On January 5, 1989, private respondents

ZENAIDA M. SANTOS, petitioner,

instituted an action for reconveyance of
vs. CALIXTO SANTOS, ALBERTO
property with preliminary injunction against
SANTOS, ROSA SANTOS-CARREON
petitioner in the Regional Trial Court of Manila,
and ANTONIO SANTOS, respondents.
where they alleged that the two deeds of sale
QUISUMBING, J.: executed on January 19, 1959 and November
20, 1973 were simulated for lack of
This petition for review[1] seeks to annul
consideration. They were executed to
and set aside the decision dated March 10,
accommodate Salvador in generating funds for
1998 of the Court of Appeals that affirmed the
his business ventures and providing him with
decision of the Regional Trial Court of Manila,
greater business flexibility.
Branch 48, dated March 17, 1993. Petitioner
also seeks to annul the resolution that denied In her Answer, Zenaida denied the material
her motion for reconsideration. allegations in the complaint and as special and
affirmative defenses, argued that Salvador was
Petitioner Zenaida M. Santos is the widow
the registered owner of the property, which
of Salvador Santos, a brother of private
could only be subjected to encumbrances or
respondents Calixto, Alberto, Antonio, all
liens annotated on the title; that the
surnamed Santos and Rosa Santos-Carreon.
respondents right to reconveyance was already
The spouses Jesus and Rosalia Santos barred by prescription and laches; and that the
owned a parcel of land registered under TCT complaint stated no cause of action.
No. 27571 with an area of 154 square meters,
On March 17, 1993, the trial court decided
located at Sta. Cruz Manila. On it was a four-
in private respondents favor, thus:
door apartment administered by Rosalia who
rented them out. The spouses had five
WHEREFORE, viewed from all the foregoing
children, Salvador, Calixto, Alberto, Antonio
considerations, judgment is hereby made in
and Rosa.
favor of the plaintiffs and against the
On January 19, 1959, Jesus and Rosalia defendants:
executed a deed of sale of the properties in favor
of their children Salvador and Rosa. TCT No. a) Declaring Exh. B, the deed of sale executed
27571 became TCT No. 60819. Rosa in turn by Rosalia Santos and Jesus Santos on
sold her share to Salvador on November 20, January 19, 1959, as entirely null and void for
1973 which resulted in the issuance of a new being fictitious or simulated and inexistent and
TCT No. 113221. Despite the transfer of the without any legal force and effect;
property to Salvador, Rosalia continued to lease
and receive rentals from the apartment units. b) Declaring Exh. D, the deed of sale executed
by Rosa Santos in favor of Salvador Santos on
On November 1, 1979, Jesus died. Six
November 20, 1973, also as entirely null and
years after or on January 9, 1985, Salvador
void for being likewise fictitious or simulated
died, followed by Rosalia who died the following
and inexistent and without any legal force and
month. Shortly after, petitioner Zenaida,
effect;
claiming to be Salvadors heir, demanded the
rent from Antonio Hombrebueno,[2] a tenant of c) Directing the Register of Deeds of Manila to
Rosalia. When the latter refused to pay, cancel Transfer Certificate of Title No. T-
Zenaida filed an ejectment suit against him 113221 registered in the name of Salvador
with the Metropolitan Trial Court of Manila, Santos, as well as, Transfer Certificate of Title
Branch 24, which eventually decided in No. 60819 in the names of Salvador Santos,
Zenaidas favor. Rosa Santos, and consequently thereafter,
reinstating with the same legal force and effect Filipino custom, petitioner, at least, should
as if the same was not cancelled, and which have shown evidence to prove that her husband
shall in all respects be entitled to like faith and declared the property for tax purposes in his
credit; Transfer Certificate of Title No. T-27571 name or paid the land taxes, acts which
registered in the name of Rosalia A. Santos, strongly indicate control and possession. The
married to Jesus Santos, the same to be appellate court disposed:
partitioned by the heirs of the said registered
owners in accordance with law; and WHEREFORE, finding no reversible error in the
decision appealed from, the same is hereby
d) Making the injunction issued in this case AFFIRMED. No pronouncement as to costs.
permanent.
SO ORDERED.[6]
Without pronouncement as to costs.
Hence, this petition where petitioner avers
SO ORDERED.[3] that the Court of Appeals erred in:
I.
The trial court reasoned that
notwithstanding the deeds of sale transferring
...HOLDING THAT THE OWNERSHIP OVER
the property to Salvador, the spouses Rosalia
THE LITIGATED PROPERTY BY THE LATE
and Jesus continued to possess the property
HUSBAND OF DEFENDANT-APPELLANT WAS
and to exercise rights of ownership not only by
AFFECTED BY HIS FAILURE TO EXERCISE
receiving the monthly rentals, but also by
CERTAIN ATTRIBUTES OF OWNERSHIP.
paying the realty taxes. Also, Rosalia kept the
owners duplicate copy of the title even after it
II
was already in the name of Salvador. Further,
the spouses had no compelling reason in 1959
...HOLDING THAT DUE EXECUTION OF A
to sell the property and Salvador was not PUBLIC INSTRUMENT IS NOT EQUIVALENT
financially capable to purchase it. The deeds of
TO DELIVERY OF THE LAND IN DISPUTE.
sale were therefore fictitious. Hence, the action
to assail the same does not prescribe.[4] III
Upon appeal, the Court of Appeals affirmed
the trial courts decision dated March 10, ...NOT FINDING THAT THE CAUSE OF ACTION
1998. It held that in order for the execution of OF ROSALIA SANTOS HAD PRESCRIBED
a public instrument to effect tradition, as AND/OR BARRED BY LACHES.
provided in Article 1498 of the Civil Code,[5] the
vendor shall have had control over the thing IV
sold, at the moment of sale. It was not enough
to confer upon the purchaser the ownership ...IGNORING PETITIONERS ALLEGATION TO
and the right of possession. The thing sold THE EFFECT THAT PLAINTIFF DR. ROSA [S.]
must be placed in his control. The subject CARREON IS NOT DISQUALIFIED TO TESTIFY
deeds of sale did not confer upon Salvador the AS TO THE QUESTIONED DEEDS OF SALE
ownership over the subject property, because CONSIDERING THAT SALVADOR SANTOS
even after the sale, the original vendors HAS LONG BEEN DEAD.[7]
remained in dominion, control, and possession
In this petition, we are asked to resolve the
thereof. The appellate court further said that if
following:
the reason for Salvadors failure to control and
possess the property was due to his
acquiescence to his mother, in deference to
 1. Are payments of realty taxes and sale, did so out of respect for her and out of
retention of possession indications of generosity, a factual matter beyond the
continued ownership by the original owners? province of this Court.[14]Significantly, in Alcos
vs. IAC, 162 SCRA 823, 837 (1988), we noted
2. Is a sale through a public instrument
that the buyers immediate possession and
tantamount to delivery of the thing sold?
occupation of the property corroborated the
3. Did the cause of action of Rosalia Santos truthfulness and authenticity of the deed of
and her heirs prescribe? sale.Conversely, the vendors continued
possession of the property makes dubious the
4. Can petitioner invoke the Dead Mans
contract of sale between the parties.
Statute?[8]
On the second issue, is a sale through a
On the first issue, petitioner contends that
public instrument tantamount to delivery of the
the Court of Appeals erred in holding that
thing sold? Petitioner in her memorandum
despite the deeds of sale in Salvadors favor,
invokes Article 1477[15] of the Civil Code which
Jesus and Rosalia still owned the property
provides that ownership of the thing sold is
because the spouses continued to pay the
transferred to the vendee upon its actual or
realty taxes and possess the property. She
constructive delivery. Article 1498, in turn,
argues that tax declarations are not conclusive
provides that when the sale is made through a
evidence of ownership when not supported by
public instrument, its execution is equivalent
evidence. She avers that Salvador allowed his
to the delivery of the thing subject of the
mother to possess the property out of respect
contract. Petitioner avers that applying said
to her in accordance with Filipino values.
provisions to the case, Salvador became the
It is true that neither tax receipts nor owner of the subject property by virtue of the
declarations of ownership for taxation purposes two deeds of sale executed in his favor.
constitute sufficient proof of ownership. They
Nowhere in the Civil Code, however, does it
must be supported by other effective
provide that execution of a deed of sale is a
proofs.[9] These requisite proofs we find present
conclusive presumption of delivery of
in this case. As admitted by petitioner, despite
possession. The Code merely said that the
the sale, Jesus and Rosalia continued to
execution shall be equivalent to delivery. The
possess and administer the property and enjoy
presumption can be rebutted by clear and
its fruits by leasing it to third persons.[10] Both
convincing evidence.[16] Presumptive delivery
Rosa and Salvador did not exercise any right of
can be negated by the failure of the vendee to
ownership over it.[11] Before the second deed of
take actual possession of the land sold.[17]
sale to transfer her 1/2 share over the property
was executed by Rosa, Salvador still sought the In Danguilan vs. IAC, 168 SCRA 22, 32
permission of his mother.[12] Further, after (1988), we held that for the execution of a
Salvador registered the property in his name, public instrument to effect tradition, the
he surrendered the title to his mother.[13] These purchaser must be placed in control of the
are clear indications that ownership still thing sold. When there is no impediment to
remained with the original owners. In Serrano prevent the thing sold from converting to
vs. CA, 139 SCRA 179, 189 (1985), we held that tenancy of the purchaser by the sole will of the
the continued collection of rentals from the vendor, symbolic delivery through the
tenants by the seller of realty after execution of execution of a public instrument is
alleged deed of sale is contrary to the notion of sufficient. But if, notwithstanding the
ownership. execution of the instrument, the purchaser
cannot have the enjoyment and material
Petitioner argues that Salvador, in allowing
tenancy nor make use of it himself or through
her mother to use the property even after the
another in his name, then delivery has not been case. The complaint filed by respondents in the
effected. court a quo was for the reconveyance of the
subject property to the estate of Rosalia since
As found by both the trial and appellate
the deeds of sale were simulated and
courts and amply supported by the evidence on
fictitious. The complaint amounts to a
record, Salvador was never placed in control of
declaration of nullity of a void contract, which
the property. The original sellers retained their
is imprescriptible. Hence, respondents cause of
control and possession. Therefore, there was
action has not prescribed.
no real transfer of ownership.
Neither is their action barred by
Moreover, in Norkis Distributors, Inc. vs.
laches. The elements of laches are: 1) conduct
CA, 193 SCRA 694, 698-699 (1991), citing the
on the part of the defendant, or of one under
land case of Abuan vs. Garcia, 14 SCRA 759
whom he claims, giving rise to the situation of
(1965), we held that the critical factor in the
which the complaint seeks a remedy; 2) delay
different modes of effecting delivery, which
in asserting the complainants rights, the
gives legal effect to the act is the actual
complainant having had knowledge or notice of
intention of the vendor to deliver, and its
the defendants conduct as having been
acceptance by the vendee. Without that
afforded an opportunity to institute a suit; 3)
intention, there is no tradition. In the instant
lack of knowledge or notice on the part of the
case, although the spouses Jesus and Rosalia
defendant that the complainant would assert
executed a deed of sale, they did not deliver the
the right in which he bases his suit; and 4)
possession and ownership of the property to
injury or prejudice to the defendant in the event
Salvador and Rosa. They agreed to execute a
relief is accorded to the complainant, or the suit
deed of sale merely to accommodate Salvador
is not held barred.[18] These elements must all
to enable him to generate funds for his
be proved positively. The conduct which caused
business venture.
the complaint in the court a quo was
On the third issue, petitioner argues that petitioners assertion of right of ownership as
from the date of the sale from Rosa to Salvador heir of Salvador. This started in December
on November 20, 1973, up to his death on 1985 when petitioner demanded payment of
January 9, 1985, more or less twelve years had the lease rentals from Antonio Hombrebueno,
lapsed, and from his death up to the filing of the tenant of the apartment units. From
the case for reconveyance in the court a quo on December 1985 up to the filing of the complaint
January 5, 1989, four years had lapsed. In for reconveyance on January 5, 1989, only less
other words, it took respondents about sixteen than four years had lapsed which we do not
years to file the case below. Petitioner argues think is unreasonable delay sufficient to bar
that an action to annul a contract for lack of respondents cause of action. We likewise find
consideration prescribes in ten years and even the fourth element lacking. Neither petitioner
assuming that the cause of action has not nor her husband made considerable
prescribed, respondents are guilty of laches for investments on the property from the time it
their inaction for a long period of time. was allegedly transferred to the latter. They
also did not enter into transactions involving
Has respondents cause of action
the property since they did not claim ownership
prescribed? In Lacsamana vs. CA, 288 SCRA
of it until December 1985. Petitioner stood to
287, 292 (1998), we held that the right to file
lose nothing. As we held in the same case
an action for reconveyance on the ground that
of Lacsamana vs. CA, cited above, the concept
the certificate of title was obtained by means of
of laches is not concerned with the lapse of time
a fictitious deed of sale is virtually an action for
but only with the effect of unreasonable
the declaration of its nullity, which does not
lapse. In this case, the alleged 16 years of
prescribe. This applies squarely to the present
respondents inaction has no adverse effect on
the petitioner to make respondents guilty of G.R. No. 92989 July 8, 1991
laches.
PERFECTO DY, JR. petitioner,
Lastly, petitioner in her memorandum
vs.
seeks to expunge the testimony of Rosa Santos-
COURT OF APPEALS, GELAC TRADING INC.,
Carreon before the trial court in view of Sec. 23,
and ANTONIO V. GONZALES, respondents.
Rule 130 of the Revised Rules of Court,
otherwise known as the Dead Mans
GUTIERREZ, JR., J.:
Statute.[19] It is too late for petitioner, however,
to invoke said rule. The trial court in its order This is a petition for review on certiorari seeking
dated February 5, 1990, denied petitioners the reversal of the March 23, 1990 decision of
motion to disqualify respondent Rosa as a the Court of Appeals which ruled that the
witness.Petitioner did not appeal petitioner's purchase of a farm tractor was not
therefrom. Trial ensued and Rosa testified as a validly consummated and ordered a complaint
witness for respondents and was cross- for its recovery dismissed.
examined by petitioners counsel. By her failure
to appeal from the order allowing Rosa to The facts as established by the records are as
testify, she waived her right to invoke the dead follows:
mans statute. Further, her counsel cross-
examined Rosa on matters that occurred The petitioner, Perfecto Dy and Wilfredo Dy are
during Salvadors lifetime. In Goi vs. CA, 144 brothers. Sometime in 1979, Wilfredo Dy
SCRA 222, 231 (1986), we held that protection purchased a truck and a farm tractor through
under the dead mans statute is effectively financing extended by Libra Finance and
waived when a counsel for a petitioner cross- Investment Corporation (Libra). Both truck and
examines a private respondent on matters tractor were mortgaged to Libra as security for
occurring during the deceaseds lifetime. The the loan.
Court of Appeals cannot be faulted in ignoring
petitioner on Rosas disqualification. The petitioner wanted to buy the tractor from
WHEREFORE, the instant petition is his brother so on August 20, 1979, he wrote a
DENIED. The assailed decision dated March letter to Libra requesting that he be allowed to
10, 1998 of the Court of Appeals, which purchase from Wilfredo Dy the said tractor and
sustained the judgment of the Regional Trial assume the mortgage debt of the latter.
Court dated March 17, 1993, in favor of herein
private respondents, is AFFIRMED. Costs In a letter dated August 27, 1979, Libra thru its
against petitioner. manager, Cipriano Ares approved the
petitioner's request.
SO ORDERED.
Thus, on September 4, 1979, Wilfredo Dy
executed a deed of absolute sale in favor of the
petitioner over the tractor in question.

At this time, the subject tractor was in the

possession of Libra Finance due to Wilfredo
Dy's failure to pay the amortizations.

