights over the property. These benefits of ownership shall be denied him if the titles of the property shall remain in the name of vendor. Therefore, it is inconceivable as contrary to behavioral pattern of a true buyer and the empirical knowledge of man to assume that a buyer who invested on the property he bought would be uninvolved and not endeavor to register the property he bought. The nonchalance of Leonarda amply demonstrates the pretended sale to her, and the evident scheme of her brother Amado who invested on the property he bought. 2. Despite the sale of property to Leonarda, the sellers continued paying taxes on the property from the time they acquired it from Elvira in 1984 up to the present or a period of ten years. The tax payment receipts remained in the name of Anita and her siblings, (Exhibits "16" to "16-H"). On the other hand, Leonarda does not even pretend to have paid any tax on the land she allegedly bought in 1985. Even the Tax Declaration issued in 1988, three years after the sale to her (Leonarda) is still in the name of her nieces and nephew. These circumstances can only account for the fact that her nieces and nephew remained the owners of the land and continued paying taxes thereon. 3. Leonarda never exercised the attributes of ownership. Far from it, she vested the exercise of domiciliary and possessory rights in her brother Amado the father of Anita, Angelina, Angelito and Amy, by constituting him with full power including the ejectment of plaintiffs, to defend and to enter a compromise of any case he may file. She allowed the children of Amado to remain as the registered owners of the property without pressing for its transfer to her. 4. And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not plausibly assume the stance of a buyer in good faith from the forger Elvira Delos Reyes, knowing of Elviras defective title, Amado hoped that the entry of his sister Leonarda, might conjure the image and who might pass off as an innocent purchaser, specially considering that the notice of adverse claim of the Plaintiffs which was annotated in Elviras title was not, strangely enough, NOT carried over in the title of his children, who were made to appear as the sellers to their Aunt Leonarda. It was a neat chicanery of Amado to bring the property out of the reach of Plaintiffs thru a series of transfers involving a third party, to make her appear as an innocent purchaser for value. His sister could be manipulated to evict or oust the real owners from their own property thru a documentary manipulation. Unfortunately, his scheme has not passed unnoticed by a discerning and impartial evaluator, like this court. The Municipal Court of Muntinlupa in Civil Case No. 17446 has even established that Amados children Anita and others are buyers in bad faith who knew of the defective title of their transferor Elvira Delos Reyes, the forger, as aforestated. These circumstances taken altogether would show that the sale, which occurred between Leonarda and the Burgos siblings, was simply a scheme designed to cleanse the title passed on to them by the forger Delos Reyes. Respondents had to resort to this strategy because they were fully aware that their

title, having originated from the forged deed of sale of Delos Reyes, was not a clean and valid title. The trial court explained, thus: And, this simulated sale is the handiwork of Amado who apparently acted advisedly to make it appear that his sister Leonarda as the second transferee of the property is an innocent purchaser for value. Since he or his children could not plausibly assume the stamp of a buyer in good faith from the forger Elvira Delos Reyes, knowing Elviras defective title, Amado had hoped that the entry of hi s sister Leonarda, might conjure the image and might pass off as an innocent purchaser. xxx. It was a neat chicanery of Amado to bring the property out of the reach of plaintiffs [herein petitioners] thru a series of transfers involving a third party, to make her appear as an innocent purchaser for value. Unfortunately, his scheme has not passed unnoticed by a discerning and impartial evaluator, like this Court.23 (Words in bracket ours) Patently, the Burgos siblings were not innocent purchasers for value and the simulated sale to Leonarda did not remove the defect in their title. Accordingly, we sustain the trial courts award of P20,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as attorneys fees.24 However, the actual damages in the amount of P134,200.00 should be deleted. In view of this Courts ruling that the property rightfully belongs to petitioners and must be restored to them, there is no more basis for the award of said actual damages to the Rufloes. WHEREFORE, the petition for review is hereby GRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. CV. No. 49939 are REVERSED and SET ASIDE. Accordingly, the decision of the trial court is hereby REVIVED, except the award of actual damages which must be deleted. SO ORDERED. SECOND DIVISION G.R. No. 170282 December 18, 2008

ALEXANDER and JEAN J. BACUNGAN, petitioners, vs. COURT OF APPEALS and SPS. NAPOLEON and VICTORIA VELO, respondents. DECISION TINGA, J.: This is a petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure, assailing the decision2 and resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 64370. The Decision dated 21 March 2005 reversed and set aside the judgment4 of dismissal by the Regional Trial Court (RTC), Branch 53, Pangasinan in the action for reconveyance filed by respondents against petitioners, while the resolution denied petitioners motion for reconsideration of the CA decision. The following factual antecedents are matters of record. Respondents Napoleon and Victoria Velo instituted an action for reconveyance with damages against petitioners Alexander and Jean Jimeno Bacungan before the RTC of Rosales, Pangasinan. In the complaint,5 docketed as Civil Case No. 1085-R, respondents alleged that they were the registered owners of 18 parcels of land situated in Rosales, Pangasinan and embraced in Transfer Certificate of Title (TCT) Nos. 34998, 36022, 35158, 36017, 18128, 26761, 36020, 28387, 35585, 25739, 36023, 40059, 40055, 40060, 40057, 40056, 36967 and 35268.6

Respondents claimed that sometime in February of 1993, they had experienced business reversals and financial difficulties and had sought assistance from petitioners in securing a loan. Petitioners allegedly proposed that they would obtain the loan from the bank provided that respondents secure the transfer of the titles to petitioners that would be used as security for the loan. Respondents agreed, executed the corresponding deeds of sale and caused the cancellation and issuance of new TCTs over the properties in favor of petitioners. However, respondents claimed that after petitioners had obtained the new titles, they never applied for a loan with the bank but had secretly negotiated for the sale of the properties to third parties.7 In their answer,8 petitioners asserted that respondents offered to sell to them 23 parcels of land, 18 of which were used as collateral for the loan respondents had obtained from Traders Royal Bank. Petitioners claimed to have bought 22 parcels of land and executed the corresponding deeds of sale on 26 February 1993 and 10 March 1993. They also allegedly paid in full respondents obligation with said bank but only 18 certificates of title released by the bank were delivered to petitioners. Petitioners further maintained that out of their gratuitousness, they returned one of the deeds of sale to respondents and considered the sale as cancelled. Petitioners averred that the amounts they paid to respondents, as well as their payments to the bank, were more than enough as consideration of the 23 contracts.9 After trial on the merits, the RTC rendered a decision on 20 April 1999, dismissing the complaint for lack of merit. The RTC gave evidentiary weight on the notarized deeds of sale, the presumed validity and due execution of which, according to the RTC, were not overcome by the uncorroborated testimony of respondent Victoria Velo. The RTC held that in any case, respondents admitted to have voluntarily consented to the simulation of the contracts, thus, the principle of in pari delicto must prevail and both parties were at fault and should be left at where the law finds them. Respondents elevated the matter to the CA via a petition for review, arguing that the contracts between respondents and petitioners were simulated. On 21 March 2005, the CA rendered the assailed decision, reversing the RTCs judgment. The dispositive portion of the CAs decision reads: WHEREFORE, the assailed decision dated 20 April 1999 of the Regional Trial Court of Rosales, Pangasinan is SET ASIDE. Judgment is hereby rendered: 1. Declaring the Deeds of Sale covering parcels of land under TCT Nos. 34998, 36022, 35158, 36017, 18128, 26761, 36020, 28381, 35585, 25739, 36023, 40059, 40055, 40060, 40057, 40056, 36967and 35268 as simulated; and 2. Ordering the defendants-appellees to reconvey the aforesaid properties to the plaintiffs-appellants. SO ORDERED.10 In reversing the RTC decision, the CA held that by their contemporaneous and subsequent acts, the deeds of sale were simulated as the parties did not intend to be bound by them at all. Among the indicators pointed out by the appellate court in support of its conclusion were the gross inadequacy of prices, respondents failure to receive any part of the purchase price stated in the deeds of sale, the offer by petitioners to return some of the certificates of title and petitioner Alexander Bacungans admission that the sale was simulated.11 Petitioners filed a motion for reconsideration,12 raising the CAs failure to consider the amounts tendered by petitioners for the redemption of the properties as well as the amounts advanced by petitioners as payments of the properties. On 7 November 2005, the CA issued the assailed resolution, denying petitioners motion for reconsideration. Hence, the instant petition, raising the following arguments: (1) the deeds of sale embody the real agreement of the parties and are not nullified by the gross inadequacy of the prices; (2) the contracts

of sale cannot be simulated because prior to their execution, petitioner extended a loan to respondents which was used to redeem the mortgaged properties; and (3) respondents admitted that the only agreement was the contracts of sale; thus, the appellate court erred in interpreting the acts of the parties before and after their execution.13 The petition is partly meritorious. Respondents and petitioners advance contrasting claims. Petitioners would have this Court uphold the validity of the deeds of sale while respondents seek their nullification. Neither is claiming that they had agreed other terms and conditions not embodied in the deeds of sale or that the deeds of sale do not embody their real agreement. However, after a perusal of the records of the case, the Court finds that the resolution of the controversy cannot be limited only to determining whether the deeds of sale were void. Such issue may still be considered and resolved by the Court in the interest of substantial justice, if it finds that to do so is necessary to arrive at a just decision, or when an issue is closely related to an issue raised in the trial court and the Court of Appeals and is necessary for a just and complete resolution of the case.14 After a careful examination of the records of the case, the Court finds that the deeds of absolute sale do not embody the real intention of the parties. The records reveal that respondents had earlier executed several real estate mortgages over the properties to secure the payment of the total amount of P350,000.00.15 Respondents defaulted on the payments, prompting the bank to foreclose the properties. However, as illustrated in the testimony of respondent Victoria Velo, respondents and petitioners devised a plan in which they agreed that in exchange for the apparent transfer of ownership of the parcels of land to petitioners, the latter would provide for the funds for the redemption of the properties from the bank in addition to the loan that petitioners would obtain from the bank. Thus, respondents were able to redeem the properties for the amount of P369,000.00 that was advanced by way of mortgage to them by petitioners.16 The amount approximates the total loans in the amount ofP350,000.00 secured by the properties subject of the real estate mortgages executed by respondents.17 Thereafter, respondents executed several deeds of sale purporting to transfer the 18 parcels of lands for a total consideration of P232,000.00. The parties further agreed that upon the transfer of the properties in the name of petitioners, the latter would obtain another loan from the bank using the properties as collateral. Petitioners were supposed to remit the loan proceeds to respondents after deducting the amount of P369,000.00 lent by petitioners to respondents and, thereafter, allow respondents to buy back the properties. However, because petitioners had failed to secure a loan from the bank after the transfer of the titles in their names, respondents instituted the present action to nullify the deeds of sale on the ground that the sale was simulated. This kind of arrangement, where the ownership of the land is supposedly transferred to the buyer who provides for the funds to redeem the property from the bank but nonetheless allows the seller to later on buy back the properties, is in the nature of an equitable mortgage governed by Articles 1602 and 1604 of the Civil Code, which provide: Article 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold;

(6) In any case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. From a reading of the above-quoted provisions, for a presumption of an equitable mortgage to arise, two requisites must be satisfied, namely: that the parties entered into a contract denominated as a contract of sale and that their intention was to secure an existing debt by way of mortgage. Under Art. 1604 of the Civil Code, a contract purporting to be an absolute sale shall be presumed to be an equitable mortgage should any of the conditions in Art. 1602 be present. The existence of any of the circumstances therein, not a concurrence or an overwhelming number of such circumstances, suffices to give rise to the presumption that the contract is an equitable mortgage. 18 In the instant case, three telling circumstances indicating that an equitable mortgage exists are present. First, as established by the CA, the price of each of the properties was grossly inadequate. Second, petitioners retained part of the "purchase price" when they failed to turn over to the respondents the loan that they were supposed to secure from the bank. Third, petitioners insisted that part of the consideration of the sale consisted of amounts previously borrowed by respondents from them, indicating that petitioners were using the properties as "security" for the payment of respondents other loans from them. The CA concluded that the sale was simulated because of the gross inadequacy of the prices and the failure by respondents to receive the purchase price. Gross inadequacy of price by itself will not result in a void contract. Gross inadequacy of price does not even affect the validity of a contract of sale, unless it signifies a defect in the consent or that the parties actually intended a donation or some other contract. Inadequacy of cause will not invalidate a contract unless there has been fraud, mistake or undue influence.19 That respondents did not receive the purchase price is not entirely correct. As already discussed above, the consideration for the transaction was to secure the payment of respondents loan to petitioners. Also, the CAs conclusion that petitioner Alexander Bacungan admitted that the sale was simulated is not supported by the records of the case. Petitioners merely admitted that previous to the execution of the deeds of sale, respondents had borrowed other sums of money from them. All told, while the deeds of sale do not reflect the true intention of the parties, their real agreement must nonetheless be recognized and enforced. While neither party claimed that the real agreement was an equitable mortgage, the factual circumstances of the case nudge the Court to declare the real agreement as such and enforce the rights and liabilities of the parties accordingly. This being the case, the proper remedy availed by either party was to institute an action for the reformation of the deeds of sale in order to reflect the true intention of the parties. However, instead of dismissing the complaint altogether, the just and expeditious manner is to settle once and for all the rights and obligations of the parties under the equitable mortgage. It has been established that petitioners advanced the sum of P369,000.00 to respondents that prompted the latter to transfer the properties to petitioners. Thus, before the respondents can recover the said amount, respondents must first return the amount of P369,000.00 to petitioners. In Lustan v. Court Appeals,20 where the Court established the reciprocal obligations of the parties under an equitable mortgage, the Court ordered the reconveyance of the property to the rightful owner therein upon the payment of the loan within 90 days from the finality of this decision.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED and the decision and resolution of the Court of Appeals in CA-G.R. CV No. 64370 are AFFIRMED with the following MODIFICATIONS: 1) DECLARING the Deeds of Absolute Sale as equitable mortgages; and 2) ORDERING petitioners to RECONVEY to respondents the properties covered by Transfer Certificate of Title Nos. 34998, 36022, 35158, 36017, 18128, 26761, 36020, 28381, 35585, 25739, 36023, 40059, 40055, 40060, 40057, 40056, 36967 AND 35268 of the Register of Deeds of Pangasinan UPON THE PAYMENT OFP369,000.00 by respondents within NINETY DAYS FROM THE FINALITY OF THIS DECISION. SO ORDERED. SECOND DIVISION G.R. No. 171321 December 18, 2008

MARY ANN DEHEZA-INAMARGA, petitioner, vs. CELENIA C. ALANO, BERNALDA A. PAROHINOG, GODOFREDO ALANO, AVELINO ALANO, ESTRELLA ALANO, FORTUNATA ALANO, NANY ALANO, SALLY ALANO, ADIONITO ALANO, and SUFRONIA ALANO, respondents. DECISION QUISUMBING, J.: This petition for review on certiorari assails the Decision1 dated September 8, 2004 and Resolution2 dated January 4, 2006 of the Court of Appeals in CA-G.R. CV No. 64164. The appellate court had affirmed the Decision3dated November 26, 1998 of the Regional Trial Court (RTC) Branch 1, Kalibo, Aklan in Civil Case No. 4278. The facts of the case are as follows: Tomas Alano, husband of respondent Celenia Alano, owned two parcels of land covered by Original Certificates of Title (OCT) Nos. P-761 and P-762. He mortgaged the properties in favor of Renato Gepty on September 20, 1972. In 1976, Gepty demanded that Tomas pay the loan. Tomas, however, did not have money at that time to redeem his properties so he sought help from his niece, petitioner Mary Ann Deheza-Inamarga. Petitioner agreed to pay the loan while the spouses, in turn, mortgaged said properties to her. Petitioner kept in her possession OCT Nos. P-761 and P-762 and asked the spouses to sign blank pieces of paper which petitioner said will be converted into receipts evidencing their indebtedness to her. In November 1990, after Tomas had passed away, respondents Celenia and her children went to petitioner to redeem the property. Petitioner, however, told them that she had mortgaged the property to the Rural Bank of Libacao. Respondents verified the matter with the bank and discovered that OCT Nos. P-761 and P-762 have been cancelled and in lieu thereof, Transfer Certificates of Title (TCT) Nos. T-9080 and T-9081 were issued in petitioners name. Respondents learned that the TCTs in petitioners favor were issued by virtue of a Deed of Sale purportedly executed by the Spouses Alano in her favor. On January 24, 1991, respondents filed a complaint for the declaration of nullity of document, reconveyance and damages against petitioner and the Rural Bank of Libacao. Respondents contended that the deed of sale is null and void because the signatures of the Spouses Alano were forged and even if they were the signatures of the spouses, they were affixed on blank sheets of paper which were not intended to be a deed of sale.

Petitioner, on the other hand, denied the allegation of forgery and maintained that the deed of sale was valid. She claimed that the spouses offered to sell her the property so they can use the purchase price of P7,000 to redeem the property from Gepty. Petitioner added that the action is barred by prescription, laches and estoppel. On November 26, 1998, the RTC rendered its decision, the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered: 1. Declaring the transaction between the plaintiffs and defendant Mary Ann Deheza (Inamarga) as an EQUITABLE MORTGAGE and declaring the plaintiffs entitled to redeem the mortgaged properties which shall be effected upon payment of the mortgage debt to said defendant in the amount of P2,400.00 with legal rate of interest from 1983, the year plaintiffs ceased paying said defendant interests; 2. Declaring the nullity of the Deed of Absolute Sale (Exh. "B") dated March 4, 1978 allegedly executed by Tomas Alano in favor of Mary Ann Deheza; 3. Declaring the nullity of Transfer Certificate of Title No. T-9080 and Transfer Certificate of Title No. T-9081 in the name of Mary Ann Deheza; 4. Ordering the reconveyance of Lot 7 and Lot 2, all of Psu-235010, by defendant Mary Ann Deheza Inamarga in favor of the plaintiffs. In the event that said defendant fails to reconvey to plaintiffs said lots, the Clerk of Court is hereby directed to execute it pursuant to the provisions of Section 10 of Rule 39 of the 1997 Rules of Civil Procedure. As Amended; 5. Ordering defendant Mary Ann Deheza-Inamarga to pay plaintiffs exemplary damages in the amount ofP50,000.00 and attorneys fees in the amount of P10,000.00. Costs against said defendant. SO ORDERED.4 Petitioner elevated the case to the Court of Appeals but her appeal was denied.5 The appellate court held that the signatures in the Deed of Sale were forged and even if they were genuine, the agreement entered into by the parties was one of equitable mortgage. It likewise upheld the trial courts award of damages, ruling that the transactions involved in the case were repeatedly tainted with fraud. Petitioners motion for reconsideration having been denied, petitioner filed the insta nt appeal, assigning errors as follows: I. THE LOWER COURT ERRED IN DECLARING THE TRANSACTION BETWEEN [THE] SPOUSES TOMAS AND CELENIA ALANO AND THE [PETITIONER] MARY ANN DEHEZAINAMARGA AS ONE OF EQUITABLE MORTGAGE AND NOT ONE OF SALE. II. THE LOWER COURT ERRED IN ORDERING THE RECONVEYANCE OF THE LANDS IN QUESTION IN FAVOR OF THE [RESPONDENTS] AND ORDERING THE NULLITY OF TCT NO. T-9080 AND TCT NO. T-9081 IN THE NAME OF MARY ANN DEHEZA. III.

THE LOWER COURT ERRED IN FINDING THAT THE QUESTIONED DEED OF SALE WAS A FORGERY OR THAT IT WAS SIGNED IN BLANK BY [THE] SPOUSES TOMAS AND CELENIA ALANO AND I[N] GIVING CREDENCE TO THE EVIDENCE OF THE [RESPONDENTS]. IV. THE LOWER COURT ERRED IN NOT DECLARING THAT [RESPONDENTS] ACTION IS ALREADY BARRED BY PRESCRIPTION, LACHES OR ESTOPPEL. V. THE LOWER COURT ERRED IN AWARDING EXEMPLARY DAMAGES AND ATTORNEYS FEE[S] TO THE [RESPONDENTS].6 Essentially, the issues for resolution are: (1) whether the Deed of Sale is a forgery; (2) whether the transaction between petitioner and the Spouses Alano is one of sale or equitable mortgage; (3) whether respondents action is already barred by prescription, laches or estoppel; and (4) whether the award of exemplary damages and attorneys fees in favor of respondents is legal and justifiable. As to the first issue, petitioner contends that respondents never presented a handwriting expert to prove that the signatures of Tomas and Celenia Alano were forged and such allegation of forgery cannot overcome the presumption of regularity in the performance of duty of the notary public as well as the due execution of the public document.7 Respondents, in turn, contend that the findings of handwriting experts are not conclusive upon the trial court. The question of forgery is one of fact.8 It is well-settled that when supported by substantial evidence or borne out by the records, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court.9 It is a hornbook doctrine that the findings of fact of trial courts are entitled to great weight on appeal and should not be disturbed except for strong and valid reasons. It is not a function of this Court to analyze and weigh evidence by the parties all over again. Our jurisdiction is limited to reviewing errors of law that might have been committed by the Court of Appeals. Where the factual findings of the trial court are affirmed in toto by the Court of Appeals as in this case, there is great reason for not disturbing such findings and for regarding them as not reviewable by this Court. 10 Moreover, after a careful perusal of the records and a thorough consideration of this case, this Court finds sufficient basis for the finding of the Court of Appeals that the said signatures were indeed forged. The Court of Appeals cited apparent differences in the signatures on the face of the documentary evidence submitted before the RTC. Also, it found that the signatures on the deed of sale appeared to be different in characteristics, spacing and strokes from the signatures of the Spouses Alano appearing in other documents forming part of the records of this case which are admittedly genuine. Moreover, contrary to petitioners contention, the presentation of a handwriting expert is not necessary. Handwriting experts are usually helpful in the examination of forged documents because of the technical procedure involved in analyzing them. But resort to these experts is not mandatory or indispensable to the examination or the comparison of handwriting.11 The findings of handwriting experts are not conclusive upon the courts. As this Court has once observed, the authenticity of signatures "is not a highly technical issue in the same sense that questions concerning, e.g., quantum physics or topology or molecular biology, would constitute matters of a highly technical nature. The opinion of a handwriting expert on the genuineness of a questioned signature is certainly much less compelling upon a judge than an opinion rendered by a specialist on a highly technical issue. The signatures on a questioned document can be examined visually by a judge who can and should exercise independent judgment on the issue of authenticity of such signatures." 12

With regard to the second issue, petitioner contends that it was the Spouses Alano who caused the execution of the deed of sale in question and that the document was signed by them in the presence of the notary public. She likewise argues that after the sale, she took possession of the land; and she adds that the consideration for the property was adequate because the property was not productive. 13 On the other hand, respondents aver that the transaction between the Spouses Alano and petitioner is not one of sale but one of equitable mortgage. Respondents stress that they continued to be in possession of the property even after the alleged execution of the Deed of Sale and they claim that the P7,000 consideration is grossly inadequate for the market value of the property. Respondents further stated that they paid P500 interest annually for the loan.14 In our considered view, the appellate court did not err in sustaining the decision of the trial court holding that the transaction between the parties is an equitable mortgage. An equitable mortgage is one which, although lacking in some formality, or form, or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law.15 Articles 1602 and 1604 of the Civil Code of the Philippines state: ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of the sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing case, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. In the instant case, the RTC, as affirmed by the Court of Appeals, correctly found that more than one of the circumstances enumerated in Article 1602 are present, to wit: the inadequacy of the selling price of the properties in relation to its true value; the vendors (Spouses Alano) remained in possession as lessee or otherwise; respondents paid the real property taxes; and the spouses secured the payment of the principal debt owed to petitioner with said properties.16 On this score, we are in agreement that the parties intended an equitable mortgage and not a contract of sale. On the third issue, petitioner claims that the complaint was barred by extinctive prescription as it was filed only on January 24, 1991, or almost 13 years from March 7, 1978 when the TCTs were issued in favor of petitioner. Petitioner argues that the prescriptive period for reconveyance of land based on implied or constructive trust is 10 years.17 Respondents counter that since the deed of sale and the certificates of title in the name of petitioner are all null and void, prescription, laches or estoppel has not set in.18

Again, we find for the respondents. Where there is no consent given by one party in a purported contract, such contract was not perfected; therefore, there is no contract to speak of. The deed of sale relied upon by petitioner is deemed a void contract. This being so, the action based on said deed of sale shall not prescribe in accordance with Article 141019 of the Civil Code. On the issue of damages, petitioner contends that the award of exemplary damages and attorneys fees were not justified under the law and the facts obtaining in this case. 20 Respondents, on their part, state that petitioner having acted in bad faith to the damage and prejudice of respondents, it is but proper that she should pay for such deception and unlawful acts.21 We do not find any cogent reason to disturb the findings of the RTC on this point as affirmed by the Court of Appeals with respect to the award of damages and attorneys fees. As correctly held by the RTC, the act of petitioner of inducing her two trusting old relatives to sign blank pieces of paper purporting to be a deed of sale so that the certificates of title of their properties could be transferred in her name is a fraudulent act. Exemplary damages were rightfully imposed in order to deter persons similarly disposed from committing such acts of fraud. Consequently, with the grant of exemplary damages, attorneys fees should likewise be awarded.22 WHEREFORE, the Decision dated September 8, 2004 and the Resolution dated January 4, 2006 of the Court of Appeals in CA-G.R. CV No. 64164 are AFFIRMED. Costs against petitioner. SO ORDERED. THIRD DIVISION G.R. No. 176474 November 27, 2008

HEIRS OF ARTURO REYES, represented by Evelyn R. San Buenaventura, petitioners, vs. ELENA SOCCO-BELTRAN, respondent. DECISION CHICO-NAZARIO, J.: 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. The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally part of a larger parcel of land, measuring 1,022 square meters, allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses Laquian), who paid for the same with Japanese money. When Marcelo died, the property was left to his wife Constancia. Upon Constancias 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.3 Pursuant to an unnotarized document entitled "Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco," executed by Constancias heirs sometime in 1965, the parcel of land was partitioned into three lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.4 The subject property, Lot No. 6-B, was adjudicated to respondent, but no title had been issued in her name. On 25 June 1998, respondent 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 Soccos estate.5

Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents petition before the DAR on the ground that the subject property was sold by respondents brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5 September 1954, stipulating that:6 That I am one of the co-heirs of the Estate of the deceased Constancia Socco; and that I am to inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located on the (sic) Zamora St., Municipality of Dinalupihan, Province of Bataan, bounded as follows: xxxx That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter, hereby 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 x x x. (Emphasis supplied.) Petitioners 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. Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an investigation, the results of which were contained in her Report/ Recommendation dated 15 April 1999. Other than recounting the afore-mentioned facts, Legal Officer Pinlac also made the following findings in her Report/Recommendation:7 Further investigation was conducted by the undersigned and based on the documentary evidence presented by both parties, the following facts were gathered: that the house of [the] Reyes family is adjacent to the landholding in question and portion of the subject property consisting of about 15 meters [were] occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were] constructed therein; on the remaining portion a skeletal form made of hollow block[s] is erected and according to the heirs of late Arturo Reyes, this was constructed since the year (sic) 70s at their expense; that construction of the said skeletal building was not continued and left unfinished which according to the affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena Socco in their attempt of occupancy of the subject landholding; (affidavit of Patricia Hipolito is hereto attached as Annex "F"); that Elena Socco cannot physically and personally occupy the subject property because of the skeletal building made by the Reyes family who have been requesting that they be paid for the cost of the construction and the same be demolished at the expense of Elena Socco; that according to Elena Socco, [she] is willing to waive her right on the portion where [the] kitchen and bathroom is (sic) constructed but not the whole of Lot [No.] 6-B adjudicated to her; that the Reyes family included the subject property to the sworn statement of value of real properties filed before the municipality of Dinalupihan, Bataan, copies of the documents are hereto attached as Annexes "G" and "H"; that likewise Elena Socco has been continuously and religiously paying the realty tax due on the said property. In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance of title over the subject property, ruling that respondent was qualified to own the subject property pursuant to Article 1091 of the New Civil Code.8 Provincial Agrarian Reform Officer (PARO) Raynor Taroy concurred in the said recommendation in his Indorsement dated 22 April 1999.9 In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however, dismissed respondents petition for issuance of title over the subject property on the ground that respondent was not an actual tiller and had abandoned the said property for 40 years; hence, she had already renounced her right to recover the same.10 The dispositive part of the Order reads: 1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna Socco for lack of merit;

2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square meters, more or less, situated Zamora Street, Dinalupihan, Bataan, in favor of the heirs of Arturo Reyes. 3. ORDERING the complainant to refrain from any act tending to disturb the peaceful possession of herein respondents. 4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent documents for the issuance of CLOA in favor of the heirs of Arturo Reyes.11 Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR Regional Director Acosta in another Order dated 15 September 1999.12 Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November 2001, the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that neither petitioners predecessor-in-interest, Arturo Reyes, nor respondent was an actual occupant of the subject property. However, since it was respondent who applied to purchase the subject property, she was better qualified to own said property as opposed to petitioners, who did not at all apply to purchase the same. Petitioners were further disqualified from purchasing the subject property because they were not landless. Finally, during the investigation of Legal Officer Pinlac, petitioners requested that respondent pay them the cost of the construction of the skeletal house they built on the subject property. This was construed by the DAR Secretary as a waiver by petitioners of their right over the subject property.13 In the said Order, the DAR Secretary ordered that: WHEREFORE, premises considered, the September 15, 1999 Order is hereby SET ASIDE and a new Order is hereby issued APPROVING the application to purchase Lot [No.] 6-B of Elena Socco-Beltran.14 Petitioners sought remedy from the Office of the President by appealing the 9 November 2001 Decision of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30 June 2003, the Office of the President rendered its Decision denying petitioners appeal and affirming the DAR Secretarys Decision.15 The fallo of the Decision reads: WHEREFORE, premises considered, judgment appealed from is AFFIRMED and the instant appeal DISMISSED.16 Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a Resolution dated 30 September 2004.17 In the said Resolution, the Office of the President noted that petitioners failed to allege in their motion the date when they received the Decision dated 30 June 2003. Such date was material considering that the petitioners Motion for Reconsideration was filed only on 14 April 2004, or almost nine months after the promulgation of the decision sought to be reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond fifteen days from receipt of the decision to be reconsidered, rendered the said decision final and executory. Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP No. 87066. Pending the resolution of this case, the DAR already issued on 8 July 2005 a Certificate of Land Ownership Award (CLOA) over the subject property in favor of the respondents niece and representative, Myrna Socco-Beltran.18 Respondent passed away on 21 March 2001,19 but the records do not ascertain the identity of her legal heirs and her legatees. Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision, dated 31 January 2006, affirming the Decision dated 30 June 2003 of the Office of the President. It held that petitioners could not have been actual occupants of the subject property, since actual occupancy requires the positive act of occupying and tilling the land, not just the introduction of an unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their claim over the subject property was executed by Miguel Socco, who was not the owner of the said property and, therefore, had no right to transfer the same. Accordingly, the Court of Appea ls affirmed respondents right over the subject property, which was derived form the original allocatees thereof. 20 The fallo of the said Decision reads:

WHEREFORE, premises considered, the instant PETITION FOR REVIEW is DISMISSED. Accordingly, the Decision dated 30 June 2003 and the Resolution dated 30 December 2004 both issued by the Office of the President are hereby AFFIRMED in toto.21 The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a Resolution dated 16 August 2006.22 Hence, the present Petition, wherein petitioners raise the following issues: I WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTERS CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE, NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN THIRTY (30) YEARS. II WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONERS "CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX DECLARATION." III WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT "WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19, 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO. IV WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE FACT THAT MYRNA V. SOCCO-ARIZO GROSSLY MISREPRESENTED IN HER INFORMATION SHEET OF BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT SHE IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN FACT, SHE IS ALREADY AN AMERICAN NATIONAL.23 The main issue in this case is whether or not petitioners have a better right to the subject property over the respondent. Petitioners 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. 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 Constancias estate.24 It was also declared in the Contract itself that Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a c onditional 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. Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years and, thus, they gained ownership of the property through acquisitive prescription, citing Sandoval v. Insular Government 25 and San Miguel Corporation v. Court of Appeals. 26 In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926, otherwise known as the Land Registration Act, which required -- for the issuance of a certificate of title to agricultural public lands -- the open, continuous, exclusive, and notorious possession and occupation of the same in good faith and under claim of ownership for more than ten years. After evaluating the evidence presented, consisting of the testimonies of several witnesses and proof that fences were constructed around the property, the Court in the afore-stated case denied the petition on the ground that petitioners failed to prove that they exercised acts of ownership or were in open, continuous, and peaceful possession of the whole land, and had caused it to be enclosed to the exclusion of other persons. It further decreed that whoever claims such possession shall exercise acts of dominion and ownership which cannot be mistaken for the momentary and accidental enjoyment of the property. 27 In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby land ceases to be public land and is, therefore, private property. It stressed, however, that the occupation of the land for 30 years must be conclusively established. Thus, the evidence offered by petitioner therein tax declarations, receipts, and the sole testimony of the applicant for registration, petitioners predecessor-in-interest who claimed to have occupied the land before selling it to the petitioner were considered insufficient to satisfy the quantum of proof required to establish the claim of possession required for acquiring alienable public land. 28 As in the two aforecited cases, petitioners herein were unable to prove actual possession of the subject property for the period required by law. It was underscored in San Miguel Corporation that the open, continuous, exclusive, and notorious occupation of property for more than 30 years must be no less thanconclusive, such quantum of proof being necessary to avoid the erroneous validation of actual fictitious claims of possession over the property that is being claimed. 29 In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart from their self-serving statement that they took possession of the subject property, the only proof offered to support their claim was a general statement made in the letter30 dated 4 February 2002 of BarangayCaptain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject property "since peace time and at present." The statement is rendered doubtful by the fact that as early as 1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes had already died and was already represented by his heirs, petitioners herein. Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the premises for an unspecified period of time, i.e., since peace time until the present, cannot prevail over Legal Officer Pinlacs more particular findings in her Report/Recommendation. Legal Officer Pinlac reported that petitioners admitted that it was only in the 1970s that they built the skeletal structure found on the subject property. She also referred to the averments made by Patricia Hipolito in an Affidavit,31 dated 26 February 1999, that the structure was left unfinished because respondent prevented petitioners from occupying the subject property. Such finding s disprove petitioners claims

that their predecessor-in-interest, Arturo Reyes, had been in open, exclusive, and continuous possession of the property since 1954. The adverted findings were the result of Legal Officer Pinlacs investigation in the course of her official duties, of matters within her expertise which were later affirmed by the DAR Secretary, the Office of the President, and the Court of Appeals. The factual findings of such administrative officer, if supported by evidence, are entitled to great respect.32 In contrast, respondents claim over the subject property is backed by sufficient evidence. Her predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who have fully paid for the subject property. The subject property was allocated to respondent in the extrajudicial settlement by the heirs of Constancias estate. The document entitled "Extra -judicial Settlement of the Estate of the Deceased Constancia Socco" was not notarized and, as a private document, can only bind the parties thereto. However, its authenticity was never put into question, nor was its legality impugned. Moreover, executed in 1965 by the heirs of Constancia Socco, or more than 30 years ago, it is an ancient document which appears to be genuine on its face and therefore its authenticity must be upheld.33 Respondent has continuously paid for the realty tax due on the subject property, a fact which, though not conclusive, served to strengthen her claim over the property. 34 From the foregoing, it is only proper that respondents claim over the subject property be upheld. This Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001, which granted the petitioners right to purchase the property, is flawed and may be assailed in the proper proceedings. Records show that the DAR affirmed that respondents predecessors -in-interest, Marcelo Laquian and Constancia Socco, having been identified as the original allocatee, have fully paid for the subject property as provided under an agreement to sell. By the nature of a contract or agreement to sell, the title over the subject property is transferred to the vendee upon the full payment of the stipulated consideration. Upon the full payment of the purchase price, and absent any showing that the allocatee violated the conditions of the agreement, ownership of the subject land should be conferred upon the allocatee.35 Since the extrajudicial partition transferring Constancia Soccos interest in the subject land to the respondent is valid, there is clearly no need for the respondent to purchase the subject property, despite the application for the purchase of the property erroneously filed by respondent. The only act which remains to be performed is the issuance of a title in the name of her legal heirs, now that she is deceased. Moreover, the Court notes that the records have not clearly established the right of respondents representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why the DAR issued on 8 July 2005 a CLOA36 over the subject property in favor of Myrna Socco-Arizo. Respondents death does not automatically transmit her rights to the property to Myrna Socco Beltran. Respondent only authorized Myrna Socco-Arizo, through a Special Power of Attorney37 dated 10 March 1999, to represent her in the present case and to administer the subject property for her benefit. There is nothing in the Special Power of Attorney to the effect that Myrna Socco-Arizo can take over the subject property as owner thereof upon respondents death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel R. Socco, and Myrna Socco -Arizos brother, executed a waiver of his right to inherit from respondent, does not automatically mean that the subject property will go to Myrna Socco-Arizo, absent any proof that there is no other qualified heir to respondents estate. Thus, this Decision does not in any way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo, which may be assailed in appropriate proceedings. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006, is AFFIRMED withMODIFICATION. This Court withholds the confirmation of the validity of title over the subject property in the name of Myrna Socco-Arizo pending determination of respondents legal heirs in appropriate proceedings. No costs. SO ORDERED. . Manzano, are the owners of Lot 2732 which is adjacent to Lot 2730-A. The respondents' lot has no access to the nearest road except through a road which they constructed over a portion of Lot 2730-A. On September 26, 1995, petitioner sent a letter to respondents informing them that he is the owner of Lot 2730-A and that he does not agree with the use of the portion of his lot as an access road because

it will affect the configuration of his property. As an option, petitioner offered to sell to the respondents the entire property.1 Apparently, respondents did not agree to the proposition because two days later, petitioner wrote another letter to them, offering instead a perpetual easement of right of way (4 meters wide) and stating that he will prepare the necessary document to facilitate the transaction. 2 Instead of a deed of perpetual easement, it appears that petitioner and respondents executed a Deed of Absolute Sale3 on October 20, 1995 over a 175-sq m portion of Lot 2730-A, to be used as an access road 5-meters wide, for a consideration of P20,000.00. The Deed of Absolute Sale contained the following terms and conditions: 1] The portion subject of this sale agreement is as per the sketch plan attached herein as Annex "A" and made as an integral part of this instrument; 2] The total purchase for the aforesaid portion of lot shall be in the sum of TWENTY THOUSAND (P20,000.00) PESOS, Philippine Currency, payable on cash basis upon the signing and execution of this deed, the signature of the VENDOR being his acknowledgment that he already received the said amount satisfactorily; 3] The realty taxes and assessments on the lot subject of this sale agreement, costs of preparation of the document of sale, all other taxes, cost of subdivision survey to segregate the portion of lot, and all the incidental expenses to facilitate issuance of the individual transfer certificate of titles for the resulting lots shall be for the sole account and expense of the VENDEE; 4] The use of the aforesaid portion of lot sold shall be for the purpose of the right of way of and for the abovesaid property of the VENDEE, whereby the VENDOR, by virtue whereof, shall have the perpetual right and/or privilege to use the same as right of way for his own purposes. Almost a year later, or on September 12, 1996, petitioner informed respondents that he is canceling the deed of sale by way of a Deed of Cancellation4 which he executed on his own.5 When respondents refused to honor the cancellation, petitioner filed a Complaint 6 for Cancellation of Contract with the Municipal Circuit Trial Court (MCTC) of Teresa-Baras on April 22, 1997. The complaint alleged that, contrary to what was stated in the Deed of Absolute Sale, respondents constructed an access road 8-m wide (with an area of 280 sq m); that the respondents have not complied with the conditions stated in the Deed of Absolute Sale and the Deed of Undertaking attached thereto; and that respondents have been dumping high piles of gravel, sand and soil along the access road in violation of the condition in the deed of sale that the access road will be used only for the purpose of a right of way. The complaint prayed for the court to declare as canceled the grant of right of way to respondents and to order them to pay moral and exemplary damages and attorney's fees. In their Answer with Counterclaims, respondents averred that they purchased the disputed 280-sq m portion of Lot 2730-A from its previous owner, Rudy Llagas, as early as March 2, 1994. After the sale, they immediately constructed a 7 by 35-m road with a total area of 245 sq m, leaving a 1 by 35-m strip along the western portion as an easement along the irrigation canal. However, to buy peace and avoid any conflict with the petitioner, who was claiming to be the new owner, respondents agreed to payP20,000.00 in consideration of the petitioner's desistance from further pursuing his claim over the 280 sq m area. Petitioner prepared the Deed of Absolute Sale and respondents agreed to sign it without prejudice to the resolution of the civil case (Civil Case No. 777-M), filed by Llagas against the petitioner, on the issue of the ownership of the property.7 Respondents narrated that, after they signed the Deed of Absolute Sale but before they could deliver theP20,000.00, they discovered that it covered only 175 sq m, not 280 sq m. There was an immediate renegotiation between the parties and, for an additional consideration of P40,000.00, petitioner agreed to sell the entire 280 sq m. Relying on the petitioner's assurance that he will prepare a new

deed of sale to reflect the new agreement, respondents paid him the additional P40,000.00 as evidenced by an Acknowledgment Receipt. Despite several demands, petitioner failed to present the new deed of sale.8 According to the respondents, petitioner initially allowed them peaceful possession and use of the area even when he started constructing his house adjacent to the access road. However, while petitioner was constructing his house, a serious misunderstanding took place between petitioner and respondents' caretaker, Benjamin Manzano, brought about by the latter's refusal to allow petitioner to tap water and electricity from the respondents' property. Petitioner allegedly retaliated and took possession of the eastern half portion of the 280-sq-m area by constructing a fence along the length of the access road, which reduced it to a narrow passage that could not allow trucks to pass through. On account of this dispute, Manzano, upon respondents' authority, filed a complaint before the Barangay Lupon to compel the petitioner to remove the fence but the petitioner did not attend the conciliation proceedings. Respondents obtained from the barangay a certification to file an action in court, but petitioner preempted them by filing the instant case. Respondents pointed out that the petitioner did not seek the intervention of the Barangay Lupon before he filed the instant case; hence, the petitioner's complaint should be dismissed for failure to state a cause of action. 9 In claiming damages, respondents alleged that the construction of the fence caused them difficulties when they started developing their property because the trucks that carried the necessary materials could not pass through the access road. They purportedly incurred additional costs since they had to hire laborers to manually carry the construction materials from the barangay road to the construction site.10 Respondents further asserted that what was agreed upon was a sale and not only an easement of right of way. They denied the existence of the Deed of Undertaking which does not even bear their signatures. And respondents argued that the deed of sale may not be canceled unilaterally by the petitioner since they already acquired full ownership over the property by virtue thereof. 11 Finally, respondents stressed that it is the petitioner who is actually enjoying a right of way along the access road in compliance with the condition stated in the Deed of Absolute Sale. It is the petitioner who violated the terms of the contract when he obstructed the access road with the concrete fence he built thereon. For this violation, petitioner should be denied his right of way over the access road. Moreover, petitioner's property abuts the barangay road; hence, there is actually no need for him to be granted a right of way. During trial, petitioner testified for himself and presented his brother, Cesar Yaneza, as witness. Petitioner narrated that Cesar handed to him the P20,000.00 and that he constructed the iron fence during the latter part of 1996 because respondents did not comply with the conditions set out in the Deed of Undertaking. Cesar Yaneza testified that he was the one who delivered the Deed of Absolute Sale to the office of respondent Manuel de Jesus in Manila and that the latter requested that he leave the Deed of Undertaking so that his wife can also sign the same, but he never returned the document despite several demands. For the respondents, respondent Manuel de Jesus, Rudy Llagas and Benjamin Manzano testified. Rudy Llagas admitted that he indeed sold to the respondents the subject property which is on the western side; what he sold to the petitioner was on the eastern side of his property. 12 Respondent Manuel de Jesus swore that he and petitioner agreed on a price of P20,000.00 for the 5-m by 35-m area and an additionalP40,000.00 to increase the area to 8-m by 35-m, so that the total consideration was P60,000.00. He claimed he had to agree to the additional amount because by then he had already constructed the gate to, and trucks could not enter, their property.13 And finally, Benjamin Manzano attested that when petitioner started constructing his house, petitioner asked him if he could tap water and electricity from respondents' property, but he did not agree. He said that, after a few days from said incident, petitioner constructed the low level iron fence in the middle of the road right of way. 14 On September 6, 1999, the MCTC promulgated its decision dismissing the complaint and granting the respondents' counterclaims, thus: In view of the foregoing considerations, this Court hereby resolves to order the following:

1. To dismiss the complaint as well as the plaintiff's claim for damages and attorney's fees; 2. For plaintiff to execute a new deed of absolute sale covering the access road or road right of way of 8 meters wide by 35 meter long, including the meter easement beside the irrigation canal; with a total area of 280 sq. m. from the northwest portion of Lot 2730, now covered by TCT No. 50181 of the Register of Deeds of Rizal, Morong Branch, without prejudice to the outcome of Civil Case No. 777-M filed by Rudy Llagas against plaintiff Jaime Yaneza; 3. To cancel and declare as null and void the plaintiff's right of way over the access road of defendants; 4. For plaintiff to remove at his expense, the steel fence or structure he caused to be constructed at about the middle of defendants' access road or found within the 280 sq.m. area that obstruct, impede or alter the full and peaceful use by defendants of subject realty; 5. To restore defendants to the full, adequate and peaceful possession and use of subject realty; 6. For plaintiff to pay to the defendants the following: a. P1,000,000.00 as actual damages; b. P1,300,000.00 as moral damages; c. P300,000.00 as exemplary damages; d. P300,000.00 as attorney's fees; e. P30,000.00 as reimbursement for incidental litigation expenses; f. 6% interest on the actual damages from the time they were incurred up to the time of finality of the decision; g. 6% interest on the award for moral, exemplary, attorney's fees and litigation expenses from the promulgation of the decision until its finality; h. Costs. SO ORDERED.15 On January 5, 2001, the Regional Trial Court (RTC), Morong, Rizal Branch 78, rendered a Decision16 on petitioner's appeal affirming the MCTC Decision with the modification that the monetary award (item no. 6 of the dispositive portion) in favor of the respondents was deleted. Respondents filed a motion for reconsideration with respect to the deletion of the award of damages, but the same was denied for failure to include a Notice of Hearing. Respondents filed a Petition for Relief from Judgment, the status of which was not disclosed by the parties in this petition. Meanwhile, petitioner's counsel received a copy of the RTC Decision on February 6, 2001. On February 9, 2001, he withdrew his appearance for the petitioner. On February 22, 2001, petitioner, through his new counsel, filed an Urgent Motion for Extension of Time to File Petition for Review praying that they be given a period of 15 days from February 24, 2001, or until March 12, 2001, within which to file the petition.

