Republic of the Philippines Gaite in turn executed a general assignment (Record on Appeal,

SUPREME COURT pp. 17-19) conveying the development and exploitation of said
Manila mining claims into the Larap Iron Mines, a single proprietorship
owned solely by and belonging to him, on the same royalty basis
EN BANC provided for in Exhibit "3". Thereafter, Gaite embarked upon the
development and exploitation of the mining claims in question,
G.R. No. L-11827             July 31, 1961 opening and paving roads within and outside their boundaries,
making other improvements and installing facilities therein for use
in the development of the mines, and in time extracted therefrom
FERNANDO A. GAITE, plaintiff-appellee,
what he claim and estimated to be approximately 24,000 metric
vs.
tons of iron ore.
ISABELO FONACIER, GEORGE KRAKOWER, LARAP MINES
& SMELTING CO., INC., SEGUNDINA VIVAS, FRNACISCO
DANTE, PACIFICO ESCANDOR and FERNANDO For some reason or another, Isabelo Fonacier decided to revoke
TY, defendants-appellants. the authority granted by him to Gaite to exploit and develop the
mining claims in question, and Gaite assented thereto subject to
certain conditions. As a result, a document entitled "Revocation of
Alejo Mabanag for plaintiff-appellee.
Power of Attorney and Contract" was executed on December 8,
Simplicio U. Tapia, Antonio Barredo and Pedro Guevarra for
1954 (Exhibit "A"),wherein Gaite transferred to Fonacier, for the
defendants-appellants.
consideration of P20,000.00, plus 10% of the royalties that
Fonacier would receive from the mining claims, all his rights and
REYES, J.B.L., J.: interests on all the roads, improvements, and facilities in or
outside said claims, the right to use the business name "Larap
This appeal comes to us directly from the Court of First Instance Iron Mines" and its goodwill, and all the records and documents
because the claims involved aggregate more than P200,000.00. relative to the mines. In the same document, Gaite transferred to
Fonacier all his rights and interests over the "24,000 tons of iron
Defendant-appellant Isabelo Fonacier was the owner and/or ore, more or less" that the former had already extracted from the
holder, either by himself or in a representative capacity, of 11 iron mineral claims, in consideration of the sum of P75,000.00,
lode mineral claims, known as the Dawahan Group, situated in P10,000.00 of which was paid upon the signing of the agreement,
the municipality of Jose Panganiban, province of Camarines and
Norte.
b. The balance of SIXTY-FIVE THOUSAND PESOS
By a "Deed of Assignment" dated September 29, 1952(Exhibit (P65,000.00) will be paid from and out of the first letter of
"3"), Fonacier constituted and appointed plaintiff-appellee credit covering the first shipment of iron ores and of the
Fernando A. Gaite as his true and lawful attorney-in-fact to enter first amount derived from the local sale of iron ore made
into a contract with any individual or juridical person for the by the Larap Mines & Smelting Co. Inc., its assigns,
exploration and development of the mining claims administrators, or successors in interests.
aforementioned on a royalty basis of not less than P0.50 per ton
of ore that might be extracted therefrom. On March 19, 1954,
To secure the payment of the said balance of P65,000.00, of the surety bonds delivered by Fonacier to Gaite (Record on
Fonacier promised to execute in favor of Gaite a surety bond, and Appeal, pp. 82-94).
pursuant to the promise, Fonacier delivered to Gaite a surety
bond dated December 8, 1954 with himself (Fonacier) as Up to December 8, 1955, when the bond Exhibit "B" expired with
principal and the Larap Mines and Smelting Co. and its respect to the Far Eastern Surety and Insurance Company, no
stockholders George Krakower, Segundina Vivas, Pacifico sale of the approximately 24,000 tons of iron ore had been made
Escandor, Francisco Dante, and Fernando Ty as sureties (Exhibit by the Larap Mines & Smelting Co., Inc., nor had the P65,000.00
"A-1"). Gaite testified, however, that when this bond was balance of the price of said ore been paid to Gaite by Fonacier
presented to him by Fonacier together with the "Revocation of and his sureties payment of said amount, on the theory that they
Power of Attorney and Contract", Exhibit "A", on December 8, had lost right to make use of the period given them when their
1954, he refused to sign said Exhibit "A" unless another bond bond, Exhibit "B" automatically expired (Exhibits "C" to "C-24").