Despite the offer of full payment by the

petitioner to Libra for the tractor, the
immediate release could not be effected
because Wilfredo Dy had obtained financing
not only for said tractor but also for a truck and return the same to the plaintiff herein;
Libra insisted on full payment for both. directing the defendants jointly and
severally to pay to the plaintiff the
The petitioner was able to convince his sister, amount of P1,541.00 as expenses for
Carol Dy-Seno, to purchase the truck so that hiring a tractor; P50,000 for moral
full payment could be made for both. On damages; P50,000 for exemplary
November 22, 1979, a PNB check was issued in damages; and to pay the cost. (Rollo, pp.
the amount of P22,000.00 in favor of Libra, 35-36)
thus settling in full the indebtedness of
Wilfredo Dy with the financing firm. Payment On appeal, the Court of Appeals reversed the
having been effected through an out-of-town decision of the RTC and dismissed the
check, Libra insisted that it be cleared first complaint with costs against the petitioner. The
before Libra could release the chattels in Court of Appeals held that the tractor in
question. question still belonged to Wilfredo Dy when it
was seized and levied by the sheriff by virtue of
Meanwhile, Civil Case No. R-16646 entitled the alias writ of execution issued in Civil Case
"Gelac Trading, Inc. v. Wilfredo Dy", a collection No. R-16646.
case to recover the sum of P12,269.80 was
pending in another court in Cebu. The petitioner now comes to the Court raising
the following questions:
On the strength of an alias writ of execution
issued on December 27, 1979, the provincial A.
sheriff was able to seize and levy on the tractor
which was in the premises of Libra in Carmen, WHETHER OR NOT THE HONORABLE
Cebu. The tractor was subsequently sold at COURT OF APPEALS
public auction where Gelac Trading was the MISAPPREHENDED THE FACTS AND
lone bidder. Later, Gelac sold the tractor to one ERRED IN NOT AFFIRMING THE TRIAL
of its stockholders, Antonio Gonzales. COURT'S FINDING THAT OWNERSHIP
OF THE FARM TRACTOR HAD
It was only when the check was cleared on ALREADY PASSED TO HEREIN
January 17, 1980 that the petitioner learned PETITIONER WHEN SAID TRACTOR
about GELAC having already taken custody of WAS LEVIED ON BY THE SHERIFF
the subject tractor. Consequently, the PURSUANT TO AN ALIAS WRIT OF
petitioner filed an action to recover the subject EXECUTION ISSUED IN ANOTHER
tractor against GELAC Trading with the CASE IN FAVOR OF RESPONDENT
Regional Trial Court of Cebu City. GELAC TRADING INC.

On April 8, 1988, the RTC rendered judgment B.

in favor of the petitioner. The dispositive
portion of the decision reads as follows: WHETHER OR NOT THE HONORABLE
COURT OF APPEALS EMBARKED ON
WHEREFORE, judgment is hereby MERE CONJECTURE AND SURMISE IN
rendered in favor of the plaintiff and HOLDING THAT THE SALE OF THE
against the defendant, pronouncing that AFORESAID TRACTOR TO PETITIONER
the plaintiff is the owner of the tractor, WAS DONE IN FRAUD OF WILFREDO
subject matter of this case, and directing DY'S CREDITORS, THERE BEING NO
the defendants Gelac Trading EVIDENCE OF SUCH FRAUD AS
Corporation and Antonio Gonzales to FOUND BY THE TRIAL COURT.
C. later, by purchase or otherwise, acquire
the properties referred to therein.
WHETHER OR NOT THE HONORABLE
COURT OF APPEALS The absence of the written consent of the
MISAPPREHENDED THE FACTS AND mortgagee to the sale of the mortgaged
ERRED IN NOT SUSTAINING THE property in favor of a third person,
FINDING OF THE TRIAL COURT THAT therefore, affects not the validity of the
THE SALE OF THE TRACTOR BY sale but only the penal liability of the
RESPONDENT GELAC TRADING TO ITS mortgagor under the Revised Penal Code
CO-RESPONDENT ANTONIO V. and the binding effect of such sale on the
GONZALES ON AUGUST 2, 1980 AT mortgagee under the Deed of Chattel
WHICH TIME BOTH RESPONDENTS Mortgage.
ALREADY KNEW OF THE FILING OF
THE INSTANT CASE WAS VIOLATIVE xxx xxx xxx
OF THE HUMAN RELATIONS
PROVISIONS OF THE CIVIL CODE AND The mortgagor who gave the property as
RENDERED THEM LIABLE FOR THE security under a chattel mortgage did not part
MORAL AND EXEMPLARY DAMAGES with the ownership over the same. He had the
SLAPPED AGAINST THEM BY THE right to sell it although he was under the
TRIAL COURT. (Rollo, p. 13) obligation to secure the written consent of the
mortgagee or he lays himself open to criminal
The respondents claim that at the time of the prosecution under the provision of Article 319
execution of the deed of sale, no constructive par. 2 of the Revised Penal Code. And even if no
delivery was effected since the consummation consent was obtained from the mortgagee, the
of the sale depended upon the clearance and validity of the sale would still not be affected.
encashment of the check which was issued in
payment of the subject tractor. Thus, we see no reason why Wilfredo Dy, as the
chattel mortgagor can not sell the subject
In the case of Servicewide Specialists Inc. v. tractor. There is no dispute that the consent of
Intermediate Appellate Court. (174 SCRA 80 Libra Finance was obtained in the instant case.
[1989]), we stated that: In a letter dated August 27, 1979, Libra allowed
the petitioner to purchase the tractor and
xxx xxx xxx assume the mortgage debt of his brother. The
sale between the brothers was therefore valid
The rule is settled that the chattel and binding as between them and to the
mortgagor continues to be the owner of mortgagee, as well.
the property, and therefore, has the
power to alienate the same; however, he Article 1496 of the Civil Code states that the
is obliged under pain of penal liability, to ownership of the thing sold is acquired by the
secure the written consent of the vendee from the moment it is delivered to him
mortgagee. (Francisco, Vicente, Jr., in any of the ways specified in Articles 1497 to
Revised Rules of Court in the 1501 or in any other manner signing an
Philippines, (1972), Volume IV-B Part 1, agreement that the possession is transferred
p. 525). Thus, the instruments of from the vendor to the vendee. We agree with
mortgage are binding, while they the petitioner that Articles 1498 and 1499 are
subsist, not only upon the parties applicable in the case at bar.
executing them but also upon those who
Article 1498 states:
 Art. 1498. When the sale is made tractor, his right of ownership was not divested
through a public instrument, the from him upon his default. Neither could it be
execution thereof shall be equivalent to said that Libra was the owner of the subject
the delivery of the thing which is the tractor because the mortgagee can not become
object of the contract, if from the deed the owner of or convert and appropriate to
the contrary does not appear or cannot himself the property mortgaged. (Article 2088,
clearly be inferred. Civil Code) Said property continues to belong to
the mortgagor. The only remedy given to the
xxx xxx xxx mortgagee is to have said property sold at
public auction and the proceeds of the sale
Article 1499 provides: applied to the payment of the obligation
secured by the mortgagee. (See Martinez v.
Article 1499. The delivery of movable PNB, 93 Phil. 765, 767 [1953]) There is no
property may likewise be made by the showing that Libra Finance has already
mere consent or agreement of the foreclosed the mortgage and that it was the new
contracting parties, if the thing sold owner of the subject tractor. Undeniably, Libra
cannot be transferred to the possession gave its consent to the sale of the subject
of the vendee at the time of the sale, or if tractor to the petitioner. It was aware of the
the latter already had it in his transfer of rights to the petitioner.
possession for any other reason. (1463a)
Where a third person purchases the mortgaged
In the instant case, actual delivery of the property, he automatically steps into the shoes
subject tractor could not be made. However, of the original mortgagor. (See Industrial
there was constructive delivery already upon Finance Corp. v. Apostol, 177 SCRA 521
the execution of the public instrument [1989]). His right of ownership shall be subject
pursuant to Article 1498 and upon the consent to the mortgage of the thing sold to him. In the
or agreement of the parties when the thing sold case at bar, the petitioner was fully aware of the
cannot be immediately transferred to the existing mortgage of the subject tractor to
possession of the vendee. (Art. 1499) Libra. In fact, when he was obtaining Libra's
consent to the sale, he volunteered to assume
The respondent court avers that the vendor the remaining balance of the mortgage debt of
must first have control and possession of the Wilfredo Dy which Libra undeniably agreed to.
thing before he could transfer ownership by
constructive delivery. Here, it was Libra The payment of the check was actually
Finance which was in possession of the subject intended to extinguish the mortgage obligation
tractor due to Wilfredo's failure to pay the so that the tractor could be released to the
amortization as a preliminary step to petitioner. It was never intended nor could it be
foreclosure. As mortgagee, he has the right of considered as payment of the purchase price
foreclosure upon default by the mortgagor in because the relationship between Libra and the
the performance of the conditions mentioned in petitioner is not one of sale but still a mortgage.
the contract of mortgage. The law implies that The clearing or encashment of the check which
the mortgagee is entitled to possess the produced the effect of payment determined the
mortgaged property because possession is full payment of the money obligation and the
necessary in order to enable him to have the release of the chattel mortgage. It was not
property sold. determinative of the consummation of the sale.
The transaction between the brothers is
While it is true that Wilfredo Dy was not in distinct and apart from the transaction
actual possession and control of the subject between Libra and the petitioner. The
contention, therefore, that the consummation Moreover, fraud can not be presumed; it must
of the sale depended upon the encashment of be established by clear convincing evidence.
the check is untenable.
We agree with the trial court's findings that the
The sale of the subject tractor was actuations of GELAC Trading were indeed
consummated upon the execution of the public violative of the provisions on human relations.
instrument on September 4, 1979. At this time As found by the trial court, GELAC knew very
constructive delivery was already effected. well of the transfer of the property to the
Hence, the subject tractor was no longer owned petitioners on July 14, 1980 when it received
by Wilfredo Dy when it was levied upon by the summons based on the complaint for replevin
sheriff in December, 1979. Well settled is the filed with the RTC by the petitioner.
rule that only properties unquestionably owned Notwithstanding said summons, it continued
by the judgment debtor and which are not to sell the subject tractor to one of its
exempt by law from execution should be levied stockholders on August 2, 1980.
upon or sought to be levied upon. For the power
of the court in the execution of its judgment WHEREFORE, the petition is hereby
extends only over properties belonging to the GRANTED. The decision of the Court of Appeals
judgment debtor. (Consolidated Bank and promulgated on March 23, 1990 is SET ASIDE
Trust Corp. v. Court of Appeals, G.R. No. and the decision of the Regional Trial Court
78771, January 23, 1991). dated April 8, 1988 is REINSTATED.

The respondents further claim that at that time SO ORDERED.