On February 28, 2001, the CA issued a Resolution17 denying the Urgent Motion for having been filed one day late and, consequently, dismissed the appeal. On March 27, 2001, petitioner filed a Motion for Reconsideration and a Motion for Leave of Court to Admit Petition for Review, but the CA denied the motions in its Resolution18 dated July 25, 2001. Disgruntled with the CA Resolutions, petitioner filed this Petition for Certiorari and Prohibition, raising the following issues: WHETHER THE PETITION SHOULD BE GIVEN DUE COURSE IN THE LIGHT OF THE CIRCUMSTANCES AFFECTING THE TIMELINESS OF THE FILING THEREOF. WHETHER THE APPEALED DECISION OF THE REGIONAL TRIAL COURT WAS RENDERED AND WRITTEN AS REQUIRED BY THE 1987 PHILIPPINE CONSTITUTION AND THE RULES OF COURT. WHETHER THE PLAINTIFF HAS NO CAUSE OF ACTION. WHETHER THE PETITIONER MAY BE COMPELLED TO EXECUTE A DEED OF CONVEYANCE AGAINST HIS WILL AND IN VIOLATION OF HIS CONSTITUTIONAL RIGHT AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW, AND THE CIVIL LAW AGAINST UNJUST ENRICHMENT.19 The petition has no merit. In the interest of substantial justice, petitioner begs this Court's indulgence for the late filing of his motion for extension of time, which he claims is due to an honest mistake. Certainly, we cannot ascribe grave abuse of discretion upon a court that denies a motion for extension of time filed after the expiration of the reglementary period to file a petition. A motion for extension of time to file a petition should be filed prior to the expiration or lapse of the period set by law, otherwise, there is no longer any period to extend and the judgment or order to be appealed from will have become final and executory.20 Once the judgment becomes final and executory, the appellate court is without jurisdiction to modify or reverse it. We have repeatedly pronounced that perfection of an appeal in the manner and within the period prescribed by law is mandatory and jurisdictional.21 The failure to perfect an appeal is not a mere technicality as it deprives the appellate court of jurisdiction over the appeal. 22 Hence, anyone seeking an exemption from the application of the reglementary period for filing an appeal has the burden of proving the existence of an exceptionally meritorious instance warranting such deviation. 23 But none obtains in this case. Even on the merits, we find the petition noticeably infirm. The petitioner's complaint for cancellation of the contract was correctly dismissed by the MCTC. Petitioner's cause of action for cancellation of the contract is based on a breach of contract as provided in Article 119124 of the Civil Code and is properly denominated "rescission," or "resolution" under the Old Civil Code. It is grounded on the respondents' alleged noncompliance with the conditions embodied in the Deed of Absolute Sale and the Deed of Undertaking. In particular, petitioner claims that respondents constructed a road three meters wider than what was agreed upon in the deed of sale and failed to comply with their undertaking to facilitate the transfer of the title over the subject area. To state the obvious, the construction of the road beyond the stipulated area does not constitute a breach of contract. Breach of contract implies a failure, without legal excuse, to perform any promise or undertaking that forms part of the contract.25 Although the contract specifically stated the area covered by the sale, it did not contain a promise by the respondents that they will only occupy such

area. Albeit apparently wrong, petitioner's cause of action should not have been based on the contract of sale. Neither could the respondent be faulted for not facilitating the transfer of the title over the subject area. Respondents did not sign the Deed of Undertaking, and thus, could not have assumed the obligations contained therein. Moreover, considering that the respondents specifically denied the existence of the document and petitioner failed to authenticate it, the RTC was correct in declaring that it has no probative weight. Besides, rescission of a contract will not be permitted for a slight or casual breach but only for a substantial and fundamental breach as would defeat the very object of the parties in making the agreement.26 It must be a breach of faith that destroys or violates the reciprocity between the parties.27The alleged breach by the respondents was definitely not of such level and magnitude. Most importantly, rescission of a contract presupposes the existence of a valid and subsisting obligation. The breach contemplated in Article 1191 is the obligor's failure to comply with an existing obligation.28 It would be useless to rescind a contract that is no longer in existence. Here, we find that the contract of sale sought to be canceled by the petitioner does not exist anymore; hence, the filing of the petition for cancellation was an exercise in futility. The records show that the parties' original agreement, embodied in the Deed of Absolute Sale, had already been superseded or novated by a new contract, albeit an oral one, covering an increased area of 280 sq m. In his testimony, petitioner admitted that he received from his brother, Cesar Yaneza, theP20,000.00 that respondents paid. This, taken with the respondents' narration of the circumstances surrounding the signing of the deed of sale and the subsequent renegotiation for an increased area, together with the Acknowledgment Receipt showing that an additional P40,000.00 was paid to the petitioner, reasonably leads us to believe that the parties had actually entered into a new agreement which covered the entire 280-sq m area where the access road was laid. The new contract of sale between the parties is valid despite it not being evidenced by any writing.29 The requirement under the Statute of Frauds does not affect the validity of the contract of sale but is needed merely for its enforceability. In any case, it applies only to contracts which are executory, and not to those which have been consummated either totally or partially, 30 as in the new contract of sale herein. The existence of the new contract of sale over the 280-sq m area therefore having been established, it follows that the petitioner may be compelled to execute the corresponding deed of sale reflecting this new agreement. After the existence of the contract has been admitted, the party bound thereby may be compelled to execute the proper document.31 This is clear from Article 1357, viz.: Art. 1357. If the law requires a document or other special form, as in the acts and contracts enumerated in the following article [Article 1358], the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may be exercised simultaneously with the action upon the contract. WHEREFORE, the petition is DISMISSED. The assailed CA Resolutions dated February 28, 2001 and July 25, 2001 are AFFIRMED. SO ORDERED. FIRST DIVISION G.R. No. 80058 February 13, 1989 ERNESTO R. ANG and ROSALINDA ANG, petitioners, vs. THE COURT OF APPEALS and LEE CHUY REALTY CORP., respondents.

Quisumbing, Torres & Evangelista for petitioners. Victor J. Lee for respondents.

GANCAYCO, J.: This is a petition for review on certiorari of the decision of the Court of Appeals dated June 22, 1987 1 reversing the decision of the Regional Trial Court dated June 23, 1983 which dismissed the complaint of private respondent and awarded damages to petitioner. 2 The focus is on the issue of when a breach of contract may warrant its resolution. The antecedents of this case are as follows: Petitioners Ernesto Ang and Rosalinda Ang, brother and sister, are the owners of three (3) parcels of land located at A. Bonifacio St., Balintawak, Quezon City with an aggregate area of 2,096 square meters covered by Transfer Certificates of Title Nos. 258870, 258871 and 258872 which they acquired by purchase from the Cruz family on July 3, 1979 at a price of P680,000.00. 3 Sometime in November 1979, negotiations were undertaken for the sale of the aforementioned properties between the petitioners as sellers and private respondent Lee Chuy Realty Corporation, through its president Henry Lee Chuy as buyer. On December 4, 1979, private respondent issued in favor of petitioners Manila Banking Corporation Check No. 30022695 in the amount of P50,000.00 4 which it transmitted to petitioners together with a receipt supposedly embodying the terms and conditions of their agreement as follows: RECEIVED from LEE CHUY REALTY CORPORATION the sum of FIFTY THOUSAND PESOS (P50,000.00) ONLY, Philippine Currency, per MBTC (sic) Check No. 30022695, as down payment for the sale to it of three (3) parcels of land located at A. Bonifacio, Balintawak, Quezon City, covered by TCT Nos. 258870, 258871, and 258872 of the Registry of Deeds for Metro Manila District II, at the agreed total price of One Million Six Hundred Thousand Pesos (P1,600,000.00), under the following agreement: 1. The sellers hereby undertake to remove and clear the subject property of all occupants and obstruction within this month of December 1979 at their own expenses (sic); 2. Upon the subject property being cleared of occupants and obstruction and ready for turn over to the buyer, the sellers shall forthwith execute and deliver a deed of absolute sale in favor of the buyer together with a tax clearance as to payment of capital gain (sic) tax and such other papers as are necessary for the buyer to register the sale and (the) issuance of the corresponding transfer certificate of title in its name, free from any lien and encumbrance; and simultaneously therewith, the buyer shall pay the sellers the additional sum of Seven Hundred Fifty Thousand Pesos (P750,000.00) to complete payment of fifty per centum (50%) of the price in the amount of Eight hundred Thousand Pesos (P800,000.00) shall be payable by the buyer to the sellers within a period of forty-five (45) days thereafter; 3. The sale carries the usual seller's warranty of peaceful possession and valid title by the buyer. 4. All expenses for the execution and registration of the sale, including lawyer's fees, notarial fees, documentary stamp tax, transfer tax, registration fees, and agent's commission are for the accounts (sic) of the sellers. 5

The check for P50,000.00 was received and thereafter encashed by petitioners. However, the accompanying receipt was not returned by petitioners and instead another receipt prepared and signed by petitioners was forwarded to private respondent. This receipt thus reads: RECEIVED from LEE CHUY REALTY CORPORATION the sum of FIFTY THOUSAND PESOS (P50,000.00), Philippine Currency, per MBTC (Sic) Check No. 30022695 as deposit to sale of three (3) parcels of land located at A. Bonifacio, Balintawak, Quezon City, covered by TCT Nos. 258870, 258871, and 258872 of the Registry of Deeds for Metro Manila District II, in lieu of the agreed price, under the following agreement: 1. The sellers hereby undertake to remove and clear the subject property of all occupants and obstruction within this month of December 1979 at their own expenses (sic); 2. Upon the subject property being cleared of occupants and obstruction and ready for turn over to the buver, the sellers shall forthwith execute and deliver a deed of absolute sale in favor of the buyer together with all pertinent papers necessary for the transfer of the certificate of title in its name, free from any lien and encumbrance and simultaneously therewith, the buyer shall pay the seller 50% of the agreed price minus the deposit of FIFTY THOUSAND PESOS (P 50,000.00) in Philippine Currency and the balance of 50% of the agreed price shall be paid within a period of forty five (45) days with a post dated check; 3. The sale carries the usual seller's warranty of peaceful possession and valid title by the buyer; 4. The agent's commission will be for the account of the sellers; 5. All expenses for the execution and registration of the sale, including lawyer's fees, notarial fees, documentary stamp tax, transfer tax and registration fees will be deducted from the agent's commission. 6 On January 12, 1980, petitioner Rosalinda R. Ang sent private respondent a letter giving the latter up to January 24, 1980 to pay the balance of the purchase price, and informing it that failure to do so will result in the cancellation of their agreement. 7 In reply thereto, private respondent wrote petitioners on January 25, 1980 expressing surprise over the demand for payment made by petitioners since private respondent had been ready since December 1979 to perform its part of the agreement while petitioners had not yet complied with their undertaking to clear the subject properties of the obstructions thereon. 8 On March 3, 1980, private respondent, through its counsel, wrote petitioners demanding the refund of the P 50,000.00 down payment made by private respondent on account of the failure of the petitioners to comply with their undertaking and their subsequent withdrawal from the sale. 9 Upon the failure of the petitioners to return the P50,000.00 down payment, private respondent filed a complaint for the collection of a sum of money with damages before the Court of First Instance (now Regional Trial Court) of Rizal on May 9, 1980. The petitioners sought the dismissal of the complaint. They also filed a counterclaim, praying for actual damages of P20,000.00 a month counted from November 1979 to continue while their deprivation of rental income persists, as well as moral and exemplary damages, plus attorney's fees. After trial where the parties presented only one (1) witness each, the trial court rendered its decision dated June 23, 1983 10 in favor of petitioners and ordered private respondent to pay to petitioners the amounts of P170,000.00 with interest of 12% per annum to commence from the date of the filing of the complaint, P 25,000.00 as exemplary damages and P 20,000.00 as attorney's fees.

Both petitioners and private respondent appealed the decision of the trial court. The Court of Appeals held that petitioners were the ones who breached the agreement. In a decision dated June 22, 1987, 11 the appellate court reversed the decision of the trial court and ordered petitioners to pay private respondent the amount of P50,000.00 with legal interest computed from March 3, 1980 plus P 10,000.00 attorney's fees. The motion for reconsideration filed by petitioners was denied by the Court of Appeals in its resolution dated September 18,1987. 12 Hence, this petition for review on certiorari wherein petitioners raise several errors which all boil down to the issue of which party, the petitioners or the private respondent, breached the agreement. Outside of the documentary evidence submitted by the parties, the only evidence available are the testimonies of the two witnesses presented during the trial Henry Lee Chuy, president of respondent corporation, for the plaintiff (herein private respondent) and Ang Kilin alias Tan Tian, father of the petitioner, for the defense which testimonies are diametrically opposed to one another. After a careful examination of the records of the case, this Court rules in favor of the private respondent. There is no doubt that there was a perfected contract for the sale of subject properties between petitioners and private respondent as evidenced by the down payment of P50,000.00. 13 What needs to be resolved is the agreed price for the sale of subject properties. In the receipt prepared by private respondent which was not signed by petitioners, the stated purchase price is P1,600,000.00. However, the receipt signed by petitioners, which substantially reproduced the terms and conditions embodied in the original receipt, did not state the agreed price. Henry Lee Chuy testified that the second receipt did not indicate the agreed price because petitioners wanted to undervalue the price of P1,600,000.00 so that they will not pay a large amount of capital gains tax considering that the prior acquisition price for the property was only P680,000.00. 14 Initially, he refused to agree but upon the assurance of petitioners' father Ang Kilin that the clearing work in the property will be completed in a week or two, he agreed to keep the receipt. On the other hand, Ang Kilin testified that the real price for the sale is P2,340,000.00 and not P1,600,000.00 as claimed by private respondent so that they (the petitioners) did not sign the receipt prepared by the latter. He claimed that it was Mrs. Lee, the mother of Henry Lee Chuy, who did not want to state the correct price since she wanted to undervalue the property. He adds that they have received offers for the properties in the amount of P2,160,000.00 from Dolora Chua, 15 and Pl,300.00 per square meter from Eusebio Chang of the Ching Chua Printing Press. 16 He also testified that inasmuch as the offer of private respondent was made earlier, petitioners were not in a position to negotiate with the other buyers. The respondent Court of Appeals arrived at the conclusion that the petitioner committed a breach of their contract and acted in bad faith in dealing with private respondent. We agree. Petitioners did not offer any plausible explanation as to why Mrs. Lee did not want to state the correct price except that the latter wanted to undervalue the property. The reason why Mrs. Lee wanted to undervalue the property was not clear. On the other hand, Henry Lee Chuy categorically stated that petitioners did not want to state the correct price for purposes of reducing their capital gains tax liability. The Court finds that the latter explanation appears to be the more logical reason why petitioners did not state any specified amount for the agreed price in the receipt they signed. Since petitioners acquired the property for only P680,000.00 and the purchase price of the same was set at

P1,600,000.00, they would have been liable to pay quite a large amount of capital gains tax for the profits to be realized from the sale, and even more had the price been set at P2,340,000.00. Moreover, the original receipt prepared by private respondent recites in detail the manner of payment of the balance of the purchase price, to wit: P750,000.00 to be paid after the property is cleared of occupants and obstructions and upon delivery of the deed of absolute sale; and the balance of P800,000.00 to be paid within 45 days thereafter. On the other hand, the receipt prepared and signed by petitioners merely indicates that 50% of the price minus the deposit shall be paid upon delivery of the deed of absolute sale and the other 50% would be paid within 45 days thereafter without stating the price. If the price was really P2,340,000.00 as claimed by petitioners, they could have easily written the amount in the receipt. With or without a lawyer to assist them, petitioners must have been aware of the importance of indicating the correct amount in the receipt since they claim that they did not sign the receipt prepared by private respondent because the price indicated thereon was wrong. Petitioners were the ones who clearly caused the obscurity when they omitted the purchase price in the receipt they prepared and signed. Hence, such obscurity must be construed against them. 17 The claim of the petitioners, which the trial court believed, is that they could no longer accept the offers they have received from Dolora Chua and the Ching Hua Printing Press because of their previous commitment with private respondent. This pretension is not supported by the evidence. The records show that petitioners had entered into an "Agreement of Purchase or Sale" with Dolora Chua on December 3, 1979, 18 or one day before the date of the receipt they signed for the P50,000.00 down payment made by private respondent. Petitioners also argue that the appellate court e"ed when it considered the said document as an agreement and not a mere offer. We have carefully examined the said document and We find no cogent basis to view the same as a mere offer. It is clearly stated in the agreement that petitioners received P20,000.00 from Dolora Chua as down payment for the subject properties with the balance of the purchase price of P2,160,000.00 to be paid in full at the time the land shall have been cleared and that petitioners bind themselves to deliver to the buyer a deed of sale and conveyance upon full payment. The terms of the agreement are so. clear as not to leave room for any other interpretation. 19 The aforementioned agreement further bolsters the conclusion that the price agreed upon by petitioners and private respondent was P1,600,000.00. If the true price was P2,340,000.00, it would be unusual for petitioners to enter into such an agreement with Chua at a lesser purchase price. The only logical conclusion is that petitioners had intentionally omitted the price of P1,600,000.00 in the receipt they signed either to compel private respondent to agree to a price increase or to enable them to back out of their agreement notwithstanding their plan to reduce their capital gains tax liability. Having settled the issue as to the agreed purchase price, We are now faced with the question of who breached the agreement and, as a corollary to this, who has the right to withdraw from the sale. The Court of Appeals found that the petitioners breached the agreement when they failed to undertake fulfillment of the two conditions embodied in the same; (1) that petitioners will undertake to remove and clear the subject property of all occupants and obstructions within the month of December 1979 and (2) that when the subject property is cleared of all occupants and obstructions, the petitioners shall deliver a deed of absolute sale in favor of private respondent with all pertinent papers necessary for the registration and issuance of a certificate of title in the name of private respondent. Said conclusion of the Court of Appeals that petitioners failed to comply with their part of the agreement is conclusive upon this Court. 20 The appellate court discussed in detail its findings on the matter. We have gone through the records of this case and find no cogent reason to disturb such findings. However, such breach of the agreement by petitioner does not warrant a resolution of the contract. 21 While it is true that in reciprocal obligations, such as the contract of purchase and sale in this case, the power to rescind is implied and any of the contracting parties may, upon non-fulfillment by the other party of his part of the obligation, resolve the contract, 22 rescission wig not be permitted for a slight or casual breach of the contract. Rescission may be had only for such breaches that are so substantial and fundamental as to defeat the object of the parties in making the agreement. 23 The two

aforementioned conditions that were breached by petitioners are not essential for the fulfillment of the obligations to sen on their part but merely an incidental undertaking. The rescission of the contract may not be allowed on this ground alone. At any rate, private respondent at first did not seek to rescind the contract on the basis of the nonfulfillment of these conditions. Private respondent in fact sought definite advice from petitioners as to when they can comply with the conditions since it was ready to perform its part of the agreement since December 1979. This was after it received the letter of petitioners demanding payment of the balance of the purchase price on or before January 24, 1980 with the threat that failure to do so will lead to the repudiation of the agreement. Of course, petitioners cannot unilaterally repudiate the contract for the slight delay in payment incurred by private respondent which, even if true, cannot also be a ground for rescission since the same amounts to a slight breach. 24 Indeed, it was the failure of the petitioners to comply with the aforementioned conditions of the agreement that caused the delay in the payment by private respondent. However, when petitioners still failed to comply with their obligation and refused to proceed with the sale unless the purchase price is increased, that was the time private respondent demanded the resolution of the sale by asking for the refund of the downpayment. The Court holds that when petitioners refused to proceed with the sale unless private respondent agreed to pay the higher price of P2,340,000.00, the petitioners thereby committed a serious breach of the agreement. There was a perfected contract of sale between the parties and the purchase price was set at P1,600,000.00. Petitioners cannot increase the purchase price agreed upon without the consent of private respondent. As private respondent was willing to buy the subject property at the price of P1,600,000.00 as agreed upon and petitioners were not willing to sell unless the price is increased to P2,340,000.00, 25 private respondent had the right to rescind the agreement as petitioners committed a serious breach of the terms of the same. Moreover, as the Court of Appeals correctly observed, since petitioners had already sold the subject properties to Dolora Chua, they can no longer perform what was incumbent upon them under the terms of the agreement, that is, to deliver the subject property to private respondent. This is another breach of their agreement. The appellate court aptly characterized the actuations of petitioners to be "double-dealing." As a consequence of the resolution of the contract of sale, the parties should be restored to their original situation. 26 Petitioners should, therefore, be liable to refund the P50,000.00 down payment they have received from private respondent with legal interest computed from the date of the extrajudicial demand made on March 3, 1980. 27 WHEREFORE, the decision of the Court of Appeals dated June 22, 1987 in Case No. CA-GR CV No. 07139 is hereby AFFIRMED. No pronouncement as to costs. SO ORDERED. FIRST DIVISION G.R. No. 158997 October 6, 2008

FORT BONIFACIO DEVELOPMENT CORPORATION petitioner, vs. YLLAS LENDING CORPORATION and JOSE S. LAURAYA, in his official capacity as President, respondents. DECISION CARPIO, J.: The Case

This is a petition for review on certiorari1 of the Orders issued on 7 March 20032 and 3 July 20033 by Branch 59 of the Regional Trial Court of Makati City (trial court) in Civil Case No. 01-1452. The trial court's orders dismissed Fort Bonifacio Development Corporation's (FBDC) third party claim and denied FBDC's Motion to Intervene and Admit Complaint in Intervention. The Facts On 24 April 1998, FBDC executed a lease contract in favor of Tirreno, Inc. (Tirreno) over a unit at the Entertainment Center - Phase 1 of the Bonifacio Global City in Taguig, Metro Manila. The parties had the lease contract notarized on the day of its execution. Tirreno used the leased premises for Savoia Ristorante and La Strega Bar. Two provisions in the lease contract are pertinent to the present case: Section 20, which is about the consequences in case of default of the lessee, and Section 22, which is about the lien on the properties of the lease. The pertinent portion of Section 20 reads: Section 20. Default of the Lessee 20.1 The LESSEE shall be deemed to be in default within the meaning of this Contract in case: (i) The LESSEE fails to fully pay on time any rental, utility and service charge or other financial obligation of the LESSEE under this Contract; xxx 20.2 Without prejudice to any of the rights of the LESSOR under this Contract, in case of default of the LESSEE, the lessor shall have the right to: (i) Terminate this Contract immediately upon written notice to the LESSEE, without need of any judicial action or declaration; xxx Section 22, on the other hand, reads: Section 22. Lien on the Properties of the Lessee Upon the termination of this Contract or the expiration of the Lease Period without the rentals, charges and/or damages, if any, being fully paid or settled, the LESSOR shall have the right to retain possession of the properties of the LESSEE used or situated in the Leased Premises and the LESSEE hereby authorizes the LESSOR to offset the prevailing value thereof as appraised by the LESSOR against any unpaid rentals, charges and/or damages. If the LESSOR does not want to use said properties, it may instead sell the same to third parties and apply the proceeds thereof against any unpaid rentals, charges and/or damages. Tirreno began to default in its lease payments in 1999. By July 2000, Tirreno was already in arrears byP5,027,337.91. FBDC and Tirreno entered into a settlement agreement on 8 August 2000. Despite the execution of the settlement agreement, FBDC found need to send Tirreno a written notice of termination dated 19 September 2000 due to Tirreno's alleged failure to settle its outstanding obligations. On 29 September 2000, FBDC entered and occupied the leased premises. FBDC also appropriated the equipment and properties left by Tirreno pursuant to Section 22 of their Contract of Lease as partial payment for Tirreno's outstanding obligations. Tirreno filed an action for forcible entry against FBDC before the Municipal Trial Court of Taguig. Tirreno also filed a complaint for specific performance with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction against FBDC before the Regional Trial Court (RTC) of Pasig City. The RTC of Pasig City dismissed Tirreno's complaint for forum-shopping.

On 4 March 2002, Yllas Lending Corporation and Jose S. Lauraya, in his official capacity as President, (respondents) caused the sheriff of Branch 59 of the trial court to serve an alias writ of seizure against FBDC. On the same day, FBDC served on the sheriff an affidavit of title and third party claim. FBDC found out that on 27 September 2001, respondents filed a complaint for Foreclosure of Chattel Mortgage with Replevin, docketed as Civil Case No. 01-1452, against Tirreno, Eloisa Poblete Todaro (Eloisa), and Antonio D. Todaro (Antonio), in their personal and individual capacities, and in Eloisa's official capacity as President. In their complaint, respondents alleged that they lent a total of P1.5 million to Tirreno, Eloisa, and Antonio. On 9 November 2000, Tirreno, Eloisa and Antonio executed a Deed of Chattel Mortgage in favor of respondents as security for the loan. The following properties are covered by the Chattel Mortgage: a. Furniture, Fixtures and Equipment of Savoia Ristorante and La Strega Bar, a restaurant owned and managed by [Tirreno], inclusive of the leasehold right of [Tirreno] over its rented building where [the] same is presently located. b. Goodwill over the aforesaid restaurant, including its business name, business sign, logo, and any and all interest therein. c. Eighteen (18) items of paintings made by Florentine Master, Gino Tili, which are fixtures in the above-named restaurant. The details and descriptions of the above items are specified in Annex "A" which is hereto attached and forms as an integral part of this Chattel Mortgage instrument.4 In the Deed of Chattel Mortgage, Tirreno, Eloisa, and Antonio made the following warranties to respondents: 1. WARRANTIES: The MORTGAGOR hereby declares and warrants that: a. The MORTGAGOR is the absolute owner of the above named properties subject of this mortgage, free from all liens and encumbrances. b. There exist no transaction or documents affecting the same previously presented for, and/or pending transaction.5 Despite FBDC's service upon him of an affidavit of title and third party claim, the sheriff proceeded with the seizure of certain items from FBDC's premises. The sheriff's partial return indicated the seizure of the following items from FBDC: A. FIXTURES (2) - Smaller Murano Chandeliers (1) - Main Murano Chandelier B. EQUIPMENT (13) - Uni-Air Split Type 2HP Air Cond. (2) - Uni-Air Split Type 1HP Air Cond. (3) - Uni-Air Window Type 2HP Air Cond. (56) - Chairs (1) - Table

(2) - boxes - Kitchen equipments [sic]6 The sheriff delivered the seized properties to respondents. FBDC questioned the propriety of the seizure and delivery of the properties to respondents without an indemnity bond before the trial court. FBDC argued that when respondents and Tirreno entered into the chattel mortgage agreement on 9 November 2000, Tirreno no longer owned the mortgaged properties as FBDC already enforced its lien on 29 September 2000. In ruling on FBDC's motion for leave to intervene and to admit complaint in intervention, the trial court stated the facts as follows: Before this Court are two pending incidents, to wit: 1) [FBDC's] Third-Party Claim over the properties of [Tirreno] which were seized and delivered by the sheriff of this Court to [respondents]; and 2) FBDC's Motion to Intervene and to Admit Complaint in Intervention. Third party claimant, FBDC, anchors its claim over the subject properties on Sections 20.2(i) and 22 of the Contract of Lease executed by [FBDC] with Tirreno. Pursuant to said Contract of Lease, FBDC took possession of the leased premises and proceeded to sell to third parties the properties found therein and appropriated the proceeds thereof to pay the unpaid lease rentals of [Tirreno]. FBDC, likewise filed a Motion to Admit its Complaint-in-Intervention. In Opposition to the third-party claim and the motion to intervene, [respondents] posit that the basis of [FBDC's] third party claim being anchored on the aforesaid Contract [of] Lease is baseless. [Respondents] contend that the stipulation of the contract of lease partakes of a pledge which is void under Article 2088 of the Civil Code for being pactum commissorium. xxx By reason of the failure of [Tirreno] to pay its lease rental and fees due in the amount of P5,027,337.91, after having notified [Tirreno] of the termination of the lease, x x x FBDC took possession of [Tirreno.'s] properties found in the premises and sold those which were not of use to it. Meanwhile, [respondents], as mortgagee of said properties, filed an action for foreclosure of the chattel mortgage with replevin and caused the seizure of the same properties which [FBDC] took and appropriated in payment of [Tirreno's] unpaid lease rentals.7 The Ruling of the Trial Court In its order dated 7 March 2003, the trial court stated that the present case raises the questions of who has a better right over the properties of Tirreno and whether FBDC has a right to intervene in respondents' complaint for foreclosure of chattel mortgage. In deciding against FBDC, the trial court declared that Section 22 of the lease contract between FBDC and Tirreno is void under Article 2088 of the Civil Code.8 The trial court stated that Section 22 of the lease contract pledges the properties found in the leased premises as security for the payment of the unpaid rentals. Moreover, Section 22 provides for the automatic appropriation of the properties owned by Tirreno in the event of its default in the payment of monthly rentals to FBDC. Since Section 22 is void, it cannot vest title of ownership over the seized properties. Therefore, FBDC cannot assert that its right is superior to respondents, who are the mortgagees of the disputed properties. The trial court quoted from Bayer Phils. v. Agana9 to justify its ruling that FBDC should have filed a separate complaint against respondents instead of filing a motion to intervene. The trial court quoted from Bayer as follows: In other words, construing Section 17 of Rule 39 of the Revised Rules of Court (now Section 16 of the 1997 Rules on Civil Procedure), the rights of third-party claimants over certain

properties levied upon by the sheriff to satisfy the judgment may not be taken up in the case where such claims are presented but in a separate and independent action instituted by the claimants.10 The dispositive portion of the trial court's decision reads: WHEREFORE, premises considered, [FBDC's] Third Party Claim is hereby DISMISSED. Likewise, the Motion to Intervene and Admit Complaint in Intervention is DENIED.11 FBDC filed a motion for reconsideration on 9 May 2003. The trial court denied FBDC's motion for reconsideration in an order dated 3 July 2003. FBDC filed the present petition before this Court to review pure questions of law. The Issues FBDC alleges that the trial court erred in the following: 1. Dismissing FBDC's third party claim upon the trial court's erroneous interpretation that FBDC has no right of ownership over the subject properties because Section 22 of the contract of lease is void for being a pledge and a pactum commissorium; 2. Denying FBDC intervention on the ground that its proper remedy as third party claimant over the subject properties is to file a separate action; and 3. Depriving FBDC of its properties without due process of law when the trial court erroneously dismissed FBDC's third party claim, denied FBDC's intervention, and did not require the posting of an indemnity bond for FBDC's protection.12 The Ruling of the Court The petition has merit. Taking of Lessee's Properties without Judicial Intervention We reproduce Section 22 of the Lease Contract below for easy reference: Section 22. Lien on the Properties of the Lessee Upon the termination of this Contract or the expiration of the Lease Period without the rentals, charges and/or damages, if any, being fully paid or settled, the LESSOR shall have the right to retain possession of the properties of the LESSEE used or situated in the Leased Premises and the LESSEE hereby authorizes the LESSOR to offset the prevailing value thereof as appraised by the LESSOR against any unpaid rentals, charges and/or damages. If the LESSOR does not want to use said properties, it may instead sell the same to third parties and apply the proceeds thereof against any unpaid rentals, charges and/or damages. Respondents, as well as the trial court, contend that Section 22 constitutes a pactum commissorium, a void stipulation in a pledge contract. FBDC, on the other hand, states that Section 22 is merely a dacion en pago. Articles 2085 and 2093 of the Civil Code enumerate the requisites essential to a contract of pledge: (1) the pledge is constituted to secure the fulfillment of a principal obligation; (2) the pledgor is the absolute owner of the thing pledged; (3) the persons constituting the pledge have the free disposal of their property or have legal authorization for the purpose; and (4) the thing pledged is placed in the possession of the creditor, or of a third person by common agreement. Article 2088 of the Civil Code

prohibits the creditor from appropriating or disposing the things pledged, and any contrary stipulation is void. On the other hand, Article 1245 of the Civil Code defines dacion en pago, or dation in payment, as the alienation of property to the creditor in satisfaction of a debt in money. Dacion en pago is governed by the law on sales.Philippine National Bank v. Pineda 13 held that dation in payment requires delivery and transmission of ownership of a thing owned by the debtor to the creditor as an accepted equivalent of the performance of the obligation. There is no dation in payment when there is no transfer of ownership in the creditor's favor, as when the possession of the thing is merely given to the creditor by way of security. Section 22, as worded, gives FBDC a means to collect payment from Tirreno in case of termination of the lease contract or the expiration of the lease period and there are unpaid rentals, charges, or damages. The existence of a contract of pledge, however, does not arise just because FBDC has means of collecting past due rent from Tirreno other than direct payment. The trial court concluded that Section 22 constitutes a pledge because of the presence of the first three requisites of a pledge: Tirreno's properties in the leased premises secure Tirreno's lease payments; Tirreno is the absolute owner of the said properties; and the persons representing Tirreno have legal authority to constitute the pledge. However, the fourth requisite, that the thing pledged is placed in the possession of the creditor, is absent. There is non-compliance with the fourth requisite even if Tirreno's personal properties are found in FBDC's real property. Tirreno's personal properties are in FBDC's real property because of the Contract of Lease, which gives Tirreno possession of the personal properties. Since Section 22 is not a contract of pledge, there is no pactum commissorium. FBDC admits that it took Tirreno's properties from the leased premises without judicial intervention after terminating the Contract of Lease in accordance with Section 20.2. FBDC further justifies its action by stating that Section 22 is a forfeiture clause in the Contract of Lease and that Section 22 gives FBDC a remedy against Tirreno's failure to comply with its obligations. FBDC claims that Section 22 authorizes FBDC to take whatever properties that Tirreno left to pay off Tirreno's obligations. We agree with FBDC. A lease contract may be terminated without judicial intervention. Consing v. Jamandre upheld the validity of a contractually-stipulated termination clause: This stipulation is in the nature of a resolutory condition, for upon the exercise by the [lessor] of his right to take possession of the leased property, the contract is deemed terminated. This kind of contractual stipulation is not illegal, there being nothing in the law proscribing such kind of agreement. xxx Judicial permission to cancel the agreement was not, therefore necessary because of the express stipulation in the contract of [lease] that the [lessor], in case of failure of the [lessee] to comply with the terms and conditions thereof, can take-over the possession of the leased premises, thereby cancelling the contract of sub-lease. Resort to judicial action is necessary only in the absence of a special provision granting the power of cancellation. 14 A lease contract may contain a forfeiture clause. Country Bankers Insurance Corp. v. Court of Appeals upheld the validity of a forfeiture clause as follows: A provision which calls for the forfeiture of the remaining deposit still in the possession of the lessor, without prejudice to any other obligation still owing, in the event of the termination or cancellation of the agreement by reason of the lessee's violation of any of the terms and conditions of the agreement is a penal clause that may be validly entered into. A penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose of insuring the performance thereof by imposing on the debtor a special prestation (generally

consisting in the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled.15 In Country Bankers, we allowed the forfeiture of the lessee's advance deposit of lease payment. Such a deposit may also be construed as a guarantee of payment, and thus answerable for any unpaid rent or charges still outstanding at any termination of the lease. In the same manner, we allow FBDC's forfeiture of Tirreno's properties in the leased premises. By agreement between FBDC and Tirreno, the properties are answerable for any unpaid rent or charges at any termination of the lease. Such agreement is not contrary to law, morals, good customs, or public policy. Forfeiture of the properties is the only security that FBDC may apply in case of Tirreno's default in its obligations. Intervention versus Separate Action Respondents posit that the right to intervene, although permissible, is not an absolute right. Respondents agree with the trial court's ruling that FBDC's proper remedy is not intervention but the filing of a separate action. Moreover, respondents allege that FBDC was accorded by the trial court of the opportunity to defend its claim of ownership in court through pleadings and hearings set for the purpose. FBDC, on the other hand, insists that a third party claimant may vindicate his rights over properties taken in an action for replevin by intervening in the replevin action itself. We agree with FBDC. Both the trial court and respondents relied on our ruling in Bayer Phils. v. Agana 16 to justify their opposition to FBDC's intervention and to insist on FBDC's filing of a separate action. In Bayer, we declared that the rights of third party claimants over certain properties levied upon by the sheriff to satisfy the judgment may not be taken up in the case where such claims are presented, but in a separate and independent action instituted by the claimants. However, both respondents and the trial court overlooked the circumstances behind the ruling in Bayer, which makes the Bayer ruling inapplicable to the present case. The third party in Bayer filed his claim during execution; in the present case, FBDC filed for intervention during the trial. The timing of the filing of the third party claim is important because the timing determines the remedies that a third party is allowed to file. A third party claimant under Section 16 of Rule 39 (Execution, Satisfaction and Effect of Judgments)17 of the 1997 Rules of Civil Procedure may vindicate his claim to the property in a separate action, because intervention is no longer allowed as judgment has already been rendered. A third party claimant under Section 14 of Rule 57 (Preliminary Attachment)18 of the 1997 Rules of Civil Procedure, on the other hand, may vindicate his claim to the property by intervention because he has a legal interest in the matter in litigation. 19 We allow FBDC's intervention in the present case because FBDC satisfied the requirements of Section 1, Rule 19 (Intervention) of the 1997 Rules of Civil Procedure, which reads as follows: Section 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding. Although intervention is not mandatory, nothing in the Rules proscribes intervention. The trial court's objection against FBDC's intervention has been set aside by our ruling that Section 22 of the lease contract is not pactum commissorium. Indeed, contrary to respondents' contentions, we ruled in BA Finance Corporation v. Court of Appeals that where the mortgagee's right to the possession of the specific property is evident, the

action need only be maintained against the possessor of the property. However, where the mortgagee's right to possession is put to great doubt, as when a contending party might contest the legal bases for mortgagee's cause of action or an adverse and independent claim of ownership or right of possession is raised by the contending party, it could become essential to have other persons involved and accordingly impleaded for a complete determination and resolution of the controversy. Thus: A chattel mortgagee, unlike a pledgee, need not be in, nor entitled to, the possession of the property, unless and until the mortgagor defaults and the mortgagee thereupon seeks to foreclose thereon. Since the mortgagee's right of possession is conditioned upon the actual default which itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself, may be required in order to allow a full and conclusive determination of the case. When the mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not only the existence of, but also the mortgagor's default on, the chattel mortgage that, among other things, can properly uphold the right to replevy the property. The burden to establish a valid justification for that action lies with the plaintiff [-mortgagee]. An adverse possessor, who is not the mortgagor, cannot just be deprived of his possession, let alone be bound by the terms of the chattel mortgage contract, simply because the mortgagee brings up an action for replevin. 20 (Emphasis added) FBDC exercised its lien to Tirreno's properties even before respondents and Tirreno executed their Deed of Chattel Mortgage. FBDC is adversely affected by the disposition of the properties seized by the sheriff. Moreover, FBDC's intervention in the present case will result in a complete adjudication of the issues brought about by Tirreno's creation of multiple liens on the same properties and subsequent default in its obligations. Sheriff's Indemnity Bond FBDC laments the failure of the trial court to require respondents to file an indemnity bond for FBDC's protection. The trial court, on the other hand, did not mention the indemnity bond in its Orders dated 7 March 2003 and 3 July 2003. Pursuant to Section 14 of Rule 57, the sheriff is not obligated to turn over to respondents the properties subject of this case in view of respondents' failure to file a bond. The bond in Section 14 of Rule 57 (proceedings where property is claimed by third person) is different from the bond in Section 3 of the same rule (affidavit and bond). Under Section 14 of Rule 57, the purpose of the bond is to indemnify the sheriff against any claim by the intervenor to the property seized or for damages arising from such seizure, which the sheriff was making and for which the sheriff was directly responsible to the third party. Section 3, Rule 57, on the other hand, refers to the attachment bond to assure the return of defendant's personal property or the payment of damages to the defendant if the plaintiff's action to recover possession of the same property fails, in order to protect the plaintiff's right of possession of said property, or prevent the defendant from destroying the same during the pendency of the suit. Because of the absence of the indemnity bond in the present case, FBDC may also hold the sheriff for damages for the taking or keeping of the properties seized from FBDC. WHEREFORE, we GRANT the petition. We SET ASIDE the Orders dated 7 March 2003 and 3 July 2003 of Branch 59 of the Regional Trial Court of Makati City in Civil Case No. 01-1452 dismissing Fort Bonifacio Development Corporation's Third Party Claim and denying Fort Bonifacio Development Corporation's Motion to Intervene and Admit Complaint in Intervention. We REINSTATE Fort Bonifacio Development Corporation's Third Party Claim and GRANT its Motion to Intervene and Admit Complaint in Intervention. Fort Bonifacio Development Corporation may hold the Sheriff liable for the seizure and delivery of the properties subject of this case because of the lack of an indemnity bond. SO ORDERED. THIRD DIVISION