under written by a bonding company was put up by defendants to And when Fonacier and his sureties failed to pay as demanded
secure the payment of the P65,000.00 balance of their price of by Gaite, the latter filed the present complaint against them in the
the iron ore in the stockpiles in the mining claims. Hence, a Court of First Instance of Manila (Civil Case No. 29310) for the
second bond, also dated December 8, 1954 (Exhibit "B"),was payment of the P65,000.00 balance of the price of the ore,
executed by the same parties to the first bond Exhibit "A-1", with consequential damages, and attorney's fees.
the Far Eastern Surety and Insurance Co. as additional surety,
but it provided that the liability of the surety company would All the defendants except Francisco Dante set up the uniform
attach only when there had been an actual sale of iron ore by the defense that the obligation sued upon by Gaite was subject to a
Larap Mines & Smelting Co. for an amount of not less then condition that the amount of P65,000.00 would be payable out of
P65,000.00, and that, furthermore, the liability of said surety the first letter of credit covering the first shipment of iron ore
company would automatically expire on December 8, 1955. Both and/or the first amount derived from the local sale of the iron ore
bonds were attached to the "Revocation of Power of Attorney and by the Larap Mines & Smelting Co., Inc.; that up to the time of the
Contract", Exhibit "A", and made integral parts thereof. filing of the complaint, no sale of the iron ore had been made,
hence the condition had not yet been fulfilled; and that
On the same day that Fonacier revoked the power of attorney he consequently, the obligation was not yet due and demandable.
gave to Gaite and the two executed and signed the "Revocation Defendant Fonacier also contended that only 7,573 tons of the
of Power of Attorney and Contract", Exhibit "A", Fonacier entered estimated 24,000 tons of iron ore sold to him by Gaite was
into a "Contract of Mining Operation", ceding, transferring, and actually delivered, and counterclaimed for more than
conveying unto the Larap Mines and Smelting Co., Inc. the right P200,000.00 damages.
to develop, exploit, and explore the mining claims in question,
together with the improvements therein and the use of the name At the trial of the case, the parties agreed to limit the presentation
"Larap Iron Mines" and its good will, in consideration of certain of evidence to two issues:
royalties. Fonacier likewise transferred, in the same document,
the complete title to the approximately 24,000 tons of iron ore
(1) Whether or not the obligation of Fonacier and his sureties to
which he acquired from Gaite, to the Larap & Smelting Co., in
pay Gaite P65,000.00 become due and demandable when the
consideration for the signing by the company and its stockholders
defendants failed to renew the surety bond underwritten by the
Far Eastern Surety and Insurance Co., Inc. (Exhibit "B"), which appellee Gaite. The motion for contempt is unmeritorious
expired on December 8, 1955; and because the main allegation therein that the appellants Larap
Mines & Smelting Co., Inc. and Krakower had sold the iron ore
(2) Whether the estimated 24,000 tons of iron ore sold by plaintiff here in question, which allegedly is "property in litigation", has not
Gaite to defendant Fonacier were actually in existence in the been substantiated; and even if true, does not make these
mining claims when these parties executed the "Revocation of appellants guilty of contempt, because what is under litigation in
Power of Attorney and Contract", Exhibit "A." this appeal is appellee Gaite's right to the payment of the balance
of the price of the ore, and not the iron ore itself. As for the
On the first question, the lower court held that the obligation of several motions presented by appellee Gaite, it is unnecessary to
the defendants to pay plaintiff the P65,000.00 balance of the price resolve these motions in view of the results that we have reached
of the approximately 24,000 tons of iron ore was one with a term: in this case, which we shall hereafter discuss.
i.e., that it would be paid upon the sale of sufficient iron ore by
defendants, such sale to be effected within one year or before The main issues presented by appellants in this appeal are:
December 8, 1955; that the giving of security was a condition
precedent to Gait's giving of credit to defendants; and that as the (1) that the lower court erred in holding that the obligation of
latter failed to put up a good and sufficient security in lieu of the appellant Fonacier to pay appellee Gaite the P65,000.00 (balance
Far Eastern Surety bond (Exhibit "B") which expired on of the price of the iron ore in question)is one with a period or term
December 8, 1955, the obligation became due and demandable and not one with a suspensive condition, and that the term
under Article 1198 of the New Civil Code. expired on December 8, 1955; and

As to the second question, the lower court found that plaintiff (2) that the lower court erred in not holding that there were only
Gaite did have approximately 24,000 tons of iron ore at the 10,954.5 tons in the stockpiles of iron ore sold by appellee Gaite
mining claims in question at the time of the execution of the to appellant Fonacier.
contract Exhibit "A."