the sheriff levied on the tractor and took legal
custody thereof no one ever protested or filed a G.R. No. L-12342 August 3, 1918
third party claim.
A. A. ADDISON, plaintiff-appellant,
It is inconsequential whether a third party vs.
claim has been filed or not by the petitioner MARCIANA FELIX and BALBINO
during the time the sheriff levied on the subject TIOCO, defendants-appellees.
tractor. A person other than the judgment
debtor who claims ownership or right over FISHER, J.:
levied properties is not precluded, however,
from taking other legal remedies to prosecute By a public instrument dated June 11, 1914,
his claim. (Consolidated Bank and Trust Corp. the plaintiff sold to the defendant Marciana
v. Court of Appeals, supra) This is precisely Felix, with the consent of her husband, the
what the petitioner did when he filed the action defendant Balbino Tioco, four parcels of land,
for replevin with the RTC. described in the instrument. The defendant
Felix paid, at the time of the execution of the
Anent the second and third issues raised, the deed, the sum of P3,000 on account of the
Court accords great respect and weight to the purchase price, and bound herself to pay the
findings of fact of the trial court.1wphi1 There remainder in installments, the first of P2,000
is no sufficient evidence to show that the sale on July 15, 1914, and the second of P5,000
of the tractor was in fraud of Wilfredo and thirty days after the issuance to her of a
creditors. While it is true that Wilfredo and certificate of title under the Land Registration
Perfecto are brothers, this fact alone does not Act, and further, within ten years from the date
give rise to the presumption that the sale was of such title P10, for each coconut tree in
fraudulent. Relationship is not a badge of fraud bearing and P5 for each such tree not in
(Goquiolay v. Sycip, 9 SCRA 663 [1963]). bearing, that might be growing on said four
parcels of land on the date of the issuance of
title to her, with the condition that the total accompanied by a representative of the latter,
price should not exceed P85,000. It was further for the purpose of designating and delivering
stipulated that the purchaser was to deliver to the lands sold. He was able to designate only
the vendor 25 per centum of the value of the two of the four parcels, and more than two-
products that she might obtain from the four thirds of these two were found to be in the
parcels "from the moment she takes possession possession of one Juan Villafuerte, who
of them until the Torrens certificate of title be claimed to be the owner of the parts so
issued in her favor." occupied by him. The plaintiff admitted that the
purchaser would have to bring suit to obtain
It was also covenanted that "within one year possession of the land (sten. notes, record, p.
from the date of the certificate of title in favor of 5). In August, 1914, the surveyor Santamaria
Marciana Felix, this latter may rescind the went to Lucena, at the request of the plaintiff
present contract of purchase and sale, in which and accompanied by him, in order to survey the
case Marciana Felix shall be obliged to return land sold to the defendant; but he surveyed
to me, A. A. Addison, the net value of all the only two parcels, which are those occupied
products of the four parcels sold, and I shall mainly by the brothers Leon and Julio
obliged to return to her, Marciana Felix, all the Villafuerte. He did not survey the other parcels,
sums that she may have paid me, together with as they were not designated to him by the
interest at the rate of 10 per cent per annum." plaintiff. In order to make this survey it was
necessary to obtain from the Land Court a writ
In January, 1915, the vendor, A. A. Addison, of injunction against the occupants, and for the
filed suit in Court of First Instance of Manila to purpose of the issuance of this writ the
compel Marciana Felix to make payment of the defendant, in June, 1914, filed an application
first installment of P2,000, demandable in with the Land Court for the registration in her
accordance with the terms of the contract of name of four parcels of land described in the
sale aforementioned, on July 15, 1914, and of deed of sale executed in her favor by the
the interest in arrears, at the stipulated rate of plaintiff. The proceedings in the matter of this
8 per cent per annum. The defendant, jointly application were subsequently dismissed, for
with her husband, answered the complaint and failure to present the required plans within the
alleged by way of special defense that the period of the time allowed for the purpose.
plaintiff had absolutely failed to deliver to the
defendant the lands that were the subject The trial court rendered judgment in behalf of
matter of the sale, notwithstanding the the defendant, holding the contract of sale to be
demands made upon him for this purpose. She rescinded and ordering the return to the
therefore asked that she be absolved from the plaintiff the P3,000 paid on account of the
complaint, and that, after a declaration of the price, together with interest thereon at the rate
rescission of the contract of the purchase and of 10 per cent per annum. From this judgment
sale of said lands, the plaintiff be ordered to the plaintiff appealed.
refund the P3,000 that had been paid to him on
account, together with the interest agreed In decreeing the rescission of the contract, the
upon, and to pay an indemnity for the losses trial judge rested his conclusion solely on the
and damages which the defendant alleged she indisputable fact that up to that time the lands
had suffered through the plaintiff's non- sold had not been registered in accordance with
fulfillment of the contract. the Torrens system, and on the terms of the
second paragraph of clause (h) of the contract,
The evidence adduced shows that after the whereby it is stipulated that ". . . within one
execution of the deed of the sale the plaintiff, at year from the date of the certificate of title in
the request of the purchaser, went to Lucena, favor of Marciana Felix, this latter may rescind
the present contract of purchase and sale . . . declares that the execution of a public
." instruments is equivalent to the delivery of the
thing which is the object of the contract, but, in
The appellant objects, and rightly, that the order that this symbolic delivery may produce
cross-complaint is not founded on the the effect of tradition, it is necessary that the
hypothesis of the conventional rescission relied vendor shall have had such control over the
upon by the court, but on the failure to deliver thing sold that, at the moment of the sale, its
the land sold. He argues that the right to material delivery could have been made. It is
rescind the contract by virtue of the special not enough to confer upon the purchaser
agreement not only did not exist from the the ownership and the right of possession. The
moment of the execution of the contract up to thing sold must be placed in his control. When
one year after the registration of the land, but there is no impediment whatever to prevent the
does not accrue until the land is registered. The thing sold passing into the tenancy of the
wording of the clause, in fact, substantiates the purchaser by the sole will of the vendor,
contention. The one year's deliberation granted symbolic delivery through the execution of a
to the purchaser was to be counted "from the public instrument is sufficient. But if,
date of the certificate of title ... ." Therefore the notwithstanding the execution of the
right to elect to rescind the contract was instrument, the purchaser cannot have the
subject to a condition, namely, the issuance of enjoyment and material tenancy of the thing
the title. The record show that up to the present and make use of it himself or through another
time that condition has not been fulfilled; in his name, because such tenancy and
consequently the defendant cannot be heard to enjoyment are opposed by the interposition of
invoke a right which depends on the existence another will, then fiction yields to reality the
of that condition. If in the cross-complaint it delivery has not been effected.
had been alleged that the fulfillment of the
condition was impossible for reasons imputable As Dalloz rightly says (Gen. Rep., vol. 43, p.
to the plaintiff, and if this allegation had been 174) in his commentaries on article 1604 of the
proven, perhaps the condition would have been French Civil code, "the word "delivery"
considered as fulfilled (arts. 1117, 1118, and expresses a complex idea . . . the abandonment
1119, Civ. Code); but this issue was not of the thing by the person who makes the
presented in the defendant's answer. delivery and the taking control of it by the
person to whom the delivery is made."
However, although we are not in agreement
with the reasoning found in the decision The execution of a public instrument is
appealed from, we consider it to be correct in sufficient for the purposes of the abandonment
its result. The record shows that the plaintiff made by the vendor; but it is not always
did not deliver the thing sold. With respect to sufficient to permit of the apprehension of the
two of the parcels of land, he was not even able thing by the purchaser.
to show them to the purchaser; and as regards
the other two, more than two-thirds of their The supreme court of Spain, interpreting article
area was in the hostile and adverse possession 1462 of the Civil Code, held in its decision of
of a third person. November 10, 1903, (Civ. Rep., vol. 96, p. 560)
that this article "merely declares that when the
The Code imposes upon the vendor the sale is made through the means of a public
obligation to deliver the thing sold. The thing is instrument, the execution of this latter is
considered to be delivered when it is placed "in equivalent to the delivery of the thing sold:
the hands and possession of the vendee." (Civ. which does not and cannot mean that this
Code, art. 1462.) It is true that the same article fictitious tradition necessarily implies the real
tradition of the thing sold, for it is the assumption that she was to have, during
incontrovertible that, while its ownership still said period, the material possession and
pertains to the vendor (and with greater reason enjoyment of the four parcels of land.
if it does not), a third person may be in
possession of the same thing; wherefore, Inasmuch as the rescission is made by virtue of
though, as a general rule, he who purchases by the provisions of law and not by contractual
means of a public instrument should be agreement, it is not the conventional but the
deemed . . . to be the possessor in fact, yet this legal interest that is demandable.
presumption gives way before proof to the
contrary." It is therefore held that the contract of
purchase and sale entered into by and between
It is evident, then, in the case at bar, that the the plaintiff and the defendant on June 11,
mere execution of the instrument was not a 1914, is rescinded, and the plaintiff is ordered
fulfillment of the vendors' obligation to deliver to make restitution of the sum of P3,000
the thing sold, and that from such non- received by him on account of the price of the
fulfillment arises the purchaser's right to sale, together with interest thereon at the legal
demand, as she has demanded, the rescission rate of 6 per annum from the date of the filing
of the sale and the return of the price. (Civ. of the complaint until payment, with the costs
Code, arts. 1506 and 1124.) of both instances against the appellant. So
ordered.
Of course if the sale had been made under the
express agreement of imposing upon the Torres, Johnson, Street, Malcolm and Avancea,
purchaser the obligation to take the necessary JJ., concur.
steps to obtain the material possession of the
thing sold, and it were proven that she knew FELIX DANGUILAN, petitioner,
that the thing was in the possession of a third vs.
person claiming to have property rights therein, INTERMEDIATE APPELLATE COURT,
such agreement would be perfectly valid. But APOLONIA MELAD, assisted by her husband,
there is nothing in the instrument which would JOSE TAGACAY, respondents.
indicate, even implicitly, that such was the
agreement. It is true, as the appellant argues, CRUZ, J.:
that the obligation was incumbent upon the
defendant Marciana Felix to apply for and The subject of this dispute is the two lots owned
obtain the registration of the land in the new by Domingo Melad which is claimed by both the
registry of property; but from this it cannot be petitioner and the respondent. The trial court
concluded that she had to await the final believed the petitioner but the respondent
decision of the Court of Land Registration, in court, on appeal, upheld the respondent. The
order to be able to enjoy the property sold. On case is now before us for a resolution of the
the contrary, it was expressly stipulated in the issues once and for all.
contract that the purchaser should deliver to
the vendor one-fourth "of the products ... of the On January 29, 1962, the respondent filed a
aforesaid four parcels from the moment when complaint against the petitioner in the then
she takes possession of them until the Torrens Court of First Instance of Cagayan for recovery
certificate of title be issued in her favor." This of a farm lot and a residential lot which she
obviously shows that it was not forseen that the claimed she had purchased from Domingo
purchaser might be deprived of her possession Melad in 1943 and were now being unlawfully
during the course of the registration withheld by the defendant. 1 In his answer, the
proceedings, but that the transaction rested on petitioner denied the allegation and averred
that he was the owner of the said lots of which
he had been in open, continuous and adverse plaintiff nor her mother lived in the land with
possession, having acquired them from Domingo Melad. 8
Domingo Melad in 1941 and 1943. 2 The case
was dismissed for failure to prosecute but was The decision of the trial court was based mainly
refiled in 1967. 3 on the issue of possession. Weighing the
evidence presented by the parties, the
At the trial, the plaintiff presented a deed of sale judge 9 held that the defendant was more
dated December 4, 1943, purportedly signed by believable and that the plaintiff's evidence was
Domingo Melad and duly notarized, which "unpersuasive and unconvincing." It was held
conveyed the said properties to her for the sum that the plaintiff's own declaration that she
of P80.00. 4 She said the amount was earned moved out of the property in 1946 and left it in
by her mother as a worker at the Tabacalera the possession of the defendant was
factory. She claimed to be the illegitimate contradictory to her claim of ownership. She
daughter of Domingo Melad, with whom she was also inconsistent when she testified first
and her mother were living when he died in that the defendant was her tenant and later in
1945. She moved out of the farm only when in rebuttal that he was her administrator. The
1946 Felix Danguilan approached her and decision concluded that where there was doubt
asked permission to cultivate the land and to as to the ownership of the property, the
stay therein. She had agreed on condition that presumption was in favor of the one actually
he would deliver part of the harvest from the occupying the same, which in this case was the
farm to her, which he did from that year to defendant. 10
1958. The deliveries having stopped, she then
consulted the municipal judge who advised her The review by the respondent court 11 of this
to file the complaint against Danguilan. The decision was manifestly less than thorough.
plaintiff 's mother, her only other witness, For the most part it merely affirmed the factual
corroborated this testimony. 5 findings of the trial court except for an
irrelevant modification, and it was only toward
For his part, the defendant testified that he was the end that it went to and resolved what it
the husband of Isidra Melad, Domingo's niece, considered the lone decisive issue.
whom he and his wife Juana Malupang had
taken into their home as their ward as they had The respondent court held that Exhibits 2-b
no children of their own. He and his wife lived and 3-a, by virtue of which Domingo Melad had
with the couple in their house on the residential conveyed the two parcels of land to the
lot and helped Domingo with the cultivation of petitioner, were null and void. The reason was
the farm. Domingo Melad signed in 1941 a that they were donations of real property and
private instrument in which he gave the as such should have been effected through a
defendant the farm and in 1943 another private public instrument. It then set aside the
instrument in which he also gave him the appealed decision and declared the
residential lot, on the understanding that the respondents the true and lawful owners of the
latter would take care of the grantor and would disputed property.
bury him upon his death. 6 Danguilan
presented three other witnesses 7 to The said exhibits read as follows:
corroborate his statements and to prove that he
had been living in the land since his marriage EXHIBIT 2-b is quoted as
to Isidra and had remained in possession follows: 12
thereof after Domingo Melad's death in 1945.
Two of said witnesses declared that neither the I, DOMINGO MELAD, of legal age,
married, do hereby declare in this
receipt the truth of my giving to Centro, Penablanca, Cagayan, to
Felix Danguilan, my agricultural Felix Danguilan, my son-in-law
land located at Barrio Fugu- because I have no child; that I
Macusi, Penablanca, Province of have thought of giving him my
Cagayan, Philippine Islands; that land because he will be the one to
this land is registered under my take care of SHELTERING me or
name; that I hereby declare and bury me when I die and this is
bind myself that there is no one to why I have thought of executing
whom I will deliver this land this document; that the
except to him as he will be the one boundaries of this lot ison the
responsible for me in the event east, Cresencio Danguilan; on the
that I will die and also for all other north, Arellano Street; on the
things needed and necessary for south by Pastor Lagundi and on
me, he will be responsible the west, Pablo Pelagio and the
because of this land I am giving to area of this lot is 35 meters going
him; that it is true that I have south; width and length
nieces and nephews but they are beginning west to east is 40
not living with us and there is no meters.
one to whom I will give my land
except to Felix Danguilan for he IN WITNESS HEREOF, I hereby
lives with me and this is the sign this receipt this 18th day of
length175 m. and the width is December 1943.
150 m.
(SGD.) DOMINGO MELAD
IN WITNESS WHEREOF, I hereby
sign my name below and also WITNESSES:
those present in the execution of
this receipt this 14th day of (SGD.) ILLEGIBLE
September 1941. (SGD.) DANIEL
ARAO
Penablanca Cagayan, September
14, 1941. It is our view, considering the language of the
two instruments, that Domingo Melad did
(SGD.) DOMINGO MELAD intend to donate the properties to the
petitioner, as the private respondent contends.
WITNESSES: We do not think, however, that the donee was
1. (T.M.) ISIDRO MELAD moved by pure liberality. While truly donations,
2. (SGD.) FELIX DANGUILAN the conveyances were onerous donations as the
3. (T.M.) ILLEGIBLE properties were given to the petitioner in
exchange for his obligation to take care of the
EXHIBIT 3-a is quoted as donee for the rest of his life and provide for his
follows: 13 burial. Hence, it was not covered by the rule in
Article 749 of the Civil Code requiring
I, DOMINGO MELAD, a resident donations of real properties to be effected
of Centro, Penablanca, Province through a public instrument. The case at bar
of Cagayan, do hereby swear and comes squarely under the doctrine laid down
declare the truth that I have in Manalo v. De Mesa, 14 where the Court held:
delivered my residential lot at
 There can be no doubt that the that made the transaction an onerous
donation in question was made donation.
for a valuable consideration,
since the donors made it Regarding the private respondent's claim that
conditional upon the donees' she had purchased the properties by virtue of a
bearing the expenses that might deed of sale, the respondent court had only the
be occasioned by the death and following to say: "Exhibit 'E' taken together with
burial of the donor Placida the documentary and oral evidence shows that
Manalo, a condition and the preponderance of evidence is in favor of the
obligation which the donee appellants." This was, we think, a rather
Gregorio de Mesa carried out in superficial way of resolving such a basic and
his own behalf and for his wife important issue.
Leoncia Manalo; therefore, in
order to determine whether or not The deed of sale was allegedly executed when
said donation is valid and the respondent was only three years old and
effective it should be sufficient to the consideration was supposedly paid by her
demonstrate that, as a contract, it mother, Maria Yedan from her earnings as a
embraces the conditions the law wage worker in a factory. 16 This was itself a
requires and is valid and effective, suspicious circumstance, one may well wonder
although not recorded in a public why the transfer was not made to the mother
instrument. herself, who was after all the one paying for the
lands. The sale was made out in favor of
The private respondent argues that as there Apolonia Melad although she had been using
was no equivalence between the value of the the surname Yedan her mother's surname,
lands donated and the services for which they before that instrument was signed and in fact
were being exchanged, the two transactions even after she got married. 17The averment was
should be considered pure or gratuitous also made that the contract was simulated and
donations of real rights, hence, they should prepared after Domingo Melad's death in
have been effected through a public instrument 1945. 18It was also alleged that even after the
and not mere private writings. However, no supposed execution of the said contract, the
evidence has been adduced to support her respondent considered Domingo Melad the
contention that the values exchanged were owner of the properties and that she had never
disproportionate or unequal. occupied the same. 19

On the other hand, both the trial court and the Considering these serious challenges, the
respondent court have affirmed the factual appellate court could have devoted a little more
allegation that the petitioner did take care of time to examining Exhibit "E" and the
Domingo Melad and later arranged for his circumstances surrounding its execution
burial in accordance with the condition before pronouncing its validity in the manner
imposed by the donor. It is alleged and not described above. While it is true that the due
denied that he died when he was almost one execution of a public instrument is presumed,
hundred years old, 15 which would mean that the presumption is disputable and will yield to
the petitioner farmed the land practically by contradictory evidence, which in this case was
himself and so provided for the donee (and his not refuted.
wife) during the latter part of Domingo Melad's
life. We may assume that there was a fair At any rate, even assuming the validity of the
exchange between the donor and the donee deed of sale, the record shows that the private
respondent did not take possession of the
disputed properties and indeed waited until Therefore, in our Civil Code it is a
1962 to file this action for recovery of the lands fundamental principle in all
from the petitioner. If she did have possession, matters of contracts and a well-
she transferred the same to the petitioner in known doctrine of law that "non
1946, by her own sworn admission, and moved mudis pactis sed traditione
out to another lot belonging to her step- dominia rerum transferuntur". In
brother. 20 Her claim that the petitioner was conformity with said doctrine as
her tenant (later changed to administrator) was established in paragraph 2 of
disbelieved by the trial court, and properly so, article 609 of said code, that "the
for its inconsistency. In short, she failed to ownership and other property
show that she consummated the contract of rights are acquired and
sale by actual delivery of the properties to her transmitted by law, by gift, by
and her actual possession thereof in concept of testate or intestate succession,
purchaser-owner. and, in consequence of certain
contracts, by tradition". And as
As was held in Garchitorena v. Almeda: 21 the logical application of this
disposition article 1095
Since in this jurisdiction it is a prescribes the following: "A
fundamental and elementary creditor has the rights to the
principle that ownership does not fruits of a thing from the time the
pass by mere stipulation but only obligation to deliver it arises.
by delivery (Civil Code, Art. 1095; However, he shall not acquire a
Fidelity and Surety Co. v. Wilson, real right" (and the ownership is
8 Phil. 51), and the execution of a surely such) "until the property
public document does not has been delivered to him."
constitute sufficient delivery
where the property involved is in In accordance with such
the actual and adverse disposition and provisions the
possession of third persons delivery of a thing constitutes a
(Addison vs. Felix, 38 Phil. 404; necessary and indispensable
Masallo vs. Cesar, 39 Phil. 134), it requisite for the purpose of
becomes incontestable that even acquiring the ownership of the
if included in the contract, the same by virtue of a contract. As
ownership of the property in Manresa states in his
dispute did not pass thereby to Commentaries on the Civil Code,
Mariano Garchitorena. Not volume 10, pages 339 and 340:
having become the owner for lack "Our law does not admit the
of delivery, Mariano Garchitorena doctrine of the transfer of
cannot presume to recover the property by mere consent but
property from its present limits the effect of the agreement
possessors. His action, therefore, to the due execution of the
is not one of revindicacion, but contract. ... The ownership, the
one against his vendor for specific property right, is only derived
performance of the sale to him. from the delivery of a thing ... "