G.R. No. 173454

October 6, 2008

PHILIPPINE NATIONAL BANK, petitioner, vs. MEGA PRIME REALTY AND HOLDINGS CORPORATION, respondent. x-------------------------x G.R. No. 173456 October 6, 2008

MEGA PRIME REALTY AND HOLDINGS CORPORATION, petitioner, vs. PHILIPPINE NATIONAL BANK, respondent. x-------------------------x DECISION REYES, R.T., J.: IN sales of realty, a breach in the warranties of the seller entitles the buyer to a proportionate reduction of the purchase price. The principle is illustrated in these consolidated petitions for review on certiorari of the Decision1 and Resolution2of the Court of Appeals (CA) in CA-G.R. CV No. 66759, which reversed and set aside that of the Regional Trial Court (RTC) in Malabon City. Earlier, the RTC invalidated the sale of shares of stock in PNB Management and Development Corporation (PNB-Madecor) by and between Mega Prime Realty Corporation (Mega Prime), as vendee, and the Philippine National Bank (PNB), as vendor. The Facts The facts, as summarized by the appellate court, are as follows: Mega Prime filed a complaint for annulment of contract before the RTC of Malabon on November 28, 1997. An amended complaint was subsequently filed on February 17, 1998. In its amended complaint, Mega Prime alleged, among others, that PNB operates a subsidiary by the name of PNB Management and Development Corporation. In line with PNB's privatization plan, it opted to sell or dispose of all its stockholdings over PNB-Madecor to Mega Prime. Thereafter, a deed of sale dated September 27, 1996 was executed between PNB (as vendor) and Mega Prime (as vendee) whereby PNB sold, transferred and conveyed to Mega Prime, on "As is where is" basis, all of its stockholdings in PNB-Madecor for the sum of Five Hundred Five Million Six Hundred Twenty Thousand Pesos (P505,620,000.00). The pertinent portions of the deed of sale are hereunder quoted as follows: WHEREAS, PNB Management and Development Corporation (PNB-MADECOR), a corporation organized and existing under the laws of the Republic of the Philippines, with principal office at PNB Financial Center, Roxas Boulevard, Pasay City, Metro Manila, is a wholly-owned subsidiary of the vendor; WHEREAS, the Vendee has offered to buy all of the stockholdings of the Vendor in PNBMADECOR with an authorized capital stock of P250,000,000.00 and the Vendor has accepted the said offer; WHEREAS, the parties have previously agreed for the Vendee to pay the Vendor the purchase price of all the said stockholdings of the Vendor, as follows:

(i) P50,562,000.00 on or before July 18, 1996 which has been paid; (ii) P50,562,000.00 on or before September 27, 1996; and (iii) Balance of the purchase price through loan with the Vendor; subject to the condition that if the Vendee fails to pay the second installment, the agreement to sell the said stockholdings will be cancelled and the initial 10% down payment will be forfeited in favor of the Vendor; NOW, THEREFORE, for and in consideration of the foregoing premises and the sum of PHILIPPINE PESOS: FIVE HUNDRED FIVE MILLION SIX HUNDRED TWENTY (P505,620,000.00), receipt of which in full is hereby acknowledged, the Vendor hereby sells, transfers and conveys, on "As is where is" basis, unto and in favor of the Vendee, its assigns and successors-in-interest, all of the Vendor's stockholdings in PNB-MADECOR, free from any liens and encumbrances, as evidenced by the following Certificates of Stock (the "Certificates of Stock"): Number 0010 0002 0003 0004 0005 0006 0008 0009 0012 0013 No. of Shares 313,871 1 1 1 1 1 1 1 1 1

hereto attached as Annex "A," and any subscription rights thereto, subject to the following terms and conditions: 1. The sale of the above stockholdings of the Vendor is on a clean balance sheet, i.e. all assets and liabilities are squared, and no deposits, furniture, fixtures and equipment, including receivables shall be transferred to the Vendee, except real properties and improvements thereon of PNB-MADECOR in Quezon City containing an area of 19,080 sq. m., situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles, namely: TCT Nos. 87881, 87882, 87883, 87884, and 160470, per Annexes "B," "C," "D," "E," and "F" hereof. Leasehold rights of the Vendor on the Numancia property are excluded from this sale, however, lease of the Mandy Enterprises and sub-leases thereon shall be honored by the Vendor which shall become the sub-lessor of the said property. x x x Pursuant, therefore, to the terms of the above-quoted deed of sale, the parties also entered into a loan agreement on the same date (September 27, 1996) for P404,496,000.00 and Mega Prime executed in favor of PNB a promissory note for the P404,496,000.00.

Mega Prime further alleged that one of the principal inducements for it to purchase the stockholdings of defendant PNB in PNB-Madecor was to acquire assets of PNB-Madecor, specifically the 19,080 square-meter property located at the corner of Quezon Avenue and Roosevelt Avenue referred to as the Pantranco property. Mega Prime then entered into a joint venture to develop the Pantranco property. However, Mega Prime's joint venture partner pulled out of the agreement when it learned that the property covered by Transfer Certificate of Title (TCT) No. 160470 was likewise the subject matter of another title registered in the name of the City Government of Quezon City (TCT No. RT-9987 [266573]). Moreover, the lot plan of the Pantranco property shows that TCT No. 160470 covers real property located right in the middle of the Pantranco property rendering nugatory the plans set up by Mega Prime for the said property. Mega Prime sought the annulment of the deed of sale on ground that PNB misrepresented that among the assets to be acquired by Mega Prime from the sale of shares of stock was the property covered by TCT No. 160470. However, the subject property was outside the commerce of man, the same being a road owned by the Quezon City Government. Mega Prime also sought reimbursement of the P150,000,000.00 plus legal interest incurred by Mega Prime as expenses for the development of the Pantranco property as actual damages and further sought moral and exemplary damages and attorney's fees. In its answer to the amended complaint, PNB maintains that the subject matter of the deed of sale was PNB's shares of stock in PNB-Madecor which is a separate juridical entity, and not the properties owned by the latter as evidenced by the deed itself. The sale of PNB's shares of stock in PNB-Madecor to Mega Prime did not dissolve PNB-Madecor. PNB only transferred its control over PNB-Madecor to Mega Prime. The real properties of PNB-Madecor did not change ownership, but remained owned by PNB-Madecor. Moreover, PNB denied that it is liable for P150,000,000.00 allegedly incurred by Mega Prime for the development of the Pantranco property since Mega Prime itself alleged in its amended complaint that no such development could be undertaken. According to PNB, Mega Prime's accusation that there was fraudulent misrepresentation on the former's part is without basis. The best evidence of their transaction is the subject deed of sale which clearly shows that what PNB sold to Mega Prime was PNB's stockholdings in PNB-Madecor. As stockholder of PNB-Madecor, PNB did not know nor was it in a position to know, that the Quezon City Government was able to secure another title over the lot covered by TCT No. 160470. Mega Prime, as buyer, bought the shares of stock at its own risk under the caveat emptor rule, more so considering that the sale was made on an "as is where is" basis. Moreover, the fact that the Quezon City Government was able to secure a title over the same lot does not necessarily mean that PNBMadecor's title to it is void or outside the commerce of man. Only a proper proceeding may determine which of the two (2) titles should prevail over the other. Mega Prime, now as the controlling stockholder of PNB-Madecor, should have instead filed action to quiet PNB-Madecor's title over the said lot.3 RTC and CA Dispositions On December 21, 1999, the RTC gave judgment in favor of Mega Prime and against PNB. The fallo of the RTC decision states: WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendant, as follows: (1) Declaring the Deed of Sale of 27 September 1996 as void and rescinded; (2) Ordering the defendant PNB to reimburse plaintiff the legal interest on the amount of ONE HUNDRED FIFTY MILLION PESOS (P150,000,000.00) loan intended by plaintiff in developing the Pantranco properties, as actual damages;

(3) Ordering defendant PNB to pay plaintiff the sum of FIVE MILLION PESOS (P5,000,000.00) as exemplary damages; (4) Ordering defendant PNB to pay plaintiff the sum of ONE HUNDRED THOUSAND PESOS (P100,000.00) as attorney's fees; (5) Ordering defendant to restore to plaintiff the sum of ONE HUNDRED ONE MILLION ONE HUNDRED TWENTY-FOUR THOUSAND PESOS (P101,124,000.00) representing the sum actually paid by plaintiff under the subject contract of sale with legal interest thereon reckoned from the date of extra judicial demand made by plaintiff; (6) Ordering plaintiff to return the five properties covered by T.C.T. Nos. 87881, 87882, 87883, 87884 and 160470 in favor of the defendant under the principle of mutual restitution; (7) Ordering plaintiff to return the stockholdings subject matter of the 27 September 1996 contract of sale in favor of defendant; (8) Ordering defendant to pay the costs of suit. SO ORDERED.4 PNB elevated the matter to the CA via Rule 41 of the 1997 Rules of Civil Procedure. In its appeal, PNB contended,inter alia, that what was sold to Mega Prime were the bank's shares of stock in PNBMadecor, a corporation separate and distinct from PNB; that the Pantranco property was never a consideration in the contract of sale; that Mega Prime is presumed to have undertaken due diligence in ascertaining the ownership of the disputed property, it being a reputable real estate company. Further, PNB claimed that Mega Prime bought its shares of stock at its own risk under the caveat emptor rule, as the sale was on an "as is where is" basis. That the Quezon City Government was able to secure title over the same lot does not necessarily mean that PNB-Madecor's title to it was void or outside the commerce of man. According to PNB, Mega Prime's remedy, as the new controlling owner of PNB-Madecor, is to file an action for quieting of its title to the questioned lot. On January 27, 2006, the CA reversed and nullified the RTC ruling, disposing as follows: WHEREFORE, based on the above premises, the assailed Decision dated 21 December 1999 of the Regional Trial Court of Malabon, Metro Manila, Branch 72, is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint in Civil Case No. 2793-MN. The counterclaim of PNB is likewise DISMISSED. SO ORDERED.5 Both parties moved for reconsideration of the CA decision. Both motions were, however, denied with finality on July 5, 2006.6 Hence, the present recourse by both PNB and Mega Prime. PNB first filed its petition for review, docketed as G.R. No. 173454, assailing only the CA's dismissal of its counterclaim. In its separate petition for review, docketed as G.R. No. 173456, Mega Prime challenged the reversal by the CA of the RTC decision. Issues PNB assigns solely that the CA committed a grave error, giving rise to a question of law, in concluding that Mega Prime's complaint was not a mere ploy to prevent the foreclosure of the pledge and in

dismissing PNB's counterclaim, ignoring the documentary evidence proving that Mega Prime's complaint was intended to preempt the foreclosure of the pledge and evade payment of its P404,496,000.00 overdue debt. For its part, Mega Prime submits that the CA erred in ruling that Mega Prime did not have sufficient grounds to have the deed of sale dated September 27, 1996 annulled. Stripped to its bare essentials, the Court is tasked to resolve the following questions: A. Are there grounds for the annulment of the deed of sale between PNB and Mega Prime? and B. Are PNB and Mega Prime entitled to the damages they respectively claim against each other? Our Ruling A. There is no sufficient ground to annul the deed of sale. There is no basis for a finding of fraud against PNB to invalidate the sale. A perusal of the deed of sale reveals that the sale principally involves the entire shareholdings of PNB in PNB-Madecor, not the properties covered by TCT Nos. 87881, 87882, 87883, 87884 and 160740. Any defect in any of the said titles should not, therefore, affect the entire sale. Further, there is no evidence that PNB was aware of the existence of another title on one of the properties covered by TCT No. 160740 in the name of the Quezon City government before and during the execution of the deed of sale. Although it is expressly stated in the deed of sale that the transfer of the entire stockholdings of PNB in PNB-Madecor will effectively result in the transfer of the said properties, the discovery of the title under the name of the Quezon City government does not substantially affect the integrity of the object of the sale. This is so because TCT No. 160740 covers only 733.70 square meters of the entire Pantranco property which has a total area of 19,080 square meters. We quote with approval the CA observations along this line: Well-settled is the rule that the party alleging fraud or mistake in a transaction bears the burden of proof. The circumstances evidencing fraud are as varied as the people who perpetrate it in each case. It may assume different shapes and forms; it may be committed in as many different ways. Thus, the law requires that it be established by clear and convincing evidence. Fraud is never lightly inferred; it is good faith that is. Under the Rules of Court, it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular." While disputable, these presumptions can be overcome only by clear and preponderant evidence. Applied to contracts, the presumption is in favor of validity and regularity. In this case, it cannot be said that Mega Prime was able to adduce a preponderance of evidence before the trial court to show that PNB fraudulently misrepresented that it had title or authority to sell the property covered by TCT No. 160470. Nor was Mega Prime able to satisfactorily show that PNB should be held liable for damages allegedly sustained by it. First, PNB correctly argued that with Mega Prime as a corporation principally engaged in real estate business it is presumed to be experienced in its business and it is assumed that it made the proper appraisal and examination of the properties it would acquire from the sale of shares of stock. In fact, Mega Prime was given copies of the titles to the properties which were attached to the subject deed of sale. In other words, there was full disclosure on the part of PNB of the status of the properties of PNB-Madecor to be transferred to Mega Prime by reason of its purchase of all of PNB's shareholdings in PNB-Madecor.

The general rule is that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of making further inquiries. This rule, however, admits of exceptions: 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. A perusal of TCT No. 160470 would show that the property is registered under the name Marcris Realty Corporation and not under PNB or PNB-Madecor, the alleged owner of the said property. Moreover, TCT No. 160470 explicitly shows on its face that it covers a road lot. This fact notwithstanding, Mega Prime still opted to buy PNB's shares of stock, investing millions of pesos on the said purchase. Mega Prime cannot therefore claim that it can rely on the face of the title when the same is neither registered under the name of PNB, the vendor of the shares of stock in PNB-Madecor, nor of PNB-Madecor, the alleged owner of the property. This should have forewarned Mega Prime to inquire further into the ownership of PNBMadecor with respect to TCT No. 160470. And it should not be heard to complain that the property covered by TCT No. 160470 is outside the commerce of man, it being a road, since this fact is evident on the face of TCT No. 160470 itself which describes the property it covers as a road lot. If, indeed, the principal inducement for Mega Prime to buy PNB's shares of stock in PNBMadecor was the acquisition of the said properties, Mega Prime should have insisted on putting in writing, whether in the same deed of sale or in a separate agreement, any condition or understanding of the parties regarding the transfer of titles from PNB-Madecor to Mega Prime. In buying the shares of stock with notice of the flaw in the certificate of title of PNBMadecor, Mega Prime assumed the risks that may attach to the said purchase or said investment. Clearly, under the deed of sale, Mega Prime purchased the shares of stock of PNB in PNB-Madecor on an "as is where is" basis, which should give Mega Prime more reason to investigate and look deeper into the titles of PNB-Madecor. Second, Mega Prime's remedy is not with PNB. It must be stressed that PNB only sold its shares of stock in PNB-Madecor which remains to be the owner of the lot in question. Although, admittedly, PNB-Madecor is a subsidiary of PNB, this does not necessarily mean that PNB and PNB-Madecor are one and the same corporation. The mere fact that a corporation owns all of the stocks of another corporation, taken alone is not sufficient to justify their being treated as one entity. If used to perform legitimate functions, a subsidiary's separate existence shall be respected, and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The general rule is that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter. Courts may, however, in the exercise of judicial discretion step in to prevent the abuses of separate entity privilege and pierce the veil of corporate fiction. The following circumstances are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation and whether piercing of the corporate veil is proper: (a) The parent corporation owns all or most of the capital stock of the subsidiary. (b) The parent and subsidiary corporations have common directors or officers. (c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation. (e) The subsidiary has grossly inadequate capital. (f) The parent corporation pays the salaries and other expenses or losses of the subsidiary. (g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation. (h) In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own. (i) The parent corporation uses the property of the subsidiary as its own. (j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary, but take their orders from the parent corporation. (k) The formal legal requirements of the subsidiary are not observed. Aside from the fact that PNB-Madecor is a wholly-owned subsidiary of PNB, there are no other factors shown to indicate that PNB-Madecor is a mere instrumentality of PNB. Therefore, PNB's separate personality cannot be merged with PNB-Madecor in the absence of sufficient ground to pierce the veil of corporate fiction. It must be noted that at the outset, PNB presented to Mega Prime the titles to the properties. With the exception of one (1) title, TCT No. 160470, the four (4) titles are registered under PNB-Madecor's name and not PNB. PNB correctly observed that Mega Prime's remedy is not to go after PNB who merely sold its shares of stock in PNB-Madecor but to file the appropriate action to remove any cloud in PNB-Madecor's title over TCT No. 160470. Third, it is significant to note that the deed of sale is a public document duly notarized and acknowledged before a notary public. As such, it has in its favor the presumption of regularity, and it carries the evidentiary weight conferred upon it with respect to its due execution. It is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its face. Thus, It has long been settled that a public document executed and attested through the intervention of the notary public is evidence of the facts in clear, unequivocal manner therein expressed. It has in its favor the presumption of regularity. To contradict all these, there must be evidence that is clear, convincing and more than merely preponderant. The evidentiary value of a notarial document guaranteed by public attestation in accordance with law must be sustained in full force and effect unless impugned by strong, complete and conclusive proof. Based on the above arguments, there is no reason to annul the said deed considering that both parties freely and fairly entered into the said contract presumptively knowing the consequences of their acts. Lastly, Mega Prime, using its business judgment, entered into a sale transaction with PNB respecting shares of stock in PNB-Madecor, in anticipation of owning properties owned by PNB-Madecor. However, it was found out later that a title in the name of the Quezon City Government casts a cloud over PNB-Madecor's title to the so-called Pantranco Properties. This fact alone cannot justify annulment of a valid and consummated contract of sale. Mega Prime cannot be relieved from its obligation, voluntarily assumed, under the said contract simply because the contract turned out to be a poor business judgment or unwise investment. It should have been more prudent or careful in making such a huge investment worth millions

of pesos. It should have conducted its own due diligence, so to speak. By signing the deed of sale, Mega Prime accepted the risk of an "as is where is" arrangement with respect to the sale of shares of stock therein. The contract has the force of law between the parties and they are expected to abide in good faith by their respective contractual commitments, not weasel out of them. Just as nobody can be forced to enter into a contract, in the same manner, once a contract is entered into, no party can renounce it unilaterally or without the consent of the other. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. Contrary to the trial court's finding, We find that there is no sufficient basis to annul the Deed of Sale dated 27 September 1996. Mega Prime failed to sufficiently prove that PNB was guilty of misrepresentation or fraud with respect to the said transaction. 7 Nevertheless, the Court holds that there was a breach in the warranties of the seller PNB. Resultantly, a reduction in the sale price should be decreed. One of the express conditions in the deed of sale is the transfer of the properties under TCT Nos. 87881, 87882, 87883, 87884 and 160740 in the name of Mega Prime: 1. The Sale of the above stockholdings of the vendor is on a clean balance sheet, i.e., all assets and liabilities are squared, and no deposits, furniture, fixtures and equipment, including receivables shall be transferred to the vendee, except real properties and improvements thereon of PNB-Madecor in Quezon City containing an area of 19,080 sq. m., situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles namely: TCT Nos. 87881, 87882, 87883, 87884, and 160470 x x x. 8 Verily, an important sense of the deed of sale is the transfer of ownership over the subject properties to Mega Prime. Clearly, the failure of the seller PNB to effect a change in ownership of the subject properties amounts to a hidden defect within the contemplation of Articles 1547 and 1561 of the New Civil Code. The said provisions of law read: Art. 1547. In a contract of sale, unless a contrary intention appears, there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing; (2) An implied warranty that the thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or known to the buyer. This article shall not, however, be held to render liable a sheriff, auctioneer, mortgagee, pledgee, or other person professing to sell by virtue of authority in fact or law, for the sale of a thing in which a third person has a legal or equitable interest.9 xxxx Art. 1561. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have, should they render it unfit for the use for which it is intended, or should they diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it; but said vendor shall not be answerable for patent defects or those which may be visible, or for those which are not visible if the vendee is an expert who, by reason of his trade or profession, should have known them.10

Up to now, the title of the said property is still under the name of the former registered owner Marcris Realty Corporation. Mega Prime's subsequent discovery that the property covered by TCT No. 160740 is covered by a title pertaining to the City Government of Quezon City coupled with PNB's inability up to the present to submit a title in the name of PNB-Madecor constitutes a breach of warranty. Hence, a proportionate reduction in the consideration of the sale is justified, applying the Civil Code principle that "no person shall be enriched at the expense of another."11 The sale of shares of stock was undertaken to effect the transfer of the subject properties with a total area of 19,080 square meters. When PNB failed to deliver the title to the property covered by TCT No. 160740, with an area of 733.70 square meters, PNB violated an express warranty under the deed of sale. Thus, the total consideration in the Deed of Sale should be proportionately reduced equivalent to the value of the property covered by TCT No. 160740. Records bear out that the total consideration for the sale contract is P505,620,000.00. The object is the 19,080-square-meter Pantranco property. Simple division or mathematical computation yields that the property has a value of P26,500.00 per square meter. Considering that the area covered by TCT No. 160740 is 733.70 square meters, the purchase price should be proportionately reduced by P19,443,050.00, an amount arrived at after multiplying P26,500.00 by 733.70 or vice versa. Necessarily, Mega Prime cannot be considered in default with respect to its obligation to petitioner bank in view of the modification of the stipulated consideration. B. As to the parties' claims of damages against each other, the Court fully agrees with the CA that both should be dismissed for lack of factual and legal bases. The CA refused to award actual and exemplary damages to Mega Prime. Said the appellate court: Necessarily, therefore, PNB cannot be made liable for actual damages allegedly sustained by Mega Prime. The latter's allegation that it incurred expenses for the development of the Pantranco Property in the amount of P150,000,000.00 deserves scant consideration. Basic is the jurisprudential principle that in determining actual damages, the courts cannot rely on mere assertions, speculations, conjectures, or guesswork but must depend on competent proof or the best obtainable evidence of the actual amount of loss. Aside from the site development plan adduced by Mega Prime, no other proof was presented by Mega Prime to show that it had incurred expenses for the development of the Pantranco property. In fact, Mega Prime itself alleged that its partner pulled out from the project and the development of the Pantranco Property could not be undertaken after knowledge of the alleged defective title of PNB-Madecor. Without sufficient proof that Mega Prime incurred said expenses and that it was due to PNB's fault, then the latter cannot be held liable for such unsupported allegation. Regarding the award of exemplary damages, the Court likewise finds that PNB cannot be made liable for exemplary damages and attorney's fees, there being no adequate proof to show that PNB was in bad faith when it entered into the contract of sale with Mega Prime. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent or malevolent manner. On the other hand, attorney's fees may be awarded only when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the other party, as when the defendant acted in gross and evident bad faith in refusing the plaintiff's plainly valid, just and demandable claim. Such circumstances were not proved in this case.12 Along the same vein, in dismissing PNB's counterclaims, the CA explained: In the same vein, We find no reason to hold Mega Prime liable on the counterclaim of PNB for moral and exemplary damages and attorney's fees. PNB's counterclaim is anchored on the

alleged bad faith and ill motive of Mega Prime in filing the complaint which allegedly was done by Mega Prime to preempt PNB's foreclosure of the pledge of its shares of stock in PNBMadecor. According to PNB, Mega Prime filed its complaint against PNB after Mega Prime received PNB's letter dated December 11, 1997 reminding it of the maturity date on November 26, 1997 of its P404,496,000.00 loan with PNB, evidently to prevent PNB from foreclosing the pledge. We are not persuaded. The records show that Mega Prime filed its complaint on November 28, 1997, and it was preceded by Mega Prime's demand letter dated November 3, 1997 addressed to PNB, informing PNB of Mega Prime's discovery that the property covered by TCT No. 160470 is actually owned by the Quezon City Government. In said letter, Mega Prime made a demand upon PNB to pay to Mega Prime the amounts ofP101,124,000.00 as actual damages and P48,876,000.00 as other expenses, otherwise legal action shall be instituted against PNB. Clearly, Mega Prime's complaint was filed prior to PNB's letter dated December 11, 1997. Thus, PNB's allegation that Mega Prime filed its complaint as a mere ploy to prevent foreclosure of the pledge and thus evade payment of its overdue obligation is not quite true. Accordingly, in the absence of ample proof that Mega Prime acted in gross and evident bad faith in instituting the complaint against PNB, there is no justification to grant the counterclaim of PNB.13 WHEREFORE, premises considered, the appealed decision is AFFIRMED with MODIFICATION in that the consideration in the Deed of Sale dated September 27, 1996 shall be proportionately reduced by P19,443,050.00, the value corresponding to the property covered by TCT No. 160740. SO ORDERED. SECOND DIVISION DOLORES SALINAS, assisted by her husband, JUAN CASTILLO, Petitioner, - versus SPS. BIENVENIDO S. FAUSTINO and ILUMINADA G. FAUSTINO, Respondents. QUISUMBING, J., Chairperson, CARPIO MORALES, TINGA, VELASCO, JR., and BRION, JJ. Promulgated: September 19, 2008 x-------------------------------------------x DECISION CARPIO MORALES, J.: G.R. No. 153077 Present:

It appears that respondent Bienvenido S. Faustino (Faustino), by a Deed of Absolute Sale (Deed of Sale)1 dated June 27, 1962, purchased from his several co-heirs, including his first cousins Benjamin Salinas and herein petitioner Dolores Salinas, their respective shares to a parcel of land covered by Tax Declaration No. 14687, in the name of their grandmother Carmen Labitan, located in Subic, Zambales, with a "superficial area of 300.375 square meters [sq. m.] 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." On March 15, 1982, respondent Faustino, joined by his wife, filed before the then Court of First Instance of Zambales a complaint for recovery of possession with damages against petitioner, assisted by her husband, docketed as Civil Case No. 3382-0, alleging that the parcel of land he bought via the June 27, 1962 Deed of Sale from his co-heirs consisted of 1,381 sq. m. and is more particularly described as follows: A residential land located at Barrio Matain, Subic, Zambales now know as Lot 3, Block 5-K, Psd8268 bounded on the NORTH by Road Lot 1, Block 5-1, PSD-8268; on the SOUTH by Road Lot 2, Block 5-1, Psd-8268; on the EAST by Road Lot 2, Block 5-1, Psd-8286; and, on the WEST by the property of Roque Demetrio Lot 2, Block 5-k, Psd 8268; containing an area of ONE THOSUAND THREE HUNDRED EIGHTY-ONE (1,381) SQUARE METERS, more or less. Declared for taxation purposes under Tax Declaration No. 1896 in the name of Spouses Bienvenido S. Faustino and Iluminada G. Faustino.2 (Emphasis and underscoring supplied) Respondent spouses further alleged that they allowed petitioner and co-heirs to occupy and build a house on a 627 sq. m. portion of the land, particularly described as follows: The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this complaint; bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the East by Road Lot 2, Block 5-1, Psd-8268; and on the SOUTH and WEST by the remaining portion of Lot 5, Block 5-1, PSD-8268 of herein plaintiffs which is the land described in Paragraph 2 of this complaint owned by the plaintiffs and that this portion in question has an area of SIX HUNDRED TWENTYSEVEN (627) SQUARE METERS, more or less;3 (Emphasis and underscoring supplied), on the condition that they would voluntarily and immediately remove the house and vacate that portion of the land should they (respondents) need the land; and that when they asked petitioner and her co-heir-occupants to remove the house and restore the possession of the immediatelydescribed portion of the land, they refused, hence, the filing of the complaint. In her Answer,4 petitioner claimed that she is the owner of a 628 sq. m. lot covered by Tax Declaration No. 1017 in her name, particularly described as follows: A residential lot, together with the two (2) storey house thereon constructed, and all existing improvements thereon, situated at Matain, Subic, Zambales, containing an area of 628 square meters, more or less. Bounded on the North, by Lot 12313 [sic]; on the East, by Lot 12413 (Road Lot); on the South, by Lot 12005-Cecilia Salinas; and on the West, by Lot 12006, Loreto Febre. Declared under Tax No. 1017, in the name of Dolores Salinas Castillo. (Emphasis and underscoring supplied); that if respondents refer to the immediately described lot, then they have no right or interest thereon;5 and that her signature in the June 27, 1962 Deed of Sale is forged. After trial, Branch 73 of the Regional Trial Court (RTC) of Olongapo City, by Decision of August 31, 1993, found petitioners claim of forgery unsupported. It nevertheless dismissed the complaint,6 it holding that, inter alia, the Deed of Sale indicated that only 300.375 sq. m. was sold to petitioner. . . . [I]n the . . . Deed of Sale [dated June 27, 1962] (Exhibit "B"), the area of the land sold was only 300.375 square meters while the plaintiffs[-herein respondents] in their complaint claim 1,381 square meters or the whole of the lot shown by exhibit "A" (Lot 3, Block 5-A, Psd-8268). Since the document is the best evidence, and the deed of sale indicates only 300.375 square meters, so

then, only the area as stated in the Deed of Sale should be owned by the plaintiffs. The allegations [sic] that there might be a typographical error is again mere conjecture and not really supported by evidence. The boundaries of the land indicated in the Deed of Sale (Exhibit "B") [are] different from that of Exhibit "A" claimed by the plaintiff[s-herein respondents] to be the plan of the lot which they allegedly bought. The Deed of Sale states [that the boundary of the lot in the] North is the lot of Carmen Labitan while Exhibit "A" indicated that North of the land is Lot 3, Block 5-A, Psd-8268 (Exhibit "A") is a Road Lot (Lot 1, Block 5-1, Psd-8268). This Court believes that after examining the documents presented, that the land bought by the plaintiff is only a portion of the land appearing in Exhibit "A" and not the whole lot. The land bought being situated at the southern portion of Lot 3, Block 5-K, Psd-8268. This explains why the northern portion of the lot sold indicated in the Deed of Sale is owned by Carmen Labitan, the original owner of the whole Lot 3, Block 5-K, Psd-8268 (Exhibit "C-1"). Even the tax declaration submitted by the plaintiff indicates different boundaries with that of the land indicated in the Deed of Sale. The law states in Art. 434 of the Civil Code: "Art. 434. In an action to recover, the property must be identified, and the plaintiff must rely on the weakness of the defendants claim." xxxx Herein plaintiffs[-respondents] only own the area of 300.375 square meters of the said lot and not the whole area of 1,381 square meters as claimed by them. There is no evidence to substantiate the plaintiffs claim for the area of 1,381 square meters. x x x x7 (Emphasis and underscoring supplied) On respondents appeal,8 the Court of Appeals, by Decision of December 20, 2001, 9 modified the RTC decision. It held that since respondents are claiming the whole lot containing 1,381 sq. m. but that petitioner is claiming 628 sq. m. thereof, then respondents are "entitled to the remaining portion . . . of 753 square meters." The appellate court explained: x x x [T]he Court agrees with the court a quo that only a portion of the whole lot was indeed sold to the plaintiffs-appellants by the heirs of deceased Isidro Salinas and Carmen Labitan. What remains to be determined is the particular portion of the area that was sold to the plaintiffs-appellants. x x x [W]hat really defines a piece of land is not the area calculated with more or less certainty mentioned in the description but the boundaries therein laid down as enclosing the land and indicating its limits. Where the land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the land stated in the contract determine the effects and scope of the sale not the area thereof. Based on these rules, plaintiffs-appellants are not strictly bound by the area stated in the Deed of Sale which is merely 300.375 square meters, but by the metes and bounds stated therein. As found by the court a quo, the land bought by the plaintiffs-appellants is a portion of the land appearing in Exhibit "A", situated at the southern portion of Lot 3, Block 5-K, Psd 8268 where the northern portion of the land sold as indicated in the Deed of Sale is owned by Carmen Labitan, the original owner of the whole Lot 3, Block 5-K, Psd-8268 (Exhibit "C-1".) None of the other heirs questioned the sale of the property as described in the Deed of Sale. Considering the foregoing, this Court believes that plaintiffs-appellants[-herein respondents] own more than 300.375 square meters of the land in question. However, said ownership does not extend to the northern portion of the land being claimed by the defendants-appellees, consisting of 628 (erroneously stated in the decision of the court a quo as 268) square meters and covered by Tax Declaration No. 1017 in the name of defendant-appellee[-herein petitioner] Dolores Salinas. Plaintiffs-appellants are[,] however, entitled to the remaining portion of the property

consisting of seven hundred fifty-three (753) square meters, more or less. (Emphasis and underscoring supplied) The appellate court thus disposed: WHEREFORE, based on the foregoing premises, the judgment appealed from is hereby MODIFIED, as follows: 1. Plaintiffs-appellants Bienvenido S. Faustino and Iluminada G. Faustin[o] are declared owners of seven hundred fifty-three (753) square meters, more or less, of the parcel of land subject of this case. 2. Plaintiffs-appellants and defendants-appellees are directed to cause the segregation of their respective shares in the property as determined by this Court, with costs equally shared between them. x x x x10 (Underscoring supplied) Petitioners motion for reconsideration having been denied, 11 she filed the present petition12 faulting the Court of Appeals a. x x x IN MODIFYING THE DECISION OF THE COURT A QUO DISMISSING THE COMPLAINT FOR INSUFFICIENCY OF EVIDENCE; b. x x x IN DECLARING THE PRIVATE RESPONDENTS OWNERS OF 753 SQUARE METERS, MORE OR LESS, OF THE PARCEL OF LAND SUBJECT OF THE CASE[;] c. x x x IN NOT AFFIRMING THE DECISION OF THE COURT A QUO AND XXX IN NOT DECLARING THE PETITIONER AS OWNER OF HER PROPERTY WHICH, SINCE THEN UP TO THE PRESENT, SHE HAD BEEN OCCUPYING AND DESPITE PREPONDERANCE OF EVIDENCE OF HER OWNERSHIP THERETO .13 (Underscoring in the original) The petition is meritorious. Indeed, in a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. 14 Thus, it is the boundaries indicated in a deed of absolute sale, and not the area in sq. m. mentioned therein 300.375 sq. m. in the Deed of Sale in respondents favor that control in the determination of which portion of the land a vendee acquires. In concluding that respondents acquired via the June 27, 1962 Deed of Sale the total land area of 753 sq. m., the Court of Appeals subtracted from the total land area of 1,381 sq. m. reflected in Exh. "A," which is "Plan of Lot 3, Block 5-k, Psd-8268, as prepared for Benjamin R. Salinas" containing an area of 1,381 sq. m. and which was prepared on February 10, 1960 by a private land surveyor, the 628 sq. m. area of the lot claimed by petitioner as reflected in Tax Declaration No. 1017 in her name. As will be shown shortly, however, the basis of the appellate courts conclusion is erroneous. As the immediately preceding paragraph reflects, the "Plan of Lot 3, Bk 5-K, Psd-82" was prepared for respondent Faustinos and petitioners first cousin co-heir Benjamin Salinas on February 10, 1960. Why the appellate court, after excluding the 628 sq. m. lot covered by a Tax Declaration in the name of petitioner from the 1,381 sq. m. lotsurveyed for Benjamin P. Salinas in 1960, concluded that what was sold via the 1962 Deed of Sale to respondent Faustino was the remaining 753 sq. m., despite the clear provision of said Deed of Sale that what was conveyed was 300.375 sq. m., escapes comprehension. It defies logic, given that respondents base their claim of ownership of the questioned 628 sq. m. occupied by petitioner on that June 27, 1962 Deed of Sale covering a