The first issue involves an interpretation of the following provision
Judgment was, accordingly, rendered in favor of plaintiff Gaite in the contract Exhibit "A":
ordering defendants to pay him, jointly and severally, P65,000.00
with interest at 6% per annum from December 9, 1955 until 7. That Fernando Gaite or Larap Iron Mines hereby
payment, plus costs. From this judgment, defendants jointly transfers to Isabelo F. Fonacier all his rights and interests
appealed to this Court. over the 24,000 tons of iron ore, more or less, above-
referred to together with all his rights and interests to
During the pendency of this appeal, several incidental motions operate the mine in consideration of the sum of
were presented for resolution: a motion to declare the appellants SEVENTY-FIVE THOUSAND PESOS (P75,000.00) which
Larap Mines & Smelting Co., Inc. and George Krakower in the latter binds to pay as follows:
contempt, filed by appellant Fonacier, and two motions to dismiss
the appeal as having become academic and a motion for new trial a. TEN THOUSAND PESOS (P10,000.00) will be paid
and/or to take judicial notice of certain documents, filed by upon the signing of this agreement.
 b. The balance of SIXTY-FIVE THOUSAND PESOS the obligation must clearly appear. Nothing is found in the record
(P65,000.00)will be paid from and out of the first letter of to evidence that Gaite desired or assumed to run the risk of losing
credit covering the first shipment of iron ore made by the his right over the ore without getting paid for it, or that Fonacier
Larap Mines & Smelting Co., Inc., its assigns, understood that Gaite assumed any such risk. This is proved by
administrators, or successors in interest. the fact that Gaite insisted on a bond a to guarantee payment of
the P65,000.00, an not only upon a bond by Fonacier, the Larap
We find the court below to be legally correct in holding that the Mines & Smelting Co., and the company's stockholders, but also
shipment or local sale of the iron ore is not a condition precedent on one by a surety company; and the fact that appellants did put
(or suspensive) to the payment of the balance of P65,000.00, but up such bonds indicates that they admitted the definite existence
was only a suspensive period or term. What characterizes a of their obligation to pay the balance of P65,000.00.
conditional obligation is the fact that its efficacy or obligatory force
(as distinguished from its demandability) is subordinated to the 3) To subordinate the obligation to pay the remaining P65,000.00
happening of a future and uncertain event; so that if the to the sale or shipment of the ore as a condition precedent, would
suspensive condition does not take place, the parties would stand be tantamount to leaving the payment at the discretion of the
as if the conditional obligation had never existed. That the parties debtor, for the sale or shipment could not be made unless the
to the contract Exhibit "A" did not intend any such state of things appellants took steps to sell the ore. Appellants would thus be
to prevail is supported by several circumstances: able to postpone payment indefinitely. The desireability of
avoiding such a construction of the contract Exhibit "A" needs no
1) The words of the contract express no contingency in the stressing.
buyer's obligation to pay: "The balance of Sixty-Five Thousand
Pesos (P65,000.00) will be paid out of the first letter of credit 4) Assuming that there could be doubt whether by the wording of
covering the first shipment of iron ores . . ." etc. There is no the contract the parties indented a suspensive condition or a
uncertainty that the payment will have to be made sooner or later; suspensive period (dies ad quem) for the payment of the
what is undetermined is merely the exact date at which it will be P65,000.00, the rules of interpretation would incline the scales in
made. By the very terms of the contract, therefore, the existence favor of "the greater reciprocity of interests", since sale is
of the obligation to pay is recognized; only essentially onerous. The Civil Code of the Philippines, Article
its maturity or demandability is deferred. 1378, paragraph 1, in fine, provides:

2) A contract of sale is normally commutative and onerous: not If the contract is onerous, the doubt shall be settled in
only does each one of the parties assume a correlative obligation favor of the greatest reciprocity of interests.