In the aforecited case of Fidelity and Deposit Co. As for the argument that symbolic delivery was
v. Wilson, 22 Justice Mapa declared for the effected through the deed of sale, which was a
Court: public instrument, the Court has held:
 The Code imposes upon the decision should still incline in favor of the
vendor the obligation petitioner pursuant to the doctrine announced
to deliver the thing sold. The in Santos & Espinosa v. Estejada 24 where the
thing is considered to be delivered Court announced:
when it is placed "in the hands
and possession of the vendee." If the claim of both the plaintiff
(Civil Code, art. 1462). It is true and the defendant are weak,
that the same article declares that judgment must be for the
the execution of a public defendant, for the latter being in
instrument is equivalent to the possession is presumed to be the
delivery of the thing which is the owner, and cannot be obliged to
object of the contract, but, in show or prove a better right.
order that this symbolic delivery
may produce the effect of WHEREFORE, the decision of the respondent
tradition, it is necessary that the court is SET ASIDE and that of the trial court
vendor shall have had REINSTATED, with costs against the private
such control over the thing sold respondent. It is so ordered.
that, at the moment of the sale,
its material delivery could have Narvasa (Chairman), Gancayco, Grio-Aquino
been made. It is not enough to and Medialdea, JJ., concur.
confer upon the purchaser
the ownership and the right of CALIXTO PASAGUI and FAUSTA
possession. The thing sold must MOSAR, plaintiffs-appellants,
be placed in his control.When vs.
there is no impediment whatever ESTER T. VILLABLANCA, ZOSIMO
to prevent the thing sold passing VILLABLANCA, EUSTAQUIA BOCAR and
into the tenancy of the purchaser CATALINA BOCAR defendants-appellees.
by the sole will of the vendor,
symbolic delivery through the ANTONIO, J.:
execution of a public instrument
is sufficient. But if, The only issue posed by this appeal is whether
notwithstanding the execution of or not, from the nature of the action pleaded as
the instrument, the purchaser appears in the allegations of the complaint, the
cannot have the enjoyment and aforesaid action is one of forcible entry, within
material tenancy of the thing and the exclusive jurisdiction of the municipal
make use of it himself or through court. .
another in his name, because
On February 4, 1963, appellants Calixto
such tenancy and enjoyment are
Pasagui and Fausta Mosar filed a complaint
opposed by the interposition of
with the Court of First Instance at Tacloban
another will, then fiction yields to
City, alleging that onNovember 15, 1962, for
realitythe delivery has not been
and in consideration of Two Thousand Eight
effected. 23
Hundred Pesos (P2,800.00), they bought from
There is no dispute that it is the petitioner and appellees Eustaquia Bocar and Catalina Bocar
not the private respondent who is in actual a parcel of agricultural land with an area of
possession of the litigated properties. Even if 2.6814 hectares, situated in Hamindangon,
the respective claims of the parties were both to Pastrana, Leyte; that the corresponding
be discarded as being inherently weak, the document of sale was executed, notarized on
the same date, and recorded in the Registry of
Deeds of Tacloban, Leyte on November 16, entry case is the nature of the action pleaded
1962; that during the first week of February, as appears from the allegations in the
1963, defendant spouses Ester T. Villablanca complaint. In ascertaining whether or not the
and Zosimo Villablanca, "illegally and without action is one of forcible entry within the original
any right, whatsoever, took possession of the exclusive jurisdiction of the municipal court,
above property harvesting coconuts from the the averments of the complaint and the
coconut plantation thereon, thus depriving character of the relief sought are the ones to be
plaintiffs" of its possession; that despite consulted.. 1 .
demands made by the plaintiffs upon the
above-mentioned defendants "to surrender to In the case at bar, the complaint does not allege
them the above-described property and its that the plaintiffs were in physical possession
possession" the latter failed or refused to return of the land and have been deprived of that
said parcel of land to the former, causing them possession through force, intimidation, threat,
damage; and that Eustaquia and Catalina strategy, or stealth. It simply avers that
Bocar, vendors of the property, are included plaintiffs-appellants bought on November 12,
defendants in the complaint by virtue of the 1962 from defendants-appellees Eustaquia
warranty clause contained in the document of Bocar and Catalina Bocar the parcel of land in
sale. Plaintiffs prayed for a decision ordering question for the amount of P2,800.00; that a
defendants to surrender the possession of the deed of sale was executed, notarized and
parcel of land above-described to them and to registered;that "during this first week of
pay damages in the amounts specified. . February, 1963, defendants Ester T.
Villablanca and her husband, Zosimo
On February 21, 1963, appellees moved to Villablanca, illegally and without any right
dismiss the complaint on the ground that the whatsoever, took possession of the above
Court of First Instance had no jurisdiction over described property, harvesting coconuts from
the subject matter, the action being one of the coconut plantation therein, thus depriving
forcible entry. Appellants opposed the Motion of its possession herein plaintiffs, and causing
to Dismiss asserting that the action is not one them damages for the amount of EIGHT
for forcible entry inasmuch as in the complaint, HUNDRED PESOS (P800.00)"; that for the
there is no allegation that the deprivation of purpose of enforcing the vendors' warranty in
possession was effected through "force, case of eviction, Eustaquia Bocar and Catalina
intimidation, threat, strategy or stealth." . Bocar were also included as defendants; and,
therefore, plaintiffs-appellants pray that a
On May 13, 1963, the trial court issued an decision be rendered, ordering (a) defendants
order dismissing the complaint for lack of Ester T. Villablanca and her husband, Zosimo
jurisdiction, it appearing from the allegations in Villablanca, "to surrender the possession of the
the complaint that the case is one for forcible above described property to said plaintiffs"; (b)
entry which belongs to the exclusive defendants Ester T. Villablanca and her
jurisdiction of the Justice of the Peace (now husband, Zosimo Villablanca, "to pay to said
Municipal Court) of Pastrana, Leyte. The first plaintiffs the amount of EIGHT HUNDRED
Motion for Reconsideration was denied on May PESOS (P800.00) as damages for the
27, 1963 and the second was likewise denied usurpation by them of said property"; and (c)
on July 5, 1963. From the aforementioned defendants Eustaquia Bocar and Catalina
orders, appeal on a pure question of law was Bocar "to pay the plaintiffs the amount of
interposed to this Court. . P2,800.00, plus incidental expenses, as
provided for by Art. 1555 of the Civil Code, in
It is well-settled that what determines the case of eviction or loss of ownership to said
jurisdiction of the municipal court in a forcible
above described property on the part of ownership" of the said property. It is, therefore,
plaintiffs." . not the summary action of forcible entry within
the context of the Rules. .
It is true that the execution of the deed of
absolute sale in a public instrument is WHEREFORE, the order of dismissal is hereby
equivalent to delivery of the land subject of the set aside, and the case remanded to the court
sale.2 This presumptive delivery only holds true a quo for further proceedings. Costs against
when there is no impediment that may prevent defendants-appellees. .
the passing of the property from the hands of
the vendor into those of the vendee. It can be
negated by the reality that the vendees actually
POWER COMMERCIAL AND INDUSTRIAL
failed to obtain material possession of the land
CORPORATION, petitioner, vs.
subject of the sale.. 3 It appears from the
COURT OF APPEALS, SPOUSES
records of the case at bar that plaintiffs-
REYNALDO and ANGELITA R.
appellants had not acquired physical
QUIAMBAO and PHILIPPINE
possession of the land since its purchase on
NATIONAL BANK, respondents.
November 12, 1962. As a matter of fact, their
purpose in filing the complaint in Civil Case No.
DECISION
3285 is precisely to "get the possession of the
property."4 In order that an action may be PANGANIBAN, J.:
considered as one for forcible entry, it is not
only necessary that the plaintiff should allege Is the sellers failure to eject the lessees
his prior physical possession of the property from a lot that is the subject of a contract of
but also that he was deprived of his possession sale with assumption of mortgage a ground (1)
by any of the means provided in section 1, Rule for rescission of such contract and (2) for a
70 of the Revised Rules of Court, namely: force, return by the mortgagee of the amortization
intimidation, threats, strategy and stealth. For, payments made by the buyer who assumed
if the dispossession did not take place by any such mortgage?
of these means, the courts of first instance, not Petitioner posits an affirmative answer to
the municipal courts, have jurisdictions.. 5 The such question in this petition for review
bare allegation in the complaint that the on certiorari of the March 27, 1995
plaintiff has been "deprived" of the land of Decision[1] of the Court of Appeals, Eighth
which he is and has been the legal owner for a Division, in CA-G.R. CV Case No. 32298
long period has been held to be insufficient.6 It upholding the validity of the contract of sale
is true that the mere act of a trespasser in with assumption of mortgage and absolving the
unlawfully entering the land, planting himself mortgagee from the liability of returning the
on the ground and excluding therefrom the mortgage payments already made.[2]
prior possessor would imply the use of force. In
the case at bar, no such inference could be
made as plaintiffs-appellants had not claimed The Facts
that they were in actual physical possession of
the property prior to the entry of the
Villablancas. Moreover, it is evident that Petitioner Power Commercial & Industrial
plaintiffs-appellants are not only seeking to get Development Corporation, an industrial
the possession of the property, but as an asbestos manufacturer, needed a bigger office
alternative cause of action, they seek the return space and warehouse for its products. For this
of the price and payment of damages by the purpose, on January 31, 1979, it entered into
vendors "in case of eviction or loss of a contract of sale with the spouses Reynaldo
and Angelita R. Quiambao, herein private the Land Reform Code -- the same having no
respondents. The contract involved a 612-sq. agricultural lessee and/or tenant.
m. parcel of land covered by Transfer Certificate
of Title No. S-6686 located at the corner of We hereby also warrant that we are the lawful
Bagtican and St. Paul Streets, San Antonio and absolute owners of the above described
Village, Makati City. The parties agreed that property, free from any lien and/or
petitioner would pay private encumbrance, and we hereby agree and
respondents P108,000.00 as down payment, warrant to defend its title and peaceful
and the balance of P295,000.00 upon the possession thereof in favor of the said Power
execution of the deed of transfer of the title over Commercial and Industrial Development
the property. Further, petitioner assumed, as Corporation, its successors and assigns,
part of the purchase price, the existing against any claims whatsoever of any and all
mortgage on the land. In full satisfaction third persons; subject, however, to the
thereof, he paid P79,145.77 to Respondent provisions hereunder provided to wit:
Philippine National Bank (PNB for brevity).
That the above described property is mortgaged
On June 1, 1979, respondent spouses
to the Philippine National Bank, Cubao,
mortgaged again said land to PNB to guarantee
Branch, Quezon City for the amount of one
a loan of P145,000.00, P80,000.00 of which
hundred forty-five thousand pesos, Philippine,
was paid to respondent spouses. Petitioner
evidenced by document No. 163, found on page
agreed to assume payment of the loan.
No. 34 of Book No. XV, Series of 1979 of Notary
On June 26, 1979, the parties executed a Public Herita L. Altamirano registered with the
Deed of Absolute Sale With Assumption of Register of Deeds of Pasig (Makati), Rizal xxx;
Mortgage which contained the following terms
and conditions:[3] That the said Power Commercial and Industrial
Development Corporation assumes to pay in
That for and in consideration of the sum of Two full the entire amount of the said mortgage
Hundred Ninety-Five Thousand Pesos above described plus interest and bank
(P295,000.00) Philippine Currency, to us in charges, to the said mortgagee bank, thus
hand paid in cash, and which we hereby holding the herein vendor free from all claims
acknowledge to be payment in full and received by the said bank;
to our entire satisfaction, by POWER
COMMERCIAL AND INDUSTRIAL That both parties herein agree to seek and
DEVELOPMENT CORPORATION, a 100% secure the agreement and approval of the said
Filipino Corporation, organized and existing Philippine National Bank to the herein sale of
under and by virtue of Philippine Laws with this property, hereby agreeing to abide by any
offices located at 252-C Vito Cruz Extension, and all requirements of the said bank, agreeing
we hereby by these presents SELL, TRANSFER that failure to do so shall give to the bank first
and CONVEY by way of absolute sale the above lieu (sic) over the herein described property.
described property with all the improvements
existing thereon unto the said Power On the same date, Mrs. C.D. Constantino,
Commercial and Industrial Development then General Manager of petitioner-
Corporation, its successors and assigns, free corporation, submitted to PNB said deed with a
from all liens and encumbrances. formal application for assumption of
mortgage.[4]
We hereby certify that the aforesaid property is On February 15, 1980, PNB informed
not subject to nor covered by the provisions of respondent spouses that, for petitioners failure
to submit the papers necessary for approval
pursuant to the formers letter dated January A review of our records show that it has been
15, 1980, the application for assumption of past due from last maturity with interest
mortgage was considered withdrawn; that the arrearages amounting to P25,826.08 as of
outstanding balance of P145,000.00 was February 19, 1982. The last payment received
deemed fully due and demandable; and that by us was on December 24, 1980
said loan was to be paid in full within fifteen for P20,283.14. In order to place your account
(15) days from notice.[5] in current form, we request you to remit
payments to cover interest, charges, and at
Petitioner paid PNB P41,880.45 on June
least part of the principal.
24, 1980 and P20,283.14 on December 23,
1980, payments which were to be applied to the
On March 17, 1982, petitioner filed Civil
outstanding loan. On December 23, 1980, PNB
Case No. 45217 against respondent spouses for
received a letter from petitioner which reads:[6]
rescission and damages before the Regional
Trial Court of Pasig, Branch 159. Then, in its
With regard to the presence of the people who
reply to PNBs letter of February 19,
are currently in physical occupancy of the (l)ot
1982, petitioner demanded the return of the
xxx it is our desire as buyers and new owners
payments it made on the ground that its
of this lot to make use of this lot for our own
assumption of mortgage was never
purpose, which is why it is our desire and
approved. On May 31, 1983, while this case
[8]
intention that all the people who are currently
was pending, the mortgage was foreclosed. The
physically present and in occupation of said lot
property was subsequently bought by PNB
should be removed immediately.
during the public auction. Thus, an amended
complaint was filed impleading PNB as party
For this purpose we respectfully request that
defendant.
xxx our assumption of mortgage be given
favorable consideration, and that the mortgage On July 12, 1990, the trial court[9] ruled
and title be transferred to our name so that we that the failure of respondent spouses to deliver
may undertake the necessary procedures to actual possession to petitioner entitled the
make use of this lot ourselves. latter to rescind the sale, and in view of such
failure and of the denial of the latters
It was our understanding that this lot was free assumption of mortgage, PNB was obliged to
and clear of problems of this nature, and that return the payments made by the latter. The
the previous owner would be responsible for the dispositive portion of said decision states:[10]
removal of the people who were
there. Inasmuch as the previous owner has not IN VIEW OF ALL THE FOREGOING, the Court
been able to keep his commitment, it will be hereby renders judgment in favor of plaintiff
necessary for us to take legal possession of this and against defendants:
lot inorder (sic) to take physical possession.
(1) Declaring the rescission of the Deed of Sale
On February 19, 1982, PNB sent petitioner with Assumption of Mortgage executed between
a letter as follows:[7] plaintiff and defendants Spouses Quiambao,
dated June 26, 1979;
(T)his refers to the loan granted to Mr. Reynaldo
Quiambao which was assumed by you on June (2) Ordering defendants Spouses Quiambao to
4, 1979 for P101,500.00. It was last renewed return to plaintiff the amount of P187,144.77
on December 24, 1980 to mature on June 4, (P108,000.00 plus P79,145.77) with legal
1981. interest of 12% per annum from date of filing of
herein complaint, that is, March 17, 1982 until
the same is fully paid;
(3) Ordering defendant PNB to return to obligating PNB to return such payments. In its
plaintiff the amount of P62,163.59 (P41,880.45 Memorandum, it specifically assigns the
and P20,283.14) with 12% interest thereon following errors of law on the part of
from date of herein judgment until the same is Respondent Court:[12]
fully paid.
A. Respondent Court of Appeals gravely
No award of other damages and attorneys fees, erred in failing to consider in its
the same not being warranted under the facts decision that a breach of implied
and circumstances of the case. warranty under Article 1547 in
relation to Article 1545 of the Civil
The counterclaim of both defendants spouses Code applies in the case-at-bar.
Quiambao and PNB are dismissed for lack of
merit. B. Respondent Court of Appeals gravely
erred in failing to consider in its
No pronouncement as to costs. decision that a mistake in
payment giving rise to a situation
SO ORDERED. where the principle
of solutio indebiti applies is
On appeal by respondent-spouses and obtaining in the case-at-bar.
PNB, Respondent Court of Appeals reversed the
trial court. In the assailed Decision, it held that
the deed of sale between respondent spouses The Courts Ruling
and petitioner did not obligate the former to
eject the lessees from the land in question as a
The petition is devoid of merit. It fails to
condition of the sale, nor was the occupation
appreciate the difference between a condition
thereof by said lessees a violation of the
and a warranty and the consequences of such
warranty against eviction. Hence, there was no
distinction.
substantial breach to justify the rescission of
said contract or the return of the payments
made. The dispositive portion of said Decision
Conspicuous Absence of an Imposed
reads:[11]
Condition
WHEREFORE, the Decision appealed from is
hereby REVERSED and the complaint filed by The alleged failure of respondent spouses
Power Commercial and Industrial Development to eject the lessees from the lot in question and
Corporation against the spouses Reynaldo and to deliver actual and physical possession
Angelita Quiambao and the Philippine National thereof cannot be considered a substantial
Bank is DISMISSED. No costs. breach of a condition for two reasons: first,
such failure was not stipulated as a condition -
Hence, the recourse to this Court . - whether resolutory or suspensive -- in the
contract; and second, its effects and
consequences were not specified either.[13]
Issues
The provision adverted to by petitioner does
not impose a condition or an obligation to eject
Petitioner contends that: (1) there was a the lessees from the lot. The deed of sale
substantial breach of the contract between the provides in part:[14]
parties warranting rescission; and (2) there was
a mistake in payment made by petitioner,
We hereby also warrant that we are the lawful Absent a stipulation therefor, we cannot
and absolute owners of the above described say that the parties intended to make its
property, free from any lien and/or nonfulfillment a ground for rescission. If they
encumbrance, and we hereby agree and did intend this, their contract should have
warrant to defend its title and peaceful expressly stipulated so. In Ang vs.
possession thereof in favor of the said Power C.A., rescission was sought on the ground
[18]