300.375 sq. m. lot. The trial court in fact noted in its Pre-trial Order that "the parties cannot agree as to the identity of the property sought to be recovered by the plaintiff."15 (Emphasis and underscoring supplied.) Indeed, in her Answer to the Complaint, petitioner alleged "[t]hat if the plaintiffs refer to [the lot covered by Tax Declaration No. 1017], then they have no right or interest or participation whatsoever over the same x x x."16(Emphasis and italics supplied.) Even the boundaries of the 628 sq. m. area covered by Tax Declaration No. 1017 in petitioners name and those alleged by respondents to be occupied by petitioner are different. Thus, the boundaries of the lot covered by Tax Declaration No. 1017 are: Lot No. 12302 on the North; Lot No. 12005 (Cecilia Salinas) on the South; Lot No. 12413 (road lot) on the East; and Lot No. 12006 (Loreto Febre) on the West.17Whereas, following respondents claim, the 627 sq. m. area occupied by petitioner has the following boundaries, viz: The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this complaint; bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the EAST by Road Lot 2, Block 5-1, Psd-8268; and on the SOUTH and WEST by the remaining portion of Lot 5, Block 5-1, PSD8268 of herein plaintiffs which is the land described in Paragraph 2 of this complaint owned by the plaintiffs and that this portion in question has an area of SIX HUNDRED TWENTY-SEVEN (627) SQUARE METERS, more or less.18 (Emphasis and underscoring supplied) The Court of Appeals thus doubly erred in concluding that 1) what was sold to respondents via the June 27, 1962 Deed of Sale was the 1,381 sq. m. parcel of land reflected in the Plan-Exh. "A" prepared in 1960 for Benjamin Salinas, and 2) petitioner occupied 628 sq. m. portion thereof, hence, respondents own the remaining 753 sq. m. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated December 20, 2001 is REVERSED and SET ASIDE, and the Decision of Branch 73 of the Regional Trial Court of Olongapo City dated August 31, 1993 DISMISSING Civil Case No. 3382-0 is REINSTATED. SO ORDERED. THIRD DIVISION SPOUSES EMMA H. VER REYES and RAMON REYES, Petitioners, - versus DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, ROSALINA PADLAN, AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC, MARIA Q. CRISTOBAL and DULOS REALTY & DEVELOPMENT CORPORATION, TRINIDAD LOZADA, JOHN DOE and RICHARD DOE, Respondents. x- - - - - - - - - - - - - - - - - - - - - - x MARIA Q. CRISTOBAL and DULOS REALTY & DEVELOPMENT CORPORATION, Present: TINGA,* J., CHICO-NAZARIO, Acting Chairperson, VELASCO,* NACHURA, and REYES, JJ. Promulgated: September 11, 2008 G.R. No. 139047 G.R. No. 139365

Petitioners, - versus DOMINADOR SALVADOR, SR., EMILIO FUERTE, FELIZA LOZADA, TRINIDAD LOZADA, ROSALINA PADLAN, AURORA TOLENTINO, TRINIDAD L. CASTILLO, ROSARIO BONDOC, SPOUSES EMMA H. VER REYES and RAMON REYES, Respondents. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CHICO-NAZARIO, J.: The two Petitions for Review on Certiorari1 now before this Court seek to challenge, under Rule 45 of the Rules of Court, the Decision2 dated 17 June 1999 of the Court of Appeals in CA-G.R. CV No. 35688, which reversed and set aside the Decision3dated 25 November 1991 of the Regional Trial Court (RTC) of Pasay City, Branch 119, in the consolidated cases of LRC Case No. LP-553-P (an application for registration of title to real property) and Civil Case No. 6914-P (an action to declare ownership over real property, formerly numbered Pq-8557-P). The Court of Appeals upheld the title of Rosario Bondoc to the disputed property, thus, overturning the finding of the RTC of Pasay City that Maria Q. Cristobal and Dulos Realty & Development Corporation have a registrable title to the same property. The Contracts At the core of the controversy in the Petitions at bar is a parcel of unregistered land located in Tungtong, Las Pias, formerly of the Province of Rizal, now a part of Metro Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square meters (subject property). It previously formed part of a bigger parcel of agricultural land4 first declared in the name of Domingo Lozada (Domingo) in the year 1916 under Tax Declaration No. 2932.5 During the lifetime of Domingo, he was married twice. From his first marriage to Hisberta Guevarra in the year 1873,6 he fathered two children, namely Bernardo and Anatalia. After the death of Hisberta, Domingo married Graciana San Jose in the year 18877 and their marriage produced two children, namely Nicomedes and Pablo. Domingo and Graciana died on 27 February 1930 and 12 August 1941, respectively. On 18 March 1965, Nicomedes and the heirs of his brother Pablo entered into an Extrajudicial Settlement of the Estate8 of their parents Domingo and Graciana. According to the settlement, the entire parcel of agricultural land declared in the name of Domingo9 was divided into two, Lot 1 and Lot 2, in accordance with the approved subdivision plan Psu-205035. The subject property, i.e., Lot 1, was adjudicated to Nicomedes; while Lot 2 was given to the heirs of Pablo. Nicomedes then declared the subject property in his name in 1965 under Tax Declaration No. 2050.10 On 23 June 1965, Nicomedes executed a Deed of Conditional Sale11 over the subject property in favor of Emma Ver Reyes (Emma), which provided: That the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at Tungtong, Las Pinas, Rizal, more particularly described as follows:

"A parcel of land (Lot 1 of plan Psu-205035), x x x; containing an area of NINETEEN THOUSAND FIVE HUNDRED FOURTY FIVE (19,545) SQUARE METERS, more or less, and still a portion of the land covered by Tax Declaration No. 2304 of Las Pinas, Rizal, in the name of Domingo Lozada, and with a total assessed value of P1,860.00." That the [subject property] is a paraphernal property of the Vendor [Nicomedes], the same having been inherited by him from his deceased mother, Graciana San Jose, but was declared for taxation in the name of his deceased father, Domingo Lozada; That for and in consideration of the sum of FOUR PESOS AND FIFTY CENTAVOS (P4.50), Philippine Currency, per square meter to be paid by the Vendee to the Vendor, the said Vendor by these presents hereby SELLS, CEDES, TRANSFERS and CONVEYS by way of CONDITIONAL SALE the above-described parcel of land together with all the improvements thereon to the said Vendee [Emma], her heirs, assigns and successors, free from all liens and encumbrances, under the following terms and conditions, to wit: 1. That the Vendee [Emma] will pay the Vendor [Nicomedes] as follows: (a). TWENTY FIVE PERCENT (25%) of the total price on the date of the signing of this contract; (b). The next TWENTY FIVE PERCENT (25%) of the total price upon the issuance of the title for the land described above; and (c). The balance of FIFTY PERCENT (50%) of the total price within one (1) year from the issuance of the said title; 2. That if the Vendee [Emma] fails to pay the Vendor [Nicomedes] the sums stated in paragraphs 1(b) and 1(c) above within the period stipulated and after the grace period of one (1) month for each payment, this contract shall automatically be null and void and of no effect without the necessity of any demand, notice or filing the necessary action in court, and the Vendor [Nicomedes] shall have the full and exclusive right to sell, transfer and convey absolutely the above-described property to any person, but the said Vendor [Nicomedes] shall return to the Vendee [Emma] all the amount paid to him by reason of this contract without any interest upon the sale of the said property to another person; 3. That the total price shall be subject to adjustment in accordance with the total area of the abovedescribed property that will be finally decreed by the court in favor of the herein Vendor [Nicomedes]; and 4. That the Vendor [Nicomedes] will execute a final deed of absolute sale covering the said property in favor of the Vendee [Emma] upon the full payment of the total consideration in accordance with the stipulations above. (Emphases ours.) The Deed of Conditional Sale was registered in the Registry of Property for Unregistered Lands in August 1965.12 It would appear from the records of the case that Emma was only able to pay the first installment of the total purchase price agreed upon by the parties. Furthermore, as will be discussed later on, Nicomedes did not succeed in his attempt to have any title to the subject property issued in his name. On 14 June 1968, Nicomedes entered into another contract involving the subject property with Rosario D. Bondoc (Rosario). Designated as an Agreement of Purchase and Sale,13 the significant portions thereof states: NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE

HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the BUYER [Rosario] shall pay to the SELLER [Nicomedes] in the manner and form hereinafter specified, the SELLER [Nicomedes] by these presents hereby agreed and contracted to sell all his rights, interests, title and ownership over the parcel of land x x x unto the BUYER [Rosario], who hereby agrees and binds herself to purchase from the former, the aforesaid parcel of land, subject to the following terms and conditions: 1. Upon the execution of this Agreement, the BUYER [Rosario] shall pay the SELLER [Nicomedes], the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency. 2. [That] upon the delivery by the SELLER [Nicomedes] to the BUYER [Rosario] of a valid title of the aforesaid parcel of land, free from any and all liens and encumbrances, and the execution of the final Deed of Sale, the BUYER [Rosario] shall pay to the SELLER [Nicomedes], the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final balance of ONE HUNDRED TWENTY THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one year from the date of execution of the final deed of sale, all without interest. 3. That in the event the BUYER [Rosario] fails to pay any amount as specified in Section 2, Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and shall be considered automatically cancelled, of no value and effect, and immediately thereafter the SELLER [Nicomedes] shall return to the BUYER [Rosario] the sums of money he had received from the BUYER [Rosario] without any interests and whatever improvement or improvements made or introduced by the BUYER [Rosario] on the lot being sold shall accrue to the ownership and possession of the SELLER [Nicomedes]. xxxx 6. The SELLER [Nicomedes] hereby warrants the useful and peaceful possession and occupation of the lot subject matter of this agreement by the BUYER [Rosario]. (Emphasis ours.) On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,14 whereby they confirmed the sale of the subject property by Nicomedes to Rosario through the Agreement of Purchase and Sale dated 14 June 1968. They likewise agreed to have the said Agreement registered with the Registry of Deeds in accordance with the provisions of Section 194 of the Revised Administrative Code, as amended by Act No. 3344. The Agreement of Purchase and Sale was thus registered on 10 March 1969.15 The records of this case show that, of the entire consideration stipulated upon in the Agreement, only the first installment was paid by Rosario. No title to the subject property was ever delivered to her since, at the time of the execution of the above contract, Nicomedess application for the registration of the subject property was still pending. Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed of Absolute Sale of Unregistered Land,16 involving a portion of the subject property measuring 2,000 square meters, in favor of Maria Q. Cristobal (Maria).17The relevant terms of the Deed recite: THAT I, NICOMEDES J. LOZADA, of legal age, Filipino citizen, married and a resident of Las Pias, Rizal, Philippines, for and in consideration of the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS, Philippine currency, receipt of which is hereby acknowledged to my full and entire satisfaction, do hereby sell, transfer and convey to MARIA Q. CRISTOBAL, likewise of legal age, Filipino citizen, married to Juan [Dulos], and a resident of 114 Real Street, Las Pias, Rizal, Philippines, her heirs, executors, administrators and assigns, TWO THOUSAND SQUARE METERS (2,000) for an easement of way of a parcel of unregistered land situated in the Barrio of Tungtong, Municipality of Las Pias, Province of Rizal, Philippines, exclusively belonging to and

possessed by me, and more particularly described as follows: "A parcel of land described under Tax Declaration No. 9575 (Lot No. 1, Psu 205035), situated in the Barrio of Tuntong, Municipality of Las Pias, Province of Rizal, Philippines. xxx [C]ontaining an area of 1.9545 hectares, more or less." (Emphasis ours.) Nicomedes passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered Land between Nicomedes and Maria was registered only on 8 February 1973,18 or more than seven months after the formers death. On 10 August 1979, Nicomedess heirs, namely, the four children from his first marriage,19 the six children from his second marriage,20 and his surviving second spouse Genoveva Pallera Vda. De Lozada, executed a Deed of Extrajudicial Settlement of the Estate of the Late Nicomedes J. Lozada with Ratification of a Certain Deed of Absolute Sale of Unregistered Land.21 The heirs declared in said Deed of Extrajudicial Settlement that the only property left by Nicomedes upon his death was the subject property. They also ratified therein the prior sale of a portion of the subject property made by Nicomedes in favor of Maria, but they clarified that the actual area of the portion sold as presented in the plan was 2,287 square meters, not 2,000 square meters. After excluding the portion sold to Maria, the heirs claimed equal pro indiviso shares in the remaining 17,258 square meters of the subject property. On 30 July 1980, Nicomedess heirs22 collectively sold, for the sum of P414,192.00, their shares in the subject property in favor of Dulos Realty and Development Corporation (Dulos Realty), as represented by its President Juan B. Dulos, via a Deed of Absolute Sale of an Unregistered Land.23 The said Deed of Absolute Sale dated 30 July 1980, however, was not registered. The Cases On 11 April 1966, after executing the Deed of Conditional Sale in favor of Emma on 23 June 1965, Nicomedes filed an application for the registration of the subject property with the then Court of First Instance (CFI) of Pasig, docketed as LRC Case No. N-6577. The grandchildren of Domingo by his former marriage24 opposed the application for registration and Emma and her husband Ramon filed their intervention. Sometime in 1973, following the execution in her favor of the Agreement of Purchase and Sale dated 14 June 1968 and Joint Affidavit dated 7 March 1969, Rosario filed a motion to intervene in LRC Case No. N-6577 then pending before the CFI of Pasig; however, her motion was denied by the CFI of Pasig, in an Order dated 2 June 1973.25 Rosario no longer appealed from the order denying her motion to intervene in said case. In view of the conflicting claims over the subject property, the CFI of Pasig dismissed without prejudice LRC Case No. N-6577 on 21 November 1975 and ordered the parties therein, namely, the applicant Nicomedes and the oppositors/intervenors, to litigate first the issues of ownership and possession.26 Five years later, on 27 June 1980, Domingos grandchildren from his first marriage, Dominador, et al.,27 filed an Application for Registration28 of title to the subject property with the CFI of Rizal, docketed as LRC Case No. LP-553-P. In their Application, Dominador, et al., alleged, inter alia, that they were the owners of the subject property by virtue of inheritance; they were the actual occupants of the said property; and, other than Emma, they had no knowledge of any encumbrance or claim of title affecting the same. On 6 November 1980, Rosario, assisted by her husband Mariano Bondoc, invoking the Agreement of Purchase and Sale executed in her favor by Nicomedes on 14 June 1968, filed a Complaint29 before the CFI of Rizal for the declaration in her favor of ownership over the subject

property, with an application for a temporary restraining order or preliminary injunction, against Trinidad Lozada (one of Domingos heirs from his first marriage who applied for registration of the subject property in LRC Case No. LP-553-P) and two other persons, who allegedly trespassed into the subject property. Rosarios complaint was docketed as Civil Case No. Pq-8557-P. On 4 August 1981, the parties agreed to have LRC Case No. LP-553-P (the application for land registration of Dominador, et al.) consolidated with Civil Case No. Pq-8557-P (the action for declaration of ownership of Rosario).30 By subsequent events,31 and in consideration of the location of the subject property in Las Pias, LRC Case No. LP-553-P and Civil Case No. Pq-8557-P, reinstated as Civil Case No. 6914-P, were finally transferred to and decided by the RTC of Pasay City. In its Decision dated 25 November 1991, the RTC of Pasay City, Branch 119, disposed of the cases thus: WHEREFORE, considering all the foregoing, the court denies the application of Dominador Salvador, Sr. et al, having no more right over the land applied for, dismisses Civil Case No. Pq8557-P now 6914 for lack of merit, and hereby declares Maria Cristobal Dulos and Dulos Realty and Development Corporation to have a registrable title, confirming title and decreeing the registration of Lot 1 PSU-205035 containing a total area of 19,545 square meters, 2,287 square meters of which appertains to Maria Cristobal Dulos married to Juan Dulos and the remaining portion, in favor of Dulos Realty and Development Corporation, without pronouncement as to costs.32 (Emphasis ours.) In so ruling, the RTC rationalized that the subject property constituted Domingos share in the conjugal properties of his second marriage to Graciana San Jose and, therefore, properly pertained to Nicomedes as one of his sons in said marriage. Being Domingos heirs from his first marriage, Dominador, et al., were not entitled to the subject property. The lower court also found that neither Emma nor Rosario acquired a better title to the subject property as against Maria and Dulos Realty. No final deed of sale over the subject property was executed in favor of Emma or Rosario, while the sales of portions of the same property in favor of Maria and of the rest to Dulos Realty were fully consummated as evidenced by the absolute deeds of sale dated 10 August 1969 and 30 July 1980, respectively. Dominador, et al., Emma and her spouse Ramon Reyes (Ramon), and Rosario separately appealed to the Court of Appeals the foregoing Decision dated 25 November 1991 of the RTC of Pasay City.33 Their consolidated appeals were docketed as CA-G.R. CV No. 35688. Dominador, et al., however, moved to withdraw their appeal in light of the amicable settlement they entered into with Maria and Dulos Realty.34 In a Resolution dated 24 September 1992,35 the Court of Appeals granted their Motion to Withdraw Appeal. Dominador, et al., later filed a motion to withdraw their earlier Motion to Withdraw Appeal, but this was denied by the Court of Appeals in a Resolution dated 15 January 1993.36 In their respective Briefs before the appellate court,37 Emma and Rosario both faulted the RTC of Pasay City for awarding the subject property to Maria and Dulos Realty. They each claimed entitlement to the subject property and asserted the superiority of their respective contracts as against those of the others. On 17 June 1999, the Court of Appeals rendered its assailed Decision, ruling as follows: As gathered above, both contracts [entered into with Emma and Rosario] gave Nicomedes, as vendor, the right to unilaterally rescind the contract the moment the buyer failed to pay within a

fixed period (Pingol v. CA, 226 SCRA 118), after which he, as vendor, was obliged to return without interest the sums of money he had received from the buyer (under the Deed of Conditional Sale [to Emma], upon the sale of the property to another). Additionally, under the Agreement of Purchase and Sale [with Rosario], the vendor, in case of rescission, would become the owner and entitled to the possession of whatever improvements introduced by the buyer. Under the Deed of Conditional Sale [to Emma], there was no provision that possession would be, in case of rescission, returned to the vendor, thereby implying that possession remained with him (vendor). Such being the case, it appears to be a contract to sell. Whereas under the Agreement of Purchase and Sale [with Rosario], the provision that in case of rescission, any improvements introduced by the vendee would become the vendors implies that possession was transferred to the vendee and, therefore, it appears to be a contract of sale. That the Agreement of Purchase and Sale [with Rosario] was a contract of sale gains light from the Joint Affidavit subsequently executed by Rosario and Nicomedes stating that "an Agreement of Purchase and Sale wherein the former (Nicomedes J. Lozada) sold to the latter (Rosario D. Bondoc) a parcel of land" had been executed but that the lot "not having been registered under Act No. 496 nor under the Spanish Mortgage Law, the parties hereto have agreed to register the Agreement of Purchase and Sale ... under the provision of Section 194 of the Revised Administrative Code, as amended by Act No. 3344." Rosario registered the Agreement of Purchase and Sale alright on March 10, 1969. She paid taxes on the lot from 1980 1985. She fenced the lot with concrete and hollow blocks. And apart from opposing the land registration case, she filed a complaint against Trinidad, et al., for declaration ownership. Article 1371 of the Civil Code provides: "Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered." From the provisions of the Agreement of Purchase and Sale [to Rosario] and the subsequent acts of the parties then including the execution of the Joint Affidavit by Rosario and Nicomedes stating that "an Agreement of Purchase and Sale wherein the former (Nicomedes...) sold to the latter (Rosario...) a parcel of land", had been executed, there is no mistaking that the lot was sold to Rosario xxx. Anent the effect of Rosarios registration of the Agreement of Purchase and Sale on Emmas contract involving the same lot, Act No. 3344 (Amending Sec. 194 of the Administrative Code [Recording of instruments or deeds relating to real estate not registered under Act No. 496 or under the Spanish Mortgage Law]) provides that any registration made under Sec. 194 of the Administrative Code "shall be understood to be without prejudice to a third party who has a better right". "Better right", however, was not defined by law. But author Narciso Pea is inclined to concur that "better right" should refer to a "right which must have been acquired by a third party independently of the unregistered deed, such as, for instance, title by prescription, and that it has no reference to rights acquired under that unregistered deed itself", he citing Nisce v. Milo, G.R. No. 425016, January 17, 1936 Unrep. 62 Phil. 976 x x x. Given the fact that the contract in Emmas favor is a mere contract to sell, as against Rosarios contract which, as demonstrated above is one of sale and, in any event, independently of Emmas contract to sell, she has no claim of a better right unlike Rosario who has, not to mention the

fact that she (Rosario) registered her contract earlier than Emmas, Rosario must preva il. The lot having been previously sold to Rosario, there was no lot or portion thereof to be later sold to Maria and to Dulos Realty in 1979 and 1980, respectively. WHEREFORE, the appealed Joint Decision is hereby REVERSED and SET ASIDE and another is rendered confirming the title ofRosario D. Bondoc over subject lot, Lot 1, PSU-205035 containing an area of 19,545 sq.m., ordering its registration in her name, and dismissing the claims of ownership of all other claimants. Appellees Maria Cristobal and Dulos Realty and Development Corporation and all other claimants to subject land including all persons claiming under them are hereby ordered to vacate and restore possession to appellant Rosario D. Bondoc. Upon issuance of title to subject lot, appellant Rosario D. Bondoc is ordered to pay the balance of the purchase price to the heirs of Nicomedes Lozada in accordance with the Agreement of Purchase and Sale executed by the latter in her favor. This judgment is without prejudice to the rights which Emma Ver Reyes and Maria Cristobal and Dulos Realty and Development Corporation might have against the estate or surviving heirs of Nicomedes Lozada to the extent that the latter was/were benefited.38 (Emphasis ours.) Aggrieved, Emma and her husband Ramon,39 as well as Maria and Dulos Realty,40 without seeking reconsideration of the appellate courts decision, filed directly before this Court separate Petitions for Review on Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 139047 and G.R. No. 139365, respectively, assailing the 17 June 1999 Decision of the appellate court. Upon the manifestation and motion of Maria and Dulos Realty,41 the two Petitions were ordered consolidated by this Court in a Resolution42 dated 13 December 1999. In their Petition, Emma and her husband Ramon raise the following issues: I. WHETHER OR NOT OWNERSHIP OF THE DISPUTED LOT WAS VALIDLY AND LEGALLY TRANSFERRED TO EMMA VER REYES. II. WHETHER OR NOT MARIA CRISTOBAL DULOS AND DULOS REALTY AND DEVELOPMENT CORPORATION ARE PURCHASERS IN BAD FAITH. III. WHETHER OR NOT EMMA VER REYES AND RAMON REYES ARE BARRED BY PRESCRIPTION OR LACHES. IV. WHETHER OR NOT THE COURT OF APPEALS PATENTLY AND GRAVELY ERRED IN CONFIRMING THE TITLE OF ROSARIO BONDOC OVER THE DISPUTED LOT, ORDERING ITS REGISTRATION IN HER NAME AND DISMISSING THE CLAIM OF EMMA VER REYES AND RAMON REYES.43 Maria and Dulos Realty, on the other hand, submitted in their Petition the following issues for consideration of this Court: I. WHETHER OR NOT BONDOCS AGREEMENT OF PURCHASE AND SALE AND SPOUSES REYES DEED OF CONDITIONAL SALE ARE REGISTRABLE ABSOLUTE CONVEYANCES IN

FEE SIMPLE TO SERVE AS BASIS FOR AN AWARD AND REGISTRATION OF THE SUBJECT LOT IN THEIR FAVOR. II. WHETHER OR NOT RESPONDENTS BONDOC AND THE REYESES ARE BARRED BY LACHES AND/OR PRESCRIPTION. III. WHETHER OR NOT RESPONDENT BONDOC IS BARRED BY RES JUDICATA.44 The fundamental issue that the Court is called upon to resolve is, in consideration of all the contracts executed by Nicomedes and/or his heirs involving the subject property, which party acquired valid and registrable title to the same. Emma and Ramon contend that although the subject property was conditionally sold to them by Nicomedes, the "conditionality" of the sale did not suspend the transfer of ownership over the subject property from Nicomedes to Emma. Even though Nicomedes may automatically rescind the contract in case of non-payment by Emma of the balance of the purchase price, it did not bar the transfer of title to the subject property to Emma in the meantime. Emma and Reyes likewise claim that there was constructive delivery of the subject property to Emma, inasmuch as the Deed of Conditional Sale in her favor was a public instrument. Furthermore, Emma was in possession of the subject property in the concept of owner since she had been paying realty taxes for the same, albeit in the name of Nicomedes (in whose name it was declared), from the time of the sale in 1965 until 1972. Emma and Ramon also assert that Maria and Dulos Realty were in bad faith as the sales of the subject property in their favor, on 10 August 1969 and 30 July 1980, respectively, occurred only after the filing of the cases involving the property45 and the registration of the sale to Emma. Finally, Emma and Ramon maintain that the Court of Appeals erred in ruling that the contract in favor of Rosario was a contract of sale for the sole reason that actual possession of the property was already transferred to the latter. For their part, Maria and Dulos Realty point out that Emma and Rosario are not holders of absolute deeds of conveyances over the subject property, which would have entitled them to register the same in their respective names. They further buttress their alleged superior right to the subject property based on the execution of two notarized documents of sale in their favor, which constituted symbolic and constructive delivery of the subject property to them. Maria and Dulos Realty likewise assert that the claims of Emma and Rosario are already barred by laches and prescription because they only decided to enforce their respective rights over the subject property after Domingos heirs filed with the CFI of Rizal on 27 June 1980 an application for registration of the subject property, docketed as LRC Case No. LP-553-P, notwithstanding their knowledge of Nicomedess death on 29 June 1972. Lastly, Maria and Dulos Realty aver that Rosario is already barred by res judicata since her motion to intervene in LRC Case No. 6577, the case instituted by Nicomedes to register the subject property, was denied by the CFI of Pasig. The dismissal of Rosarios motion to intervene in the case for registration of the subject property already became final and executory, thus, barring Rosario from pursuing her claim over the same. This Courts Ruling After a conscientious review of the arguments and evidence presented by the parties, the Court finds that the Deed of Conditional Sale between Nicomedes and Emma and the Agreement of Purchase and Sale between Nicomedes and Rosario were both mere contracts to sell and did not transfer ownership or title to either of the buyers in light of their failure to fully pay for the purchase price of the subject property.

In Coronel v. Court of Appeals,46 this Court effectively provided the guidelines for differentiating between a contract to sell and a contract of sale, to wit: The Civil Code defines a contract of sale, thus: Art. 1458. 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. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: 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. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: 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 promissor if the promise is supported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of

consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price,ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. Theprospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. (Emphases ours.) Also in Coronel v. Court of Appeals, the Court highlighted the importance of making the distinction between a contract to sell and a contract of sale: It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In acontract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.47 Even in the absence of an express stipulation to such effect, the intention of the parties to execute a contract to sell may be implied from the provisions of the contract. While Article 147848 of the Civil Code recognizes the right of the parties to agree that the ownership of the thing shall not pass to the purchaser until he has fully paid the price therefore, the same statutory provision does not require that such be expressly stipulated in the contract. In Adelfa Properties, Inc. v. Court of Appeals,49 the Court ruled that since the contract between the parties therein did not contain a stipulation on reversion or reconveyance of the property to the seller in the event that the buyer did not comply with its obligation, it may legally be inferred that the parties never intended to transfer ownership to the buyer prior to the completion of the payment of the purchase price. Consequently, the contract involved in the aforementioned case was a mere contract to sell. An agreement is also considered a contract to sell if there is a stipulation therein giving the vendor the rights to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period and to consequently open the subject property anew to purchase offers.50 In the same vein, where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell.51

Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale executed by Nicomedes in favor of Emma on 23 June 1965 is unmistakably a mere contract to sell. The Court looks beyond the title of said document, since the denomination or title given by the parties in their contract is not conclusive of the nature of its contents.52 In the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued.53 If the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.54 A simple reading of the terms of the 23 June 1965 Deed of Conditional Sale readily discloses that it contains stipulations characteristic of a contract to sell. It provides for the automatic cancellation of the contract should Emma fail to pay the purchase price as required therein; and, in such an event, it grants Nicomedes the exclusive right to thereafter sell the subject property to a third person. As in Adelfa Properties, the contract between Nicomedes and Emma does not provide for reversion or reconveyance of the subject property to Nicomedes in the event of nonpayment by Emma of the purchase price. More importantly, the Deed in question clearly states that Nicomedes will issue a final deed of absolute sale only upon the full payment of the purchase price for the subject property. Taken together, the terms of the Deeds reveal the evident intention of the parties to reserve ownership over the subject property to Nicomedes pending payment by Emma of the full purchase price for the same. While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public instrument, it did not constitute constructive delivery of the subject property to Emma in view of the contrary inference in the Deed itself that the ownership over the subject property was reserved by Nicomedes.55 Moreover, other than her claim that she paid the realty taxes on the subject property, Emma did not present any evidence that she took actual and physical possession of the subject property at any given time. This Court also finds that, contrary to the ruling of the Court of Appeals, the Agreement of Purchase and Sale executed by Nicomedes in favor of Rosario on 14 June 1968 is likewise a mere contract to sell. The Agreement itself categorically states that Nicomedes only undertakes to sell the subject property to Rosario upon the payment of the stipulated purchase price and that an absolute deed of sale is yet to be executed between the parties. Thus: NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the BUYER shall pay to the SELLER in the manner and form hereinafter specified, the SELLER by these presents hereby agreed and contracted to sell all his rights, interests, title and ownership over the parcel of land xxx unto the BUYER, who hereby agrees and binds herself to purchase from the former, the aforesaid parcel of land, subject to the following terms and conditions: 1. Upon the execution of this Agreement, the BUYER shall pay the SELLER, the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency. 2. That upon the delivery by the SELLER to the BUYER of a valid title of the aforesaid parcel of land, free from any and all liens and encumbrances, and the execution of the final Deed of Sale, the BUYER shall pay to the SELLER, the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final balance of ONE HUNDRED TWENTY THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one year from the date of the execution of the final deed of sale, all without interest.56 (Emphases ours.)

The Agreement additionally grants Nicomedes the right to automatically cancel the same in the event of nonpayment by Rosario of any of the specified sums therein and any improvement introduced in the subject property shall thereby accrue to Nicomedes, viz: 3. That in the event the BUYER fails to pay any amount as specified in Section 2, Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and shall be considered automatically cancelled, of no value and effect, and immediately thereafter the SELLER shall return to the buyer the sums of money he had received from the BUYER without any interests and whatever improvement or improvements made or introduced by the BUYER on the lot being sold shall accrue to the ownership and possession of the SELLER.57 As can be clearly read above, only the rights to possess the property and construct improvements thereon have been evidently given to Rosario. The provisions of the Agreement do not in any way indicate that the ownership of the subject property has likewise been transferred to Rosario. That Nicomedes shall appropriate the improvements as his own should Rosario default in her payment of the purchase price only further supports the conclusion that title to the subject property itself still remained with Nicomedes. The Court concludes that the Deed of Conditional Sale in favor of Emma and the Agreement of Purchase and Sale in favor of Rosario were mere contracts to sell. As both contracts remained unperfected by reason of the non-compliance with conditions thereof by all of the parties thereto, Nicomedes can still validly convey the subject property to another buyer. This fact, however, is without prejudice to the rights of Emma and Rosario to seek relief by way of damages against the estate and heirs of Nicomedes to the extent that the latter were benefited by the sale to succeeding buyers.58 Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the only conveyances of the subject property in this case that can be the source of a valid and registrable title. Both contracts were designated as absolute sales and the provisions thereof leave no doubt that the same were true contracts of sale. The total considerations for the respective portions of the subject property were fully paid by the buyers and no conditions whatsoever were stipulated upon by the parties as regards the transmission of the ownership of the said property to the said buyers. The fact that Rosario was the first among the parties to register her contract in the Registry of Property for Unregistered Lands on 10 March 1969 is of no moment. Act No. 3344,59 which amended Section 194 of the Administrative Code, enunciates that any registration made under Section 194 of the Administrative Code "shall be understood to be without prejudice to a third party who has a better right." In this case, Maria and Dulos Realty acquired their title to the property in separate deeds of absolute sale executed in their favor by Nicomedes and his heirs. Upon the execution of these deeds, the ownership of the subject property was vested unto the said buyers instantly, unlike the contracts to sell executed in favor of Emma and Rosario. Consequently, the rights to the subject property of Maria and Dulos Realty, acquired through the contracts of sale in their favor, are undeniably better or superior to those of Emma or Rosario, and can thus be confirmed by registration. In sum, this Court recognizes the valid and registrable rights of Maria and Dulos Realty to the subject property, but without prejudice to the rights of Emma and Rosario to seek damages against the estate and heirs of Nicomedes. WHEREFORE, premises considered, the Petition in G.R. No. 139047 is DENIED, while the Petition in G.R. No. 139365 isGRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 35688 dated 17 June 1999 is SET ASIDE and the Decision dated 25 November 1991 of the

Regional Trial Court of Pasay City, Branch 119, is REINSTATED. No costs. SO ORDERED. THIRD DIVISION ESTATE OF LINO OLAGUER, Represented by Linda O. Olaguer, and LINDA O. MONTAYRE, Petitioners, G.R. No. 173312 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and - versus REYES, JJ.

Promulgated:

EMILIANO M. ONGJOCO,

August 26, 2008

Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari[1] is the Decision[2] of the Court of Appeals dated 27 February 2006 in CA-G.R. CV No. 71710. Said decision modified the Decision[3] and the subsequent Order[4] of the Regional Trial Court (RTC) ofLegazpi City, Branch 6, in Civil Case No. 6223, and upheld the validity of the sales of properties to respondent Emiliano M. Ongjoco.

The relevant factual antecedents of the case, as found by the trial court and adapted by the Court of Appeals, are as follows:

The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre are the legitimate children of the spouses Lino Olaguer and defendant Olivia P. Olaguer.

Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in the then Court of First Instance of Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to the will. Later, defendant Eduardo Olaguer was appointed as co-administrator. x x x

On October 15, 1959 defendant Olivia P. Olaguer got married to defendant Jose A. Olaguer before the then Justice of the Peace of Sto. Domingo (Libog) Albay. (Exhibit NNNN) On January 24, 1965 they were married in church. (Exhibit XX)

In the order of the probate court dated April 4, 1961, some properties of the estate were authorized to be sold to pay obligations of the estate. Pursuant to this authority, administrators Olivia P. Olaguer and Eduardo Olaguer on December 12, 1962 sold to Pastor Bacani for [P]25,000 Pesos, twelve (12) parcels of land, particularly, Lots 4518, 4526, 4359, 8750, 7514, 6608, 8582, 8157, 7999, 6167, 8266, and 76with a total area of 99 hectares. (Exhibit A Deed of Sale notarized by defendant Jose A. Olaguer)

This sale of twelve (12) parcels of land to Pastor Bacani was approved by the Probate Court on December 12, 1962. (Exhibit 15)

The following day, December 13, 1962, Pastor Bacani sold back to Eduardo Olaguer and Olivia Olaguer for [P]12,000.00 Pesos, one of the twelve (12) lots he bought the day before, particularly, Lot No. 76 in the proportion of 7/13 and 6/13 pro-indiviso respectively. (Exhibit B Deed of Sale notarized by Felipe A. Cevallos, Sr.)

Simultaneously, on the same day December 13, 1962, Pastor Bacani sold back to Olivia Olaguer and Eduardo Olaguer the other eleven (11) parcels he bought from them as follows:

To Olivia Olaguer Four (4) parcels for 10,700 Pesos, particularly Lots 4518, 4526, 4359, 8750 with a total area of 84 hectares. (Exhibit E Deed of Sale notarized by Felipe A. Cevallos, Sr.)

To Eduardo Olaguer Seven (7) parcels of land for 2,500 Pesos, particularly Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266 with a total area of 15 hectares. (Exhibit C Deed of Sale notarized by defendant Jose A. Olaguer)

Relying upon the same order of April 4, 1961 but without prior notice or permission from the Probate Court, defendants Olivia P. Olaguer and Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer for 7,000 Pesos, ten (10) parcels of land, particularly, (a) TCT No. T-4011 Lot No. 578, (b) TCT No. T-1417 Lot No. 1557, (c) TCT No. T-4031 Lot No. 1676, (d) TCT No. T-4034 Lot No. 4521, (e) TCT No. T-4035 Lot No. 4522, (f) TCT No. 4013 Lot No. 8635, (g) TCT No. T-4014 Lot 8638, (h) TCT No. T-4603 Lot No. 7589, (i) TCT No. 4604 Lot No. 7593, and (j) TCT No. T-4605 Lot No. 7396. (Exhibit D Deed of Sale notarized by Rodrigo R. Reantaso)

This sale to Estanislao Olaguer was approved by the Probate Court on November 12, 1965.

After the foregoing sale to Estanislao Olaguer, the following transactions took place:

1) On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney notarized by Rod rigo R. Reantaso (Exhibit T) in favor of defendant Jose A. Olaguer, authorizing the latter to sell, mortgage, assign, transfer, endorse and deliver the properties covered by TCT No. 14654 for Lot 76 6/13 share only , T-13983, T-14658, T-14655, T14656, and T-14657.

2) On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer (Exhibit X) notarized by Rodrigo R. Reantaso authorizing the latter to sell, mortgage, assign, transfer, endorse and deliver the properties covered by TCT No. T-20221, T-20222, T-20225 for Lot No. 8635, T20226 for Lot No. 8638, T-20227, T-20228, and T-20229.

By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao Olaguer mortgaged Lots 7589, 7593 and 7396 to defendant Philippine National Bank (PNB) as security for a loan of 10,000 Pesos. The mortgage was foreclosed by the PNB on June 13, 1973 and the properties mortgage were sold at public auction to PNB. On December 10, 1990, the PNB transferred the properties to the Republic of the Philippines pursuant to Exec. Order No. 407 dated June 14, 1990 for agrarian reform purposes. (records, vol. 1, page 66)

3) On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney notarized by Rodrigo R. Reantaso (Exhibit Y) in favor of Jose A. Olaguer, authorizing the latter to exercise general control and supervision over all of his business and properties, and among others, to sell or mortgage any of his properties.

4) On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 Pesos, (Exhibit UU) the ten (10) parcels of land (Lots 578, 4521, 4522, 1557, 1676, 8635, 8638, 7589, 7593 and 7396) he bought from Olivia P. Olaguer and Eduardo Olaguer under Exhibit D.

5) On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable consideration Lot No. 4521 TCT No. T-20223 and Lot 4522 TCT No. 20224 with a total area of 2.5 hectares. (records, vol. 1, page 33)

6) On June 5, 1968, Estanislao Olaguer sold Lot No. 8635 under TCT No. T20225, and Lot No. 8638 under TCT No. 20226 to Jose A. Olaguer for 1 Peso and other valuable consideration. (Exhibit F) Deed of Sale was notarized by Rodrigo R. Reantaso.

7) On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to his son Virgilio Olaguer for 1 Peso and other valuable consideration Lot No. 1557 TCT No. 20221 and Lot No. 1676 TCT No. 20222. The deed of sale was notarized by Otilio Sy Bongon.

8) On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000 Pesos. Deed of Salewas notarized by Otilio Sy Bongon. (records, vol. 1, page 34)

9) On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer notarized by Otilio Sy Bongon (Exhibit V) authorizing the latter to exercise general control and supervision over all of his business and properties and among others, to sell or mortgage the same.

Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February 12, 1980, plaintiff Ma. Linda Olaguer Montayre was appointed administrator by the Probate Court.

Defendant Jose A. Olaguer died on January 24, 1985. (Exhibit NN) He was survived by his children, namely the defendants Nimfa Olaguer Taguay, Corazon Olaguer Uy, Jose Olaguer, Jr., Virgilio Olaguer, Jacinto Olaguer, and Ramon Olaguer.

Defendant Olivia P. Olaguer died on August 21, 1997 (E xhibit OO) and was survived by all the plaintiffs as the only heirs.

The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who died April 6, 1925. His second wife was Gloria Buenaventura who died on July 2, 1937. The third wife was the defendant Olivia P. Olaguer.

Lot No. 76 with an area of 2,363 square meters is in the heart of the Poblacion of Guinobatan, Albay. The deceased Lino Olaguer inherited this property from his parents. On it was erected their ancestral home.

As already said above, Lot No. 76 was among the twelve (12) lots sold for 25,000 Pesos, by administrators Olivia P. Olaguer and Eduardo Olaguer to Pastor Bacani on December 12, 1962. The sale was approved by the probate court on December 12, 1962.