(the seller to deliver and transfer ownership of the thing sold and
the buyer to pay the price),but each party anticipates and there can be no question that greater reciprocity obtains if the
performance by the other from the very start. While in a sale the buyer' obligation is deemed to be actually existing, with only its
obligation of one party can be lawfully subordinated to an maturity (due date) postponed or deferred, that if such obligation
uncertain event, so that the other understands that he assumes were viewed as non-existent or not binding until the ore was sold.
the risk of receiving nothing for what he gives (as in the case of a
sale of hopes or expectations, emptio spei), it is not in the usual
course of business to do so; hence, the contingent character of
The only rational view that can be taken is that the sale of the ore (3) When by his own acts he has impaired said guaranties
to Fonacier was a sale on credit, and not an aleatory contract or securities after their establishment, and when through
where the transferor, Gaite, would assume the risk of not being fortuitous event they disappear, unless he immediately
paid at all; and that the previous sale or shipment of the ore was gives new ones equally satisfactory.
not a suspensive condition for the payment of the balance of the
agreed price, but was intended merely to fix the future date of the Appellants' failure to renew or extend the surety company's bond
payment. upon its expiration plainly impaired the securities given to the
creditor (appellee Gaite), unless immediately renewed or
This issue settled, the next point of inquiry is whether appellants, replaced.
Fonacier and his sureties, still have the right to insist that Gaite
should wait for the sale or shipment of the ore before receiving There is no merit in appellants' argument that Gaite's acceptance
payment; or, in other words, whether or not they are entitled to of the surety company's bond with full knowledge that on its face
take full advantage of the period granted them for making the it would automatically expire within one year was a waiver of its
payment. renewal after the expiration date. No such waiver could have
been intended, for Gaite stood to lose and had nothing to gain
We agree with the court below that the appellant have forfeited barely; and if there was any, it could be rationally explained only if
the right court below that the appellants have forfeited the right to the appellants had agreed to sell the ore and pay Gaite before the
compel Gaite to wait for the sale of the ore before receiving surety company's bond expired on December 8, 1955. But in the
payment of the balance of P65,000.00, because of their failure to latter case the defendants-appellants' obligation to pay became
renew the bond of the Far Eastern Surety Company or else absolute after one year from the transfer of the ore to Fonacier by
replace it with an equivalent guarantee. The expiration of the virtue of the deed Exhibit "A.".
bonding company's undertaking on December 8, 1955
substantially reduced the security of the vendor's rights as All the alternatives, therefore, lead to the same result: that Gaite
creditor for the unpaid P65,000.00, a security that Gaite acted within his rights in demanding payment and instituting this
considered essential and upon which he had insisted when he action one year from and after the contract (Exhibit "A") was
executed the deed of sale of the ore to Fonacier (Exhibit "A"). The executed, either because the appellant debtors had impaired the
case squarely comes under paragraphs 2 and 3 of Article 1198 of securities originally given and thereby forfeited any further time
the Civil Code of the Philippines: within which to pay; or because the term of payment was
originally of no more than one year, and the balance of
"ART. 1198. The debtor shall lose every right to make use P65,000.00 became due and payable thereafter.
of the period:
Coming now to the second issue in this appeal, which is whether
(1) . . . there were really 24,000 tons of iron ore in the stockpiles sold by
appellee Gaite to appellant Fonacier, and whether, if there had
(2) When he does not furnish to the creditor the been a short-delivery as claimed by appellants, they are entitled
guaranties or securities which he has promised. to the payment of damages, we must, at the outset, stress two
things: first, that this is a case of a sale of a specific mass of
fungible goods for a single price or a lump sum, the quantity of
"24,000 tons of iron ore, more or less," stated in the contract Now, appellee Gaite asserts that there was a total of 7,375 cubic
Exhibit "A," being a mere estimate by the parties of the total meters in the stockpiles of ore that he sold to Fonacier, while
tonnage weight of the mass; and second, that the evidence appellants contend that by actual measurement, their witness
shows that neither of the parties had actually measured of Cirpriano Manlañgit found the total volume of ore in the stockpiles
weighed the mass, so that they both tried to arrive at the total to be only 6.609 cubic meters. As to the average weight in tons
quantity by making an estimate of the volume thereof in cubic per cubic meter, the parties are again in disagreement, with
meters and then multiplying it by the estimated weight per ton of appellants claiming the correct tonnage factor to be 2.18 tons to a
each cubic meter. cubic meter, while appellee Gaite claims that the correct tonnage
factor is about 3.7.