Commercial and Industrial Development that the petitioners had failed to fulfill their
Corporation, its successors and assigns, obligation to remove and clear the lot sold, the
against any claims whatsoever of any and all performance of which would have given rise to
third persons; subject, however, to the the payment of the consideration by private
provisions hereunder provided to wit: respondent. Rescission was not allowed,
however, because the breach was not
By his own admission, Anthony Powers, substantial and fundamental to the fulfillment
General Manager of petitioner-corporation, did by the petitioners of the obligation to sell.
not ask the corporations lawyers to stipulate in
As stated, the provision adverted to in the
the contract that Respondent Reynaldo was
contract pertains to the usual warranty against
guaranteeing the ejectment of the occupants,
eviction, and not to a condition that was not
because there was already a proviso in said
met. The terms of the contract are so clear as
deed of sale that the sellers were guaranteeing
to leave no room for any other interpretation.[19]
the peaceful possession by the buyer of the
land in question.[15] Any obscurity in a contract, Futhermore, petitioner was well aware of
if the above-quoted provision can be so the presence of the tenants at the time it
described, must be construed against the party entered into the sales transaction. As testified
who caused it.[16] Petitioner itself caused the to by Reynaldo,[20] petitioners counsel during
obscurity because it omitted this alleged the sales negotiation even undertook the job of
condition when its lawyer drafted said contract. ejecting the squatters. In fact, petitioner
actually filed suit to eject the
If the parties intended to impose on
occupants. Finally, petitioner in its letter to
respondent spouses the obligation to eject the
PNB of December 23, 1980 admitted that it was
tenants from the lot sold, it should have
the buyer(s) and new owner(s) of this lot.
included in the contract a provision similar to
that referred to in Romero vs. Court of
Appeals,[17] where the ejectment of the
Effective Symbolic Delivery
occupants of the lot sold by private respondent
was the operative act which set into motion the
period of petitioners compliance with his own The Court disagrees with petitioners
obligation, i.e., to pay the balance of the allegation that the respondent spouses failed to
purchase price. Failure to remove the squatters deliver the lot sold. Petitioner asserts that the
within the stipulated period gave the other legal fiction of symbolic delivery yielded to the
party the right to either refuse to proceed with truth that, at the execution of the deed of sale,
the agreement or to waive that condition of transfer of possession of said lot was
ejectment in consonance with Article 1545 of impossible due to the presence of occupants on
the Civil Code. In the case cited, the contract the lot sold. We find this misleading.
specifically stipulated that the ejectment was a
Although most authorities consider
condition to be fulfilled; otherwise, the
transfer of ownership as the primary purpose
obligation to pay the balance would not
of sale, delivery remains an indispensable
arise. This is not so in the case at bar.
requisite as our law does not admit the doctrine
of transfer of property by mere consent.[21] The
Civil Code provides that delivery can either be equivalent to delivery.[24] This deed operates as
(1) actual (Article 1497) or (2) constructive a formal or symbolic delivery of the property
(Articles 1498-1501). Symbolic delivery (Article sold and authorizes the buyer to use the
1498), as a species of constructive delivery, document as proof of ownership. Nothing more
effects the transfer of ownership through the is required.
execution of a public document. Its efficacy
can, however, be prevented if the vendor does
not possess control over the thing sold,[22] in Requisites of Breach of Warranty Against
which case this legal fiction must yield to Eviction
reality.
The key word is control, not possession, of Obvious to us in the ambivalent stance of
the land as petitioner would like us to petitioner is its failure to establish any breach
believe. The Court has consistently held of the warranty against eviction. Despite its
that:[23] protestation that its acquisition of the lot was
to enable it to set up a warehouse for its
x x x (I)n order that this symbolic delivery may asbestos products and that failure to deliver
produce the effect of tradition, it is necessary actual possession thereof defeated this
that the vendor shall have had purpose, still no breach of warranty against
such control over the thing sold that xxx its eviction can be appreciated because the facts of
material delivery could have been made. It is the case do not show that the requisites for
not enough to confer upon the purchaser such breach have been satisfied. A breach of
the ownership and the right of possession. The this warranty requires the concurrence of the
thing sold must be placed in his control. When following circumstances:
there is no impediment whatever to prevent the
(1) The purchaser has been deprived of
thing sold passing into the tenancy of the
the whole or part of the thing sold;
purchaser by the sole will of the vendor,
symbolic delivery through the execution of a (2) This eviction is by a final judgment;
public instrument is sufficient. But if,
(3) The basis thereof is by virtue of a
notwithstanding the execution of the
right prior to the sale made by the
instrument, the purchaser cannot have the
vendor; and
enjoyment and material tenancy of the thing
and make use of it himself or through another (4) The vendor has been summoned
in his name, because such tenancy and and made co-defendant in the suit
enjoyment are opposed by the interposition of for eviction at the instance of the
another will, then fiction yields to reality -- the vendee.[25]
delivery has not been effected.
In the absence of these requisites, a breach of
the warranty against eviction under Article
Considering that the deed of sale between
1547 cannot be declared.
the parties did not stipulate or infer otherwise,
delivery was effected through the execution of Petitioner argues in its memorandum that
said deed. The lot sold had been placed under it has not yet ejected the occupants of said lot,
the control of petitioner; thus, the filing of the and not that it has been evicted therefrom. As
ejectment suit was subsequently done. It correctly pointed out by Respondent Court, the
signified that its new owner intended to obtain presence of lessees does not constitute an
for itself and to terminate said occupants encumbrance of the land,[26] nor does it deprive
actual possession thereof. Prior physical petitioner of its control thereof.
delivery or possession is not legally required
and the execution of the deed of sale is deemed
 We note, however, that petitioners encumbrance that the vendee, or the party in
deprivation of ownership and control finally whose favor the alienation or encumbrance is
occurred when it failed and/or discontinued to be made, should take the property subject to
paying the amortizations on the mortgage, the obligation of this mortgage in the same
causing the lot to be foreclosed and sold at terms and condition under which it is
public auction. But this deprivation is due to constituted, it being understood that the
petitioners fault, and not to any act attributable Mortgagor is not in any manner relieved of his
to the vendor-spouses. obligation to the Mortgagee under this
mortgage by such sale, alienation or
Because petitioner failed to impugn its
encumbrance; on the contrary both the vendor
integrity, the contract is presumed, under the
and the vendee, or the party in whose favor the
law, to be valid and subsisting.
alienation or encumbrance is made shall be
jointly and severally liable for said mortgage
obligations. xxx.
Absence of Mistake In Payment

Therefore, it cannot be said that it did not have

Contrary to the contention of petitioner a duty to pay to PNB the amortization on the
that a return of the payments it made to PNB is mortgage.
warranted under Article 2154 of the
Also, petitioner insists that its payment of
Code, solutio indebiti does not apply in this
the amortization was a mistake because PNB
case. This doctrine applies where: (1) a
disapproved its assumption of mortgage after it
payment is made when there exists no binding
failed to submit the necessary papers for the
relation between the payor, who has no duty to
approval of such assumption.
pay, and the person who received the payment,
and (2) the payment is made through mistake, But even if petitioner was a third party in
and not through liberality or some other regard to the mortgage of the land purchased,
cause.[27] the payment of the loan by petitioner was a
condition clearly imposed by the contract of
In this case, petitioner was under
sale.This fact alone disproves petitioners
obligation to pay the amortizations on the
insistence that there was a mistake in
mortgage under the contract of sale and the
payment. On the contrary, such payments
deed of real estate mortgage. Under the deed of
were necessary to protect its interest as a the
sale (Exh. 2),[28] both parties agreed to abide by
buyer(s) and new owner(s) of the lot.
any and all the requirements of PNB in
connection with the real estate The quasi-contract of solutio indebiti is one
mortgage. Petitioner was aware that the deed of of the concrete manifestations of the ancient
mortgage (Exh. C) made it solidarily and, principle that no one shall enrich himself
therefore, primarily[29] liable for the mortgage unjustly at the expense of another.[31] But as
obligation:[30] shown earlier, the payment of the mortgage was
an obligation petitioner assumed under the
(e) The Mortgagor shall neither lease the contract of sale. There is no unjust enrichment
mortgaged property xxx nor sell or dispose of where the transaction, as in this case, is quid
the same in any manner, without the written pro quo, value for value.
consent of the Mortgagee. However, if not
All told, respondent Court did not commit
withstanding this stipulation and during the
any reversible error which would warrant the
existence of this mortgage, the property herein
reversal of the assailed Decision.
mortgaged, or any portion thereof, is xxx sold,
it shall be the obligation of the Mortgagor to
impose as a condition of the sale, alienation or
 WHEREFORE, the petition is receipt (Receipt) evidencing the
hereby DENIED, and the assailed Decision transaction, signed by Valdes-Choy as seller,
is AFFIRMED. and Chua as buyer, reads:

SO ORDERED.
RECEIPT

RECEIVED from MR. TOMAS K. CHUA PBCom

TOMAS K. CHUA, petitioner, vs. COURT OF
Check No. 206011 in the amount of ONE
APPEALS and ENCARNACION
HUNDRED THOUSAND PESOS ONLY
VALDES-CHOY, respondents.
(P100,000.00) as EARNEST MONEY for the sale
of the property located at 40 Tampingco cor.
DECISION
Hidalgo, San Lorenzo Village, Makati, Metro
CARPIO, J.: Manila (Area : 718 sq. meters).

The balance of TEN MILLION SEVEN

The Case HUNDRED THOUSAND (P10,700,000.00) is
payable on or before 15[5] July 1989. Capital
Gains Tax for the account of the seller. Failure
This is a petition for review
to pay balance on or before 15 July 1989 forfeits
on certiorari seeking to reverse the decision[1] of
the earnest money. This provided that all papers
the Court of Appeals in an action for specific
are in proper order.[6]
performance[2] filed in the Regional Trial
Court[3] by petitioner Tomas K. Chua (Chua)
CONFORME: ENCARNACION VALDES
against respondent Encarnacion Valdes-Choy
(Valdes-Choy). Chua sought to compel Valdes-
Seller
Choy to consummate the sale of her
paraphernal house and lot in Makati City. The TOMAS K. CHUA
Court of Appeals reversed the
decision[4] rendered by the trial court in favor of Buyer
Chua.
x x x.[7]

The Facts In the morning of 13 July 1989, Chua

secured from Philippine Bank of Commerce
Valdes-Choy advertised for sale her (PBCom) a managers check
paraphernal house and lot (Property) with an for P480,000.00. Strangely, after securing the
area of 718 square meters located at No. 40 managers check, Chua immediately gave
Tampingco Street corner Hidalgo Street, San PBCom a verbal stop payment order claiming
Lorenzo Village, Makati City. The Property is that this managers check for P480,000.00 was
covered by Transfer Certificate of Title No. lost and/or misplaced.[8] On the same day, after
162955 (TCT) issued by the Register of Deeds receipt of Chuas verbal order, PBCom Assistant
of Makati City in the name of Valdes- VicePresident Julie C. Pe notified in
Choy. Chua responded to the writing[9] the PBCom Operations Group of
advertisement. After several meetings, Chua Chuas stop payment order.
and Valdes-Choy agreed on a purchase price In the afternoon of 13 July 1989, Chua and
of P10,800,000.00 payable in cash. Valdes-Choy met with their respective counsels
On 30 June 1989, Valdes-Choy received to execute the necessary documents and
from Chua a check for P100,000.00. The arrange the payments.[10] Valdes-Choy as
vendor and Chua as vendee signed two Deeds ENCARNACION VALDEZ-
of Absolute Sale (Deeds of Sale). The first Deed CHOY P10,215,000.00
of Sale covered the house and lot for the VVVVVVVVVVVV
purchase price of P8,000,000.00.[11] The
second Deed of Sale covered the furnishings, PLUS P80,000.00 for documentary
fixtures and movable properties contained in stamps paid in advance by seller ___80,000.00
the house for the purchase price
of P2,800,000.00. The parties also computed
[12] P10
the capital gains tax to amount ,29
to P485,000.00. 5,0
00.
On 14 July 1989, the parties met again at
00
the office of Valdes-Choys counsel. Chua
handed to Valdes-Choy the PBCom managers x x x.[13]
check for P485,000.00 so Valdes-Choy could
pay the capital gains tax as she did not have On the same day, 14 July 1989, Valdes-
sufficient funds to pay the tax. Valdes-Choy Choy, accompanied by Chua, deposited
issued a receipt showing that Chua had a the P485,000.00 managers check to her
remaining balance of P10,215,000.00 after account with Traders Royal Bank. She then
deducting the advances made by Chua. This purchased a Traders Royal Bank managers
receipt reads: check for P480,000.00 payable to the
Commissioner of Internal Revenue for the
July 14, 1989 capital gains tax. Valdes-Choy and Chua
returned to the office of Valdes-Choys counsel
Received from MR. TOMAS K. CHUA PBCom.
and handed the Traders Royal Bank check to
Check No. 325851 in the amount of FOUR
the counsel who undertook to pay the capital
HUNDRED EIGHTY FIVE THOUSAND PESOS
gains tax. It was then also that
ONLY (P485,000.00) as Partial Payment for the
Chua showed to Valdes-Choy a PBCom
sale of the property located at 40 Tampingco
managers check for P10,215,000.00
Cor. Hidalgo St., San Lorenzo Village, Makati,
representing the balance of the purchase
Metro Manila (Area 718 sq. meters), covered by
price. Chua, however, did not give this PBCom
TCT No. 162955 of the Registry of Deeds of
managers check to Valdes-Choy because the
Makati, Metro Manila.
TCT was still registered in the name of Valdes-
Choy. Chua required that the Property be
The total purchase price of the above-
registered first in his name before he would
mentioned property is TEN MILLION EIGHT
turn over the check to Valdes-Choy. This
HUNDRED THOUSAND PESOS only, broken
angered Valdes-Choy who tore up the Deeds of
down as follows:
Sale, claiming that what Chua required was not
part of their agreement.[14]
SELLING PRICE P10,800,000.00
On the same day, 14 July 1989, Chua
EARNEST MONEY P100,000.00 confirmed his stop payment order by
PARTIAL PAYMENT 485,000.00 submitting to PBCom an affidavit of loss[15] of
the PBCom Managers Check
_________________ for P480,000.00. PBCom Assistant Vice-
___585,000.00 President Pe, however, testified that the
managers check was nevertheless honored
BALANCE DUE TO because Chua subsequently verbally advised
the bank that he was lifting the stop-payment
order due to his special arrangement with the defendant in favor of the plaintiff, whether
bank.[16] notarized or not; and
On 15 July 1989, the deadline for the
2. Within five (5) days from compliance by the
payment of the balance of the purchase price,
defendant of the above, ordering the plaintiff to
Valdes-Choy suggested to her counsel that to
deliver to the Branch Clerk of Court of this
break the impasse Chua should deposit in
Court the sum of P10,295,000.00 representing
escrow the P10,215,000.00 balance.[17] Upon
the balance of the consideration (with the sum
such deposit, Valdes-Choy was willing to cause
of P80,000.00 for stamps already included);
the issuance of a new TCT in the name of Chua
even without receiving the balance of the
3. Ordering the Branch Clerk of this Court or
purchase price.Valdes-Choy believed this was
her duly authorized representative:
the only way she could protect herself if the
certificate of title is transferred in the name of a. to make representations with the BIR for the
the buyer before she is fully paid. Valdes-Choys payment of capital gains tax for the sale of the
counsel promised to relay her suggestion to house and lot (not to include the fixtures) and
Chua and his counsel, but nothing came out of to pay the same from the funds deposited with
it. her;
On 17 July 1989, Chua filed a complaint
for specific performance against Valdes-Choy b. to present the deed of sale executed in favor
which the trial court dismissed on 22 November of the plaintiff, together with the
1989. On 29 November 1989, Chua re-filed his owners duplicate copy of TCT No. 162955, real
complaint for specific performance with estate tax receipt and proof of payment of
damages. After trial in due course, the trial capital gains tax, to the Makati Register of
court rendered judgment in favor of Chua, the Deeds;
dispositive portion of which reads:
c. to pay the required registration fees and
Applying the provisions of Article 1191 of the stamps (if not yet advanced by the defendant)
new Civil Code, since this is an action for and if needed update the real estate taxes all to
specific performance where the plaintiff, as be taken from the funds deposited with her;
vendee, wants to pursue the sale, and in order and
that the fears of the defendant may be allayed
and still have the sale materialize, judgment is d. surrender to the plaintiff the new Torrens
hereby rendered: title over the property;

I. 1. Ordering the defendant to deliver to the 4. Should the defendant fail or refuse to
Court not later than five (5) days from finality surrender the two deeds of sale over the
of this decision: property and the fixtures that were prepared by
Atty. Mark Bocobo and executed by the parties,
a. the owners duplicate copy of TCT No. 162955 the Branch Clerk of Court of this Court is
registered in her name; hereby authorized and empowered to prepare,
sign and execute the said deeds of sale for and
b. the covering tax declaration and the latest in behalf of the defendant;
tax receipt evidencing payment of real estate
taxes; 5. Ordering the defendant to pay to the plaintiff;

c. the two deeds of sale prepared by Atty. Mark a. the sum of P100,000.00 representing moral
Bocobo on July 13, 1989, duly executed by and compensatory damages for the plaintiff;
and
b. the sum of P50,000.00 as reimbursement for 3. To pay to the plaintiff the sum
plaintiffs attorneys fees and cost of litigation. of P700,000.00 in the concept of moral
damages and the additional sum
6. Authorizing the Branch Clerk of Court of this of P300,000.00 in the concept of exemplary
Court to release to the plaintiff, to be taken damages; and
from the funds said plaintiff has deposited with
the Court, the amounts covered at paragraph 5 4. To pay to the plaintiff the sum
above; of P100,000.00 as reimbursement of attorneys
fees and cost of litigation.
7. Ordering the release of the P10,295,000.00
to the defendant after deducting therefrom the SO ORDERED.[18]
following amounts:
Valdes-Choy appealed to the Court of
a. the capital gains tax paid to the BIR; Appeals which reversed the decision of the trial
court. The Court of Appeals handed down a
b. the expenses incurred in the registration of new judgment, disposing as follows:
the sale, updating of real estate taxes, and
transfer of title; and WHEREFORE, the decision appealed from is
hereby REVERSED and SET ASIDE, and
c. the amounts paid under this judgment to the another one is rendered:
plaintiff.
(1) Dismissing Civil Case No. 89-5772;
8. Ordering the defendant to surrender to the
plaintiff or his representatives the premises (2) Declaring the amount of P100,000.00,
with the furnishings intact within seventy-two representing earnest money as forfeited in
(72) hours from receipt of the proceeds of the favor of defendant-appellant;
sale;
(3) Ordering defendant-appellant to
9. No interest is imposed on the payment to be return/refund the amount of P485,000.00 to
made by the plaintiff because he had always plaintiff-appellee without interest;
been ready to pay the balance and the premises
had been used or occupied by the defendant for (4) Dismissing defendant-appellants
the duration of this case. compulsory counter-claim; and