But, the following day, December 13, 1962 Pastor Bacani sold back the same 12 lots to Olivia P. Olaguer and Eduardo Olaguer for 25,200 Pesos, as follows:

a) Lot No. 76 was sold back to Olivia P. Olaguer and Eduardo Olaguer for 12,000 Pesos, in the proportion of [6/13] and [7/13] respectively. (Exhibit B)

b) 4 of the 12 lots namely, Lots 4518, 4526, 4359, and 8750 were sold back to Olivia Olaguer for 10,700 Pesos. (Exhibit E)

c) 7 of the 12 lots namely, Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266 were sold back to Eduardo Olaguer for 2,500 Pesos. (Exhibit C)

d) Lot No. 76 was thus issued TCT No. T14654 on December 13, 1962 in the names of Eduardo B. Olaguer married to Daisy Pantig and Olivia P. Olaguer married to Jose A. Olaguer to the extent of 7/13 and 6/13 pro-indiviso, respectively. (Exhibit FF also 14-a)

e) It appears from Plan (LRC) Psd-180629 (Exhibit 3) that defendant Jose A. Olaguer caused the subdivision survey of Lot 76 into eleven (11) lots, namely, 76-A, 76-B, 76C, 76-D, 76-E, 76-F, 76-G, 76-H, 76-I, 76-J, and 76-K, sometime on April 3, 1972. The subdivision survey was approved on October 5, 1973. After the approval of the subdivision survey of Lot 76, a subdivision agreement was entered into on November 17, 1973, among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre and Emiliano M. [Ongjoco]. (records, vol. 2, page 109).

This subdivision agreement is annotated in TCT No. 14654 (Exhibit 14 14-d) as follows:

Area in Owner Domingo Candelaria Olivia P. Olaguer - do - do - do - do - do Domingo O. de la Torre - do - do Emiliano M. [Ongjoco] Lot No. sq. m. 76-A 76-B 76-C 76-D 76-E 76-F 76-G 76-H 76-I 76-J 76-K 300 200 171 171 171 171 202 168 168 168 473 T-36277 T-36278 T-36279 T-36280 T-36281 T-36282 T-36283 T-36284 T-36285 T-36286 T-36287 206 97 98 99 100 101 102 103 104 105 106 107 TCT No. Vol. Page

After Lot 76 was subdivided as aforesaid, Jose A. Olaguer as attorney-in-fact of Olivia P. Olaguer, sold to his son Virgilio Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G on January 9, 1974 for 3,000 Pesos. (Exhibit G) The deed of absolute sale was notarized by Otilio Sy Bongon.

Lots 76-B and 76-C were consolidated and then subdivided anew and designated as Lot No. 1 with an area of 186 square meters and Lot No. 2 with an area of 185 square meters of the Consolidation Subdivision

Plan (LRC) Pcs-20015. (Please sketch plan marked as Exhibit 4, records, vol. 2, page 68)

On January 15, 1976, Jose A. Olaguer claiming to be the attorneyin-fact of his son Virgilio Olaguer under a general power of attorney Doc. No. 141, Page No. 100, Book No. 7, Series of 1972 of Notary Public Otilio Sy Bongon, sold Lot No. 1 to defendant Emiliano M. [Ongjoco] for 10,000 Pesos per the deed of absolute sale notarized by Otilio Sy Bongon. (Exhibit H) The alleged general power of attorney however was not presented or marked nor formally offered in evidence.

On September 7, 1976, Jose A. Olaguer again claiming to be the attorney-in-fact of Virgilio Olaguer under the same general power of attorney referred to in the deed of absolute sale of Lot 1, sold Lot No. 2 to Emiliano M. [Ongjoco] for 10,000 Pesos. (Exhibit I) The deed of absolute sale was notarized by Otilio Sy Bongon.

On July 16, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a general power of attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 sold Lot No. 76-D to Emiliano M. [Ongjoco] for 5,000 Pesos. The deed of absolute sale is Doc. No. 571, Page No. 20, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit K)

The same Lot No. 76-D was sold on October 22, 1979 by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a general power of attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 of Notary Public Otilio Sy Bongon sold Lot No. 76-D to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc. No. 478, Page No. 97, Book NO. XXII, Series of 1979 of Notary Public Antonio A. Arcangel. (Exhibit J)

On July 3, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lots 76-E and 76-F to Emiliano M. [Ongjoco] for 15,000 Pesos. The deed of absolute sale is Doc. No. 526, Page No. 11, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit M)

The same Lots 76-E and 76-F were sold on October 25, 1979, by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under the same general power of attorney of 1978 referred to above to Emiliano M. [Ongjoco] for 30,000 Pesos. The deed of absolute sale is Doc. No. 47, Page No. 11, Book No. XXIII, Series of 1972 of Notary Public Antonio A. Arcangel. (Exhibit L)

On July 2, 1979 Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lot No. 76-G to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of sale is Doc. No. 516, Page No. 9, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit N)

The same Lot 76-G was sold on February 29, 1980 by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under the same general power of attorney of 1978 referred to above to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc. No. l02, Page No. 30, Book No. 17, Series of 1980 of Notary Public Otilio Sy Bongon. (Exhibit O)[5] (Emphases ours.)

Thus, on 28 January 1980, the Estate of Lino Olaguer represented by the legitimate children of the spouses Lino Olaguer and defendant Olivia P. Olaguer, namely, Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre, as attorney-in-fact and in her own behalf, filed an action for the Annulment of Sales of Real Property and/or Cancellation of Titles[6] in the then Court of First Instance of Albay. [7]

Docketed as Civil Case No. 6223, the action named as defendants the spouses Olivia P. Olaguer and Jose A. Olaguer; Eduardo Olaguer; Virgilio Olaguer; Cipriano Duran; the Heirs of Estanislao O. Olaguer, represented by Maria Juan Vda. de Olaguer; and the Philippine National Bank (PNB).

In the original complaint, the plaintiffs therein alleged that the sales of the following properties belonging to the Estate of Lino Olaguer to Estanislao Olaguer were absolutely simulated or fictitious, particularly: Lots Nos. 578, 1557, 1676, 4521, 4522, 8635, 8638, 7589, 7593, and 7396. In praying that the sale be declared as null and void, the plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued to Jose Olaguer, Virgilio Olaguer, Cipriano Duran and the PNB be annulled.

Defendant PNB claimed in its Answer,[8] inter alia, that it was a mortgagee in good faith and for value of Lots Nos. 7589, 7593 and 7396, which were mortgaged as security for a loan of P10,000.00; the mortgage contract and other loan documents were signed by the spouses Estanislao and Maria Olaguer as registered owners; the proceeds of the loan were received by the mortgagors themselves; Linda Olaguer Montayre had no legal capacity to sue as attorney-in-fact; plaintiffs as well as Maria Olaguer were in estoppel; and the action was already barred by prescription. PNB set up a compulsory counterclaim for damages, costs of litigation and attorneys fees. It also filed a cross-claim against Maria Olaguer for the payment of the value of the loan plus the agreed interests in the event that judgment would be rendered against it.

Defendants Olivia P. Olaguer, Jose A. Olaguer and Virgilio Olaguer, in their Answer, [9] denied the material allegations in the complaint. They maintained that the sales of the properties to Pastor Bacani and Estanislao Olaguer were judicially approved; the complaint did not state a sufficient cause of action; it was barred by laches and/or prescription; lis pendens existed; that the long possession of the vendees have ripened into acquisitive prescription in their favor, and the properties no longer formed part of the Estate of Lino Olaguer; until the liquidation of the conjugal properties of Lino Olaguer and his former wives, the plaintiffs were not the proper parties in interest to sue in the action; and in order to afford complete relief, the other conjugal properties of Lino Olaguer with his former wives, and his capital property that had been conveyed without the approval of the testate court should also be included for recovery in the instant case.

Defendant Maria Juan Vda. de Olaguer, representing the heirs of Estanislao Olaguer, in her Answer,[10] likewise denied the material allegations of the complaint and insisted that the plaintiffs had no valid cause of action against the heirs of the late Estanislao Olaguer, as the latter did not participate in the alleged transfer of properties by Olivia P. Olaguer and Eduardo Olaguer in favor of the late Estanislao Olaguer.

Defendant Cipriano Duran claimed, in his Answer,[11] that the complaint stated no cause of action; he was merely instituted by his late sister-in-law Josefina Duran to take over the management of Lots Nos. 8635 and 8638 in 1971; and the real party-in-interest in the case was the administrator of the estate of Josefina Duran.

On 11 January 1995, an Amended Complaint[12] was filed in order to implead respondent Emiliano M. Ongjoco as the transferee of Virgilio Olaguer with respect to portions of Lot No. 76, namely Lots Nos. 1, 2, 76-D, 76-E, 76-F, and 76-G.

In his Answer with Counterclaim and Motion to Dismiss, [13] respondent Ongjoco denied the material allegations of the amended complaint and interposed, as affirmative defenses the statute of limitations, that he was a buyer in good faith, that plaintiffs had no cause of action against him, and that the sale of property to Pastor Bacani, from whom Ongjoco derived his title, was judicially approved.

On 23 January 1996, plaintiffs filed a Re-Amended Complaint,[14] in which the heirs of Estanislao Olaguer were identified, namely, Maria Juan Vda. de Olaguer, Peter Olaguer, Yolanda Olaguer and Antonio Bong Olaguer.

In their Answer,[15] the heirs of Estanislao Olaguer reiterated their claim that Estanislao Olaguer never had any transactions or dealings with the Estate of Lino Olaguer; nor did they mortgage any property to the PNB.

On 5 August 1998, the heirs of Estanislao Olaguer and petitioner Ma. Linda Olaguer Montayre submitted a compromise agreement,[16] which was approved by the trial court.

On 6 October 1999, Cipriano Duran filed a Manifestation [17] in which he waived any claim on Lots Nos. 8635 and 8638. Upon motion, Duran was ordered dropped from the complaint by the trial court in an order[18] dated 20 October 1999.

In a Decision[19] dated 13 July 2001, the RTC ruled in favor of the plaintiffs. The pertinent portions of the decision provide:

The entirety of the evidence adduced clearly show that the sale of the 12 lots to Pastor Bacani pursuant to Exhibit A and the sale of the 10 lots to Estanislao Olaguer pursuant to Exhibit D were absolutely simulated sales and thus void ab initio. The two deeds of sales Exhibits A and D are even worse than fictitious, they are completely null and void for lack of consideration and the parties therein never intended to be bound by the terms thereof and the action or defense for the declaration of their inexistence does not prescribe. (Art. 1410, Civil Code) Aside from being simulated they were clearly and unequivocally intended to deprive the compulsory heirs of their legitime x x x.

The deeds of sale, Exhibits A and D being void ab initio, they are deemed as non-existent and the approval thereof by the probate court becomes immaterial and of no consequence, because the approval by the probate court did not change the character of the sale from void to valid x x x.

xxxx

Defendant Jose A. Olaguer simulated the sales and had them approved by the probate court so that these properties would appear then to cease being a part of the estate and the vendee may then be at liberty to dispose of the same in any manner he may want. They probably believed that by making it appear that the properties were bought back from Pastor Bacani under a simulated sale, they (Olivia Olaguer and Eduardo Olaguer) would appear then as the owners of the properties already in their personal capacities that disposals thereof will no longer require court intervention. x x x.

xxxx

[Jose A. Olaguer] had Olivia P. Olaguer execute a Special Power of Attorney (Exhibit T) authorizing him (Jose A. Olaguer) to sell or encumber the properties allegedly bought back from Pastor Bacani which Jose A. Olaguer did with respect to the 6/13 share of Olivia P. Olaguer on Lot No. 76 by selling it to his son Virgilio for only 3,000 Pesos, then caused Virgilio to execute a power of attorney authorizing him to sell or encumber the 6/13 share which he did by selling the same to defendant Emiliano M. [Ongjoco].

Virgilio Olaguer however executed an affidavit (Exhibit CC) wherein he denied having bought any property from the estate of Lino Olaguer and that if there are documents showing that fact he does not know how it came about. x x x.

The 1972 power of attorney referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2 (formerly lots 76-B and 76-C) was not presented nor offered in evidence.

There are two deeds of sale over Lot 76-D, (Exhibits K and J) in favor of defendant Emiliano M. [Ongjoco] with different dates of execution, different amount of consideration, different Notary Public.

There are two deeds of sale over Lots 76-E and 76-F (Exhibits M and L) in favor of defendant Emiliano M. [Ongjoco] with different dates of execution, different amount of consideration and different Notary Public.

There are two deeds of sale over Lot 76-G (Exhibits N and O) in favor of Emiliano M. [Ongjoco] with different dates of execution with the same amount of consideration and the same Notary Public.

While Lot 76-D was allegedly sold already to Emiliano M. [Ongjoco] in 1979, yet it was still Jose A. Olaguer who filed a petition for the issuance of a second owners copy as at torney in fact of Virgilio Olaguer on August 8, 1980 (Exhibit SS) and no mention was made about the sale.

Under these circumstances, the documents of defendant Emiliano M. [Ongjoco] on lots 76 therefore, in so far as the portions he allegedly

bought from Jose A. Olaguer as attorney in fact of Virgilio Olaguer suffers seriously from infirmities and appear dubious.

Defendant Emiliano M. [Ongjoco] cannot claim good faith because according to him, when these lots 76-[B] to 76-G were offered to him his condition was to transfer the title in his name and then he pays. He did not bother to verify the title of his vendor. x x x.

So with respect to the sale of Lots 76-B to 76-G, Emiliano M. [Ongjoco] has no protection as innocent purchaser for good faith affords protection only to purchasers for value from the registered owners. x x x. Knowing that he was dealing only with an agent x x x, it behooves upon defendant Emiliano M. [Ongjoco] to find out the extent of the authority of Jose A. Olaguer as well as the title of the owner of the property, because as early as 1973 pursuant to the subdivision agreement, (records, vol. 2, page 109 and Exhibit 14 and 14 -d) he already knew fully well that Lots 76-B to 76-G he was buying was owned by Olivia P. Olaguer and not by Virgilio Olaguer.

xxxx

With respect to the 10 lots sold to [Eduardo] Olaguer (Exhibit D) Jose A. Olaguer had Estanislao Olaguer execute a power of attorney (Exhibit X) authorizing him (Jose A. Olaguer) to sell or encumber the 10 lots allegedly bought by Estanislao from the estate. With this power of attorney, he mortgaged lots 7589, 7593 and 7398 to the PNB. He sold lots 1557 and 1676 to his son Virgilio Olaguer. While under Exhibit UU dated December 29, 1966, he bought the 10 parcels of land, among which is lots 4521 and 4522 from Estanislao Olaguer, yet, on March 16, 1968, he again bought lots 4521 and 4522 (records, vol. 1, page 38) from Estanislao Olaguer. While lots 8635 and 8638 were among those sold to him under Exhibit UU, it appears that he again bought the same on June 5, 1968 under Exhibit F.

The heirs of Estanislao Olaguer however denied having bought any parcel of land from the estate of Lino Olaguer. Estanislao Olaguers widow, Maria Juan vda. de Olaguer, executed an affidavit (Exhibit BB) that they did not buy any property from the estate of Lino Olaguer, they did not sell any property of the estate and that they did not mortgage any property with the PNB. She repeated this in her deposition. (records, vol. 2, page 51) This was corroborated by no less than former co-administrator Eduardo Olaguer in his deposition too (Exhibit RRRR) that the sale of the 10 parcels of land to Estanislao Olaguer was but a simulated sale without any consideration. x x x.

xxxx

A partial decision was already rendered by this court in its order of August 5, 1998 (records, vol. 2, page 64) approving the compromise agreement with defendants Heirs of Estanislao Olaguer. (records, vol. 2 page 57).

Defendant Cipriano Duran was dropped from the complaint per the order of the court dated October 20, 1999 (records, vol. 2, page 155) because he waived any right or claim over lots 8635 and 8638. (records, vol. 2, page 150). (Emphasis ours.)

Order[20]

The dispositive portion of the above decision was, however, amended by the trial court in an dated 23 July 2001 to read as follows:

WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiffs as follows:

1) The deed of sale to Pastor Bacani (Exhibit A) and the deed of sale to Estanislao Olaguer (Exhibit D) are hereby declared as null and void and without force and effect and all the subsequent transfers and certificates arising therefrom likewise declared null and void and cancelled as without force and effect, except as herein provided for.

2) Lot Nos. 4518, 4526, 4359 and 8750 are hereby ordered reverted back to the estate of Lino Olaguer and for this purpose, within ten (10) days from the finality of this decision, the heirs of Olivia P. Olaguer (the plaintiffs herein) [sic] are hereby ordered to execute the necessary document of reconveyance, failure for which, the Clerk of Court is hereby ordered to execute the said deed of reconveyance.

3) Lot Nos. 7514, 6608, 8582, 8157, 7999, 6167 and 8266 are hereby ordered reverted back to the estate of Lino Olaguer and for this purpose, within ten (10) days from the finality of this decision, defendant Eduardo Olaguer is hereby ordered to execute the necessary document of reconveyance, failure for which, the Clerk of Court is hereby ordered to execute the said deed of reconveyance.

4) Lots 1 and 2, Pcs-20015, and Lots 76-D, 76-E, 76-F and 76-G, Psd-180629 sold to Emiliano M. [Ongjoco] are hereby ordered reverted back to the estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision, defendant Emiliano M. [Ongjoco] is hereby ordered to execute the necessary deed of reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said

reconveyance and have the same registered with the Register of Deeds so that new titles shall be issued in the name of the estate of Lino Olaguer and the titles of Emiliano [Ongjoco] cancelled.

5) The parties have acquiesced to the sale of the 7/13 portion of Lot 76 to Eduardo Olaguer as well as to the latters disposition thereof and are now in estoppel to question the same. The court will leave the parties where they are with respect to the 7/13 share of Lot 76.

6) Lots 578, 1557, 1676, 4521, 4522, 8635, 8638, are hereby reverted back to the estate of Lino Olaguer and for this purpose, the Clerk of [Court] is hereby ordered to execute the necessary deed of reconveyance within ten days from the finality of this decision and cause its registration for the issuance of new titles in the name of the Estate of Lino Olaguer and the cancellation of existing ones over the same.

7) While the mortgage with the defendant PNB is null and void, Lots 7589, 7593 and 7396 shall remain with the Republic of the Philippinesas a transferee in good faith.

Both the petitioners and respondent filed their respective Notices of Appeal [21] from the above decision. The case was docketed in the Court of Appeals as CA-G.R. CV No. 71710.

In their Plaintiff-Appellants Brief[22] filed before the Court of Appeals, petitioner Estate argued that the trial court erred in not ordering the restitution and/or compensation to them of the value of the parcels of land that were mortgaged to PNB, notwithstanding the fact that the mortgage was declared null and void. Petitioners maintain that the PNB benefited from a void transaction and should thus be made liable for the value of the land, minus the cost of the mortgage and the reasonable expenses for the foreclosure, consolidation and transfer of the lots.

Ongjoco, on the other hand, argued in his Defendant-Appellants Brief[23] that the trial court erred in: declaring as null and void the Deeds of Sale in favor of Pastor Bacani and Eduardo Olaguer and the subsequent transfers and certificates arising therefrom; ordering the reconveyance of the lots sold to him (Ongjoco); and failing to resolve the affirmative defenses of prescription, the authority of Olivia and Eduardo to dispose of properties formerly belonging to the estate of Lino Olaguer, recourse in a court of co-equal jurisdiction, and forum shopping.

Petitioner Linda O. Montayre was likewise allowed to file a Brief[24] on her own behalf, as Plaintiff-Appellee and Plaintiff-Appellant.[25] She refuted therein the assignment of errors made by Defendant-Appellant Ongjoco and assigned as error the ruling of the trial court that the lots

mortgaged to the PNB should remain with the Republic of the Philippines as a transferee in good faith.

On 27 February 2006, the Court of Appeals rendered the assailed Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the appealed Decision is hereby MODIFIED, in that Paragraph 4 of the amended decision is hereby Ordered Deleted, and the questioned sales to defendant-appellant Emiliano M. Ongjoco are UPHELD.[26]

In denying the appeal interposed by petitioners, the appellate court reasoned that the claim for the value of the lots mortgaged with the PNB were not prayed for in the original Complaint, the Amended Complaint or even in the Re-Amended Complaint. What was sought therein was merely the declaration of the nullity of the mortgage contract with PNB. As the relief prayed for in the appeal was not contained in the complaint, the same was thus barred.

The Court of Appeals also ruled that the evidence of petitioners failed to rebut the presumption that PNB was a mortgagee in good faith. Contrarily, what was proven was the fact that Olivia Olaguer and Jose A. Olaguer were the persons responsible for the fraudulent transactions involving the questioned properties. Thus, the claim for restitution of the value of the mortgaged properties should be made against them.

As regards the appeal of respondent Ongjoco, the appellate court found the same to be meritorious. The said court ruled that when the sale of real property is made through an agent, the buyer need not investigate the principals title. What the law merely requires for the validity of the sale is that the agents authority be in writing.

Furthermore, the evidence adduced by petitioners was ruled to be inadequate to support the conclusion that Ongjoco knew of facts indicative of the defect in the title of Olivia Olaguer or Virgilio Olaguer.

Petitioners moved for a partial reconsideration[27] of the Court of Appeals decision in order to question the ruling that respondent Ongjoco was a buyer in good faith. The motion was, however, denied in a Resolution[28] dated 29 June 2006.

Aggrieved, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, raising the following assignment of errors:

I.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT RULED, ON SPECULATION, THAT RESPONDENT EMILIANO M. ONGJOCO WAS A BUYER IN GOOD FAITH OF THE PROPERTIES OF THE ESTATE OF LINO OLAGUER, DESPITE THE EXISTENCE OF FACTS AND CIRCUMSTANCES FOUND BY THE TRIAL COURT THAT OUGHT TO PUT EMILIANO M. ONGJOCO ON NOTICE THAT THE PETITIONERS-APPELLANTS HAVE A RIGHT OR INTEREST OVER THE SAID PROPERTIES, AND CONTRARY TO PREVAILING JURISPRUDENCE.

II.

THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT DISREGARDED THE CLEAR FINDINGS OF FACTS AND CONCLUSIONS MADE BY THE TRIAL COURT, IN THE ABSENCE OF ANY STRONG AND COGENT REASONS TO REVERSE THE SAID FINDINGS, CONTRARY TO PREVAILING JURISPRUDENCE.[29]

Essentially, the question that has been brought before us for consideration is whether or not, under the facts and circumstances of this case, respondent Ongjoco can be considered an innocent purchaser for value.

Petitioners agree with the pronouncement of the trial court that respondent Ongjoco could not have been a buyer in good faith since he did not bother to verify the title and the capacity of his vendor to convey the properties involved to him. Knowing that Olivia P. Olaguer owned the properties in 1973 and that he merely dealt with Jose A. Olaguer as an agent in January 1976, Ongjoco should have ascertained the extent of Joses authority, as well as the title of Virgilio as the principal and owner of the properties.

Petitioners likewise cite the following incidents that were considered by the trial court in declaring that respondent was a buyer in bad faith, namely: (1) that Virgilio Olaguer executed an affidavit,[30] wherein he denied having bought any property from the estate of Lino Olaguer, and that if there are documents showing that fact, he does not know how they came about; (2) that the power of attorney referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2 (formerly Lots 76-B and 76-C) was not presented or offered in evidence; (3) that there are two deeds of sale [31] over Lot 76-

D in favor of Ongjoco; (4) that there are two deeds of sale [32] over Lots 76-E and 76-F in favor of Ongjoco; (5) that there are two deeds of sale [33] over Lot 76-G in favor of Ongjoco; and (6) that while Lot 76-D was already sold to Ongjoco in 1979, it was still Jose A. Olaguer as attorney in fact of Virgilio Olaguer who filed on 8 August 1980 a petition for the is suance of a second owners copy[34] of the title to the property, and no mention was made about the sale to Ongjoco.

Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that he was an innocent purchaser for value. His adamant stance is that, when he acquired the subject properties, the same were already owned by Virgilio Olaguer. Respondent insists that Jose A. Olaguer was duly authorized by a written power of attorney when the properties were sold to him (Ongjoco). He posits that this fact alone validated the sales of the properties and foreclosed the need for any inquiry beyond the title to the principal. All the law requires, respondent concludes, is that the agents authority be in writing in order for the agents transactions to be considered valid.

Respondent Ongjocos posture is only partly correct.

According to the provisions of Article 1874[35] of the Civil Code on Agency, when the sale of a piece of land or any interest therein is made through an agent, the authority of the latter shall be in writing. Absent this requirement, the sale shall be void. Also, under Article 1878,[36] a special power of attorney is necessary in order for an agent to enter into a contract by which the ownership of an immovable property is transmitted or acquired, either gratuitously or for a valuable consideration.

We note that the resolution of this case, therefore, hinges on the existence of the written power of attorney upon which respondent Ongjoco bases his good faith.

When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the Transfer Certificates of Title of said properties were in Virgilios name. [37] Unfortunately for respondent, the power of attorney that was purportedly issued by Virgilio in favor of Jose Olaguer with respect to the sale of Lots Nos. 1 and 2 was never presented to the trial court. Neither was respondent able to explain the omission. Other than the self-serving statement of respondent, no evidence was offered at all to prove the alleged written power of attorney. This of course was fatal to his case.

As it stands, there is no written power of attorney to speak of. The trial court was thus correct in disregarding the claim of its existence. Accordingly, respondent Ongjocos claim of good faith in the sale of Lots Nos. 1 and 2 has no leg to stand on.

As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a general power of attorney that was executed by Virgilio Olaguer. While the law requires a special power of attorney, the general power of attorney was sufficient in this case, as Jose A. Olaguer was expressly empowered to

sell any of Virgilios properties; and to sign, execute, acknowledge and deliver any agreement therefor.[38] Even if a document is designated as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the performance of the act.[39] The special power of attorney can be included in the general power when the act or transaction for which the special power is required is specified therein.[40]

On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly notarized. As such, the same is considered a public document and it has in its favor the presumption of authenticity and due execution, which can only be contradicted by clear and convincing evidence.[41]

No evidence was presented to overcome the presumption in favor of the duly notarized power of attorney. Neither was there a showing of any circumstance involving the said document that would arouse the suspicion of respondent and spur him to inquire beyond its four corners, in the exercise of that reasonable degree of prudence required of a man in a similar situation. We therefore rule that respondent Ongjoco had every right to rely on the power of attorney in entering into the contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.

With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any claim or participation in the purchase of any of the properties of the deceased Lino Olaguer, we hold that the same is rather irrelevant. The affidavit was executed only on 1 August 1986 or six years after the last sale of the properties was entered into in 1980. In the determination of whether or not a buyer is in good faith, the point in time to be considered is the moment when the parties actually entered into the contract of sale.

Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco twice does not warrant the conclusion that he was a buyer in bad faith. While the said incidents might point to other obscured motives and arrangements of the parties, the same do not indicate that respondent knew of any defect in the title of the owner of the property.

As to the petition filed by Jose A. Olaguer for the issuance o f a second owners copy of the title to Lot No. 76-D, after the property was already sold to respondent Ongjoco, the same does not inevitably indicate that respondent was in bad faith. It is more likely that Jose A. Olaguer was merely compiling the documents necessary for the transfer of the subject property. Indeed, it is to be expected that if the title to the property is lost before the same is transferred to the name of the purchaser, it would be the responsibility of the vendor to cause its reconstitution.

In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots Nos. 1 and 2 from Jose A. Olaguer, as the latter was not proven to be duly authorized to sell the said properties.

However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos. 76-D, 76-E, 76-F and 76-G since it was entirely proper for him to rely on the duly notarized written power of attorney executed in favor of Jose A. Olaguer.

WHEREFORE, premises considered, the instant petition is hereby PARTIALLY GRANTED. The assailed Decision of the Court of Appeals dated 27 February 2006 in CA-G.R. CV NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July 2001 of the Regional Trial Court of Legazpi City, Branch 6, and the Order dated 23 July 2001 shall read as follows:

4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered reverted back to the estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision, defendant Emiliano M. Ongjoco is hereby ordered to execute the necessary deed of reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said reconveyance and have the same registered with the Register of Deeds so that new titles shall be issued in the name of the estate of Lino Olaguer and the titles of Emiliano Ongjoco cancelled.

No costs.

SO ORDERED. STA. LUCIA REALTY & DEVELOPMENT, INC., v. ROMEO UYECIO, AMARIS UYECIO, REYNALDO UYECIO and MANUEL UYECIO 562 SCRA 226 (2008), SECOND DIVISION (Carpio Morales, J.) Articles 1191 of the Civil Code does not thus apply to a contract to sell since there can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred. FACTS: Romeo, Amaris, Reynaldo a and Manuel, all surnamed Uyecio (Uyecios), entered into a contract to sell with Sta. Lucia Realty & Development, Inc., (Sta. Lucia Realty) covering seven (7) lots. The sale was premised upon the brochures of the project detailing the improvements and amenities to the unconstructed subdivision. The Uyecios agreed to pay part of down payment of the lots in installment of 10 years at 21% interest per annum. They partially paid amortization until April 2001, despite the fact that the improvements and amenities reflected in the sales brochures were yet to be completed. The Uyecios filed a complaint against the Sta. Lucia Realty at the Housing and Land Use Regulatory Board (HLURB) compelling the completion of the Sta. Lucia Realt ys project within six (6) months or refund of their total payments. After the investigation, HLURB ruled in favor of the Uyecios and ordered, among others, the rescission of the Contract to Sell between the parties. The decision of HLURB was affirmed by the Office of the President and by the Court of Appeals. ISSUES: Whether or not the Court of Appeals erred in ordering the rescission of the Contract to Sell between the parties

HELD: In the absence of substantial showing that the findings of facts of administrative bodies charged with their specific field of expertise were arrived at from an erroneous estimation of the evidence presented, they are considered conclusive, and in the interest of stability of the governmental structure, are not to be disturbed. In the present case, Sta. Lucia has not shown any ground to merit a disturbance of the findings of the HLURB which have been sustained by the OP and the appellate court. Articles 1191 of the Civil Code does not thus apply to a contract to sell since there can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred. In other words, the breach contemplated in Article 1191 is the obligor's failure to comply with an obligation already extant, like a contract of sale, not a failure of a condition to render binding that obligation. In a contract to sell real property on installments, the full payment of the purchase price is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force. Cancellation, not rescission, of the contract to sell is thus the correct remedy in the premises.

SECOND DIVISION G.R. No. 176217 August 13, 2008

STA. LUCIA REALTY & DEVELOPMENT INC., petitioner, vs. ROMEO UYECIO, AMARIS UYECIO, REYNALDO UYECIO AND MANUEL UYECIO, respondents. DECISION CARPIO MORALES, J.: Sta. Lucia Realty Development, Inc. (petitioner), developer of "The Royale Tagaytay Estates" which is a subdivision project located in Alfonso, Cavite, offered lots for sale payable on installments, proffering thatthe development of the project would be completed by September 1999. The sales brochures of the project detailed the following improvements and amenities: 1. Church 2. Grand Clubhouse 3. Landscaped gardens and promenade 4. Basketball court 5. Adult pool 6. Kiddie swimming pool 7. Multipurpose hall 8. Function room system 9. Billiards 10. Grand Entrance (Ph. I)

11. Perimeter fence for security and privacy 12. Cemented roads, curbs and gutters 13. Cemented sidewalk 14. Storm drainage system 15. Electrical facilities 16. Mercury street lamps 17. Centralized interrelated water system with deepwell and overhead water tank 18. Concrete electrical posts 19. Tennis court1 Respondents Romeo, Amaris, Reynaldo and Manuel, all surnamed Uyecio, entered into contracts to sell with petitioner covering seven lots in petitioners Phase II project. Under the contrac ts to sell which were all dated May 21, 1999, each of the respondents would and did in fact pay a downpayment of P240,000, and the balance of P960,000 would be paid in 10 years at 21% interest per annum. Respondents paid their monthly amortizations until April 2001 when they suspended further payments, the promised delivery date of the project not having been met, and the improvements and amenities reflected in the sales brochures were yet to be introduced or completed. 2 Respondents thus sent petitioner a letter demanding the completion of the entire project and informing it that they were suspending the payment of monthly amortizations on account of "contractual breach."3 Petitioner for its part also sent letters to respondents advising them of their default in the payment of their monthly amortizations covering the period March 2001 up to the third quarter of 2002.4 On August 22, 2002, respondents lodged a complaint5 against petitioner at the Housing and Land Use Regulatory Board (HLURB) Regional Field Office No. IV, praying for the completion of the project within six months or, in the alternative, for the refund of their total payments to bear interest at 21% per annum reckoned from February 1999 until said payments are finally paid, and for the award of moral and exemplary damages and attorneys fees. In an ocular inspection of the subdivision conducted on December 3, 2002, the HLURB Regional Office found that, indeed, the project remained unfinished. In his Report,6 Engineer Rey E. Musa of the said office reflected the following findings: xxxx 1. The following features and amenities for the whole Phase II indicated in the brochure are yet to be provided/constructed, to wit: a. Church b. Electrical facilities including concrete posts & mercury street lamps b. Clubhouse 1. Basketball court

2. Tennis court 3. Swimming pool 4. Multi-purpose Hall d. Property perimeter wall for security and privacy e. Landscaped garden & promenade 2. There is an existing water tanks [sic] in Phase II, however, not yet operational. 3. There is no sewerage water treatment plant within the whole project. (Emphasis supplied) By petitioners claim, "the basic components of [the] subdivision development are almost 100% complete,"7 in support of which it submitted the report of its project engineer Gregorio Evangelio8 stating that all constructions relating to earthworks, concrete works and drainage system had been done with, while the water distribution system was 98% finished. The report went on to state, however, that works on the electrical distribution system and perimeter fence remained at 5% and 50%, respectively, as of September 2002.9 Petitioner disclaimed having had any participation in the preparation of the advertising materials distributed by the marketing firm Asian Pacific Realty & Brokerage, Inc., a separate and distinct entity.10 To further shore up its case, petitioner reiterated that it is not precluded from asking from the HLURB for extension of time to complete the project, citing License to Sell No. R4-98-12-020311 which provides, among other things, that it could xxxx 2. Apply for an extension of time to complete the development in case the project cannot be completed within the prescribed period before its expiration; x x x x (Underscoring supplied) HLURB, by letter dated November 5, 2003,12 in fact granted petitioner an extension until September 2004 to complete Phase II-B of the project. By Decision13 of June 23, 2003, the HLURB ruled in favor of respondents, disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainants and against the respondent to read as follows: 1. Ordering the rescission of the Contracts to Sell between the complainants and respondent; 2. Ordering the respondent to refund complainant Romeo Uyecio the amount of P1,224,000.00 withinterest at 12% per annum from the filing of the complaint until full payment; 3. Ordering the respondent to refund the complainant Reynaldo Uyecio the amount of P816,000.00 with interest at 12 % per annum from the filing of the complaint until full payment;

4. Ordering the respondent to refund complainants Amaris Uyecio and Manuel Uyecio the amount of P408,000.00 each with interest at 12 % per annum from the filing of the complaint until full payment; 5. Ordering the respondent to pay complainant(s) the amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages, P50,000.00 as attorney s fees to be divided among the complainants in proportion to their respective claims; 6. Ordering the respondent to pay this Board P20,000.00 as administrative fine for violation of Sections 19 and 20 in relation to Section 38 of P.D. 957. SO ORDERED. (Emphasis and underscoring supplied) The HLURB Board of Commissioners (First Division) to which petitioner appealed the decision via petition for review denied its petition by Decision14 of December 5, 2003 and Resolution15 of March 31, 2004. The Office of the President (OP) affirmed the HLURB decision. The Court of Appeals in turn affirmed16that of the HLURB. Hence, the present petition for review, petitioner faulting the Court of Appeals in upholding the rescission of the contracts to sell, in granting respondents prayer for refund with exorbitant interest, and in upholding the award of moral and exemplary damages and attorneys fees.17 The Court finds the issues raised by petitioner bearing on findings of facts to be mere rehash of those already passed upon by the HLURB, the OP and the appellate court. In the absence of substantial showing that the findings of facts of administrative bodies charged with their specific field of expertise were arrived at from an erroneous estimation of the evidence presented, they are considered conclusive, and in the interest of stability of the governmental structure, are not to be disturbed.18 In the present case, petitioner has not shown any ground to merit a disturbance of the findings of the HLURB which have been sustained by the OP and the appellate court. It bears noting that petitioners project accomplishment report and the HLURB letter dated November 5, 2003 granting petitioners request for the completion of the subdivision until September 2004, which request does not even appear to have been made "within the prescribed period before its expiration," corroborate the findings in the HLURB ocular inspection report and respondents claim that petitioner did not finish the project within the announced time frame. Petitioners counterclaim that it was respondents who were in default is immaterial to the issue of its failure to finish its project on time. En passant, even assuming arguendo that respondents defaulted, albeit the evidence shows otherwise, that did not prevent petitioner from exercising its option to cancel the contracts to sell. It did not, however. It merely demanded in May 2002 the payment of overdue amortizations from respondents, after the lapse of 14 months of alleged default. The, fact is that respondents suspended their payment of monthly amortizations pending compliance by petitioner with its contractual obligation, which is justified under Section 23 of Presidential Decree No. 957.19 Petitioners attempt at reversal of the Court of Appeals decision thus fails. A word on the application by the HLURB, the OP, and the appellate court of Article 1191 20 of the Civil Code on rescission. The case involves contracts to sell, not a contract which absolutely conveys real property. Distinguishing the two contracts, the Court, in Rillo v. Court of Appeals,21 held:

x x x In a contract to sell real property on installments, the full payment of the purchase price is apositive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force. The transfer of ownership and title would occur after full payment of the purchase price. We held in Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc. that there can be no rescission of an obligation that is still non-existent, the suspensive condition not having happened . (Citations omitted; emphasis and underscoring supplied) Articles 1191 of the Civil Code does not thus apply to a contract to sell since there can be no rescission of an obligation that is still non-existent, the suspensive condition not having occurred. In other words, the breach contemplated in Article 1191 is the obligors failure to comply with an obligation already extant, like a contract of sale, not a failure of a condition to render binding that obligation. 22 Cancellation, not rescission, of the contract to sell is thus the correct remedy in the premises. On the issue of damages, the Court sustains the award of moral and exemplary damages given the testimonial evidence of respondents thereon. As for the award of P50,000 attorneys fees, the Court sustains it too, respondents having been compelled to litigate with petitioner and incur expenses to enforce and protect their interests. 23 On the issue of interest, the imposition of 12% per annum interest on the amount of refund must be reduced to 6%, conformably with this Courts ruling in Eastern Shipping Lines, Inc. v. Court of Appeals24and in Fil-Estate Properties, Inc. v. Go,25 the amount to be refunded being neither a loan nor a forbearance of money, goods or credit. WHEREFORE, the October 16, 2006 Decision and January 10, 2007 Resolution of the Court of Appeals in CA-G.R. SP No. 87027 are AFFIRMED with MODIFICATION in light of the foregoing disquisitions. As modified, the dispositive portion of the decision reads: WHEREFORE, judgment is rendered in favor of the plaintiffs and against the defendant to read as follows: 1. Ordering the cancellation of the Contracts to Sell between the plaintiffs and defendant; 2. Ordering the defendant to refund the plaintiff Romeo Uyecio the amount of P1,224,000 with interest at 6% per annum from the filing of the complaint until full payment; 3. Ordering the defendant to refund the plaintiff Reynaldo Uyecio the amount of P816,000 with interest at 6% per annum from the filing of the complaint until full payment; 4. Ordering the defendant to refund plaintiffs Amaris Uyecio and Manuel Uyecio the amount ofP408,000 each with interest at 6% per annum from the filing of the complaint until full payment; 5. Ordering the defendant to pay plaintiffs the amount of P100,000 as moral damages, P100,000 as exemplary damages, P50,000 as attorneys fees to be divided among the plaintiffs in proportion to their respective claims; 6. Ordering the defendant to pay [the Housing and Land Use Regulatory] Board P20,000 as administrative fine for violation of Sections 19 and 20 in relation to Section 38 of P.D. 957. Costs against petitioner.

SO ORDERED. THIRD DIVISION

SPS. CORNELIO JOEL I. ORDEN and MARIA NYMPHA V. ORDEN, and REGISTER OF DEEDS OF NEGROSORIENTAL, Petitioners, - versus SPS. ARTURO AUREA and MELODIA C. AUREA, SPS. ERNESTO P. COBILE and SUSANA M. COBILE, and FRANKLIN M. QUIJANO, Respondents.

G.R. No. 172733

Present: YNARES-SANTIAGO, J. Chairperson. AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ.

Promulgated:

August 20, 2008 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks to set aside the Decision [1] of the Court of Appeals dated 20 April 2006 in CA-

G.R. CV No. 75788 affirming in toto the Decision[2] of Branch 33 of the Regional Trial Court (RTC) of Dumaguete City in Civil Case No. 12056. The RTC decision ordered petitioners Sps. Cornelio Joel I. Orden and Maria Nympha V. Orden to return to respondents-spouses Ernesto Cobile and Susana M. Cobile the amount of P738,596.28 plus twenty percent interest per annum from the filing of the complaint until fully paid.

The antecedents are as follows:

Petitioners spouses Cornelio Joel I. Orden and Maria Nympha V. Orden are the owners of two parcels of land located at theMunicipality of Sibulan, Negros Oriental covered by Transfer Certificate of Title Nos. T-27159 and T-27160, and the residential house standing thereon.