The sale between the parties is a sale of a specific mass or iron
ore because no provision was made in their contract for the In the face of the conflict of evidence, we take as the most
measuring or weighing of the ore sold in order to complete or reliable estimate of the tonnage factor of iron ore in this case to
perfect the sale, nor was the price of P75,000,00 agreed upon by be that made by Leopoldo F. Abad, chief of the Mines and
the parties based upon any such measurement.(see Art. 1480, Metallurgical Division of the Bureau of Mines, a government
second par., New Civil Code). The subject matter of the sale is, pensionado to the States and a mining engineering graduate of
therefore, a determinate object, the mass, and not the actual the Universities of Nevada and California, with almost 22 years of
number of units or tons contained therein, so that all that was experience in the Bureau of Mines. This witness placed the
required of the seller Gaite was to deliver in good faith to his tonnage factor of every cubic meter of iron ore at between 3
buyer all of the ore found in the mass, notwithstanding that the metric tons as minimum to 5 metric tons as maximum. This
quantity delivered is less than the amount estimated by them estimate, in turn, closely corresponds to the average tonnage
(Mobile Machinery & Supply Co., Inc. vs. York Oilfield Salvage factor of 3.3 adopted in his corrected report (Exhibits "FF" and
Co., Inc. 171 So. 872, applying art. 2459 of the Louisiana Civil FF-1") by engineer Nemesio Gamatero, who was sent by the
Code). There is no charge in this case that Gaite did not deliver to Bureau of Mines to the mining claims involved at the request of
appellants all the ore found in the stockpiles in the mining claims appellant Krakower, precisely to make an official estimate of the
in questions; Gaite had, therefore, complied with his promise to amount of iron ore in Gaite's stockpiles after the dispute arose.
deliver, and appellants in turn are bound to pay the lump price.
Even granting, then, that the estimate of 6,609 cubic meters of
But assuming that plaintiff Gaite undertook to sell and appellants ore in the stockpiles made by appellant's witness Cipriano
undertook to buy, not a definite mass, but approximately 24,000 Manlañgit is correct, if we multiply it by the average tonnage
tons of ore, so that any substantial difference in this quantity factor of 3.3 tons to a cubic meter, the product is 21,809.7 tons,
delivered would entitle the buyers to recover damages for the which is not very far from the estimate of 24,000 tons made by
short-delivery, was there really a short-delivery in this case? appellee Gaite, considering that actual weighing of each unit of
the mass was practically impossible, so that a reasonable
We think not. As already stated, neither of the parties had actually percentage of error should be allowed anyone making an
measured or weighed the whole mass of ore cubic meter by cubic estimate of the exact quantity in tons found in the mass. It must
meter, or ton by ton. Both parties predicate their respective claims not be forgotten that the contract Exhibit "A" expressly stated the
only upon an estimated number of cubic meters of ore multiplied amount to be 24,000 tons, more or less. (ch. Pine River Logging
by the average tonnage factor per cubic meter. & Improvement Co. vs U.S., 279, 46 L. Ed. 1164).
There was, consequently, no short-delivery in this case as would
entitle appellants to the payment of damages, nor could Gaite
have been guilty of any fraud in making any misrepresentation to
appellants as to the total quantity of ore in the stockpiles of the
mining claims in question, as charged by appellants, since Gaite's
estimate appears to be substantially correct.

WHEREFORE, finding no error in the decision appealed from, we

hereby affirm the same, with costs against appellants.

Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes,

Dizon, De Leon and Natividad, JJ., concur.
 On September 27, 1961, petitioner Province
of Cebu leased4 in favor of Rufina Morales a
210-square meter lot which formed part of
Lot No. 646-A of the Banilad Estate.
Subsequently or sometime in 1964,
THIRD DIVISION petitioner donated several parcels of land to
the City of Cebu. Among those donated was
[G.R. NO. 170115 : February 19, 2008]
Lot No. 646-A which the City of Cebu
PROVINCE OF CEBU, Petitioner, v. HEIRS divided into sub-lots. The area occupied by
OF RUFINA MORALES, NAMELY: Morales was thereafter denominated as Lot
FELOMINA V. PANOPIO, NENITA No. 646-A-3, for which Transfer Certificate
VILLANUEVA, ERLINDA V. ADRIANO and of Title (TCT) No. 308835 was issued in favor
CATALINA V. QUESADA, Respondents. of the City of Cebu.