II. In the event that specific (5) Ordering the plaintiff-appellee to pay the
performance cannot be done for reasons or costs.[19]
causes not attributable to the plaintiff,
judgment is hereby rendered ordering the Hence, the instant petition.
defendant:

1. To refund to the plaintiff the earnest money The Trial Courts Ruling
in the sum of P100,000.00, with interest at the
legal rate from June 30, 1989 until fully paid; The trial court found that the transaction
reached an impasse when Valdes-Choy wanted
2. To refund to the plaintiff the sum
to be first paid the full consideration before a
of P485,000.00 with interest at the legal rate
new TCT covering the Property is issued in the
from July 14, 1989 until fully paid;
name of Chua. On the other hand, Chua did
not want to pay the consideration in full unless
a new TCT is first issued in his name. The trial The trial court held that Chuas non-
court faulted Valdes-Choy for this impasse. payment of the balance of P10,215,000.00 on
the agreed date was due to Valdes-Choys fault.
The trial court held that the parties entered
into a contract to sell on 30 June 1989, as
evidenced by the Receipt for the P100,000.00
The Court of Appeals Ruling
earnest money. The trial court pointed out that
the contract to sell was subject to the following
conditions: (1) the balance In reversing the trial court, the Court of
of P10,700,000.00 was payable not later than Appeals ruled that Chuas stance to pay the full
15 July 1989; (2) Valdes-Choy may stay in the consideration only after the Property is
Property until 13 August 1989; and (3) all registered in his name was not the agreement
papers must be in proper order before full of the parties. The Court of Appeals noted that
payment is made. there is a whale of difference between the
phrases all papers are in proper order as
The trial court held that Chua complied
written on the Receipt, and transfer of title as
with the terms of the contract to sell. Chua
demanded by Chua.
showed that he was prepared to pay Valdes-
Choy the consideration in full on 13 July 1989, Contrary to the findings of the trial court,
two days before the deadline of 15 July the Court of Appeals found that all the papers
1989. Chua even added P80,000.00 for the were in order and that Chua had no valid
documentary stamp tax. He purchased from reason not to pay on the agreed date. Valdes-
PBCom two managers checks both payable to Choy was in a position to deliver the owners
Valdes-Choy. The first check for P485,000.00 duplicate copy of the TCT, the signed Deeds of
was to pay the capital gains tax. The second Sale, the tax declarations, and the latest realty
check for P10,215,000.00 was to pay the tax receipt. The Property was also free from all
balance of the purchase price. The trial court liens and encumbrances.
was convinced that Chua demonstrated his
The Court of Appeals declared that the trial
capacity and readiness to pay the balance on
court erred in considering Chuas showing to
13 July 1989 with the production of the PBCom
Valdes-Choy of the PBCom managers check
managers check for P10,215,000.00.
for P10,215,000.00 as compliance with Chuas
On the other hand, the trial court found obligation to pay on or before 15 July 1989. The
that Valdes-Choy did not perform her Court of Appeals pointed out that Chua did not
correlative obligation under the contract to sell want to give up the check unless the property
to put all the papers in order. The trial court was already in his name.[20] Although Chua
noted that as of 14 July 1989, the capital gains demonstrated his capacity to pay, this could
tax had not been paid because Valdes-Choys not be equated with actual payment which he
counsel who was suppose to pay the tax did not refused to do.
do so. The trial court declared that Valdes-
The Court of Appeals did not consider the
Choy was in a position to deliver only the
non-payment of the capital gains tax as failure
owners duplicate copy of the TCT, the signed
by Valdes-Choy to put the papers in proper
Deeds of Sale, the tax declarations, and the
order. The Court of Appeals explained that the
latest realty tax receipt. The trial court
payment of the capital gains tax has no bearing
concluded that these documents were all
on the validity of the Deeds of Sale. It is only
useless without the Bureau of Internal Revenue
after the deeds are signed and notarized
receipt evidencing full payment of the capital
can the final computation and payment of the
gains tax which is a pre-requisite to the
capital gains tax be made.
issuance of a new certificate of title in Chuas
name.
The Issues There is no dispute that Valdes-Choy is the
absolute owner of the Property which is
registered in her name under TCT No.162955,
In his Memorandum, Chua raises the
free from all liens and encumbrances. She was
following issues:
ready, able and willing to deliver to Chua the
owners duplicate copy of the TCT, the signed
1. WHETHER THERE IS A PERFECTED
Deeds of Sale, the tax declarations, and the
CONTRACT OF SALE OF IMMOVABLE
latest realty tax receipt. There is also no
PROPERTY;
dispute that on 13 July 1989, Valdes-Choy
2. WHETHER VALDES-CHOY MAY RESCIND received PBCom Check No. 206011
THE CONTRACT IN CONTROVERSY WITHOUT for P100,000.00 as earnest money from
OBSERVING THE PROVISIONS OF ARTICLE Chua. Likewise, there is no controversy that
1592 OF THE NEW CIVIL CODE; the Receipt for the P100,000.00 earnest money
embodied the terms of the binding contract
3. WHETHER THE WITHHOLDING OF between Valdes-Choy and Chua.
PAYMENT OF THE BALANCE OF THE Further, there is no controversy that as
PURCHASE PRICE ON THE PART OF CHUA embodied in the Receipt, Valdes-Choy and
(AS VENDEE) WAS JUSTIFIED BY THE Chua agreed on the following terms: (1) the
CIRCUMSTANCES OBTAINING AND MAY NOT balance of P10,215,000.00 is payable on or
BE RAISED AS GROUND FOR THE before 15 July 1989; (2) the capital gains tax is
AUTOMATIC RESCISSION OF THE CONTRACT for the account of Valdes-Choy; and (3) if Chua
OF SALE; fails to pay the balance of P10,215,000.00 on
or before 15 July 1989, Valdes-Choy has the
4. WHETHER THERE IS LEGAL AND FACTUAL right to forfeit the earnest money, provided that
BASIS FOR THE COURT OF APPEALS TO all papers are in proper order. On 13 July
DECLARE THE EARNEST MONEY IN THE 1989, Chua gave Valdes-Choy the PBCom
AMOUNT OF P100,000.00 AS FORFEITED IN managers check for P485,000.00 to pay the
FAVOR OF VALDES-CHOY; capital gains tax.

5. WHETHER THE TRIAL COURTS Both the trial and appellate courts found
JUDGMENT IS IN ACCORD WITH LAW, that the balance of P10,215,000.00 was not
REASON AND EQUITY DESERVING OF BEING actually paid to Valdes-Choy on the agreed
REINSTATED AND AFFIRMED.[21] date. On 13 July 1989, Chua did show to
Valdes-Choy the PBCom managers check
The issues for our resolution are: (a) for P10,215,000.00, with Valdes-Choy as
whether the transaction between Chua and payee. However, Chua refused to give this
Valdes-Choy is a perfected contract of sale or a check to Valdes-Choy until a new TCT covering
mere contract to sell, and (b) whether Chua can the Property is registered in Chuas name. Or,
compel Valdes-Choy to cause the issuance of a as the trial court put it, until there is proof of
new TCT in Chuas name even before payment payment of the capital gains tax which is a pre-
of the full purchase price. requisite to the issuance of a new certificate of
title.

The Courts Ruling

First and Second Issues: Contract of Sale or
Contract to Sell?
The petition is bereft of merit.
 Chua has consistently characterized his to pass to the vendee until full payment of the
agreement with Valdez-Choy, as evidenced by purchase price. Otherwise stated, in a contract
the Receipt, as a contract to sell and not a of sale, the vendor loses ownership over the
contract of sale. This has been Chuas property and cannot recover it until and unless
persistent contention in his pleadings before the contract is resolved or rescinded; whereas,
the trial and appellate courts. in a contract to sell, title is retained by the
vendor until full payment of the price. In the
Chua now pleads for the first time that
latter contract, payment of the price is a
there is a perfected contract of sale rather than
positive suspensive condition, failure of which
a contract to sell. He contends that there was
is not a breach but an event that prevents the
no reservation in the contract of sale that
obligation of the vendor to convey title from
Valdes-Choy shall retain title to the Property
becoming effective.[25]
until after the sale. There was no agreement for
an automatic rescission of the contract in case
A perusal of the Receipt shows that the true
of Chuas default. He argues for the first time
agreement between the parties was a contract
that his payment of earnest money and its
to sell. Ownership over the Property was
acceptance by Valdes-Choy precludes the latter
retained by Valdes-Choy and was not to pass to
from rejecting the binding effect of the contract
Chua until full payment of the purchase price.
of sale. Thus, Chua claims that Valdes-Choy
may not validly rescind the contract of sale First, the Receipt provides that the earnest
without following Article 1592[22] of the Civil money shall be forfeited in case the buyer fails
Code which requires demand, either judicially to pay the balance of the purchase price on or
or by notarial act, before rescission may take before 15 July 1989. In such event, Valdes-
place. Choy can sell the Property to other interested
parties. There is in effect a right reserved in
Chuas new theory is not well taken in light
favor of Valdes-Choy not to push through with
of well-settled jurisprudence. An issue not
the sale upon Chuas failure to remit the
raised in the court below cannot be raised for
balance of the purchase price before the
the first time on appeal, as this is offensive to
deadline. This is in the nature of a stipulation
the basic rules of fair play, justice and due
reserving ownership in the seller until full
process.[23] In addition, when a party
payment of the purchase price. This is also
deliberately adopts a certain theory, and the
similar to giving the seller the right to rescind
case is tried and decided on that theory in the
unilaterally the contract the moment the buyer
court below, the party will not be permitted to
fails to pay within a fixed period.[26]
change his theory on appeal. To permit him to
change his theory will be unfair to the adverse Second, the agreement between Chua and
party.[24] Valdes-Choy was embodied in a receipt rather
than in a deed of sale, ownership not having
Nevertheless, in order to put to rest all
passed between them. The signing of the Deeds
doubts on the matter, we hold that the
of Sale came later when Valdes-Choy was
agreement between Chua and Valdes-Choy, as
under the impression that Chua was about to
evidenced by the Receipt, is a contract to sell
pay the balance of the purchase price. The
and not a contract of sale. The distinction
absence of a formal deed of conveyance is a
between a contract of sale and contract to sell
strong indication that the parties did not intend
is well-settled:
immediate transfer of ownership, but only a
transfer after full payment of the purchase
In a contract of sale, the title to the property
price.[27]
passes to the vendee upon the delivery of the
thing sold; in a contract to sell, ownership is, Third, Valdes-Choy retained possession of
by agreement, reserved in the vendor and is not the certificate of title and all other documents
relative to the sale. When Chua refused to pay Third and Fourth Issues: Withholding of
Valdes-Choy the balance of the purchase price, Payment of the Balance
Valdes-Choy also refused to turn-over to Chua of the Purchase Price and Forfeiture of the
these documents.[28] These are additional proof Earnest Money
that the agreement did not transfer to Chua,
either by actual or constructive delivery,
Chua insists that he was ready to pay the
ownership of the Property.[29]
balance of the purchase price but withheld
It is true that Article 1482 of the Civil Code payment because Valdes-Choy did not fulfill
provides that [W]henever earnest money is her contractual obligation to put all the papers
given in a contract of sale, it shall be considered in proper order. Specifically, Chua claims that
as part of the price and proof of the perfection Valdes-Choy failed to show that the capital
of the contract. However, this article speaks of gains tax had been paid after he had advanced
earnest money given in a contract of sale. In the money for its payment. For the same
this case, the earnest money was given in a reason, he contends that Valdes-Choy may not
contract to sell. The Receipt evidencing the forfeit the earnest money even if he did not pay
contract to sell stipulates that the earnest on time.
money is a forfeitable deposit, to be forfeited if
There is a variance of interpretation on the
the sale is not consummated should Chua fail
phrase all papers are in proper order as written
to pay the balance of the purchase price. The
in the Receipt. There is no dispute though, that
earnest money forms part of the consideration
as long as the papers are in proper order,
only if the sale is consummated upon full
Valdes-Choy has the right to forfeit the earnest
payment of the purchase price. If there is a
money if Chua fails to pay the balance before
contract of sale, Valdes-Choy should have the
the deadline.
right to compel Chua to pay the balance of the
purchase price. Chua, however, has the right to The trial court interpreted the phrase to
walk away from the transaction, with no include payment of the capital gains tax, with
obligation to pay the balance, although he will the Bureau of Internal Revenue receipt as proof
forfeit the earnest money.Clearly, there is no of payment. The Court of Appeals held
contract of sale. The earnest money was given otherwise.We quote verbatim the ruling of the
in a contract to sell, and thus Article 1482, Court of Appeals on this matter:
which speaks of a contract of sale, is not
applicable. The trial court made much fuss in connection
with the payment of the capital gains tax, of
Since the agreement between Valdes-Choy
which Section 33 of the National Internal
and Chua is a mere contract to sell, the full
Revenue Code of 1977, is the governing
payment of the purchase price partakes of a
provision insofar as its computation is
suspensive condition. The non-fulfillment of
concerned. The trial court failed to consider
the condition prevents the obligation to sell
Section 34-(a) of the said Code, the last
from arising and ownership is retained by the
sentence of which provides, that [t]he amount
seller without further remedies by the
realized from the sale or other disposition of
buyer.[30] Article 1592 of the Civil Code permits
property shall be the sum of money
the buyer to pay, even after the expiration of
received plus the fair market value of the
the period, as long as no demand for rescission
property (other than money) received; and that
of the contract has been made upon him either
the computation of the capital gains tax can
judicially or by notarial act. However, Article
only be finally assessed by the Commission on
1592 does not apply to a contract to sell where
Internal Revenue upon the presentation of the
the seller reserves the ownership until full
Deeds of Absolute Sale themselves, without
payment of the price.[31]
which any premature computation of the
capital gains tax becomes of no moment. At Prior to the existence of the contract of sale,
any rate, the computation and payment of the the seller is not obligated to transfer ownership
capital gains tax has no bearing insofar as the to the buyer, even if there is a contract to sell
validity and effectiveness of the deeds of sale in between them. It is also upon the existence of
question are concerned, because it is only after the contract of sale that the buyer is obligated
the contracts of sale are finally executed in due to pay the purchase price to the seller. Since
form and have been duly notarized that the the transfer of ownership is in exchange for the
final computation of the capital gains tax can purchase price, these obligations must be
follow as a matter of course. Indeed, exhibit D, simultaneously fulfilled at the time of the
the PBC Check No. 325851, dated July 13, execution of the contract of sale, in the absence
1989, in the amount of P485,000.00, which is of a contrary stipulation.
considered as part of the consideration of the
In a contract of sale, the obligations of the
sale, was deposited in the name of appellant,
seller are specified in Article 1495 of the Civil
from which she in turn, purchased the
Code, as follows:
corresponding check in the amount
representing the sum to be paid for capital
Art. 1495. The vendor is bound to transfer the
gains tax and drawn in the name of the
ownership of and deliver, as well as warrant
Commissioner of Internal Revenue, which then
the thing which is the object of the
allayed any fear or doubt that that amount
sale. (Emphasis supplied)
would not be paid to the Government after
all.[32] The obligation of the seller is to transfer to the
buyer ownership of the thing sold. In the sale
We see no reason to disturb the ruling of
of real property, the seller is not obligated to
the Court of Appeals.
transfer in the name of the buyer a new
In a contract to sell, the obligation of the certificate of title, but rather to transfer
seller to sell becomes demandable only upon ownership of the real property. There is a
the happening of the suspensive condition. In difference between transfer of the certificate of
this case, the suspensive condition is the full title in the name of the buyer, and transfer of
payment of the purchase price by Chua. Such ownership to the buyer.The buyer may become
full payment gives rise to Chuas right to the owner of the real property even if the
demand the execution of the contract of sale. certificate of title is still registered in the name
of the seller. As between the seller and buyer,
It is only upon the existence of the contract
ownership is transferred not by the issuance of
of sale that the seller becomes obligated to
a new certificate of title in the name of the
transfer the ownership of the thing sold to the
buyer but by the execution of the instrument of
buyer. Article 1458 of the Civil Code defines a
sale in a public document.
contract of sale as follows:
In a contract of sale, ownership is
Art. 1458. By the contract of sale one of the transferred upon delivery of the thing sold. As
contracting parties obligates himself to the noted civil law commentator Arturo M.
transfer the ownership of and to deliver a Tolentino explains it, -
determinate thing, and the other to pay
therefor a price certain in money or its Delivery is not only a necessary condition for the
equivalent. enjoyment of the thing, but is a mode of
acquiring dominion and determines the
x x x. (Emphasis supplied) transmission of ownership, the birth of the real
right. The delivery, therefore, made in any
of the forms provided in articles 1497 to
1505 signifies that the transmission of In the instant case, Valdes-Choy was in a
ownership from vendor to vendee has taken position to comply with all her obligations as a
place. The delivery of the thing constitutes an seller under the contract to sell. First, she
indispensable requisite for the purpose of already signed the Deeds of Sale in the office of
acquiring ownership. Our law does not admit her counsel in the presence of the
the doctrine of transfer of property by mere buyer. Second, she was prepared to turn-over
consent; the ownership, the property right, is the owners duplicate of the TCT to the buyer,
derived only from delivery of the thing. x x along with the tax declarations and latest realty
x.[33] (Emphasis supplied) tax receipt.Clearly, at this point Valdes-Choy
was ready, able and willing to transfer
In a contract of sale of real property, ownership of the Property to the buyer as
delivery is effected when the instrument of sale required by the contract to sell, and by Articles
is executed in a public document. When the 1458 and 1495 of the Civil Code to
deed of absolute sale is signed by the parties consummate the contract of sale.
and notarized, then delivery of the real property
Chua, however, refused to give to Valdes-
is deemed made by the seller to the
Choy the PBCom managers check for the
buyer. Article 1498 of the Civil Code provides
balance of the purchase price. Chua imposed
that
the condition that a new TCT should first be
issued in his name, a condition that is found
Art. 1498. When the sale is made through a
neither in the law nor in the contract to sell as
public instrument, the execution thereof shall
evidenced by the Receipt. Thus, at this point
be equivalent to the delivery of the thing which
Chua was not ready, able and willing to pay the
is the object of the contract, if from the deed the
full purchase price which is his obligation
contrary does not appear or cannot clearly be
under the contract to sell. Chua was also not in
inferred.
a position to assume the principal obligation of
x x x. a vendee in a contract of sale, which is also to
pay the full purchase price at the agreed
Similarly, in a contract to sell real property, time. Article 1582 of the Civil Code provides
once the seller is ready, able and willing to sign that
the deed of absolute sale before a notary public,
the seller is in a position to transfer ownership Art. 1582. The vendee is bound to accept
of the real property to the buyer. At this point, delivery and to pay the price of the thing
the seller complies with his undertaking to sell sold at the time and place stipulated in the
the real property in accordance with the contract.
contract to sell, and to assume all the x x x. (Emphasis supplied)
obligations of a vendor under a contract of sale
In this case, the contract to sell stipulated
pursuant to the relevant articles of the Civil
that Chua should pay the balance of the
Code. In a contract to sell, the seller is not
purchase price on or before 15 July 1989. The
obligated to transfer ownership to the buyer.
signed Deeds of Sale also stipulated that the
Neither is the seller obligated to cause the
buyer shall pay the balance of the purchase
issuance of a new certificate of title in the name
price upon signing of the deeds. Thus, the
of the buyer. However, the seller must put all
Deeds of Sale, both signed by Chua, state as
his papers in proper order to the point that he
follows:
is in a position to transfer ownership of the real
property to the buyer upon the signing of the
Deed of Absolute Sale covering the lot:
contract of sale.