On 29 September 1994, petitioners Orden executed a Deed of Absolute Sale selling, transferring and conveying the aforementioned properties to respondents-spouses Arturo Aurea and Melodia C. Aurea, their heirs, successors and assigns. The Deed of Absolute Sale contained, among others, the following:

That for and in consideration of the sum of ONE MILLION NINE HUNDRED THOUSAND PESOS (P1.9M), receipt of which is hereby acknowledged to the satisfaction of the VENDORS, WE, the spouses CORNELIO JOEL I. ORDEN and MARIA NYMPHA VELARDO ORDEN, by these present, do hereby SELL, TRANSFER and CONVEY, in a manner, absolute, and irrevocable, unto and in favor of herein VENDEES, the spouses ARTURO AUREA and MELODIA C. AUREA, their heirs, successors and assigns, the above-described two (2) parcels of land, together with the residential house standing thereon, and declared under Tax Declaration ______, and assessed at ___________.[3]

Simultaneous with the execution of the Deed of Absolute Sale, respondents-spouses Aurea executed a Joint Affidavit whereby they declared that the true and real purchasers of the abovementioned properties described in the Deed of Absolute Sale are respondents-spouses Ernesto P. Cobile and Susana M. Cobile. The pertinent portions of the affidavit read:

That we are the Vendees in a document denominated DEED OF ABSOLUTE SALE from the Vendors, the spouses CORNELIO JOEL I. ORDEN and MARIA

NYMPHA VELARDO ORDEN, involving two (2) parcels of land under TCT-27159 (Tax Dec. No. 93-2-04-094) and TCT-27160 (Tax Dec. No. 93-2-04-095) and a residential house under Tax Dec. No. _____ for the sum of ONE MILLION NINE HUNDRED THOUSAND PESOS (P1.9M), per Doc. No. 384; Page No. 78, Book No. _____; Series of 1994, dated September _____, 1994 of Notary Public Atty. Jose G. Hernando, Jr.

That the true and real vendees in said DEED OF ABSOLUTE SALE adverted to above are one ERNESTO P. COBILE and SUSANA M. COBILE who are both American Citizens and residents of Honolulu, Hawaii, U.S.A.

We are executing this Joint Affidavit to prove and show that the real and true purchasers of the afore-mentioned two (2) parcels of land and the residential house sold by the spouses CORNELIO JOEL I. ORDEN are one ERNESTO P. COBILE and SUSANA M. COBILE.[4]

Immediately after the signing of the Deed of Absolute Sale and Joint Affidavit, respondents Cobile paid petitioners Orden the amount of P384,000.00 as partial payment of the purchase price of P1,900,000.00 as evidenced by a receipt signed by petitioners Orden. The receipt reads:

RECEIPT

RECEIVED from ERNESTO P. COBILE and SUSANA M. COBILE, the sum of THREE HUNDRED EIGHTY FOUR THOUSAND PESOS (P384,000.00) representing partial payment of the purchase price re Deed of Absolute Sale of two parcels of land and a residential house located at Sibulan, Negros Oriental, Philippines.[5]

Respondents Cobile then executed a document entitled PROMISSORY whereby they promised to pay petitioners Orden the amount of P566,000.00 on or before 31 October 1994, and the remaining P950,000.00 to be paid as soon as the titles of the properties shall have been transferred to them. Said document reads:

PROMISSORY

WE, ERNESTO P. COBILE and SUSANA M. COBILE, residents of Hawaii, U.S.A., by these presents, do hereby promise to pay to the spouses CORNELIO JOEL I. ORDEN and MARIA NYMPHA VELARDO ORDEN, the sum of FIVE HUNDRED SIXTY SIX THOUSAND PESOS (P566,000.00) on or before October 31, 1994, said amount representing the one-half balance of the purchase price of the sale of two (2) parcels of land and a residential house located at the Municipality of Sibulan, Negros Oriental, per Doc. No. 384; Page No. 78; Book No. IV; Series of 1994 of Notary Public JOSE G. HERNANDO, JR., the remaining balance of NINE HUNDRED FIFTY THOUSAND PESOS (P950,000.00) to be paid as soon as the titles of the properties subject-matter of the sale shall have been transferred to us.[6]

The Deed of Absolute Sale, Joint Affidavit, receipt for P384,000.00 and the promissory note were all prepared by Atty. Jose G. Hernando, Jr., counsel of petitioners Orden. It was the suggestion and advice of Atty. Hernando that respondents Aurea be indicated as the vendees in the Deed of Absolute Sale in lieu of respondents Cobile. Atty. Hernando explained that respondents Cobile, being American citizens, could not own land in the Philippines.[7] To show true ownership of the properties to be purchased, respondents executed the Joint Affidavit declaring that the real vendees were respondents Cobile.

Respondents Cobile failed to pay the P566,000.00 which was due on or before 31 October 1994.

On 13 December 1994, respondents Cobile, through Arturo Aurea, paid petitioners Orden P354,596.28 representing partial payment of the purchase price. The same was evidenced by a receipt executed by the petitioners Orden which reads:

RECEIPT RECEIVED from SPS. ERNESTO P. COBILE and SUSANA M. COBILE, the sum of PESOS: THREE HUNDRED FIFTY FOUR THOUSAND FIVE HUNDRED NINETY SIX & 28/100 (P354,596.28) representing partial payment of the purchase price re Deed of Absolute Sale of two (2) parcels of land and a residential house located at Sibulan, Negros Oriental, per Doc. No. 384; Page No. 78; Book No. IV; Series of 1994 of the notary public JOSE G. HERMANDO, Jr.

Balance after this payment = P1,161,403.72[8]

Failing to pay the balance of the purchase price, petitioners Orden wrote respondents Cobile a letter dated 11 March 1995informing the latter of their intention to dispose of the properties to other interested parties if respondents Cobile did not comply with their promise to pay the remaining balance of the purchase price. Petitioners Orden, however, gave respondents Cobile ten days from receipt of the letter to pay; otherwise, their non-payment shall be construed as refusal on their part and the properties shall be sold to others. The letter reads:

Please be informed that we have decided to dispose of the property (Lot 1 and 4, Block B of the Consolidation Subdivision Plan, (LRC) Pcs-7321, all located at Barrio Maslog, Sibulan, Negros Oriental, Philippines, entered by Transfer Certificate of Title No. T-27160 and T-272159, respectively) to other [interested] parties, in view of your failure to make good the conditions imposed on the Deed of Sale we have executed as vendors, in your favor as vendees, sometime last September 29, 1994.

However, if only to give you a chance to fully consummate our transaction, notice is hereby given upon your goodness to pay us the remaining balance of the aforesaid Deed of Sale ten (10) days upon receipt of this letter. Your failure to do so within said period shall be constrained (sic) as your refusal and we then shall proceed to dispose of the property.

Rest assured that you will be reimbursed of the advance payments you made, after the properties shall have been sold and after deductions be made concerning damages, attorneys fees, etc.[9]

Respondents Cobile did not make any further payment. All in all, they paid petitioners Orden P738,596.28 (P384,000.00 +P354,596.28). Petitioners Orden did not transfer the titles to the properties to respondents Cobile.

On 21 May 1996, petitioners sold the properties to Fortunata Adalim Houthuijzen and the titles thereto transferred to her name.[10]

On 30 September 1997, respondents-spouses Aurea and spouses Cobile, and respondent Franklin M. Quijano filed a Complaint before the Regional Trial Court of Dumaguete City for Enforcement of Contract and Damages with a Prayer for a Writ of Preliminary Attachment, Prohibitory Injuction and Restraining Order against petitioners Orden and the Register of Deeds of Negros Oriental. Franklin Quijano was the attorney-in-fact of respondents spouses Aurea and Cobile. The complaint was docketed as Civil Case No. 12056 and was raffled to Branch 44 of said court.

The complaint, among other things, asked the trial court to order petitioners Orden and the Register of Deeds of Negros Oriental for the delivery of the titles to the properties involved in the names of respondents Cobile; in the alternative, if the titles to the properties could not be delivered in respondents Cobiles name, to order petitioners Orden to pay the whole consideration of the sale plus interest of 20% per annum. The restraining order and writ of preliminary injunction were sought to restrain petitioners Orden from selling, transferring, conveying or encumbering the properties involved to other person during the pendency of the case and to prohibit the Register of Deeds of Negros Oriental from recording, registering and transferring the titles to the properties to other persons except to respondents Cobile.

On 29 October 1997, petitioners Orden filed their Answer with Counterclaim. [11] They asked that the complaint be dismissed for lack of cause of action and that the Deed of Absolute Sale be declared rescinded. They likewise ask for damages.

On 9 September 1998, following the trial courts order to amend the complaint, impleaded therein were spouses Henricus C. Houthuijzen and Fortunata Adalim Houthuijzen, the subsequent purchasers of the subject properties and holders of the titles thereto.[12]

On 23 February 1999, the trial court dismissed the case for lack of interest to prosecute.[13] On 12 March 1999, respondents filed a motion for reconsideration which the trial court granted.[14] Thus, the case was reinstated.[15]

On 13 April 1999, spouses Henricus C. Houthuijzen and Fortunata Adalim Houthuijzen filed their Answer with Motion to Dismiss.[16]

In an Order dated 1 June 1999, the trial court granted the spouses Houthuijzens motion to dismiss, ruling that said spouses were buyers in good faith who were able to register the sale with the Register of Deeds, and that respondents Cobiles complaint could be enforced only against petitioners Orden.[17]

On 8 July 1999, respondents moved for the reconsideration[18] of the 1 June 1999 Order which the trial court denied for lack of merit.[19]

During the pre-trial conference, the parties agreed only on the identities of the parties and of the subject properties.[20]

On 25 April 2000, respondents filed a Motion for Inhibition [21] which was granted by the Presiding Judge of Branch 44. The case was re-raffled to Branch 33. Trial ensued.

In a decision dated 26 April 2002, the trial court disposed of the case as follows:

ACCORDINGLY, from the foregoing disquisition, judgment is hereby rendered ordering the defendants:

(1) to return to plaintiffs, spouses Ernesto Cobile and Susana M. Cobile the amount of SEVEN HUNDRED THIRTY EIGHT THOUSAND FIVE HUNDRED NINETY-SIX PESOS and TWENTY-EIGHT CENTAVOS (P738,596.28) representing the total amount advanced by the plaintiffs to defendants; and

(2) to pay plaintiffs interest of the aforecited amount at the rate of Twenty (20%) percent per annum from the filing of the complaint until fully paid.[22]

The trial court found that petitioners Orden and respondents Cobile entered into a contract of sale. The contract, it explained, was subject to the conditions laid down in the promissory note that respondents Cobile would pay the amount of P566,000.00 on or before 31 October 1994, and the petitioners Ordens would undertake the transfer of the titles to the properties in the names of respondents Cobile, after which the latter would pay the remaining balance of P950,000.00. It said that this was an example of reciprocal obligations. Since respondents Cobile already violated the terms of the promissory note when they failed to pay the total amount of P566,000.00 on the agreed date, petitioners Orden should have filed for rescission. This, the trial court said, petitioner Orden failed to do. The letter that petitioners Orden sent to respondents Cobile -- informing them that should they fail to comply with the terms and conditions of the promissory note, petitioners Orden would be constrained to sell the properties to other interested persons -- was not the rescission envisaged by law. The rescission made by petitioners Orden was thus open to contest.

The trial court likewise ruled that the properties subject matter of the case could not be given to respondents Cobile because the ownership thereof had passed to Fortunata Adalim-Houthuijzen whom it regarded as an innocent purchaser for value.

Furthermore, the trial court declared that respondents Cobile could not demand specific performance or rescission of contract, for they themselves failed to comply with the terms and conditions set forth in the promissory note when they failed to pay the entire balance of one-half (P950,000.00) of the total price agreed upon.

The trial court ruled that it could not in conscience grant respondents Cobiles prayer that should petitioners Orden fail to deliver the titles in respondents Cobiles names, the Ordens be ordered to pay the Cobiles the entire purchase price plus 20% interest per annum. It likewise said that neither could petitioners Orden forfeit the P738,596.28 paid by respondents because they had not rescinded the contract of sale between them either judicially or by notarial act.

On 23 May 2002, petitioners Orden filed a Notice of Appeal.[23]

On 20 April 2006, the Court of Appeals rendered its Decision[24] affirming in toto the decision of the trial court. The dispositive portion of the decision reads:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us AFFIRMING (sic) EN TOTO the decision datedApril 26, 2002 of the Regional Trial Court in Civil Case No. 12056.[25]

The Court of Appeals justified the return of what had been paid by respondents Cobile (P738,596.28) on the ground that the deed of sale or promissory note did not contain any provision regarding forfeiture in case the full purchase price was not paid. Moreover, it ruled that petitioners Orden had no just or legal ground to keep the payments made by respondents Cobile because they failed to transfer the titles of the properties in the names of respondents Cobile. To allow petitioners Orden to retain said payments would unjustly enrich them at the expense of respondents Cobile.

On 16 June 2006, petitioners Orden filed before us a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court. [26] Per our resolution dated 10 July 2006, we required respondents to comment on the petition within ten days from notice of the resolution. [27]

On 3 October 2006, respondents filed their Comment [28] to which petitioners were directed to file a Reply.[29] The Reply was filed on 7 July 2007.[30]

On 17 September 2007, the Court gave due course to the petition and required the parties to submit their respective memoranda within thirty days from notice. [31] The parties submitted their respective memoranda.[32]

Petitioners argue that the Court of Appeals erred in holding that the case at bar involves a perfected contract of sale and that an action for rescission should have been pursued by them (petitioners).[33] They claimed that what they entered into with respondents Cobile was a Conditional Contract of Sale. They added that although captioned Deed of Absolute Sale, the contract is truly one of a conditional sale, if not a contract to sell real property on installments. The full payment of the purchase price as laid down in the promissory note is a positive suspensive condition, the failure of which is not considered a breach, casual or serious, but simply an event which prevented the obligation of the vendor to convey title from acquiring any obligatory force.

In the resolution of this case, what is to be determined is the kind of contract petitioners Orden and respondents Cobile entered into. Did they enter into a Contract of Sale or a Contract to Sell?

Both lower courts ruled that the contract entered into by the parties was a Contract of Sale. On the other hand, petitioners Orden insist that they entered into a Contract to Sell.

In the case at bar, on 29 September 1994, a Deed of Absolute Sale was entered into by respondents Aurea, as vendees, and petitioners Orden, as vendors. Respondents Aurea then executed a Joint Affidavit declaring respondents Cobile as the true and real buyers of the subject properties. Respondent Cobile then executed a promissory note in which they promised to pay petitioners Orden the amount of P566,000.00 on or before October 31, 1994, and the remaining P950,000.00 to be paid as soon as the titles to the properties shall have been transferred to them.

In order to determine the real nature of the contract entered into by the parties, all three documents, not merely the Deed of Absolute Sale, should be considered. The Joint Affidavit of respondents Aurea and the promissory note signed by respondents Cobile veritably show that the latter are indeed the true purchasers of the subject properties. The contents of the promissory note must be taken into account inasmuch as the true buyer signed said document.

In the promissory note, respondents Cobile obligated themselves to do two things: (1) to pay petitioners Orden the amount ofP566,000.00 on or before October 31, 1994; and (2) to pay the remaining P950,000.00 as soon as the titles to the properties shall have been transferred to them. From the records of the case, it is without question that respondents Cobile failed to fulfill what they promised. Having failed to fulfill their first obligation, petitioners Orden no longer transferred the titles to the properties to their names. The non-payment, therefore, by respondents Cobile of the balance of one-half of the purchase price triggered all subsequent actions of the parties that eventually led to respondents Cobile filing the complaint for Enforcement of Contract and Damages with a Prayer for a Writ of Preliminary Attachment, Prohibitory Injunction and Restraining Order.

It is clear from the promissory note that the parties agreed to a conditional sale, the consummation of which is subject to the conditions contained therein full payment of the purchase price.

A contract to sell is akin to a conditional sale, in which the efficacy or obligatory force of the vendors obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.[34] One form of conditional sale is what is now popularly termed as a Contract to Sell, in which ownership or title is retained until the fulfillment of a positive suspensive condition, normally the payment of the purchase price in the manner agreed upon. [35]

The distinction between a contract of sale and a contract to sell is well-settled. In a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved to the vendor and is not to pass to the vendee until full payment of the purchase price. Otherwise stated, in a contract of sale, the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until full payment of the price. In the latter contract, payment of the price is a positive suspensive condition, failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.[36]

It is thus clear that in a contract to sell, ownership is retained by the seller and is not passed to the buyer until full payment of the price.

In the case at bar, we find that petitioners Orden and respondents Cobile entered into a contract to sell. The real character of the contract is not the title given, but the intention of the parties.[37] Although there is a document denominated as Deed of Absolute Sale, and there is no provision therein of reservation of ownership to the seller, we are persuaded that the true intent of the parties was to transfer the ownership of the properties only upon the buyers full payment of the purchase price. This is evident from the promissory note executed by respondents Cobile. It is only upon payment of the full purchase price that title to the properties shall be transferred to their names. Furthermore, circumstances show ownership over the properties was never transferred to respondents Cobile. Respondents neither had possession of nor title to the properties. In fact,

petitioners Orden, per their letter to respondents Cobile, even gave the latter the chance to pay the balance of the purchase price before they would sell the properties to other interested persons. From the foregoing, it is evident that the true agreement of the parties is for the petitioners Orden to retain ownership over the properties until respondents shall have fully paid the purchase price.

Respondents Cobile failed to pay the balance of the purchase price. Such payment is a positive suspensive condition, failure of which is not a breach, serious or otherwise, but an event that prevents the obligation of the seller to convey title from arising. [38] The non-fulfillment by respondents Cobile of their obligation to pay, which is a suspensive condition for the obligation of petitioners Orden to sell and deliver the title to the properties, rendered the contract to sell ineffective and without force and effect.[39] The parties stand as if the conditional obligation had never existed. [40] Inasmuch as the suspensive condition did not take place, petitioners Orden cannot be compelled to transfer ownership of the properties to respondents Cobile.

The trial court further ruled that petitioners Orden should have filed a case for rescission or sent a notarial act of rescission to respondents Cobile when they incurred a delay by failing to pay the balance of the purchase price. Having extra-judicially rescinded their contract with respondents Cobile, such act, according to the trial court, was subject to contest.

The trial court is mistaken. Rescission, whether judicially or by notarial act, is not required to be done by petitioners Orden. There can be no rescission of an obligation that is still non-existing, the suspensive condition not having happened.[41] In the case before us, there was no contract to rescind, judicially or by notarial act, because from the moment respondent Cobile failed to pay on time the correct amount of the balance of the purchase price, the contract between the parties was deemed ipso facto rescinded.[42] The reason for this is not that petitioners Orden have the power to rescind such contract, but because their obligation thereunder did not arise. The remedy of rescission under Article 1191[43] of the Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them. Such a remedy does not apply to contracts to sell.[44] Neither does the provision of Article 1592[45] apply to this case because what said article contemplates is a contract of sale.[46]

In the exercise of the sellers right to automatically cancel the contract to sell, at least a written notice must be sent to the defaulter informing him of the same. [47] The act of petitioners Orden in notifying respondents Cobile of their intention to sell the properties to other interested persons if

respondents failed to pay the balance of the purchase price was sufficient notice for the cancellation or resolution of the their contract to sell. Since respondents Cobile failed to fulfill their obligation even after said notice, petitioners were justified in canceling their contract (to sell) and selling to a buyer who was willing to pay the full purchase price. Hence, we sustain petitioners Ordens action.

We now go to the partial payments (P738,596.28) made by respondents Cobile. We decree that said amount be returned to respondents Cobile, there being no provision regarding forfeiture of payments made in any of the documents executed by the parties. We find such action to be just and equitable under the premises. If we rule otherwise, there will be unjust enrichment on the part of petitioners Orden at the expense of respondents Cobile. Interest thereon at the rate of 12% per annum shall also be paid from30 September 1997 until fully paid.

Lest we forget, the source of all the troubles was respondents Cobile failure to pay the balance of the purchase price. Consequently they are liable for damages. Under the circumstances obtaining in this case, we find it equitable and just to award petitioners Orden moral damages and attorneys fees in the amounts of P50,000.00 and P20,000.00, respectively. Their claim for litigation expenses is denied for failure to present proof in support thereof. Exemplary damages cannot also be awarded because it was not shown that respondents Cobile acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[48]

WHEREFORE, the decision of the Court of Appeals dated 20 April 2006 in CA-G.R. CV No. 75788 is herebyMODIFIED as follows:

(1) Petitioners-spouses Cornelio Joel I. Orden and Maria Nympha V. Orden are ordered to return to respondents-spouses Ernesto P. Cobile and Susana M. Cobile the amount of P738,596.28, representing the total amount advanced by the latter to the former, with interest at the rate of 12% per annum from 30 September 1997 until fully paid; and

(2) Respondents-spouses Ernesto P. Cobile and Susana M. Cobile are ordered to pay moral damages and attorneys fees in the amounts of P50,000.00 and P20,000.00, respectively, to petitioners-spouses Cornelio Joel I. Orden and Maria Nympha V. Orden.

SO ORDERED. THIRD DIVISION G.R. No. 154450 July 28, 2008

JOSEPH L. SY, NELSON GOLPEO and JOHN TAN, Petitioners, vs. NICOLAS CAPISTRANO, JR., substituted by JOSEFA B. CAPISTRANO, REMEDIOS TERESITA B. CAPISTRANO and MARIO GREGORIO B. CAPISTRANO; NENITA F. SCOTT; SPS. JUANITO JAMILAR and JOSEFINA JAMILAR; SPS. MARIANO GILTURA and ADELA GILTURA, Respondents. RESOLUTION NACHURA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court of the Decision of the Court of Appeals (CA) dated July 23, 2002 in CA-G.R. CV No. 53314. The case originated from an action for reconveyance of a large tract of land in Caloocan City before the Regional Trial Court (RTC), Branch 129, Caloocan City, entitled Nicolas Capistrano, Jr. v. Nenita F. Scott, Spouses Juanito and Josefina Jamilar, Joseph L. Sy, Nelson Golpeo and John Tan, and the Register of Deeds, Caloocan City. Said case was docketed as Civil Case No. C-15791. The antecedents are as follows: Sometime in 1980, Nenita Scott (Scott) approached respondent Nicolas Capistrano, Jr. (Capistrano) and offered her services to help him sell his 13,785 square meters of land covered by Transfer Certificate of Title (TCT) No. 76496 of the Register of Deeds of Caloocan City. Capistrano gave her a temporary authority to sell which expired without any sale transaction being made. To his shock, he discovered later that TCT No. 76496, which was in his name, had already been cancelled on June 24, 1992 and a new one, TCT No. 249959, issued over the same property on the same date to Josefina A. Jamilar. TCT No. 249959 likewise had already been cancelled and replaced by three (3) TCTs (Nos. 251524, 251525, and 251526), all in the names of the Jamilar spouses. TCT Nos. 251524 and 251526 had also been cancelled and replaced by TCT Nos. 262286 and 262287 issued to Nelson Golpeo and John B. Tan, respectively. Upon further inquiries, Capistrano also discovered the following: 1. The cancellation of his TCT No. 76496 and the issuance of TCT No. 249959 to Jamilar were based upon two (2) deeds of sale, i.e., a "Deed of Absolute Sale" purportedly executed by him in favor of Scott on March 9, 1980 and a "Deed of Absolute Sale" allegedly executed by Scott in favor of Jamilar on May 17, 1990. 2. The supposed 1980 sale from him to Scott was for P150,000.00; but despite the lapse of more than 10 years thereafter, the alleged 1990 sale from Scott to Jamilar was also for P150,000.00. 3. Both deeds were presented for registration simultaneously on June 24, 1992.

4. Although the deed in favor of Scott states that it was executed on March 9, 1980, the annotation thereof at the back of TCT No. 76496 states that the date of the instrument is March 9, 1990. 5. Even if there was no direct sale from Capistrano to Jamilar, the transfer of title was made directly to the latter. No TCT was issued in favor of Scott. 6. The issuance of TCT No. 249959 in favor of Jamilar was with the help of Joseph Sy, who provided for (sic) money for the payment of the capital gains tax, documentary stamps, transfer fees and other expenses of registration of the deeds of sale. 7. On July 8, 1992, an Affidavit of Adverse Claim was annotated at the back of Jamilars TCT No. 249959 at the instance of Sy, Golpeo, and Tan under a Contract to Sell in their favor by the Jamilar spouses. Said contract was executed sometime in May, 1992 when the title to the property was still in the name of Capistrano. 8. Around July 28, 1992, upon request of the Jamilar spouses, TCT No. 249959 was cancelled and three (3) new certificates of title (TCT Nos. 251524, 251525, and 251526) all in the name of Jamilar on the basis of an alleged subdivision plan (No. Psd-13-011917) without Capistranos knowledge and consent as registered owner. The notice of adverse claim of Sy, Golpeo, and Tan was carried over to the three new titles. 9. Around August 18, 1992, Sy, Golpeo, and Tan filed Civil Case No. C-15551 against the Jamilars and another couple, the Giltura spouses, for alleged violations of the Contract to Sell. They caused a notice of lis pendens to be annotated on the three (3) TCTs in Jamilars name. Said civil case, however, was not prosecuted. 10. On January 26, 1993, a Deed of Absolute Sale was executed by the Jamilars and the Gilturas, in favor of Golpeo and Tan. Thus, TCT Nos. 251524 and 251526 were cancelled and TCT Nos. 262286 and 262287 were issued to Golpeo and Tan, respectively. TCT No. 251525 remained in the name of Jamilar.1 Thus, the action for reconveyance filed by Capistrano, alleging that his and his wifes signatures on the purported deed of absolute sale in favor of Scott were forgeries; that the owners duplicate copy of TCT No. 76496 in his name had always been in his possession; and that Scott, the Jamilar spouses, Golpeo, and Tan were not innocent purchasers for value because they all participated in defrauding him of his property. Capistrano claimedP1,000,000.00 from all defendants as moral damages, P100,000.00 as exemplary damages; and P100,000.00 as attorneys fees. In their Answer with Counterclaim, the Jamilar spouses denied the allegations in the complaint and claimed that Capistrano had no cause of action against them, as there was no privity of transaction between them; the issuance of TCT No. 249959 in their names was proper, valid, and legal; and that Capistrano was in estoppel. By way of counterclaim, they sought P50,000.00 as actual damages, P50,000.00 as moral damages, P50,000.00 as exemplary damages, and P50,000.00 as attorneys fees. In their Answer, Sy, Golpeo, and Tan denied the allegations in the complaint and alleged that Capistrano had no cause of action against them; that at the time they bought the property from the Jamilars and the Gilturas as unregistered owners, there was nothing in the certificates of title that would indicate any vice in its ownership; that a buyer in good faith of a registered realty need not look beyond the Torrens title to search for any defect; and that they were innocent purchasers of the land for value. As counterclaim, they sought P500,000.00 as moral damages and P50,000.00 as attorneys fees. In her Answer with Cross-claim, Scott denied the allegations in the complaint and alleged that she had no knowledge or any actual participation in the execution of the deeds of sale in her favor and the Jamilars; that she only knew of the purported conveyances when she received a copy of the complaint; that her signatures appearing in both deeds of sale were forgeries; that when her authority to sell the land expired, she had no other dealings with it; that she never received any amount of

money as alleged consideration for the property; and that, even if she were the owner, she would never have sold it at so low a price. By way of Cross-claim against Sy, Golpeo, Tan, and the Jamilars, Scott alleged that when she was looking for a buyer of the property, the Jamilars helped her locate the property, and they became conversant with the details of the ownership and other particulars thereof; that only the other defendants were responsible for the seeming criminal conspiracy in defrauding Capistrano; that in the event she would be held liable to him, her other co-defendants should be ordered to reimburse her of whatever amount she may be made to pay Capistrano; that she was entitled to P50,000.00 as moral damages and P50,000.00 as attorneys fees from her co-defendants due to their fraudulent conduct. Later, Sy, Golpeo, and Tan filed a third-party complaint against the Giltura spouses who were the Jamilars alleged co-vendors of the subject property. Thereafter, trial on the merits ensued. Subsequently, the trial court decided in favor of Capistrano. In its Decision dated May 7, 1996, adopting the theory of Capistrano as presented in his memorandum, the trial court rendered judgment as follows: 1. Declaring plaintiff herein as the absolute owner of the parcel of land located at the Tala Estate, Bagumbong, Caloocan City and covered by TCT No. 76496; 2. Ordering defendant Register of Deeds to cause the cancellation of TCT No. 251525 registered in the name of defendant Josefina Jamilar; 3. Ordering defendant Register of Deeds to cause the cancellation of TCT Nos. 262286 and 262287 registered in the names of defendants Nelson Golpeo and John B. Tan; 4. Ordering defendant Register of Deeds to cause the issuance to plaintiff of three (3) new TCTs, in replacement of the aforesaid TCTs Nos. 251525, 262286 and 262287; 5. Ordering all the private defendants in the above-captioned case to pay plaintiff, jointly and severally, the reduced amount of P400,000.00 as moral damages; 6. Ordering all the private defendants in the above-captioned case to pay to plaintiff, jointly and severally, the reduced sum of P50,000.00 as exemplary damages; 7. Ordering all the private defendants in the above-captioned case to pay plaintiffs counsel, jointly and severally, the reduced amount of P70,000.00 as attorneys fees, plus costs of suit; 8. Ordering the dismissal of defendants Sy, Golpeo and Tans Cross -Claim against defendant spouses Jamilar; 9. Ordering the dismissal of defendants Sy, Golpeo and Tans Third -Party Complaint against defendant spouses Giltura; and 10. Ordering the dismissal of the Counterclaims against plaintiff. SO ORDERED.2 On appeal, the CA, in its Decision dated July 23, 2002, affirmed the Decision of the trial court with the modification that the Jamilar spouses were ordered to return to Sy, Golpeo, and Tan the amount of P1,679,260.00 representing their full payment for the property, with legal interest thereon from the date of the filing of the complaint until full payment.

Hence, this petition, with petitioners insisting that they were innocent purchasers for value of the parcels of land covered by TCT Nos. 262286 and 262287. They claim that when they negotiated with the Jamilars for the purchase of the property, although the title thereto was still in the name of Capistrano, the documents shown to them the court order directing the issuance of a new owners duplicate copy of TCT No. 76496, the new owners duplicate copy thereof, the tax declaration, the deed of absolute sale between Capistrano and Scott, the deed of absolute sale between Scott and Jamilar, and the real estate tax receipts there was nothing that aroused their suspicion so as to compel them to look beyond the Torrens title. They asseverated that there was nothing wrong in financing the cancellation of Capistranos title and the issuance of titles to the Jamilars because the money they spent therefor was considered part of the purchase price they paid for their property. In their Comment, the heirs of Capistrano, who were substituted after the latters death, reiterated the factual circumstances which should have alerted the petitioners to conduct further investigation, thus (a) Why the "Deed of Absolute Sale" supposedly executed by Capistrano had remained unregistered for so long, i.e., from March 9, 1980 up to June 1992, when they were negotiating with the Jamilars and the Gilturas for their purchase of the subject property; (b) Whether or not the owners copy of Capistranos certificate of title had really been lost; (c) Whether Capistrano really sold his property to Scott and whether Scott actually sold it to the Jamilars, which matters were easily ascertainable as both Capistrano and Scott were still alive and their names appear on so many documents; (d) Why the consideration for both the March 9, 1980 sale and the May 17, 1990 sale was the same (P150,000.00), despite the lapse of more than 10 years; (e) Why the price was so low (P10.88 per square meter, both in 1980 and in 1990) when the petitioners were willing to pay and actually paid P150.00 per square meter in May 1992; and (f) Whether or not both deeds of sale were authentic.3 In addition, the heirs of Capistrano pointed out that petitioners entered into negotiations over the property, not with the registered owner thereof, but only with those claiming ownership thereof based on questionable deeds of sale. The petition should be denied. The arguments proffered by petitioners all pertain to factual issues which have already been passed upon by both the trial court and the CA. Findings of facts of the CA are final and conclusive and cannot be reviewed on appeal, as long as they are based on substantial evidence. While, admittedly, there are exceptions to this rule such as: (a) when the conclusion is a finding grounded entirely on speculations, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) when there is grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of facts are conflicting; (f) when the CA, in making its findings, went beyond the issues of the case and the same were contrary to the admissions of both the appellant and appellee. 4 Not one of these exceptional circumstances is present in this case. First. The CA was correct in upholding the finding of the trial court that the purported sale of the property from Capistrano to Scott was a forgery, and resort to a handwriting expert was not even necessary as the specimen signature submitted by Capistrano during trial showed marked variance from that found in the deed of absolute sale. The technical procedure utilized by handwriting experts, while usually helpful in the examination of forged documents, is not mandatory or indispensable to the examination or comparison of handwritings.5

By the same token, we agree with the CA when it held that the deed of sale between Scott and the Jamilars was also forged, as it noted the stark differences between the signatures of Scott in the deed of sale and those in her handwritten letters to Capistrano. Second. In finding that the Jamilar spouses were not innocent purchasers for value of the subject property, the CA properly held that they should have known that the signatures of Scott and Capistrano were forgeries due to the patent variance of the signatures in the two deeds of sale shown to them by Scott, when Scott presented to them the deeds of sale, one allegedly executed by Capistrano in her favor covering his property; and the other allegedly executed by Scott in favor of Capistrano over her property, the P40,000.00 consideration for which ostensibly constituted her initial and partial payment for the sale of Capistranos property to her. The CA also correctly found the Gilturas not innocent purchasers for value, because they failed to check the veracity of the allegation of Jamilar that he acquired the property from Capistrano. In ruling that Sy was not an innocent purchaser for value, we share the observation of the appellate court that Sy knew that the title to the property was still in the name of Capistrano, but failed to verify the claim of the Jamilar spouses regarding the transfer of ownership of the property by asking for the copies of the deeds of absolute sale between Capistrano and Scott, and between Scott and Jamilar. Sy should have likewise inquired why the Gilturas had to affix their conformity to the contract to sell by asking for a copy of the deed of sale between the Jamilars and the Gilturas. Had Sy done so, he would have learned that the Jamilars claimed that they purchased the property from Capistrano and not from Scott. We also note, as found by both the trial court and the CA, Tans testimony that he, Golpeo and Sy are brothers, he and Golpeo having been adopted by Sys father. Tan also testified that he and Golpeo were privy to the transaction between Sy and the Jamilars and the Gilturas, as shown by their collective act of filing a complaint for specific performance to enforce the contract to sell. 1avvphi1 Also noteworthy and something that would have ordinarily aroused suspicion is the fact that even before the supposed execution of the deed of sale by Scott in favor of the Jamilars, the latter had already caused the subdivision of the property into nine (9) lots, with the title to the property still in the name of Capistrano. Notable likewise is that the owners duplicate copy of TCT No. 76496 in the name of Capistrano had always been in his possession since he gave Scott only a photocopy thereof pursuant to the latters authority to look for a buyer of the property. On the other hand, the Jamilars were able to acquire a new owners duplicate copy thereof by filing an affidavit of loss and a petition for the issuance of another owners duplicate copy of TCT No. 76496. The minimum requirement of a good faith buyer is that the vendee of the real property should at least see the owners duplicate copy of the title. 6 A person who deals with registered land through someone who is not the registered owner is expected to look beyond the certificate of title and examine all the factual circumstances thereof in order to determine if the vendor has the capacity to transfer any interest in the land. He has the duty to ascertain the identity of the person with whom he is dealing and the latters legal authority to convey. 7 Finally, there is the questionable cancellation of the certificate of title of Capistrano which resulted in the immediate issuance of a certificate of title in favor of the Jamilar spouses despite the claim that Capistrano sold his property to Scott and it was Scott who sold the same to the Jamilars. In light of the foregoing disquisitions, based on the evidence on record, we find no error in the findings of the CA as to warrant a discretionary judicial review by this Court. WHEREFORE, the petition is DENIED DUE COURSE for failure to establish reversible error on the part of the Court of Appeals. Costs against petitioners. SO ORDERED. THIRD DIVISION

G.R. No. 159578

February 18, 2009

ROGELIA DACLAG and ADELINO DACLAG (deceased), substituted by RODEL M. DACLAG, and ADRIAN M. DACLAG, Petitioners, vs. ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA HABER and BENITA DEL ROSARIO, Respondents. RESOLUTION AUSTRIA-MARTINEZ, J.: Before us is petitioners' Motion for Reconsideration of our Decision dated July 28, 2008 where we affirmed the Decision dated October 17, 2001 and the Resolution dated August 7, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 48498. Records show that while the land was registered in the name of petitioner Rogelia in 1984, respondents complaint for reconveyance was filed in 1991, which was within the 10-year prescriptive period. We ruled that since petitioners bought the property when it was still an unregistered land, the defense of having purchased the property in good faith is unavailing. We affirmed the Regional Trial Court (RTC) in finding that petitioners should pay respondents their corresponding share in the produce of the subject land from the time they were deprived thereof until the possession is restored to them. In their Motion for Reconsideration, petitioners contend that the 10-year period for reconveyance is applicable if the action is based on an implied or a constructive trust; that since respondents' action for reconveyance was based on fraud, the action must be filed within four years from the discovery of the fraud, citing Gerona v. De Guzman,1 which was reiterated in Balbin v. Medalla.2 We do not agree. In Caro v. Court of Appeals,3 we have explicitly held that "the prescriptive period for the reconveyance of fraudulently registered real property is 10 years reckoned from the date of the issuance of the certificate of title x x x."4 However, notwithstanding petitioners' unmeritorious argument, the Court deems it necessary to make certain clarifications. We have earlier ruled that respondents' action for reconveyance had not prescribed, since it was filed within the 10-year prescriptive period. However, a review of the factual antecedents of the case shows that respondents' action for reconveyance was not even subject to prescription. The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was not the owner of the land she sold to petitioners, and the one-half northern portion of such land was owned by respondents. Being an absolute nullity, the deed is subject to attack anytime, in accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a void contract does not prescribe. Likewise, we have consistently ruled that when there is a showing of such illegality, the property registered is deemed to be simply held in trust for the real owner by the person in whose name it is registered, and the former then has the right to sue for the reconveyance of the property.5 An action for reconveyance based on a void contract is imprescriptible. 6 As long as the land wrongfully registered under the Torrens system is still in the name of the person who caused such registration, an action in personam will lie to compel him to reconvey the property to the real owner.7 In this case, title to the property is in the name of petitioner Rogelia; thus, the trial court correctly ordered the reconveyance of the subject land to respondents. Petitioners next contend that they are possessors in good faith, thus, the award of damages should not have been imposed. They further contend that under Article 544, a possessor in good faith is entitled

to the fruits received before the possession is legally interrupted; thus, if indeed petitioners are jointly and severally liable to respondents for the produce of the subject land, the liability should be reckoned only for 1991 and not 1984. We find partial merit in this argument. Article 528 of the Civil Code provides that possession acquired in good faith does not lose this character, except in a case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith.8 Such interruption takes place upon service of summons.9lawphil.net Article 544 of the same Code provides that a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted. Records show that petitioners received a summons together with respondents' complaint on August 5, 1991;10 thus, petitioners' good faith ceased on the day they received the summons. Consequently, petitioners should pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984. Finally, petitioner would like this Court to look into the finding of the RTC that "since Maxima died in October 1993, whatever charges and claims petitioners may recover from her expired with her"; and that the proper person to be held liable for damages to be awarded to respondents should be Maxima Divison or her estate, since she misrepresented herself to be the true owner of the subject land. We are not persuaded. Notably, petitioners never raised this issue in their appellants' brief or in their motion for reconsideration filed before the CA. In fact, they never raised this matter before us when they filed their petition for review. Thus, petitioners cannot raise the same in this motion for reconsideration without offending the basic rules of fair play, justice and due process, specially since Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision. WHEREFORE, petitioners Motion for Reconsideration is PARTLY GRANTED. The Decision of the Court of Appeals dated July 28, 2008 is MODIFIED only with respect to prescription as discussed in the text of herein Resolution, and the dispositive portion of the Decision is MODIFIED to the effect that petitioners are ordered to pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984. SO ORDERED. THIRD DIVISION G.R. No. 158144 July 31, 2008

ST. MARY'S FARM, INC., Petitioner, vs. PRIMA REAL PROPERTIES, INC., RODOLFO A. AGANA, JR., and THE REGISTER OF DEEDS OF LAS PIAS, METRO MANILA, Respondents. DECISION NACHURA, J.:

This is a petition for review of the decision1 of the Court of Appeals (CA) affirming in toto the decision2 of the Regional Trial Court (RTC), Branch 254, Las Pias City, which dismissed for lack of merit the complaint for annulment of sale. The factual antecedents of the case, as narrated by the RTC, are as follows: [I]t appears that herein plaintiff was the registered owner of an originally twenty-five thousand five hundred ninety-eight (25,598) square meters of land situated at Bo. Pugad Lawin, Las Pias City under Transfer Certificate of Title No. S-1648 (11521-A) of the Registry of Deeds of Las Pias City. In compliance with a final court decision in Civil Case No. 87-42915 of the Regional Trial Court, Branch XL of Manila, plaintiff passed and approved on 27 June 1988 a board resolution authorizing defendant Rodolfo A. Agana to cede to T.S. Cruz Subdivision four thousand (4,000) square meters of the land covered by the aforecited Transfer Certificate of Title No. S-1648 (11521-A). Allegedly, after the consummation of this transaction, defendant Rodolfo A. Agana did not return to plaintiff the borrowed aforementioned title and[,] instead, allegedly forged a board resolution of the plaintiff corporation supposedly to the effect that plaintiff had authorized him to sell the remaining twenty-one thousand five hundred ninety-eight (21,598) square meters of the subject property. A series of transactions thereafter took place between defendant Rodolfo A. Agana and defendant Prima Real Properties, Inc. (Prima) which transactions culminated to the signing on 5 September 1988 of an absolute deed of sale transferring the ownership of the subject land from herein plaintiff to herein defendant Prima. After the consummation of the sale, defendant Prima effected the cancellation of Transfer Certificate of Title No. S-1648 (11521-A) in the name of plaintiff and in lieu thereof another Transfer Certificate of Title No. T-6175 in the name of defendant Prima was issued by defendant Alejandro R. Villanueva in his capacity as Register of Deeds of Las Pias City. Subsequent developments had it that on 6 October 1988, defendant Prima duly purchased from T.S. Cruz Subdivision the aforementioned four thousand (4,000) square meters portion of the subject property which development thereafter led to the cancellation of the aforementioned Transfer Certificate of Title No. T-6175 and the issuance by the Registry of Deeds of Las Pias City of two separate titles both in the name of defendant Prima, Transfer Certificate of Title No. 7863 covering the aforementioned four thousand square meters and Transfer Certificate of Title No. T-7864 covering the herein twenty-one thousand five hundred ninety-eighty (21,598) square meter subject property. In its complaint which was amended twice, the second amendment even needed the intervention of the Court of Appeals in a petition for certiorari and mandamus after the same was denied admission by Hon. N.C. Perello, Presiding Judge of the then Assisting Court of Makati, [Muntinlupa], Metro Manila, herein plaintiff alleged inter alia that the authorization certified to by Antonio V. Agcaoili, Corporate Secretary of the plaintiff and used by defendant Rodolfo A. Agana in selling the subject property to defendant Prima was a forgery as the board of directors of the plaintiff never enacted a resolution authorizing herein defendant Rodolfo A. Agana to sell herein subject property to defendant Prima or to anyone else for that matter. Plaintiff further claimed that defendant Prima in collusion with defendant Rodolfo A. Agana acted maliciously and in bad faith in relying on the forged authority without taking any step to verify the same with the plaintiff as owner of the subject property. According to plaintiff, the deed of absolute sale entered into between defendants Prima and Rodolfo A. Agana being the result of fraudulent transaction was void thereby, among others, causing damage to the plaintiff. For canceling Transfer Certificate of Title No. S-1648 (11521-A) knowing fully well that the authorization to sell [to] defendant Rodolfo A. Agana was a forgery, defendant Alejandro R. Villanueva was likewise made liable for damages. On the other hand, defendant Prima separately with defendant Rodolfo A. Agana in their respective answers, sought and insisted constantly on the dismissal of the complaint based solidly on the ground that Venice B. Agana and Ma. Natividad A. Villacorta who filed in behalf of the plaintiff the original complaint and the amended and the second amended complaints as well, respectively, lacked legal capacity to sue because they were not authorized therefor by the board of directors of the plaintiff. Furthermore, defendant Prima argued that it acted in good faith when it relied solely on the face of the purported authorization of defendant Rodolfo A. Agana and entered into the deed of absolute sale and paid in full the purchase price of PhP2,567,760.00 of the subject property. This fact, according to defendant Prima, made it a buyer in good faith and for value. To cap its argument, defendant Prima in adopting the defense of defendant Rodolfo A. Agana asserted that even assuming that the

authorization of defendant Rodolfo A. Agana was forged when plaintiff, through its President, Marcelino A. Agana, Jr. (brother of Rodolfo) accepted/received part of the aforestated purchase price knowing fully well the same to be the proceeds of the sale of the subject property, plaintiff has been precluded as it is now estopped from asking for rescission of the deed of absolute sale and reconveyance of the subject property.3 After due hearing, the trial court rendered judgment on April 7, 2000, dismissing the complaint for annulment of sale with damages filed by the petitioner.4 The trial court found that the respondent was a buyer in good faith and for value, relying on the authority of Rodolfo A. Agana to sell the property in behalf of the petitioner company, as evidenced by a notarized board resolution. As such, the trial court ruled that the petitioner was bound by the acts of its agent and must necessarily bear whatever damage may have been caused by this alleged breach of trust. On appeal, the CA affirmed in toto. Thus, petitioner filed the instant petition raising the following errors: I The Court of Appeals gravely erred in ruling that Respondent Agana was duly authorized by Petitioner under the Certification dated June 30, 1988 (Exhibits "D" and "3") to enter into the sale of the subject property with Respondent Prima Real. (A) There is no proof of the Certifications authenticity and due execution; (B) There is clear and convincing evidence that the Certification was forged. (C) Even assuming that the Certification was authentic and duly executed, it was not sufficient in form and by its terms to authorize Respondent Agana to sell the subject property or receive payment on behalf of Petitioner. II The Court of Appeals gravely erred in not holding that Respondent Prima Real was the author of its own damage by not making reasonable and prudent inquiries into the fact, nature and extent of Respondent Aganas authority, and by causing the issuance of checks in the name of Respondent Agana. The petition must fail. A cursory reading of the issues reveals that these are factual matters which are not within the province of the Court to look into, save only in exceptional circumstances which are not present in the case at bar. Well settled is the rule that in petitions for review on certiorari under Rule 45, only questions of law must be raised.5 As a matter of procedure, the Court defers and accords finality to the factual findings of trial courts, especially when, as in the case at bar, such findings are affirmed by the appellate court. This factual determination, as a matter of long and sound appellate practice, deserves great weight and shall not be disturbed on appeal. It is not the function of the Court to analyze and weigh all over again the evidence or premises supportive of the factual holding of the lower courts.6 Petitioner insists that "the sale of the realty entered into between respondent Agana, purportedly on behalf of the petitioner, and respondent Prima is null and void for lack of authority on the part of respondent Agana to sell the property."7 The board resolution allegedly granting Rodolfo Agana the authority to sell in behalf of the company, as certified by Corporate Secretary Atty. Antonio V. Agcaoili, is alleged to be a forgery. Ma. Natividad A. Villacorta, who served as assistant to Marcelino A. Agana, Jr., the President of St. Marys Farm, Inc., in 1988 testified that the board of directors did not hold any meeting on June 27, 1988; that, in fact, the signature of Atty. Antonio Agcaoili was not

genuine; and that said document was merely presented to the notary public for notarization without Atty. Agcaoili appearing before him. Despite this insistence, we find no cogent reason to deviate from the findings and conclusions of the respondent court affirming those of the trial court on this matter. Anent the forged signature of Atty. Agcaoili, the CA did not err in not giving evidentiary weight to the findings of the Document Examiner of the National Bureau of Investigation (NBI) on the ground that the findings were not really conclusive. In the first place, the procedure for the investigation of questionable handwriting was not properly followed. There is nothing on record that will conclusively show that the alleged standard sample signatures of Atty. Antonio Agcaoili, which were submitted to the NBI and made the basis of comparison, were the genuine signatures of the same Atty. Antonio Agcaoili. Moreover, the examiner testified that it was possible to have variations in the standard signatures of Atty. Agcaoili, caused by certain factors such as passage of time, pressure and physical condition of the writer which may have decisive influences on his handwritings characteristics.8 Thus, in the instant case, it cannot readily be concluded that a particular signature appearing in those documents is not genuine for lack of proper identification and a more accurate comparison of signatures. Mere allegation of forgery is not evidence and the burden of proof lies in the party making the allegation.9 Unfortunately, in the case at bar, the petitioner failed to discharge this burden. Further challenging the due execution of the board resolution be aring the Secretarys Certification, petitioner wants us to consider the same as inadmissible on the ground that Atty. Agcaoili did not appear before a notary public for notarization. We do not agree, because in the past, we have already held that the non-appearance of the party before the notary public who notarized the deed does not necessarily nullify or render the parties transaction void ab initio.10 However, the non-appearance of the party exposes the notary public to administrative liability which warrants sanction by the Court. This fact notwithstanding, we agree with the respondent court that it is not enough to overcome the presumption of the truthfulness of the statements contained in the board resolution. To overcome the presumption, there must be sufficient, clear and convincing evidence as to exclude all reasonable controversy as to the falsity of the certificate.11 In the absence of such proof, the document must be upheld. Notarization converts a private document into a public document, making it admissible in court without further proof of its authenticity.121avvphi1 On the basis of this notarized board resolution, respondent had every reason to rely on Rodolfo Aganas authority to sell the subject property. Undeniably then, the respondent is an innocent purchaser for value in good faith. Our pronouncement in Bautista v. Silva 13 is instructive: A buyer for value in good faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and pays full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. He buys the property with the well-founded belief that the person from whom he receives the thing had title to the property and capacity to convey it. To prove good faith, a buyer of registered and titled land need only show that he relied on the face of the title to the property. He need not prove that he made further inquiry for he is not obliged to explore beyond the four corners of the title. Such degree of proof of good faith, however, is sufficient only when the following conditions concur: first, the seller is the registered owner of the land; second, the latter is in possession thereof; and third, at the time of the sale, the buyer was not aware of any claim or interest of some other person in the property, or of any defect or restriction in the title of the seller or in his capacity to convey title to the property.14 All the conditions enumerated in the aforementioned case are present in the case at bar, enough for us to consider Prima as a buyer in good faith. Prima Real Properties, Inc. is a company engaged in the buying and selling of real properties. As borne out by the records, respondent exerted efforts to verify the true background of the subject property. Rodolfo Agana presented to respondent the (1) notarized board resolution which stated that at a special meeting held on June 27, 1988, the board of directors authorized Mr. Rodolfo A. Agana, Treasurer, to sell the subject property covered by Transfer Certificate of Title (TCT) No. S-1648;15 (2) a separate Certification by the petitioners president, Marcelino A. Agana, Jr., authorizing its Treasurer, Rodolfo Agana, to sell said property; 16 and, (3) TCT No. T-1648 of the subject property. Convinced that Rodolfo Agana had the authority to sell on behalf of the company after being presented all these documents, the sale between the parties was thereby

consummated. A deed of sale was executed on September 5, 198817 and the full consideration ofP2,567,760.00 for the subject property was paid.18 It is of no moment that the checks were made payable to Rodolfo Agana and not to the company which, according to the petitioner, should have alerted the respondent to inquire further into the extent of Aganas authority to transfer the subject property. This was no longer necessary considering that respondent had every reason to rely on Rodolfo Aganas authority to sell, evidenced by the notarized Certification. As explained in the Bautista case: When the document under scrutiny is a special power of attorney that is duly notarized, we know it to be a public document where the notarial acknowledgment is prima facie evidence of the fact of its due execution. A buyer presented with such a document would have no choice between knowing and finding out whether a forger lurks beneath the signature on it. The notarial acknowledgment has removed that choice from him and replaced it with a presumption sanctioned by law that the affiant appeared before the notary public and acknowledged that he executed the document, understood its import and signed it. In reality, he is deprived of such choice not because he is incapable of knowing and finding out but because, under our notarial system, he has been given the luxury of merely relying on the presumption of regularity of a duly notarized SPA. And he cannot be faulted for that because it is precisely that fiction of regularity which holds together commercial transactions across borders and time. In sum, all things being equal, a person dealing with a seller who has [in his] possession title to the property but whose capacity to sell is restricted, qualifies as a buyer in good faith if he proves that he inquired into the title of the seller as well as into the latters capacity to sell; and that in his inquiry, he relied on the notarial acknowledgment found in the sellers duly notarized special power of attorney. He need not prove anything more for it is already the function of the notarial acknowledgment to establish the appearance of the parties to the document, its due execution and authenticity. 19 Aside from the pertinent documents presented, respondent also relied on the confirmation and certification of the Register of Deeds of Las Pias City and Mr. Timoteo S. Cruz, owner of the land likewise sold by Rodolfo Agana for the petitioner, with similar authorization by the petitioner and signed by the corporate secretary Atty. Agcaoili. Agana acted as petitioners authorized agent and had full authority to bind the company in that transaction with Cruz. Contrary to the allegations of the petitioner that respondent Aganas authority was only limited to negotiate and not to sell the subject property, suffice it to state that the board resolution further averred that he was "authorized and empowered to sign any and all documents, instruments, papers or writings which may be required and necessary for this purpose to bind the Corporation in this undertaking."20 The certification of the President, Marcelino Agana, Jr. also attests to this fact. With this notarized board resolution, respondent Agana, undeniably, had the authority to cede the subject property, carrying with it all the concomitant powers necessary to implement said transaction. On the strength of the deed of absolute sale executed pursuant to such authority, title over the land in petitioners name was cancelled and a new certificate of title TCT No. T-617521 was already issued in the name of Prima Real Properties, Inc. Thus, it is too late in the day to have the sale voided, notwithstanding the retraction made by Rodolfo Agana in his Comment22 on the Petition filed with this Court. Therein, he admits that he acted solely and without proper authority of the corporation. Agana states that he wishes to end once and for all the rift that had occurred in the corporation; and in order to buy peace for all the parties and for himself, he is willing to return the money paid by Prima so that ownership of the property can be returned to the petitioner. In light of this admission that Agana had no authority, petitioner posits that there is justifiable reason for the Court to re-visit or evaluate the facts of the case anew. Unfortunately, the Court cannot give weight to this magnanimous gesture of Agana; neither will the Court lend credence to Aganas assertion that he acted solely and without proper authority from the corporation, inasmuch as it was raised for the very first time in this Court and only after 8 years from the inception of the case. In all the pleadings filed by respondent Agana in court, he was steadfast in his position that he had authority to sell the subject property. A judicial admission conclusively binds the party making it. He cannot thereafter take a position contradictory to, or inconsistent with his

pleadings. Acts or facts admitted do not require proof and cannot be contradicted unless it is shown that the admission was made through palpable mistake or that no such admission was made. 23 In the instant case, there is no proof of these exceptional circumstances. Clearly, the retraction was merely an afterthought on the part of respondent Agana with the intention to end the rift in the family corporation. Considering all the foregoing, it cannot be gainsaid that respondent Prima is an innocent purchaser in good faith and for value. WHEREFORE, the petition is DENIED. The decision of the Court of Appeals is AFFIRMED. SO ORDERED. SECOND DIVISION G.R. No. 168263 July 21, 2008

SPS. EDGARDO AND NATIVIDAD FIDEL, Petitioners, vs. HONORABLE COURT OF APPEALS, HEIRS OF THE LATE PRIMITIVO ESPINELI, namely, JOSEFINA, PATRICIO and LEONARDO, all surnamed ESPINELI, Respondents. DECISION QUISUMBING, J.: This petition for review seeks to reverse the Decision 1 dated November 22, 2004 and the Resolution2 dated May 27, 2005 of the Court of Appeals in CA-G.R. CV No. 71996. The appellate court had affirmed with modification the Decision3 dated February 20, 2001 of the Regional Trial Court (RTC), Branch 15, Naic, Cavite in Civil Case No. NC-652-95, annulling the sale in favor of the petitioners Edgardo and Natividad Fidel of a 150-square meter parcel of unregistered land located at San Miguel Street, Indang, Cavite and owned by the late Vicente Espineli. The facts, culled from the records, are as follows: On February 21, 1995, respondents filed a Complaint4 for Annulment of Sale, Tax Declaration, Reconveyance with Damages against the petitioners Edgardo and Natividad Fidel and Guadalupe Espineli-Cruz before the RTC, Branch 15, Naic, Cavite. In their complaint, respondents alleged that they are compulsory heirs of Primitivo Espineli, the only child of Vicente and his first wife, Juliana Asas. Respondents further alleged that they discovered that the abovementioned parcel of land owned by the late Vicente was sold on October 7, 1994 to the petitioners despite the fact that Vicente died intestate on June 4, 1941. They argue that the sale is void and simulated because Vicentes signature appearing on the deed of sale is a forgery. In her Answer,5 Guadalupe, the only surviving child of Vicente and his second wife, Pacencia Romea, denied any knowledge of the deed of sale allegedly signed by Vicente. She, however, admitted selling the property but by virtue of another deed of sale signed by her as heir of Vicente and in representation of her nephews and nieces who are children of her deceased siblings, all children of Vicente and Pacencia. She further denied knowledge of Vicentes alleged first marriage with Juliana Asas. She argues that the heirs of Primitivo must first establish their filiation from Vicente, prior to instituting the complaint for annulment of sale. Guadalupe further stresses that the petitioners Fidel have been able to register the sale of the property and to obtain Tax Declaration No. 16304 6 in their name. On February 20, 2001, the RTC ruled in respondents favor. The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows: 1. Ordering the annulment of the sale in favor of the defendants spouses Edgardo and Natividad Fidel of the property in litigation; 2. Ordering the Regis[ter] of Deeds and/or the Provincial Assessor of Cavite to cancel the registration and/or Tax Declaration No. 16304, Series of 1995; 3. Ordering the defendants spouses Edgardo and Natividad Fidel to cause the reconveyance of the property to Vicente Espineli and/or his heirs for disposition subject to the laws of intestacy; 4. Ordering the defendants jointly and severally, to pay the plaintiffs the amount of P50,000.00 as moral damages and P30,000.00 as exemplary damages; 5. Ordering the defendants jointly and severally, to reimburse the plaintiffs their expenses for litigation in the amount of P50,000.00 as attorneys fees; 6. And to pay costs of suit. SO ORDERED.7 On November 22, 2004, the Court of Appeals affirmed with modification the RTC Decision as follows: Accordingly, the subject property should be reconveyed to the Estate of the late Vicente Espineli but the proper proceedings should be instituted to determine the latters heirs, and if appropriate, to partition the subject property. WHEREFORE, premises considered, the assailed DECISION is hereby AFFIRMED subject to the foregoing MODIFICATION. No costs. SO ORDERED.8 Thus, the instant petition by the spouses Edgardo and Natividad Fidel, alleging that the appellate court: I. ERRED IN UPHOLDING THE DECISION OF THE TRIAL COURT, CONSIDERING THAT PRIVATE RESPONDENTS HAVE NO LEGAL PERSONALITY TO INSTITUTE THE ACTION. PRIVATE RESPONDENTS MUST FIRST ESTABLISH THE SAME IN PROPER ACTION TO PROVE THEIR FILIATION. LACK OF SUCH DETERMINATION ON THE ISSUE OF FILIATION ON SEPARATE AND INDEPENDENT ACTION, PRIVATE RESPONDENTS HAVE NO LEGAL PERSONALITY TO INSTITUTE THE ACTION FOR ANNULMENT OF SALE, CONVEYANCE AND DAMAGES. II. LIKEWISE COMMITTED ERROR IN RECOGNIZING AND/OR ADMITTING THE BAPTISMAL CERTIFICATE OF PRIMITIVO ESPINELI AS PROOF OF FILIATION THAT [VICENTE ESPINELI IS HIS FATHER]. III.

 ERRED IN AWARDING DAMAGES AND ATTORNEYS FEES, CONSIDERING THAT PRIVATE RESPONDENTS MUST FIRST INSTITUTE A SEPARATE ACTION TO PROVE THEIR FILIATION.9 Respondents for their part raise the following issues: I. WHETHER OR NOT PRIVATE RESPONDENTS ARE SUFFICIENTLY CLOTHED WITH LEGAL PERSONALITY TO FILE THE PRESENT ACTION FOR ANNULMENT OF SALE, RECONVEYANCE WITH DAMAGES WITHOUT PREJUDICE TO INSTITUTING A SEPARATE ACTION TO ESTABLISH FILIATION AND HEIRSHIP IN A SEPARATE [PROCEEDING]. II. ASSUMING PETITIONERS HAVE PERSONALITY TO RAISE THE ISSUE OF FILIATION, WHETHER OR NOT THE BAPTISMAL CERTIFICATE OF PRIMITIVO ESPINELI IS VALID AND COMPETENT EVIDENCE OF HIS FILIATION AS CHILD OF VICENTE ESPINELI. III. WHETHER OR NOT THE SALE OF SUBJECT PROPERTY BY GUADALUPE TO PETITIONERS FIDEL IS VALID UNDER THE PRINCIPLE OF BUYER IN GOOD FAITH. IV. WHETHER OR NOT THE AWARD OF DAMAGES AND ATTORNEYS FEES TO PRIVATE RESPONDENTS HAS NO BASIS SINCE A [SEPARATE] ACTION TO PROVE THEIR FILIATION SHOULD FIRST BE FILED.10 Briefly stated, the issues for our resolution are: (1) Do respondents have the legal personality to file the complaint for annulment of title? (2) Is the baptismal certificate of Primitivo valid and competent evidence to prove his filiation by Vicente? (3) Are petitioners buyers in good faith? and (4) Is the award of attorneys fees and damages to respondents proper? At the outset, we entertain no doubt that the first deed of sale, allegedly signed by Vicente, is void because his signature therein is a patent forgery. Records show he died in 1941, but the deed of sale was allegedly signed on October 7, 1994. Article 1409 of the Civil Code of the Philippines states: Art. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy; (2) Those which are absolutely simulated or fictitious ; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. (Emphasis supplied.) As for the deed of sale signed by Guadalupe as heir of Vicente and in representation of her nephews and nieces, petitioners insist that the sale is valid because respondents have no legal personality to file the complaint, the latter not having established their filiation by Vicente. They argue that respondents first need to establish their filiation by Vicente prior to instituting a complaint in a separate action, and not in the present action. On the other hand, respondents contend that their filiation was established by the baptismal certificate of their father, Primitivo, showing that Primitivo is the son of Vicente. On this point we rule in favor of respondents. While respondents principal action was for the annulment of the sale and not an action to impugn ones legitimacy and that ones legitimacy can be questioned only in a direct action seasonably filed by the proper party, it is necessary to pass upon the relationship of respondents to the deceased Vicente for the purpose of determining what legal rights respondents have in the property. In fact, the issue of whether or not respondents are heirs of Vicente was squarely raised by petitioners in their Pre-Trial Brief11 filed on April 26, 1995, before the trial court, hence they are now estopped from assailing the trial courts ruling on respondents status. In the similar case ofFernandez v. Fernandez,12 the Supreme Court held: It must be noted that the respondents principal ac tion was for the declaration of absolute nullity of two documents, namely: deed of extra-judicial partition and deed of absolute sale, and not an action to impugn ones legitimacy. The respondent court ruled on the filiation of petitioner Rodolfo Fernandez in order to determine Rodolfos right to the deed of extra -judicial partition as the alleged legitimate heir of the spouses Fernandez. While we are aware that ones legitimacy can be questioned only in a direct action seasonably filed by the proper party, this doctrine has no application in the instant case considering that respondents claim was that petitioner Rodolfo was not born to the deceased spouses Jose and Generosa Fernandez ; we do not have a situation wherein they (respondents) deny that Rodolfo was a child of their uncles wife. . . . xxxx Thus, it is necessary to pass upon the relationship of petitioner Rodolfo Fernandez to the deceased spouses Fernandez for the purpose of determining what legal right Rodolfo has in the property subject of the extra-judicial partition. In fact, the issue of whether or not Rodolfo Fernandez was the son of the deceased spouses Jose Fernandez and Generosa de Venecia was squarely raised by petitioners in their pre-trial brief filed before the trial court, hence they are now estopped from assailing the trial courts ruling on Rodolfos status. 13 (Emphasis supplied.) Petitioners nonetheless contend that Primitivos baptismal certificate is neither a public document nor a conclusive proof of the legitimate filiation by Vicente of Primitivo, the respondents father. We find petitioners contention lacking in merit, hence we reject it. Records show that Primitivo was born in 1895. At that time, the only records of birth are those which appear in parochial records. This Court has held that as to the nature and character of the entries contained in the parochial books and the certificates thereof issued by a parish priest, the same have not lost their character of being public documents for the purpose of proving acts referred to therein, inasmuch as from the time of the change of sovereignty in the Philippines to the present day, no law has been enacted abolishing the official and public character of parochial books and entries made therein. Parish priests continue to be the legal custodians of the parochial books kept during the former sovereignty, and as such they may issue certified copies of the entries contained therein in the same manner as do keepers of archives.14lavvphil The baptismal certificate of Primitivo is, therefore, a valid and competent evidence to prove his filiation by Vicente.

Accordingly, we uphold the Court of Appeals ruling that the subject property should be reconveyed to the Estate of the late Vicente Espineli and proper proceedings be instituted to determine the latters heirs, and, if appropriate, to partition the subject property. Anent the third issue, can petitioners be considered buyers in good faith? Our ruling on this point is: no, they cannot be considered buyers in good faith. For we find that petitioners were only able to register the sale of the property and Tax Declaration No. 16304 in their name; they did not have a Torrens title. Unlike a title registered under the Torrens System, a tax declaration does not constitute constructive notice to the whole world. The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land. 15 However, on the issue of actual and moral damages and attorneys fees awarded by the trial court to respondents, we find the award bereft of factual basis. A party is entitled to an adequate compensation for such pecuniary loss or losses actually suffered by him which he has duly proven. Such damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree of certainty. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages. Attorneys fees should therefore be deleted for lack of factual basis and legal justification.16 Moral damages should likewise not be awarded since respondents did not show proof of moral suffering, mental anguish, serious anxiety, besmirched reputation, nor wounded feelings and social humiliation.17 WHEREFORE, the petition is DENIED. The assailed Decision dated November 22, 2004 and the Resolution dated May 27, 2005 of the Court of Appeals in CA-G.R. CV No. 71996 are AFFIRMED with the MODIFICATION that the award of moral and exemplary damages as well as attorneys fees be DELETED. No pronouncement as to costs. SO ORDERED. SECOND DIVISION G.R. No. 175118 July 21, 2008

SOLIDSTATE MULTI-PRODUCTS CORPORATION, Petitioner, vs. SPS. ERLINDA CATIENZA-VILLAVERDE and VICTOR VILLAVERDE, Respondents. DECISION TINGA, J.: Petitioner Solidstate Multi-Products Corporation seeks the reversal of the Decision 1 of the Court of Appeals dated 31 July 2006, in CA-G.R. CV No. 73733, which annulled the sale to petitioner of the parcel of land subject of this case, and of its Resolution 2 dated 18 October 2006 which denied reconsideration. The facts are as follows: In February 1976, Julian Pearanda (Pearanda), respondent Erlinda Villaverdes uncle, sold to petitioner a 48,182-square meter parcel of land located in Molino, Bacoor, Cavite, covered by Transfer Certificate of Title (TCT) No. T-80889 of the Registry of Deeds of the Province of Cavite. Because the property was then being adversely claimed by a third party, the Intestate Estate of Antenor S. Virata (Estate of Virata), Pearanda undertook to institute at his own expense whatever legal action that might become necessary and to answer for damages to petitioner should the ownership of the property be "proven to be that of any other person or claimant thru fault of the First Party." 3 The undertaking was reduced to writing in the form of an Agreement with Mortgage 4 dated 8 July 1976, executed by Pearanda, petitioner and respondents. In the same document, respondents agreed to mortgage a 30,302-sq m property owned by them and covered by TCT No. T-82596 in order to

secure Pearandas faithful compliance with the undertaking. Respondents also signed an Agreement5 to shoulder 50% of the expenses that would be incurred in the suit between petitioner and the Estate of Virata. Petitioner instituted a civil action against the Estate of Virata to remove the cloud on its title. The complaint, docketed as Civil Case No. RTC-BCV 82-85 of the Regional Trial Court of Bacoor, Cavite, Branch 19, was dismissed on 15 June 1985 on the ground of failure to state a cause of action. 6 The dismissal was affirmed by the Court of Appeals on 13 July 1987, but was ultimately reversed by this Court on 6 May 1991 with the declaration that the parcel of land covered by TCT No. T-80889 was truly owned by petitioner.7 On 13 February 1989, while the case was pending with this Court, the parties executed a Deed of Absolute Sale8whereby respondents sold their property covered by TCT No. T-82596 to petitioner in consideration of the amount of P96,000.00receipt of which respondents acknowledged to their full satisfactionand of the cancellation of the original mortgage obligation under the Agreement with Mortgage. It appears that respondents also received the amount of P105,000.00 from petitioner on account of the sale. Respondents, seven years thence, filed a Complaint9 seeking the annulment of the Deed of Absolute Sale on the ground that their consent to the transaction was vitiated by mistake, undue influence and fraud. They alleged that petitioner had induced them to sell their land on the misinformation that the case filed against the Estate of Virata, which motivated them to sign the Agreement with Mortgage and later the Deed of Absolute Sale, had already been dismissed. The trial court rendered judgment in favor of respondents, ruling that the latters property covered by TCT No. T-82596 was made the subject of the Agreement with Mortgage and of the Deed of Absolute Sale only to guarantee the success of the quieting of title case against the Estate of Virata. Since the case was eventually won by petitioner the trial court concluded that the sale was absolutely simulated or fictitious, without consideration and, therefore, void under Article 1409 of the Civil Code. It then directed the nullification of the Deed of Absolute Sale, the return of TCT No. T-82596 to respondents, and the cancellation of the annotation on the dorsal portion of the title pertaining to the Agreement with Mortgage. It also awarded P100,000.00 to respondents as nominal damages.10 The Court of Appeals affirmed the decision of the trial court with the modification that respondents return to petitioner the amount of P105,000.00 with interest at 6% from the finality of judgment until fully paid. In this Petition for Review on Certiorari11 dated 6 November 2006, petitioner argues that the Deed of Absolute Sale is separate and distinct from the Agreement with Mortgage. According to petitioner, there is no basis for the appellate courts ruling that the stated consideration of P96,000.00 for the Agreement with Mortgage, which respondents did not actually receive, is the same consideration for the Deed of Absolute Sale. The appellate court allegedly merely speculated that there was no consideration for the sale just because the Deed of Absolute Sale alluded to the mortgage. Petitioner maintains that there is nothing in the deed which indicates that respondents agreed to sell the property because they failed to comply with their obligation under the Agreement with Mortgage or that the sale was due to the dismissal of the case for quieting of title. Petitioner insists that respondents consent to the sale was not vitiated in any manner because the status of the quieting of title case could be easily verified with the exercise of reasonable diligence on their part. It also avers that the sale was supported by valuable consideration because respondents received P96,000.00 which they themselves acknowledged in the Deed of Absolute Sale, as well as an additional P105,000.00. Finally, petitioner argues that the complaint was filed more than four (4) years from the discovery of the alleged fraud or mistake and was thus filed out of time. 1avvphi1 In their Comments12 dated 23 May 2006, respondents argue that the Agreement with Mortgage and the Deed of Absolute Sale were devised to indemnify petitioner should it lose its case against the Estate of Virata; hence, when petitioners title was upheld by the court, both agreements lost the purpose for their existence. Respondents thus aver that the appellate courts conclusion that the sale

was without a valid consideration was correct. They likewise point out that since the case is one for the declaration of nullity of a contract, prescription should not apply. Petitioner filed a Reply13 dated 14 August 2007, reiterating its arguments and adding that respondents assumed two (2) undertakings in the Agreement with Mortgage: first, to assume the litigation costs in the suit against the Estate of Virata and second, to indemnify petitioner in case it loses the case. Only the second undertaking was allegedly resolved by the Court of Appeals. Petitioner points out that respondents also signed a separate agreement to shoulder 50% of the expenses incurred in the quieting of title case. It avers that it incurred litigation expenses in the amount of P3,000,000.00 for which respondents should answer. The considerations for the Deed of Absolute Sale are allegedly the amount ofP96,000.00 stated therein, the cancellation of the original mortgage obligation under the Agreement with Mortgage, the amount of P105,000.00 received by respondents, and the payment of respondents obligations under the said agreement. A contract, as defined by the Civil Code, has the following requisites: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.14Cause or consideration is the contested requisite in this case. The Agreement with Mortgage, one of the key contracts in the present controversy, specifically mentions that the mortgage is without any consideration. Paragraph 8 thereof states: 8. The Mortgage herein agreed upon is without any consideration and the amount of NINETY SIX THOUSAND (P96,000.00) PESOS, Philippine Currency, mentioned in the next preceding paragraph was not paid to and received by the First Party and the Third Party; 15 That the parties specifically treated this contract, on the one hand, to be without consideration despite presumably knowing the legal consequence of such a characterization, i.e., that a contract without consideration is void under Article 1352 of the Civil Code, is odd in light of petitioners argument that the consideration for the mortgage was Pearandas undertakings (1) to institute at his own expense whatever legal action may be necessary to protect petitioners title to the lot he had sold to the latter and (2) to answer for any damage which may be suffered by petitioner if ownership of the property is adjudged to another claimant. On the other hand, the Deed of Absolute Sale makes specific reference to the mortgage obligation and states that the consideration for the sale, like the mortgage, is also P96,000.00 "and the cancellation of the original mortgage obligation of NINETY SIX THOUSAND PESOS (P96,000.00)."16 As previously stipulated by the parties, however, the amount of P96,000.00, which was supposedly the consideration for the mortgage, was never received by respondents. The foregoing circumstances justify the appellate courts conclusion, to which we agree, that the parties executed the Agreement with Mortgage and the Deed of Absolute Sale solely to confront the possibility that the property sold by Pearanda to petitioner would be adjudged to another claimant. The final disposition of the quieting of title case in favor of petitioner rendered the contracts without a cause, therefore void.17 The evidence clearly shows that while respondents acknowledged receipt of the amount of P96,000.00 in the Deed of Absolute Sale, such amount was not actually paid to them by petitioner. A contract of sale is void and produces no effect whatsoever where the price, which appears thereon as paid, has in fact never been paid by the purchaser to the vendor.18 As the appellate court found, respondents were given the amount of P55,000.00 in October 1988a few months before the Deed of Absolute Sale was executed after they were told that the amount was a "paconsuelo" for the use of their property.19 Later, when they obliged to sign the Deed of Absolute Sale, respondents were givenP50,000.00. The amount of P50,000.00, which is less than the stated consideration for the sale of P96,000.00, was received by respondents only because they were then under the impression that petitioner had lost the quieting of title case. The amounts received by

respondents are not the consideration for the sale but rather, as they understood it, amounts merely by petitioner out of the latters munificence and good will. In their own words, respondents allege that they signed the Deed of Absolute Sale "due to the fraudulent misrepresentation and false notice or information coupled by plaintiffs financial handicap at that time, in consideration of the meager amount ofP50,000.00,"20 We do not agree, however, with the appellate courts ruling that the sale should be considered a pactum commissorium prohibited under Article 2088 of the Civil Code.21 There is no stipulation in any of the contracts between the parties which states that ownership of the property in question shall automatically vest in petitioner upon respondents failure to perform their obligations under the mortgage contract, which is the essence ofpactum commissorium.22 There does not even appear to have been any demand or default yet. That the parties entered into a separate Deed of Absolute Sale is proof that there was no automatic transfer of ownership. Based on the foregoing, we find that prescription had not, nay cannot, set in. Article 1410 of the Civil Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. As a final note, effect should be given to the agreement signed by respondents in which they committed "to shoulder 50% of the expense that will be incurred" in the case filed by petitioner against the Estate of Virata.23The appellate court correctly ruled, however, that this issue must be resolved in another case. WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 73733 dated 31 July 2006 and its Resolution dated 18 October 2006 are AFFIRMED in accordance with the foregoing discussion. No pronouncement as to costs. SO ORDERED. THIRD DIVISION G.R. No. 146730 July 4, 2008

AMADO Z. AYSON, JR., petitioner, vs. SPOUSES FELIX and MAXIMA PARAGAS, respondents. DECISION NACHURA, J.: For review on certiorari under Rule 45 of the Rules of Court are the Decision1 dated May 31, 2000 and the Resolution2 dated December 12, 2000 of the Court of Appeals in CA-G.R. CV No. 59645. The subject of this controversy is the one-fourth (1/4) portion of, corresponding to the share of respondent Maxima Paragas in, the real property located at Caranglaan District, Dagupan City, originally covered by Transfer Certificate of Title No. 7316 of the Register of Deeds of Dagupan City. The controversy commenced with the filing of an ejectment complaint3 on April 12, 1993 before Branch 1 of the Municipal Trial Court in Cities (MTCC) of Dagupan City by herein petitioner Amado Z. Ayson, as represented by his natural father Zosimo S. Zareno4 (Zareno), against respondent-spouses Felix and Maxima Paragas. The complaint, docketed as Civil Case No. 9161, alleged, among others, that: (1) petitioner is the registered owner of the property being occupied by the respondent-spouses as shown by Transfer Certificate of Title No. 59036 of the Registry of Deeds of Dagupan City in his name; (2) respondent-spouses are occupying the said land through his tolerance without rent; (3) on April 8, 1992, respondent-spouses executed an Affidavit5 which declared:

1. That we are occupants of a parcel of land (Lot 6595-A-2) covered by Transfer Certificate of Title No. 57684 located at Caranglaan District, Dagupan City owned by Amado Ll. Ayson; 2. That we occupy the said land by tolerance without paying any rental whatsoever; 3. That we further agree to vacate the aforesaid land within three (3) months from the date hereof and to remove and transfer our house therefrom to another place; 4. That in consideration of vacating the said parcel of land the amount of Twenty Thousand Pesos (P20,000.00) shall be paid to us; and, that the amount of Ten Thousand Pesos (P10,000.00) shall be paid upon signing of this affidavit and the balance of Ten Thousand Pesos (P10,000.00) shall be paid upon removal of our house on the third month from date hereof. (4) despite the receipt of the P10,000.00 upon the execution of the Affidavit, respondent-spouses refused to vacate the land as agreed upon; and (5) despite demands, respondent-spouses still refused to vacate, thus constraining him to file the complaint. Aside from respondents vacating the land, petitioner prayed for the return of the P10,000.00 he paid them; and the payment of P10,000.00 actual damages, P10,000.00 exemplary damages,P20,000.00 attorneys fees, and the costs. In their Answer,6 respondent-spouses alleged that Zareno had no personality and authority to file the case and the filing of the complaint was made in bad faith. During the preliminary conference, the following admissions were made By petitioner: (1) That the defendants (respondent spouses) had been in possession of the land in question since 1930; and (2) That the semi-concrete house of the defendants (respondent spouses) stands on the land in question. By respondent spouses: (1) That the defendant (respondent) Felix Paragas had executed an affidavit on April 8, 1992 wherein he admitted that he is occupying the land by tolerance of the plaintiff (petitioner) without paying any rental whatsoever and had agreed to vacate the premises within three (3) months but refused to vacate later; (2) That the plaintiff (petitioner) is the registered owner of the land in question; (3) That there was a demand to vacate the premises; and (4) That there is a Certification to File Action in Court.7 On August 31, 1993, the MTCC, Branch 1, Dagupan City decided in favor of petitioner, based mainly on the above admissions, rendering judgment as follows: WHEREFORE, the preponderance of evidence being in favor of the plaintiff (petitioner), judgment is hereby rendered: 1) Ordering the defendants (respondent spouses) to vacate the land in question located at Caranglaan District, Dagupan City and covered by Transfer Certificate of Title No. 59036 of the Registry of Deeds for the City of Dagupan, and to deliver the physical and peaceful possession to the plaintiff (petitioner);