xxx
For and in consideration of the sum of EIGHT complete a sale of real estate: (1) owners
MILLION PESOS (P8,000,000.00), Philippine duplicate copy of the Torrens title;[36] (2) signed
Currency, receipt of which in full is hereby deed of absolute sale; (3) tax declaration; and
acknowledged by the VENDOR from the (3) latest realty tax receipt. The buyer can
VENDEE, the VENDOR sells, transfers and retain the amount for the capital gains tax and
conveys unto the VENDEE, his heirs, pay it upon authority of the seller, or the seller
successors and assigns, the said parcel of land, can pay the tax, depending on the agreement of
together with the improvements existing the parties.
thereon, free from all liens and
The buyer has more interest in having the
encumbrances. (Emphasis supplied)
[34]
capital gains tax paid immediately since this is
a pre-requisite to the issuance of a new Torrens
Deed of Absolute Sale covering the furnishings:
title in his name. Nevertheless, as far as the
government is concerned, the capital gains tax
xxx
remains a liability of the seller since it is a tax
For and in consideration of the sum of TWO on the sellers gain from the sale of the real
MILLION EIGHT HUNDRED THOUSAND estate. Payment of the capital gains tax,
PESOS (P2,800,000.00), Philippine however, is not a pre-requisite to the
Currency, receipt of which in full is hereby transfer of ownership to the buyer. The
acknowledged by the VENDOR from the transfer of ownership takes effect upon the
VENDEE, the VENDOR sells, transfers and signing and notarization of the deed of absolute
conveys unto the VENDEE, his heirs, sale.
successors and assigns, the said furnitures, The recording of the sale with the proper
fixtures and other movable properties thereon, Registry of Deeds[37] and the transfer of the
free from all liens and certificate of title in the name of the buyer are
encumbrances.[35] (Emphasis supplied) necessary only to bind third parties to the
transfer of ownership.[38] As between the seller
However, on the agreed date, Chua refused to and the buyer, the transfer of ownership takes
pay the balance of the purchase price as effect upon the execution of a public
required by the contract to sell, the signed instrument conveying the real
Deeds of Sale, and Article 1582 of the Civil estate.[39] Registration of the sale with the
Code. Chua was therefore in default and has Registry of Deeds, or the issuance of a new
only himself to blame for the rescission by certificate of title, does not confer ownership on
Valdes-Choy of the contract to sell. the buyer. Such registration or issuance of a
Even if measured under existing usage or new certificate of title is not one of the modes of
custom, Valdes-Choy had all her papers in acquiring ownership.[40]
proper order. Article 1376 of the Civil Code In this case, Valdes-Choy was ready, able
provides that: and willing to submit to Chua all the papers
that customarily would complete the sale, and
Art. 1376. The usage or custom of the place to pay as well the capital gains tax. On the
shall be borne in mind in the interpretation of other hand, Chuas condition that a new TCT be
the ambiguities of a contract, and shall fill the first issued in his name before he pays the
omission of stipulations which are ordinarily balance of P10,215,000.00, representing
established. 94.58% of the purchase price, is not customary
in a sale of real estate. Such a condition, not
Customarily, in the absence of a contrary specified in the contract to sell as evidenced by
agreement, the submission by an individual the Receipt, cannot be considered part of the
seller to the buyer of the following papers would omissions of stipulations which are ordinarily
established by usage or custom.[41] What is since unless expressly stipulated, this is not
increasingly becoming customary is to deposit one of the obligations of a vendor.
in escrow the balance of the purchase price
WHEREFORE, the Decision of the Court of
pending the issuance of a new certificate of title
Appeals in CA-G.R. CV No. 37652 dated 23
in the name of the buyer. Valdes-Choy
February 1995 is AFFIRMED in toto.
suggested this solution but unfortunately, it
drew no response from Chua. SO ORDERED.

Chua had no reason to fear being

swindled. Valdes-Choy was prepared to turn- VIVE EAGLE LAND, INC. and G.R. No.
over to him the owners duplicate copy of the 150308
TCT, the signed Deeds of Sale, the tax VIRGILIO O. CERVANTES,
declarations, and the latest realty tax Petitioners, Present:
receipt. There was no hindrance to paying the PUNO, J., Chairman,
capital gains tax as Chua himself had advanced AUSTRIA-MARTINEZ,
the money to pay the same and Valdes-Choy - versus - CALLEJO, SR.,
had procured a managers check payable to the TINGA, and
Bureau of Internal Revenue covering the COURT OF APPEALS and Promulgated:
amount. It was only a matter of time before the GENUINO ICE CO., INC.,
capital gains tax would be paid. Chua acted Respondents. November 26, 2004
precipitately in filing the action for specific
performance a mere two days after the deadline x-------------------------------
of 15 July 1989 when there was an -------------------x
impasse. While this case was dismissed on 22
November 1989, he did not waste any time in DECISION
re-filing the same on 29 November 1989.

Accordingly, since Chua refused to pay the

CALLEJO, SR., J.:
consideration in full on the agreed date, which
is a suspensive condition, Chua cannot compel
Valdes-Choy to consummate the sale of the
This is a petition filed by Vive Eagle
Property. Article 1181 of the Civil Code
Land, Inc. (VELI) and Virgilio Cervantes for the
provides that -
review of the July 19, 2001 Decision[1] and
October 4, 2001 Resolution of the Court of
ART. 1181. In conditional obligations, the
Appeals (CA) in CA-G.R. CV No. 51933.
acquisition of rights, as well as the
extinguishment or loss of those already
The Antecedents
acquired shall depend upon the happening of
the event which constitutes the condition.
The Spouses Raul and Rosalie Flores
were the owners of two parcels of land situated
Chua acquired no right to compel Valdes-Choy
along Aurora Boulevard, Cubao, Quezon City,
to transfer ownership of the Property to him
covered by
because the suspensive condition - the full
Transfer Certificates of Title (TCT) Nos. 241845
payment of the purchase price - did not
and 241846, with an area of 1,026 and 2,963
happen.There is no correlative obligation on the
square meters, respectively. On October 10,
part of Valdes-Choy to transfer ownership of
1987, the Spouses Flores and Tatic Square
the Property to Chua. There is also no
International Corporation (TATIC) executed an
obligation on the part of Valdes-Choy to cause
Agreement to Sell in which the said spouses
the issuance of a new TCT in the name of Chua
bound and obliged themselves to sell the
properties to TATIC. The latter then applied for The OWNERS warrant that
a loan with the Capital Rural Bank of Makati, the titles of the two properties are
Inc. (Bank) to finance its purchase of the said free and clear from any and all
lots. The Bank agreed to grant the application obligations and claims, whether
of TATIC in the amount of P5,757,827.63 past or present, from any bank or
provided that the torrens titles over the subject financial institution or any other
properties would be registered under the name creditor, or third persons;
of the latter as the subject lots would be used
as collateral for the payment of the said loan.[2] 7. The BROKER shall
undertake to pay any and all
On April 13, 1988, the Spouses Flores, taxes and assessments imposed
TATIC, Isidro S. Tobias (who acted as broker), and/or charged over the two (2)
and the Bank executed a Memorandum of parcels of land including the
Agreement (MOA), wherein the Spouses Flores, payment of capital gains tax and
as vendees-owners, warranted that the titles of secure tax clearance from the
the two properties were free and clear from any proper government agency/ies
and all obligations and claims, whether past or within thirty (30) days from April
present, from any creditors or third persons. 12, 1988. Official receipts of
Tobias, as broker, undertook to pay any and all payments thereof shall be
the taxes and assessments imposed and/or presented and delivered to
charged over the lots, including the payment of CAPITAL BANK;
capital gains tax; and to secure tax clearances
from the proper government agencies within The payment of any taxes and
thirty days from April 12, 1988. Tobias also assessments on the two parcels of
undertook to remove any and all land may be advanced by
tenants/occupants on the lots within sixty CAPITAL BANK provided that
days from April 12, 1988 with the assistance TATIC SQUARE will execute a
and cooperation of the Spouses Flores. The Promissory Note in favor of
parties agreed that the expenses to be incurred CAPITAL BANK in the amount
by Tobias and TATIC would be deducted from corresponding thereto. The
the purchase price of the property, which was amount covered by this
estimated at P790,000.00: Promissory Note shall be
deducted from the balance of the
6. The BROKER undertakes purchase price payable by TATIC
to clear the titles covering the two SQUARE to the OWNERS;
(2) parcels of land from any and
all liens and encumbrances, 8. The BROKER and TATIC
including future claims and/or SQUARE shall undertake to
liability from any person or entity remove any and all
within thirty (30) days from April occupants/tenants of the two (2)
12, 1988. Towards this end, the parcels of land whether legally or
OWNER shall endeavor to provide illegally residing thereat within
the BROKER the sixty (60) days from April 12,
documents/papers, which are 1988 with the assistance and
necessary and proper to carry out cooperation of the OWNERS;
this objective;
9. Any and all expenses to be
incurred in complying with the
 undertakings mentioned in TATIC SQUARE undertakes
paragraphs 6, 7 and 8 shall be to remove all the
deducted from the purchase price occupants/tenants whether
of the two parcels of land, the legally or illegally residing thereat
expenses of which is estimated to within sixty (60) days from April
be SEVEN HUNDRED NINETY 12, 1988. Otherwise, VELI shall
THOUSAND PESOS have the right and authority to
(P790,000.00). If the said amount withhold payment of the
of P790,000.00 would not be remaining balance of the
sufficient, the other expenses purchase price of the sale of the
connected therewith shall be entire project;
taken and/or deducted from the
amount due the BROKER.[3] 2. In consideration of the
execution of the Deed of Sale over
the two (2) parcels of land (Annex
On the same day, the Spouses Flores A hereof), VELI hereby absorbs
executed a deed of absolute sale over the two and assumes to pay the loan
parcels of land for the price of P5,700,000.00 in obligations of TATIC SQUARE
favor of TATIC.[4] The Spouses Flores, with CAPITAL BANK in the
thereafter, turned over the custody of the principal amount of FIVE
owners copy of their titles to the Bank.[5] MILLION SEVEN HUNDRED
FIFTY-SEVEN THOUSAND
Although the torrens titles over the lots EIGHT HUNDRED TWENTY-
were still in the custody of the Bank, TATIC, as SEVEN & 63/100
vendor, and petitioner VELI, as vendee, (P5,757,827.63) plus whatever
executed a deed of absolute sale[6] on April 14, interests and other charges that
1988, in which TATIC sold the properties to the may be imposed thereon by
petitioner for P6,295,224.88, receipt of which CAPITAL BANK including the
was acknowledged in the said deed by TATIC. release of the mortgage
The latter warranted in the said deed that there constituted over the property
were valid titles to the property and that it upon full payment of the loan;
would deliver possession thereof to the
petitioner. The parties executed a deed entitled 3. TATIC SQUARE, likewise,
Addendum in which they agreed on the represents and warrants that it is
following: the absolute owner of the entire
project known as TATIC WALK-
1. TATIC SQUARE represents UP CONDOMINIUM including its
and warrants that the titles accessories and appurtenance
covering the two (2) parcels of thereto;
land are free from any and all
liens and encumbrances except
the mortgage which may be
subsisting in favor of CAPITAL 4. In accordance with the
BANK. TATIC SQUARE shall Deed of Sale of the entire project
cause the registration and (Annex B hereof), VELI shall
transfer of the titles covering the promptly pay on its due date
two (2) parcels of land in its name; TATIC SQUARE, the remaining
balance of the purchase price in
 the amount of P400,000.00 company in order to protect the
subject to adjustment set forth in interest of our client.[10]
the next preceding paragraph.[7]
In a letter to the respondent, petitioner
On November 11, 1988, VELI, as vendor, VELI, through counsel, rejected the formers
through its president, petitioner Virgilio demand.[11]
Cervantes, and respondent Genuino Ice Co.,
Inc., as vendee, executed a deed of absolute On June 24, 1990, the respondent filed
sale[8] over the parcel of land covered by TCT a Complaint against petitioner VELI and its
No. 241846 for the price of P4,000,000.00, president, Virgilio Cervantes, for specific
receipt of which was acknowledged by performance and damages in the Regional Trial
petitioner VELI. On the same day, the Court (RTC) of Quezon City. The respondent
respondent and petitioner VELI executed a alleged, inter alia, that petitioner VELI failed (a)
deed of assignment of rights in which the latter to transfer title to and in the name of the
assigned in favor of the respondent, for and in respondent over the property covered by TCT
consideration of P4,000,000.00, all its rights No. 241846 despite the lapse of a reasonable
and interests under the Deed of Absolute Sale time; (b) to cause the eviction/removal of the
executed on April 13, 1988 by the Spouses squatters/occupants on the property; and (c) to
Flores and the deed of absolute sale executed pay the capital gains tax and other
by TATIC in its favor, insofar as that lot covered assessments due to effectuate the transfer of
by TCT No. 241846 only was concerned.[9] the titles of the property to and in its name. The
respondent prayed that, after due proceedings,
judgment be rendered in its favor, thus:

In the meantime, the respondent, WHEREFORE, premises

through counsel, wrote petitioner VELI and considered, it is most respectfully
made the following demands: prayed that, after trial, judgment
be rendered against defendants
In view of the foregoing to, jointly and severally,
facts, demand is hereby made indemnify plaintiff as follows:
upon you to pay to the BIR the
capital gains tax amounting
to P285,000.00 and deliver to us
the receipt and/or clearance I. FIRST CAUSE OF
thereof, plus the interests for all ACTION
registration fees on account of
delay in the payment of the a) To effect or
capital gains tax and the 1% cause the transfer of
documentary stamp tax for the title in favor of the
sale of the property from your plaintiff;
company to our client or to give b) To pay the
them a BIR clearance regarding capital gains tax
payment of all said taxes within and other
five (5) days from receipt hereof; requirements or
otherwise, much to our regret, we expenses necessary
will be constrained to file legal to effect said
action for specific performance transfer.
and damages against your
 II. SECOND CAUSE OF petitioner VELI was exempt from the payment
ACTION of capital gains tax; (b) the Spouses Flores and
Tobias were liable for the payment of capital
a) To direct gains tax; and (c) the Spouses Flores and
defendants to cause Tobias were responsible for the eviction of the
the removal or occupants/squatters from the property.
eviction of the
squatters or The trial court rendered judgment,
unlawful occupants amended per its Order dated April 17, 1995, in
for (sic) the area; favor of the respondent. The fallo of the
b) In the decision, as amended, reads:
alternative, if
eviction is not WHEREFORE, foregoing
accomplished to considered, judgment is hereby
forfeit the amount rendered in favor of plaintiff
of P300,000 in favor ordering defendants to cause the
of plaintiff. transfer of the title to the plaintiff.
The payment of the capital gains
III. THIRD CAUSE OF tax shall be paid by the
ACTION defendants. Further, defendants
are hereby ordered to remove or
a) To pay actual evict or cause the removal or
damages in the eviction of the squatters or
amount of no less unlawful occupants of the area,
than FIVE otherwise, the amount
HUNDRED of P300,000.00 shall be deemed
THOUSAND forfeited in favor of plaintiff; to
PESOS; pay attorneys fees of P20,000.00
b) To pay and to pay the costs.
exemplary damages
in the amount of SO ORDERED.[14]
FIVE HUNDRED
THOUSAND The trial court held that the petitioners
PESOS; were liable for the payment of the capital gains
c) Attorneys fees tax, and that the respondent was not privy to
in the amount the deeds of absolute sale executed by the
of P250,000; Spouses Flores and TATIC, and TATIC and
d) Costs of petitioner VELI, and as such is not bound by
suits. the said deeds; neither could the respondent
enforce the same against the Spouses Flores,
Plaintiff further prays for TATIC and petitioner VELI.
such relief or reliefs as may be
just and equitable under the In due course, the petitioners appealed
premises.[12] to the CA which rendered judgment, on July
19, 2001, affirming, with modification, the
In their answer[13] to the complaint, the appealed decision. The CA held that the
petitioners alleged that the respondent had no petitioners were liable for the expenses for the
cause of action against them because (a) registration of the sale. It also ruled that the
respondent was not bound by the deed of TATIC, the latter obliged itself to cause and
absolute sale executed by TATIC and the spend for the registration of the second deed of
petitioners because it was not a party thereto, sale between petitioner VELI and TATIC, and
and that the latter were obliged to cause the the issuance of the titles over the property in
eviction of the squatters from the property.[15] favor of petitioner VELI; and to cause the
eviction of the tenants/occupants from the
The petitioners, in the instant petition property within sixty days from April 12, 1988.
for review, raise the following issues for Also, under the deed of assignment of rights
resolution: (a) whether or not petitioner VELI is executed by petitioner VELI and the
obliged to pay for the expenses for transfer of respondent, the latter acquired the rights and
the property and the issuance of the titles to interests of petitioner VELI under the deeds of
and under the name of the respondent; (b) sale executed by the Spouses Flores in favor of
whether or not the petitioners are liable for the TATIC, and by TATIC in favor of petitioner VELI.
capital gains tax for the sale between petitioner
VELI and the respondent; and (c) whether or The petitioners aver that, under the deed
not the petitioners are obliged to evict the of sale they executed in favor of the respondent,
remaining squatters from the land. as well as the acts of the parties before,
contemporaneous with and subsequent to the
Petitioner VELI is Obliged to Cause execution of the said deed, they cannot be held
the Registration of the November 11, liable for the expenses for the registration of the
1988 Deed of Absolute Sale in Favor third deed of sale, the transfer of titles to and
of Respondent, the Issuance of a under the name of the respondent, for payment
Torrens Title in the Name of of the capital gains tax and the eviction of the
Respondent and the Eviction of the tenants/occupants on the property. Such acts
Tenants/Occupants from the Property include the execution of the following: the
at the Expense of the Petitioner. addendum to the said deed of sale; the deed of
assignment of rights executed by petitioner
The petitioners assail the ruling of the VELI in favor of the respondent; and the deeds
CA that, under Article 1487 of the New Civil executed by the Spouses Flores, TATIC and
Code, petitioner VELI, as vendor, is liable for Tobias.
the expenses for the registration of the third
deed of sale in favor of the respondent, as The petitioners contend that the CA
vendee, and to secure a torrens title over the erred in ruling that the respondent is not
property to and under the name of the latter. bound by the deeds executed by the Spouses
The petitioners contend that, under the MOA Flores, TATIC and Tobias, and by TATIC and
executed by the Spouses Flores, Tobias (the petitioner VELI simply because the respondent
broker), the Bank and TATIC, the April 14, was not a party to the said deeds. The
1988 agreement and the first deed of sale petitioners insist that the respondent acquired
executed by the Spouses Flores and Tobias, the the rights and interests of its predecessors;
latter obliged themselves to spend for the and, being the vendee/owner of the property
registration of the said deed of absolute sale covered by TCT No. 241846, the petitioners had
and for the issuance of torrens titles over the the right to enforce the said contracts against
properties in the name of the vendees; and its predecessors.
further obliged themselves to cause the eviction
of the tenants/occupants from the property We are not in full accord with the
within sixty days from April 12, 1988. The petitioners. It bears stressing that there are
petitioners, likewise, emphasize that, under the three separate deeds of absolute sale on record,
April 14, 1988 agreement of the petitioners and to wit: first, the April 13, 1988 deed of absolute
sale executed by the Spouses Flores and TATIC; Under Article 1495[18] of the New Civil
second, the April 14, 1988 deed of absolute sale Code, petitioner VELI, as the vendor, is obliged
executed by TATIC in favor of petitioner VELI; to transfer title over the property and deliver
and third, the November 11, 1988 deed of the same to the vendee. While Article 1498[19] of
absolute sale between petitioner VELI, as the New Civil Code provides that the execution
vendor, and the respondent, as vendee, over of a notarized deed of absolute sale shall be
the property covered by TCT No. 241846. Under equivalent to the delivery of the property
the April 13, 1988 MOA executed by the subject of the contract, the same shall not
Spouses Flores, Tobias, TATIC and the Bank, apply if, from the deed, the contrary does not
the Spouses Flores and Tobias obliged appear or cannot clearly be inferred. In the
themselves to spend for and cause the present case, the respondent and petitioner
registration of the first deed of absolute sale, to VELI agreed that the latter would cause the
cause the issuance of the torrens titles over the eviction of the tenants/occupants and deliver
property to and under the name of TATIC, as possession of the property. It is clear that at the
vendee, and to pay the capital gains tax on the time the petitioner executed the deed of sale in
said sales. Tobias and TATIC bound and favor of the respondent, there were
obliged themselves to cause the eviction of the tenants/occupants in the property. It cannot,
tenants/occupants on the property within sixty thus, be concluded that, through the execution
days from April 12, 1988, with the assistance of the third deed of sale, the property was
of the Spouses Flores. On the other hand, thereby delivered to the respondent.
under the April 14, 1988 agreement of TATIC
and petitioner VELI, TATIC obliged itself to Petitioner VELI is obliged to cause the
spend for the registration of the second deed of eviction of the tenants/occupants unless there
absolute sale and the issuance of the titles over is a contrary agreement of the parties. Indeed,
the property to and under the name of under the addendum executed by petitioner
petitioner VELI, and to cause the eviction of the VELI and the respondent, the latter was given
tenants/occupants from the property within the right to withhold P300,000.00 of the
sixty days from April 12, 1988. TATIC did not purchase price until after petitioner VELI
bind itself to pay the capital gains tax for the cleared the property of squatters.
said sale.
While it is true that the respondent
Indeed, under the third deed of absolute acquired the rights and interests of TATIC
sale, petitioner VELI did not oblige itself to under the first deed of sale and that of
spend for the registration of the said deed; to petitioner VELI under the second deed of sale
secure a torrens title over the property to and by virtue of the deed of assignment of rights
under the name of the respondent; or to cause executed by the petitioners and the respondent,
the eviction of the tenants/occupants on the the latter cannot enforce the terms and
property. Nevertheless, petitioner VELI is liable conditions of the said deeds. It must be
for the said expenses because, under Article stressed that there is no showing in the records
1487[16] of the New Civil Code, the expenses for that the Spouses Flores, Tobias and TATIC
the registration of the sale should be conformed to the said deed of assignment of
shouldered by the vendor unless there is a rights or that the same was registered in the
stipulation to the contrary. In the absence of office of the Register of Deeds in accordance
any stipulation of the parties relating to the with Article 1625[20] of the New Civil Code.
expenses for the registration of the sale and the
transfer of the title to the vendee, Article 1487 Moreover, the execution, by petitioner
shall be applied in a supplementary manner.[17] VELI and the respondent, of such deed of
assignment of rights did not relieve the said
petitioner of its obligation to clear the property letter, petitioner VELI claimed that such tax
of tenants/occupants. This is because the could not be assessed against it or against
following agreement was embodied in their TATIC for the reason that they are corporations
addendum: and, therefore, exempt from the payment of
capital gains tax for any sale or exchange or
NOW THEREFORE, for disposition of property.
and in consideration of the
foregoing premises, the It is settled that only laws existing at the
Transferee hereby retains and time of the execution of a contract are
holds from the Transferor the applicable thereto and not later statutes,
amount of Three Hundred unless the latter are specifically intended to
Thousand & 00/100 Pesos have retroactive effect.[23] When the first and
(P300,000.00), from the purchase second deeds of absolute sale took place in
price due the Transferor until 1988, the 1977 National Internal Revenue Code
after the premises have been rid (NIRC), as amended by Batas Pambansa Blg.
of and cleared from squatters 37 and
occupying therein. Executive Order No. 237 was still in effect.
Under Sections 21(e)[24] and 34(h)[25] of the
That after the said parcel 1977 NIRC, as amended, the Spouses Flores,
of land has been cleared of as vendors, were liable for the payment of
squatters, the Transferee shall capital gains tax. In the second sale, however,
immediately remit to the TATIC was not similarly liable because while
Transferor the aforesaid sum of Article 1487 of the Civil Code provides that the
Three Hundred Thousand & seller is obliged to pay the capital gains tax
00/100 Pesos (P300,000.00) based on its obligation to transfer title over the
without need of further act or property to the vendee under Sections 21(e) and
deed.[21] 34(h) of the 1977 NIRC, the payment of capital
gains tax from the sale, exchange of disposition
of real property devolved only upon individual
taxpayers. In fact, the Bureau of Internal
Petitioner VELI is Not Liable Revenue (BIR), in response to the queries of
for Payment of the Capital several corporations which had sold,
Gains Tax for the Third Sale exchanged or disposed of their real properties,
more particularly in BIR Ruling Nos. 159
We agree with the petitioners contention (September
that petitioner VELI is not liable for the 13, 1985), 127 (July 12, 1983), 191 (November
payment of capital gains tax for the third deed 15, 1983), 195 (November 15, 1983), 60 (May
of sale. A capital gains tax is a final tax 12, 1986), 177 (September 17, 1986), and 415-
assessed on the presumed gain derived by 87 (December 23, 1987), definitely ruled that
citizens and resident aliens, as well as estates the corporations were exempt from the
and trusts, from the sale or exchange of real payment of capital gains tax. Their income from
property.[22] Under the first sale, per the the sale or exchange or disposition of real
agreement of the Spouses Flores, TATIC, and property was treated as ordinary income, and
Tobias, the said spouses were obliged to pay the was taxed as such. One of the opinions of the
capital gains tax. However, under the deed of BIR Commissioner reads:
absolute sale for the second sale, TATIC was
not obliged to pay the said tax. The Court notes Ruling No. 159
that in answer to the respondents demand September 13, 1985
 tax for its sale of the property to the
Gentlemen: respondent. Section 34(h) of the 1977 NIRC, as
amended by B.P. Blg. 37 reads as follows:
In reply to your letter dated
September 11, 1985, I have the (h) The provision of
honor to inform you that Revenue paragraph (b) of this Section to
Regulations No. 8-79 the contrary notwithstanding, net
implementing Section 34(h) of the capital gains from the sale or
Tax Code, as amended by Batas other disposition of real property
Pambansa Blg. 37 is explicit that by citizens of the Philippines or
only natural persons or resident alien individuals shall
individuals are liable to the final be subject to the final income tax
capital gains tax prescribed rates prescribed as follows:
therein. Such being the case, the
gains derived by your client, the NET CAPITAL GAINS RATES
Religious of the Virgin Mary from On the first P100,000 or less 10%
the sale of its real property in On any amount over P100,000
Balanga, Bataan, is not subject to 20%
the final capital gains tax
prescribed by Section 34(h) of the Such tax shall be in lieu of
Tax Code, as amended by Batas the tax imposed under Section 21
Pambansa Blg. 37 but to the of this Code; Provided,
ordinary corporate income tax however, That the tax liability, if
prescribed under Section 24(a) of any, on gains from sales or other
the same Code, as amended. dispositions of real property to
the government or any of its
Very truly yours, political subdivisions or agencies
(Sgd.) or to government-owned and
RUBEN B. ANCHETA controlled corporations shall be
Acting Commissioner determined either under Section
21 hereof or under this Section, at
This is the reason why, in the second the option of the
sale, neither TATIC nor petitioner VELI paid taxpayer; Provided, further, That
any capital gains tax. Similarly, in the third if the taxpayer elects to report
sale, i.e., between petitioner VELI and the such gains in accordance with the
respondent, petitioner VELI, being a provisions of Section 43(b), the
corporation, was not obliged to pay the capital amount of the tax which shall be
gains tax. However, petitioner VELI, as seller, paid on each installment shall be
should have included in its ordinary income tax the proportion of the tax herein
return, whatever gain or loss it incurred with imposed, which the installment
respect to the sale of the property in dispute, payment received bears to the
pursuant to Section 24(a)[26] of the 1977 NIRC, total selling price; Provided,
as amended. finally, That failure on the part of
the seller to pay tax imposed
We do not agree with the ruling of the CA that, herein on any gains returnable
under Section 24(d) of the 1997 NIRC, under the installment method will
previously Section 34(h) of the 1977 NIRC, automatically disqualify the
petitioner VELI is obliged to pay capital gains seller-taxpayer from paying the
 tax in installments and the retro sales and other forms of
unpaid portion of the tax shall conditional sales,
immediately be due and by individuals, including
demandable. The tax herein estates and trusts: Provided,
imposed shall be returned and That the tax liability, if any, on
paid in accordance with Sections gains from sales or other
45(c)[27] and 51(a)(4) of this Code. disposition of real property to the
government or any of its political
No registration of any document subdivisions or agencies or to
transferring real property shall be government-owned or controlled
effected by Register of Deeds corporations shall be determined
unless the Commissioner or his either under Section 24(A)or
duly authorized representative under this Subsection, at the
has certified that such transfer option of the taxpayer.
has been reported and the tax
herein imposed, if any, has been As pointed out earlier, the sale between
paid; in case of deferred-payment petitioner VELI and the respondent occurred in
sales of real property where the November 11, 1988. At that point in time, it
vendor retains title to the was the 1977 NIRC as amended, which was in
property, the vendee shall furnish effect. Hence, the applicable law is Section
the Commissioner with a copy of 34(h). Section 24(d) of the 1997 NIRC, which
the instrument of sale within the requires corporations to pay capital gains tax
same period prescribed for at rates provided for in Chapter IV, Section 27
payment of the tax herein thereof, cannot be applied retroactively.[28] The
imposed. latter provision reads:

Section 24(D) of the 1997 NIRC, which CHAPTER IV TAX ON

refers to the capital gains from sale of real CORPORATIONS
property, is found in the Title Chapter III Tax
on Individuals, and is herein quoted: Section 27. Rates of
Income Tax on Domestic
(D) Capital Gains from Sale Corporations.
of Real Property.
(1) In General. The
provisions of Section 39(B) (D) Rates of Tax on Certain
notwithstanding, a final tax of six Passive Incomes.
percent (6%) based on the gross
selling price or current fair (5) Capital Gains Realized
market value as determined in from the Sale, Exchange or
accordance with Section 6(E) of Disposition of Lands and/or
this Code, whichever is higher, is Buildings. A final tax of six
hereby imposed upon capital percent (6%) is hereby imposed
gains presumed to have been on the gain presumed to have
realized from the sale, exchange, been realized on the sale,
or other disposition of real exchange or disposition of lands
property located in the and/or buildings which are not
Philippines, classified as capital actually used in the business of a
assets, including pacto de corporation and are treated as
 capital assets, based on the gross
selling price or fair market value
as determined in accordance with
Section 6(E) of this Code,
whichever is higher, of such lands
and/or buildings.

The gains that a corporation earned in

the sale, exchange or disposition of the real
properties it made should be included in the
Corporations return, pursuant to Sections
24(a) and 45 of the 1977 NIRC, as amended.[29]

IN LIGHT OF ALL THE FOREGOING,

the petition is PARTIALLY GRANTED. The
decision of the Court of Appeals in CA-G.R. CV
No. 51933 is herebyAFFIRMED WITH
MODIFICATION. That portion of the Decision
of the Court of Appeals mandating petitioner
Vive Eagle Land, Inc. to pay capital gains tax
for the November 11, 1988 sale of the property
covered by TCT No. 241846 to respondent
Genuino Ice Co., Inc. is DELETED. No costs.

SO ORDERED.