2) Ordering the defendants (respondent spouses) jointly and severally to pay the plaintiff (petitioner) the sum of P300.00 as monthly rental of the land from the date of the filing of the complaint until the defendants (respondent spouses) vacate the premises; 3) Ordering defendant (respondent) Felix Paragas to return or indemnify the plaintiff (petitioner) the amount of P10,000.00 representing the sum received by him from the plaintiff (petitioner) on April 8, 1992; 4) Other claims are denied for lack of merit. With costs against the defendants. SO ORDERED.8 Respondent-spouses appealed the said Decision to the Regional Trial Court (RTC) of Dagupan City. In the Decision9 dated August 16, 1996, the RTC affirmed the MTCC Decision, the dispositive portion of which reads WHEREFORE, the appeal interposed by the appellants is hereby DISMISSED. Judgment is rendered in favor of the plaintiff (petitioner) and against the defendants (respondent spouses), to wit: 1. ORDERING defendants (respondent spouses), their agents, representatives and assigns to vacate the land subject matter of this case; 2. ORDERING defendants (respondent spouses) to return to the plaintiff (petitioner) the amount ofP10,000.00 received by them in consideration of their promise to vacate the land subject matter of this case; 3. ORDERING defendants (respondent spouses) to pay to the plaintiff (petitioner) P10,000.00 in actual damages; P10,000.00 in exemplary damages; and P20,000.00 in attorneys fees; and 4. ORDERING defendants to pay the costs. SO ORDERED.10 Respondent-spouses went to the Court of Appeals via a petition for review. In its Decision 11 dated October 13, 1997, the appellate court dismissed the petition. The Decision was appealed to this Court. We denied the appeal in a Resolution dated December 3, 1997, on the basis of the failure of respondent-spouses to show any reversible error in the decisions of the three courts below. Our Resolution became final and executory on January 29, 1998 and was entered in the Book of Entries of Judgments.12 Meanwhile, on October 11, 1993, during the pendency of the appeal with the RTC, respondent-spouses filed against petitioner, as represented by his attorney-in-fact Zosimo S. Zareno, the heirs of Blas F. Rayos, the spouses Delfin and Gloria Alog, and Hon. Judge George M. Mejia, as Presiding Judge of the Metropolitan Trial Court, Branch 1 of Dagupan City, also before the RTC of Dagupan City, a complaint13 for declaration of nullity of deed of sale, transactions, documents and titles with a prayer for preliminary injunction and damages. The complaint was docketed as Civil Case No. D-10772 and was raffled to Branch 42. The complaint alleged, inter alia, that respondent Maxima is a co-owner of a parcel of land originally covered by TCT No. 7316 of the Registry of Deeds of Dagupan City, her share having an area of 435.75 square meters. Sometime prior to April 13, 1955, respondent Felix, then an employee of the defunct Dagupan Colleges (now University of Pangasinan) failed to account for the amount of P3,000.00. It was agreed that respondent Felix would pay the said amount by installment to the Dagupan Colleges. Pursuant to that agreement, Blas F. Rayos and Amado Ll. Ayson, then both

occupying high positions in the said institution, required respondent-spouses to sign, without explaining to them, a Deed of Absolute Sale on April 13, 1955 over respondent Maximas real property under threat that respondent Felix would be incarcerated for misappropriation if they refused to do so. The complaint further alleged that later, respondent-spouses, true to their promise to reimburse the defalcated amount, took pains to pay their obligation in installments regularly deducted from the salaries received by respondent Felix from Dagupan Colleges; that the payments totaled P5,791.69; that notwithstanding the full payment of the obligation, Amado Ll. Ayson and Blas F. Rayos did nothing to cancel the purported Deed of Absolute Sale; and that they were shocked when they received a copy of the complaint for ejectment filed by petitioner. During the pre-trial, the following was established [T] he land in question was a portion of a larger lot covered by TCT No. 41021 with an area of 1,743 square meters in the name of Buenaventura Marias, father of the plaintiff (respondent) Maxima Marias-Paragas. Transfer Certificate of Title No. 41021 was later on cancelled and replaced by TCT No. 7316 in the names of Maxima Marias, Rufino Marias, Rizalina Marias and Buenaventura Marias, specifying that each would receive one-fourth (1/4) thereof. The portion pertaining to Maxima Marias-Paragas was later on allegedly conveyed to Blas F. Rayos and Amado Ll. Ayson by virtue of a Deed of Sale allegedly executed on April 13, 1955 by Maxima Marias-Paragas with the conformity of her husband Felix Paragas, after which TCT 7354 was issued canceling TCT No. 7316. Under TCT No. 7354, the new owners were Blas F. Rayos and Amado Ll. Ayson, Rufino Marias, Rizalina Marias and Angela Marias. The land was subdivided later on into four (4) lots, distributed as follows: Lot A went to Blas F. Rayos and Amado Ll. Ayson, Lot B to Rufino Marias, Lot C to Rizalina Marias, and Lot D to Angela Marias. Each lot has an area of 435.75 square meters. For Lot A, TCT No. 22697 was issued in the name of both Blas F. Rayos and Amado Ll. Ayson. On November 15, 1991, Lot A was the subject of a subdivision between Amado Ll. Ayson and Blas F. Rayos. Said subdivision was approved on December 10, 1991, dividing the property into equal halves, each half with an area of 217.88 square meters. Thereafter, the one-half (1/2) pertaining to Blas F. Rayos was sold by his successors-in-interest to spouses Delfin and Gloria Alog by virtue of an Extra-Judicial Settlement With Sale dated January 10, 1992, to which the said spouses were issued TCT 57683 on January 14, 1992. On the same day, Amado Ll. Ayson for his portion of the property was also issued TCT 57684. Amado Ll. Ayson later passed on ownership of his share to Amado Z. Ayson and issued to the latter was TCT 59036 after the latter executed an Affidavit of Self Adjudication dated August 3, 1992 upon the death of Amado Ll. Ayson.14 After trial on the merits, the RTC, Branch 42, Dagupan City rendered its Decision15 dated March 6, 1998 in favor of respondent-spouses declaring the Deed of Absolute Sale as an equitable mortgage, the decretal portion of which reads WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, except the spouses Delfin and Gloria Alog: 1. Annulling the Deed of Sale executed by Felix Paragas and Maxima Paragas on April 13, 1955 (Exh. 3) in favor of defendants Blas F. Rayos and Amado Ll. Ayson except as it affects the interest of Spouses Delfin and Gloria Alog over the property in question; 2. Annulling likewise TCT No. 57684 issued to Amado Ll. Ayson and TCT No. 59036 issued to Amado Z. Ayson, including the respective tax declarations thereof; 3. Ordering Amado Z. Ayson to reconvey ownership of the property covered by TCT No. 59036 to the herein plaintiffs, the true owners thereof; 4. Ordering defendant Amado Z. Ayson and the estate of Blas F. Rayos to pay jointly and severally to the herein plaintiffs the amount paid by Spouses Delfin and Gloria Alog to the late

Blas F. Rayos, there being no proof adduced by the plaintiffs as to the actual current market value of the said property; 5. Ordering the said defendants Amado Z. Ayson and the estate of Blas F. Rayos to pay jointly and severally to the plaintiffs other amounts of P50,000.00 as moral damages and P10,000.00 as attorneys fees, including appearance fee; 6. Further ordering the aforementioned defendants, except defendant-spouses Delfin and Gloria Alog, to pay costs. SO ORDERED.16 Petitioner appealed the said Decision to the Court of Appeals, which affirmed the same in its Decision dated May 31, 2000. The motion for reconsideration filed by petitioner was likewise denied by the Court of Appeals in its Resolution dated December 12, 2000. Hence, this petition raising the sole issue that The Honorable Court of Appeals has acted in excess of or with grave abuse of discretion amounting to lack of jurisdiction in dismissing the appeal of the herein petitioner Amado Z. Ayson, Jr. and in affirming the decision of the Regional Trial Court, Branch 42, Dagupan City in Civil Case No. D-10772, in violation of the laws on sale, equitable mortgage, prescription, laches and estoppel as well as the laws on property registration.17 Petitioner contends that respondent-spouses are bound by the judicial admissions they made both in the ejectment case and in the case for declaration of nullity of the Deed of Absolute Sale. With respect to the ejectment case, he posits that respondent-spouses cannot renege on the effects of their admissions that petitioner is the registered owner of the disputed property; that they were occupying the same by mere tolerance of the latter without rent; and that they undertook to vacate the premises in accordance with the Affidavit dated April 8, 1992, especially when the findings of the MTCC had already become final upon the Entry of Judgment of our Resolution affirming the MTCC, the RTC, and the Court of Appeals. As regards the action for declaration of nullity of the deed of absolute sale, petitioner claims that respondent-spouses are likewise bound by their admission during the pre-trial that the series of certificates of title from the time the Deed of Absolute Sale was registered with the Register of Deeds of Dagupan City eventually led to the issuance of TCT No. 59036 in his name. Petitioner further argues that the action instituted before the RTC, Branch 42, Dagupan City has already prescribed. According to him, the complaint alleged that the Deed of Absolute Sale was executed through fraud, making the said contract merely voidable, and the action to annul voidable contracts based on fraud prescribed in four (4) years from the discovery of fraud. He insists that the registration of the Deed of Absolute Sale occurred on May 4, 1955, which operated as constructive notice of the fraud to the whole world, including respondent-spouses. Thus, petitioner concludes that the action had long prescribed when they filed the same on October 11, 1993, since its cause had accrued 38 years ago. Petitioner adds that respondent-spouses are bound by estoppel and guilty of laches in light of the judicial admissions they have already made and the unreasonable length of time that had lapsed before they questioned the validity of the Deed of Absolute Sale and the Affidavit they executed on April 8, 1992. He also asseverates that the Deed of Absolute Sale is a true sale and not an equitable mortgage, arguing that the alleged payments made by respondent Felix were made from December 29, 1965 to December 17, 1980, long after the execution of the contract on April 13, 1955; that respondent-spouses only paid realty taxes over their house and not on the disputed land; that their possession of the property was by his mere tolerance; that there was no evidence proffered that the amount of P3,000.00 as consideration for the sale was unusually inadequate in 1955; and that the other co-

owners of the land did not question or protest the subdivision thereof leading to the issuance of TCT No. 59036 in his name. Lastly, petitioner claims that he is a transferee in good faith, having had no notice of the infirmity affecting the title of his predecessor Amado Ll. Ayson over the property. He says that he was only exercising his right as an heir when he adjudicated unto himself the parcel of land pertaining to his adoptive father,18 resulting in the issuance of TCT No. 59036 in his name, and, thus, should not be penalized for his exercise of a legal right. The arguments do not persuade. First. With respect to the admissions made by respondent-spouses, through their counsel during the preliminary conference of the ejectment case, it is worthy to note that, as early as the submission of position papers before the MTCC, they already questioned the sale of the subject property to Amado Ll. Ayson and Blas F. Rayos for being fictitious and asserted their ownership over the land, pointing to the fact that respondent Maxima had been living on the land since her birth in 1913 and that they had been in continuous possession thereof since her marriage to respondent Felix in 1944. However, unfortunately for them, the MTCC held them bound by the admissions made by their counsel and decided that petitioner had a better right to possess the property. Nevertheless, it must be remembered that in ejectment suits the issue to be resolved is merely the physical possession over the property, i.e., possession de facto and not possession de jure, independent of any claim of ownership set forth by the party-litigants.19 Should the defendant in an ejectment case raise the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.20 The judgment rendered in such an action shall be conclusive only with respect to physical possession and shall in no wise bind the title to the realty or constitute a binding and conclusive adjudication of the merits on the issue of ownership. Therefore, such judgment shall not bar an action between the same parties respecting the title or ownership over the property,21 which action was precisely resorted to by respondent-spouses in this case. Anent the claim that respondent-spouses admitted the series of TCTs issued by reason of the registration of the questioned Deed of Absolute Sale, suffice it to state that records show that they admitted only the existence thereof, not necessarily the validity of their issuance. Second. The Deed of Absolute Sale is, in reality, an equitable mortgage or a contract of loan secured by a mortgage. The Civil Code enumerates the cases in which a contract, purporting to be a sale, is considered only as a contract of loan secured by a mortgage, viz.: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of the sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.22 Art. 1604. The provisions of article 1602 shall also apply to a contract purporting to be an absolute sale. In such cases, parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan; and upon adequate proof of the truth of such allegations, the courts will enforce the agreement or understanding in this regard, in accord with the true intent of the parties at the time the contract was executed, even if the conveyance was accompanied by registration in the name of the transferee and the issuance of a new certificate of title in his name.23 In this case, the evidence before the RTC, Branch 42, Dagupan City had established that the possession of the subject property remained with respondent-spouses despite the execution of the Deed of Absolute Sale on April 13, 1955. In fact, testimonies during the trial showed that petitioner and his predecessors never disturbed the possession of respondent-spouses until the filing of the ejectment case on April 12, 1992.24 Moreover, the evidence presented by respondent-spouses indubitably reveals that they signed the contract under threat of prosecution, with the view to secure the payment of the P3,000.00 defalcated by respondent Felix. Amado Ll. Ayson and Blas F. Rayos obviously exerted undue influence on Felix taking advantage of the latters lack of education and understanding of the legal effects of his signing the deed. Respondent-spouses have clearly proven that they have already paid the aforesaid amount. That the obligation was paid in installments through salary deduction over a period of 10 years from the signing of the Deed of Absolute Sale is of no moment. It is safe to assume that this repayment scheme was in the nature of an easy payment plan based on the respondent-spouses capacity to pay. Also noteworthy is that the deductions from respondent Felixs salary amounted to a total o f P5,791.69,25 or almost double the obligation of P3,000.00. Furthermore, it cannot be denied that petitioner failed to adduce countervailing proof that the payments, as evidenced by the volume of receipts, were for some other obligation.1avvphi1 That the realty taxes paid by respondent-spouses was only for their house can be explained by the fact that, until the filing of the ejectment case, respondent Maxima was not aware that the land she coowned was already partitioned, such that the payments of real estate taxes in her name were limited to the improvement on the land. An equitable mortgage is a voidable contract. As such, it may be annulled within four (4) years from the time the cause of action accrues. This case, however, not only involves a contract resulting from fraud, but covers a transaction ridden with threat, intimidation, and continuing undue influence which started when petitioners adoptive father Amado Ll. Ayson and Blas F. Rayos, Felixs superiors at Dagupan Colleges, practically bullied respondent-spouses into signing the Deed of Absolute Sale under threat of incarceration. Thus, the four-year period should start from the time the defect in the consent ceases.26 While at first glance, it would seem that the defect in the consent of respondentspouses ceased either from the payment of the obligation through salary deduction or from the death of Amado Ll. Ayson and Blas F. Rayos, it is apparent that such defect of consent never ceased up to the time of the signing of the Affidavit on April 8, 1992 when Zareno, acting on behalf of petitioner, caused respondent Felix to be brought to him, and taking advantage of the latter being unlettered, unduly influenced Felix into executing the said Affidavit for a fee of P10,000.00.27 The complaint praying for the nullity of the Deed of Absolute Sale was filed on October 11, 1993, well within the fouryear prescriptive period. Regarding the finality of the adjudication of physical possession in favor of petitioner, it may be reiterated that the right of possession is a necessary incident of ownership. This adjudication of ownership of the property to respondent-spouses must include the delivery of possession to them since petitioner has not shown a superior right to retain possession of the land independently of his claim of ownership which is herein rejected. Verily, to grant execution of the judgment in the

ejectment case would work an injustice on respondent-spouses who had been conclusively declared the owners and thus, rightful possessors of the disputed land.28 WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in CA-G.R. CV No. 59645 dated May 31, 2000 is AFFIRMED. SO ORDERED. THIRD DIVISION G.R. No. 173002 July 4, 2008

BENJAMIN BAUTISTA, petitioner, vs. SHIRLEY G. UNANGST and OTHER UNKNOWN PERSONS, respondentS. DECISION REYES, R.T., J.: THE presumption of equitable mortgage imposes a burden on the buyer to present clear evidence to rebut it. He must overthrow it, lest it persist.1 To overturn that prima facie presumption, the buyer needs to adduce substantial and credible evidence to prove that the contract was a bona fide deed of sale with right to repurchase. This petition for review on certiorari impugns the Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 859423 which reversed and set aside that4 of the Regional Trial Court (RTC) in an action for specific performance or recovery of possession, for sum of money, for consolidation of ownerships and damages. The Facts On November 15, 1996, Hamilton Salak rented a car from GAB Rent-A-Car, a car rental shop owned by petitioner Benjamin Bautista. The lease was for three (3) consecutive days at a rental fee of P1,000.00 per day.5 However, Salak failed to return the car after three (3) days prompting petitioner to file a complaint against him for estafa, violation of Batas Pambansa Blg. 22 and carnapping.6 On February 2, 1997, Salak and his common-law wife, respondent Shirley G. Unangst, were arrested by officers of the Criminal Investigation Service Group (CISG) of the Philippine National Police while riding the rented car along Quezon City. The next day, petitioner demanded from Salak at the CISG Office the sum of P232,372.00 as payment for car rental fees, fees incurred in locating the car, attorney's fees, capital gains tax, transfer tax, and other incidental expenses. 7 Salak and respondent expressed willingness to pay but since they were then short on cash, Salak proposed to sell to petitioner a house and lot titled in the name of respondent. Petitioner welcomed the proposal after consulting his wife, Cynthia. Cynthia, on the other hand, further agreed to pay the mortgage loan of respondent over the subject property to a certain Jojo Lee in the amount of P295,000.00 as the property was then set to be publicly auctioned on February 17, 1997. 8 To formalize their amicable settlement, Cynthia, Salak and respondent executed a written agreement.9 They stipulated that respondent would sell, subject to repurchase, her residential property in favor of Cynthia for the total amount of P527,372.00 broken down, as follows: (1) P295,000.00 for the amount paid by Cynthia to Lee to release the mortgage on the property; and (2) P232,372.00, which is the amount due to GAB Rent-A-Car. Cynthia also agreed to desist from pursuing the complaint against Salak and respondent.10

Respondent and petitioner also executed a separate deed of sale with right to repurchase,11 specifying, among others, that: (1) respondent, as vendor, shall pay capital gains tax, current real estate taxes and utility bills pertaining to the property; (2) if respondent fails to repurchase the property within 30 days from the date of the deed, she and her assigns shall immediately vacate the premises and deliver its possession to petitioner without need of a judicial order; and (3) respondent's refusal to do so will entitle petitioner to take immediate possession of the property. 12 Respondent failed to repurchase the property within the stipulated period. As a result, petitioner filed, on June 5, 1998, a complaint for specific performance or recovery of possession, for sum of money, for consolidation of ownership and damages against respondent and other unnamed persons before the RTC of Olongapo City. In his complaint,13 petitioner alleged, among others, that after respondent failed to repurchase the subject realty, he caused the registration of the deed of sale with the Register of Deeds and the transfer of the tax declarations in his name; that respondent failed to pay the capital gains taxes and update the real estate taxes forcing him to pay said amounts in the sum of P71,129.05 and P11,993.72, respectively; and that respondent violated the terms of the deed when she, as well as the other unnamed persons, refused to vacate the subject property despite repeated demands. 14 Petitioner prayed before the RTC that an order be issued in his favor directing respondents to: (1) surrender the possession of the property; (2) pay P150,000.00 for the reasonable compensation for its use from March 7, 1997 to June 7, 1998, plus P10,000.00 per month afterward; (3) pay the amount advanced by petitioner, to wit:P71,129.05 and P11,993.72 for the payment of capital gains tax and real estate taxes, respectively; andP70,000.00 for attorney's fees.15 On June 16, 1998, petitioner filed an amended complaint,16 reiterating his previous allegations but with the added prayer for consolidation of ownership pursuant to Article 1607 of the Civil Code. 17 On the other hand, respondents controverted the allegations in the complaint and averred in their Answer,18among others, that plaintiff had no cause of action inasmuch as respondent Unangst signed the subject deed of sale under duress and intimidation employed by petitioner and his cohorts; that, assuming that her consent was freely given, the contract of sale was simulated and fictitious since the vendor never received the stipulated consideration; that the sale should be construed as an equitable mortgage pursuant to Articles 1602 and 1604 of the Civil Code because of its onerous conditions and shockingly low consideration; that their indebtedness in the form of arrears in car rentals merely amounts to P90,000.00; and that the instant action was premature as plaintiff had not yet consolidated ownership over the property. Defendants counterclaimed for moral damages in the amount of P500,000.00 and attorney's fees in the amount of P50,000.00, plus P500.00 per appearance.19 On July 29, 2004, after due proceedings, the RTC rendered a decision in favor of petitioner, disposing as follows: WHEREFORE, judgment is rendered finding the Deed of Sale with Right to Repurchase (Exh. "C") as, indeed, a document of sale executed by the defendant in favor of the plaintiff covering the parcel of land house (sic) situated at Lot 3-B, Blk. 10, Waterdam Road, Gordon Heights, Olongapo City, declared under Tax Declaration Nos. 004-7756R and 7757R (Exhs. "I" and "I1"). The defendant and any person taking rights from her is (sic) ordered to immediately vacate from the place and turn over its possession to the plaintiff. They are likewise directed not to remove any part of the building on the lot. The ownership of the said property is properly consolidated in the name of the plaintiff. The defendant is further ordered to pay to the plaintiff the amount of P10,000.00 a month from March 7, 1997 up to the time possession of the lot and house is restored to the plaintiff representing the reasonable value for the use of the property; the amount of P71,129.05 representing the payment made by the plaintiff on the capital gain taxes and the further amount of P70,000.00 for attorney's fees and the costs of suit.

SO ORDERED.20 Respondents failed to interpose a timely appeal. However, on September 10, 2004, respondent Unangst filed a petition for relief pursuant to Section 38 of the 1997 Rules on Civil Procedure. She argued that she learned of the decision of the RTC only on September 6, 2004 when she received a copy of the motion for execution filed by petitioner.21 Petitioner, on the other hand, moved for the dismissal of respondent's petition on the ground that the latter paid an insufficient sum of P200.00 as docket fees.22 It appears that respondent Unangst initially paid P200.00 as docket fees as this was the amount assessed by the Clerk of Court of the RTC.23 Said amount was insufficient as the proper filing fees amount to P1,715.00. Nevertheless, the correct amount was subsequently paid by said respondent on February 22, 2005.24 In their comment,25 respondents countered that they should not be faulted for paying deficient docket fees as it was due to an erroneous assessment of the Clerk of Court.26 The RTC granted the petition for relief. Subsequently, it directed respondents to file a notice of appeal within twenty-four (24) hours from receipt of the order.27 Accordingly, on February 23, 2005, respondents filed their notice of appeal.28 Respondents contended before the CA that the RTC erred in: (1) not annulling the deed of sale with right to repurchase; (2) declaring that the deed of sale with right to repurchase is a real contract of sale; (3) ordering the consolidation of ownership of the subject property in the name of petitioner.29 They argued that respondent Unangst's consent to the deed of sale with right to repurchase was procured under duress and that even assuming that her consent was freely given, the contract partakes of the nature of an equitable mortgage.30 On the other hand, petitioner insisted, among others, that although the petition for relief of respondents was filed on time, the proper filing fees for said petition were paid beyond the 60-day reglementary period. He posited that jurisdiction is acquired by the court over the action only upon full payment of prescribed docket fees.31 CA Disposition In a Decision32 dated April 7, 2006, the CA reversed and set aside the RTC judgment. 33 The dispositive part of the appellate court's decision reads, thus: IN VIEW OF ALL THE FOREGOING, the instant appeal is hereby GRANTED, the challenged Decision dated July 29, 2004 hereby (sic) REVERSED and SET ASIDE, and a new one entered declaring the Deed of Sale With Right Of Repurchase dated February 4, 1997 as an equitable mortgage. No cost. SO ORDERED.34 The CA declared that the Deed of Sale with Right of Repurchase executed by the parties was an equitable mortgage. On the procedural aspect pertaining to the petition for relief filed by respondent Unangst, the CA ruled that "the trial court, in opting to apply the rules liberally, cannot be faulted for giving due course to the questioned petition for relief which enabled appellants to interpose the instant appeal."35 It ratiocinated: Appellee recognizes the timely filing of appellants' petition for relief to be able to appeal judgment but nonetheless points out that the proper filing fees were paid beyond the 60-day reglementary period. Arguing that the court acquires jurisdiction over the action only upon full payment of the prescribed docket fees, he submits that the trial court erred in granting appellants' petition for relief despite the late payment of the filing fees.

While this Court is fully aware of the mandatory nature of the requirement of payment of appellate docket fee, the High Court has recognized that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances (Meatmasters International Corporation v. Lelis Integrated Development Corporation, 452 SCRA 626 [2005], citing La Salette College v. Pilotin, 418 SCRA 380 [2003]). Applied in the instant case, the docket fees were admittedly paid only on February 22, 2005, or a little less than two (2) months after the period for filing the petition lapsed. Yet, this matter was sufficiently explained by appellants. The records bear out that appellants initially paid P200.00 as docket fees because this was the amount assessed by the Clerk of Court of the RTC of Olongapo City (p. 273, Records). As it turned out, the fees paid was insufficient, the proper filing fees being P1,715.00, which was eventually paid by appellants on February 1, 2005 (p. 296, Records). As such, appellants cannot be faulted for their failure to pay the proper docket fees for, given the prevailing circumstances, such failure was clearly not a dilatory tactic nor intended to circumvent the Rules of Court. On the contrary, appellants demonstrated their willingness to pay the docket fees when they subsequently paid on the same day they were assessed the correct fees (p. 299, Records). Notably, in Yambao v. Court of Appeals (346 SCRA 141 [2000]), the High Court declared therein that "the appellate court may extend the time for the payment of the docket fees if appellants is able to show that there is a justifiable reason for his failure to pay the correct amount of docket fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or a similar supervening casualty, without fault on the part of appellant." Verily, the trial court, in opting to apply the rules liberally, cannot be faulted for giving due course to the questioned petition for relief which enabled appellants to interpose the instant appeal.36 On the substantial issues, the CA concluded that "While the records is bereft of any proof or evidence that appellee employed unlawful or improper pressure against appellant Unangst to give her consent to the contract of sale, there is, nevertheless, sufficient basis to hold the subject contract as one of equitable mortgage."37 It explained: Jurisprudence has consistently held that the nomenclature used by the contracting parties to describe a contract does not determine its nature. The decisive factor in determining the true nature of the transaction between the parties is the intent of the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the relative situations of the parties at that time; the attitudes, acts, conduct, and declarations of the parties; the negotiations between them leading to the deed; and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding (Legaspi v. Ong, 459 SCRA 122 [2005]). It must be stressed, however, that there is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. In fact, it is often a question difficult to resolve and is frequently made to depend on the surrounding circumstances of each case. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the property in controversy ( Legaspi, ibid.). Article 1602 of the Civil Code enumerates the instances where a contract shall be presumed to be an equitable mortgage when - (a) the price of a sale with right to repurchase is unusually inadequate; (b) the vendor remains in possession as lessee or otherwise; (c) upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (d) the purchaser retains for himself a part of the purchase price; (e) the vendor binds himself to pay taxes on the thing sold; and, (f) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation (Legaspi, supra; Martinez v. Court of Appeals, 358 SCRA 38 [2001]).

For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the circumstance laid out in Article 1602, not the concurrence nor an overwhelming number of the circumstances therein enumerated, suffices to construe a contract of sale to be one of equitable mortgage (Lorbes v. Court of Appeals, 351 SCRA 716 [2001]). Applying the foregoing considerations in the instant case, there is hardly any doubt that the true intention of the parties is that the transaction shall secure the payment of a debt. It is not contested that before executing the subject deed, Unangst and Salak were under police custody and were sorely pressed for money. Such urgent prospect of prolonged detention helps explain why appellants would subscribe to an agreement like the deed in the instant case. This might very well explain appellants' insistence that Unangst was not truly free when she signed the questioned deed. Besides, there is no gainsaying that when appellee allowed appellants to retain possession of the realty sold for 30 days, as part of the agreement, that period of time surely signaled a time allotted to Salak and Unangst, as debtors, within which to pay their mortgage indebtedness. The High Court, in several cases involving similar situations, has declared that "while it was true that plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed, however, that they signed knowing that said contracts did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds. Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon them" (Lorbes, ibid.; Reyes v. Court of Appeals, 339 SCRA 97 [2000]; Lao v. Court of Appeals, 275 SCRA 237 [1997]; Zamora v. Court of Appeals, 260 SCRA 10 [1996]; Labasan v. Lacuesta, 86 SCRA 16 [1978]). After all, Article 1602(6) provides that a contract of sale with right to repurchase is presumed to be an equitable mortgage in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any obligation. In fine, a careful review of the records convincingly shows that the obtaining facts in this case qualify the controversial agreement between the parties as an equitable mortgage under Article 1602 of the New Civil Code.38 Issues Petitioner has resorted to the present recourse under Rule 45, assigning to the CA the following errors: (a) The Honorable Court of Appeals committed grave error in finding that the respondent perfected an appeal via Petition for Relief To Be Able To Appeal Judgment even when the proper docket fees were paid beyond the period prescribed to bring such action under Section 3 of Rule 38 of the 1997 Rules of Civil Procedure in relation to the pronouncements by the Honorable Court in the cases of Philippine Rabbit Bus Lines, Inc. v. Arciaga [148 SCRA 433], Philippine Pryce Assurance Corp. v. Court of Appeals [148 SCRA 433] and Sun Insurance Office, Ltd. v. Asuncion [170 SCRA 274]. (b) The Honorable Court of Appeals erred on a question of law in reversing the Decision of the Court a quo finding the Deed of Sale with Right to Repurchase a document of sale executed by the respondent in favor of the petitioner and in further holding such contract as one of equitable mortgage.39 Our Ruling On the first issue, petitioner contends that respondents' "Petition for Relief to Be Able to Appeal Judgment," which paved the way for the allowance of respondents' appeal of the RTC decision, was filed within the prescriptive period but the proper docket fees for it were belatedly paid. 40 He thus

posits that the RTC did not acquire jurisdiction over said petition. Having no jurisdiction, the RTC could not have allowed respondents to appeal. On this issue, respondent counters that the belated payment of proper docket fees was not due to their fault but to the improper assessment by the Clerk of Court. Respondent asserts the ruling of the CA that the court may extend the time for the payment of the docket fees if there is a justifiable reason for the failure to pay the correct amount. Moreover, respondent argues that petitioner failed to contest the RTC Order dated February 21, 2004 that allowed the payment of supplementary docket fees. Petitioner failed to file a motion for reconsideration or a petition for certiorari to the higher court to question said order. We agree with respondents. Their failure to pay the correct amount of docket fees was due to a justifiable reason. The right to appeal is a purely statutory right. Not being a natural right or a part of due process, the right to appeal may be exercised only in the manner and in accordance with the rules provided therefor.41 For this reason, payment of the full amount of the appellate court docket and other lawful fees within the reglementary period is mandatory and jurisdictional.42 Nevertheless, as this Court ruled in Aranas v. Endona,43 the strict application of the jurisdictional nature of the above rule on payment of appellate docket fees may be mitigated under exceptional circumstances to better serve the interest of justice. It is always within the power of this Court to suspend its own rules, or to except a particular case from their operation, whenever the purposes of justice require it. 44 In not a few instances, the Court relaxed the rigid application of the rules of procedure to afford the parties the opportunity to fully ventilate their cases on the merits. This is in line with the timehonored principle that cases should be decided only after giving all parties the chance to argue their causes and defenses.45 For, it is far better to dispose of a case on the merit which is a primordial end, rather than on a technicality, if it be the case, that may result in injustice. 46 The emerging trend in the rulings of this Court is to afford every party-litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities.47 As early as 1946, in Segovia v. Barrios,48 the Court ruled that where an appellant in good faith paid less than the correct amount for the docket fee because that was the amount he was required to pay by the clerk of court, and he promptly paid the balance, it is error to dismiss his appeal because "(e)very citizen has the right to assume and trust that a public officer charged by law with certain duties knows his duties and performs them in accordance with law. To penalize such citizen for relying upon said officer in all good faith is repugnant to justice."49 Technicality and procedural imperfections should thus not serve as bases of decisions. 50 In that way, the ends of justice would be better served. For, indeed, the general objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing always in mind that procedure is not to hinder but to promote the administration of justice. 51 We go now to the crux of the petition. Should the deed of sale with right to repurchase executed by the parties be construed as an equitable mortgage? This is the pivotal question here. According to petitioner, the deed should not be construed as an equitable mortgage as it does not fall under any of the instances mentioned in Article 1602 of the Civil Code where the agreement can be construed as an equitable mortgage. He added that the "language and terms of the Deed of Sale with Right to Repurchase executed by respondent in favor of the petition are clear and unequivocal. Said contract must be construed with its literal sense."52 We cannot agree. Respondent is correct in alleging that the deed of sale with right to repurchase qualifies as an equitable mortgage under Article 1602. She merely secured the payment of the unpaid car rentals and the amount advanced by petitioner to Jojo Lee.

The transaction between the parties is one of equitable mortgage and not a sale with right to purchase as maintained by petitioners. Article 1602 of the New Civil Code provides that the contract is presumed to be an equitable mortgage in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (4) When the purchaser retains for himself a part of the purchase price; (5) When the vendor binds himself to pay the taxes on the thing sold; (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws.53 (Emphasis ours) The conclusion that the deed of sale with right to repurchase is an equitable mortgage is buttressed by the following: First, before executing the deed, respondent and Salak were under police custody due to the complaint lodged against them by petitioner. They were sorely pressed for money, as they would not be released from custody unless they paid petitioner. It was at this point that respondent was constrained to execute a deed of sale with right to repurchase. Respondent was in no position whatsoever to bargain with their creditor, petitioner. Nel consensui tam contrarium est quam vis atqui metus. There can be no consent when under force or duress. Bale wala ang pagsang-ayon kung ito'y nakuha sa pamimilit o paraang di malaya. It is established that respondent signed the deed only because of the urgent necessity of obtaining funds.1avvphi1 When the vendor is in urgent need of money when he executes the sale, the alleged sale with pacto de retro will be construed as an equitable mortgage.54 "Necessitous men are not, truly speaking, free men; but to answer a present emergency will submit to any terms that the crafty may impose upon them."55 Second, petitioner allowed respondent and Salak to retain the possession of the property despite the execution of the deed. In fact, respondent and Salak were not bound to deliver the possession of the property to petitioner if they would pay him the amount he demanded. 56 Where in a contract of sale with pacto de retro, the vendor remains in possession, as a lessee or otherwise, the contract shall be presumed to be an equitable mortgage. 57 The reason for the presumption lies in the fact that in a contract of sale with pacto de retro, the legal title to the property is immediately transferred to the vendee, subject to the vendor's right to redeem. Retention, therefore, by the vendor of the possession of the property is inconsistent with the vendee's acquisition of the right of ownership under a true sale.58 It discloses, in the alleged vendee, a lack of interest in the property that belies the truthfulness of the sale a retro.59 Third, it is likewise undisputed that the deed was executed by reason of: (1) the alleged indebtedness of Salak to petitioner, that is, car rental payments; and (2) respondent's own obligation to petitioner, that is, reimbursement of what petitioner paid to the mortgagee, Jojo Lee. Fact is, the purchase price stated in the deed was the amount of the indebtedness of both respondent and Salak to petitioner. 60

Apparently, the deed purports to be a sale with right to purchase. However, since it was executed in consideration of the aforesaid loans and/or indebtedness, said contract is indubitably an equitable mortgage. The rule is firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro, regular on its face, is given as security for a loan, it must be regarded as an equitable mortgage. 61 The above-mentioned circumstances preclude the Court from declaring that the parties intended the transfer of the property from one to the other by way of sale. They are more than sufficient to show that the true intention of the parties is to secure the payment of said debts. Verily, an equitable mortgage under paragraphs 2 and 6 of Article 1602 exists here. Settled is the rule that to create the presumption enunciated by Article 1602, the existence of one circumstance is enough.62 Moreover, under Article 1603 of the Civil Code it is provided that: "(i)n case of doubt, a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage." In this case, We have no doubt that the transaction between the parties is that of a loan secured by said property by way of mortgage. In Lorbes v. Court of Appeals,63 the Court held that: The decisive factor in evaluating such agreement is the intention of the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the relative situation of the parties at that time, the attitude, acts, conduct, declarations of the parties, the negotiations between them leading to the deed, and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. As such, documentary and parol evidence may be submitted and admitted to prove the intention of the parties. Sales with rights to repurchase, as defined by the Civil Code, are not favored. We will not construe instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow, unless the terms of the document and the surrounding circumstances require it. Whenever, under the terms of the writing, any other construction can fairly and reasonably be made, such construction will be adopted and the contract will be construed as a mere loan unless the court can see that, if enforced according to its terms, it is not an unconscionable one.64 Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by contracts of sale with right of repurchase, such as the circumvention of the laws against usury and pactum commissorium.65 WHEREFORE, the petition is DENIED for lack of merit. SO ORDERED. FIRST DIVISION G.R. No. 167058 July 9, 2008

PHILIPPINE NATIONAL BANK, Petitioner, vs. SPOUSES TOMAS CABATINGAN and AGAPITA EDULLANTES Represented by RAMIRO DIAZ as Their Attorney-in-Fact, Respondents. RESOLUTION CORONA, J.: Respondent spouses Tomas Cabatingan and Agapita Edullantes obtained two loans, secured by a real estate mortgage,1 in the total amount of P421,2002 from petitioner Philippine National Bank. However, they were unable to fully pay their obligation despite having been granted more than

enough time to do so.3 Thus, on September 25, 1991, petitioner extrajudicially foreclosed on the mortgage pursuant to Act 3135.4 Thereafter, a notice of extrajudicial sale5 was issued stating that the foreclosed properties would be sold at public auction on November 5, 1991 between 9:00 a.m. and 4:00 p.m. at the main entrance of the office of the Clerk of Court on San Pedro St., Ormoc City. Pursuant to the notice, the properties were sold at public auction on November 5, 1991. The auction began at 9:00 a.m. and was concluded after 20 minutes with petitioner as the highest bidder. 6 On March 16, 1993, respondent spouses filed in the Regional Trial Court (RTC) of Ormoc City, Branch 12 a complaint for annulment of extrajudicial foreclosure of real estate mortgage and the November 5, 1991 auction sale.7 They invoked Section 4 of Act 3135 which provides: Section 4. The sale shall be made at public auction, between the hours of nine in the morning and four in the afternoon, and shall be under the direction of the sheriff of the province, the justice or auxiliary justice of peace of the municipality in which such sale has to be made, or of a notary public of said municipality, who shall be entitled to collect a fee of Five pesos for each day of actual work performed, in addition to his expenses. (emphasis supplied) Petitioners claimed that the provision quoted above must be observed strictly. Thus, because the public auction of the foreclosed properties was held for only 20 minutes (instead of seven hours as required by law), the consequent sale was void. On November 4, 2004, the RTC issued an order8 annulling the November 5, 1991 sale at public auction. It held: [T]he rationale behind the holding of auction sale between the hours of 9:00 in the morning and 4:00 in the afternoon of a particular day as mandated in Section 4 of Act 3135 is to give opportunity to more would-be bidders to participate in the auction sale thus giving the judgment-debtor more opportunity to recover the value of his or her property subject of the auction sale. Petitioner moved for reconsideration but it was denied in an order dated February 7, 2005. 9 Hence, this petition. The issue here is whether a sale at public auction, to be valid, must be conducted the whole day from 9:00 a.m. until 4:00 p.m. of the scheduled auction day. Petitioner contends that the RTC erred in interpreting Section 4 of Act 3135. The law only prohibits the conduct of a sale at any time before nine in the morning and after four in the afternoon. Thus, a sale held within the intervening period (i.e., at any time between 9:00 a.m. and 4:00 p.m.), regardless of duration, is valid. We grant the petition. We note that neither the previous rule (Administrative Order No. 3) 10 nor the current rules (A.M. No. 99-10-05-O, as amended, and the guidelines for its enforcement, Circular No. 7-2002)11 governing the conduct of foreclosure proceedings provide a clear answer to the question at hand. Statutes should be sensibly construed to give effect to the legislative intention. 12 Act 3135 regulates the extrajudicial sale of mortgaged real properties 13 by prescribing a procedure which effectively safeguards the rights of both debtor and creditor. Thus, its construction (or interpretation) must be equally and mutually beneficial to both parties. Section 4 of Act 3135 provides that the sale must take place between the hours of nine in the morning and four in the afternoon. Pursuant to this provision, Section 5 of Circular No. 7-2002 states:

Section 5. Conduct of extrajudicial foreclosure sale-a. The bidding shall be made through sealed bids which must be submitted to the Sheriff who shall conduct the sale between the hours of 9 a.m. and 4 p.m. of the date of the auction (Act 3135, Sec. 4).14The property mortgaged shall be awarded to the party submitting the highest bid and, in case of a tie, an open bidding shall be conducted between the highest bidders. Payment of the winning bid shall be made in either cash or in manager's check, in Philippine Currency, within five (5) days from notice. (emphasis supplied) xxx xxx xxx

A creditor may foreclose on a real estate mortgage only if the debtor fails to pay the principal obligation when it falls due.15 Nonetheless, the foreclosure of a mortgage does not ipso facto extinguish a debtors obligation to his creditor. The proceeds of a sale a t public auction may not be sufficient to extinguish the liability of the former to the latter.16 For this reason, we favor a construction of Section 4 of Act 3135 that affords the creditor greater opportunity to satisfy his claim without unduly rewarding the debtor for not paying his just debt. The word "between" ordinarily means "in the time interval that separates." 17 Thus, "between the hours of nine in the morning and four in the afternoon" merely provides a time frame within which an auction sale may be conducted. Therefore, a sale at public auction held within the intervening period provided by law (i.e., at any time from 9:00 a.m. until 4:00 p.m.) is valid, without regard to the duration or length of time it took the auctioneer to conduct the proceedings. 1avvphi1 In this case, the November 5, 1991 sale at public auction took place from 9:00 a.m. to 9:20 a.m. Since it was conducted within the time frame provided by law, the sale was valid. WHEREFORE, the petition is hereby GRANTED. The November 4, 2004 and February 7, 2005 orders of the Regional Trial Court of Ormoc City, Branch 12 in Civil Case No. 3111-0 are REVERSED and SET ASIDE. SO ORDERED.