DECISION On July 19, 1965, the city sold Lot No. 646-
A-3 as well as the other donated lots at
YNARES-SANTIAGO, J.: public auction in order to raise money for
infrastructure projects. The highest bidder
This is a Petition for Review on Certiorari of for Lot No. 646-A-3 was Hever Bascon but
the Decision1 of the Court of Appeals dated Morales was allowed to match the highest
March 29, 2005 in CA-G.R. CV No. 53632, bid since she had a preferential right to the
which affirmed in toto the Decision2 of the lot as actual occupant thereof.6 Morales thus
Regional Trial Court of Cebu City, Branch 6, paid the required deposit and partial
in Civil Case No. CEB-11140 for specific payment for the lot.7
performance and reconveyance of property.
Also assailed is the Resolution3 dated August In the meantime, petitioner filed an action
31, 2005 denying the motion for for reversion of donation against the City of
reconsideration. Cebu docketed as Civil Case No. 238-BC
before Branch 7 of the then Court of First October 10, 1986 addressed to Governor
Instance of Cebu. On May 7, 1974, Osmundo G. Rama.12
petitioner and the City of Cebu entered into
a compromise agreement which the court The requests remained unheeded thus,
approved on July 17, 1974.8 The agreement Quesada, together with the other nieces of
provided for the return of the donated lots Morales namely, respondents Nenita
to petitioner except those that have already Villanueva and Erlinda V. Adriano, as well as
been utilized by the City of Cebu. Pursuant Morales' sister, Felomina V. Panopio, filed an
thereto, Lot No. 646-A-3 was returned to action for specific performance and
petitioner and registered in its name under reconveyance of property against petitioner,
TCT No. 104310.9 which was docketed as Civil Case No. CEB-
11140 before Branch 6 of the Regional Trial
Morales died on February 20, 1969 during Court of Cebu City.13 They also consigned
the pendency of Civil Case No. 238- with the court the amount of P13,450.00
BC.10 Apart from the deposit and down representing the balance of the purchase
payment, she was not able to make any price which petitioner allegedly refused to
other payments on the balance of the accept.14
purchase price for the lot.
Panopio died shortly after the complaint was
On March 11, 1983, one of the nieces of filed.15
Morales, respondent Catalina V. Quesada,
wrote to then Cebu Governor Eduardo R. Respondents averred that the award at
Gullas asking for the formal conveyance of public auction of the lot to Morales was a
Lot No. 646-A-3 to Morales' surviving heirs, valid and binding contract entered into by
in accordance with the award earlier made the City of Cebu and that the lot was
by the City of Cebu.11 This was followed by inadvertently returned to petitioner under
another letter of the same tenor dated the compromise judgment in Civil Case No.
238-BC. They alleged that they could not
pay the balance of the purchase price during In ruling for the respondents, the trial court
the pendency of said case due to confusion held thus:
as to whom and where payment should be
made. They thus prayed that judgment be [T]he Court is convinced that there was
rendered ordering petitioner to execute a already a consummated sale between the
final deed of absolute sale in their favor, and City of Cebu and Rufina Morales. There was
that TCT No. 104310 in the name of the offer to sell in that public auction sale. It
petitioner be cancelled.16 was accepted by Rufina Morales with her bid
and was granted the award for which she
Petitioner filed its answer but failed to paid the agreed downpayment. It cannot be
present evidence despite several gainsaid that at that time the owner of the
opportunities given thus, it was deemed to property was the City of Cebu. It has the
have waived its right to present evidence.17 absolute right to dispose of it thru that
public auction sale. The donation by the
On March 6, 1996, the trial court rendered defendant Province of Cebu to Cebu City
judgment, the dispositive part of which was not voided in that Civil Case No. 238-
reads: BC. The compromise agreement between
the parties therein on the basis of which
WHEREFORE, judgment is rendered in favor judgment was rendered did not provide
of the plaintiffs and against the defendant nullification of the sales or disposition made
Province of Cebu, hereby directing the latter by the City of Cebu. Being virtually
to convey Lot 646-A-3 to the plaintiffs as successor-in-interest of City of Cebu, the
heirs of Rufina Morales, and in this defendant is bound by the contract lawfully
connection, to execute the necessary deed entered into by the former. Defendant did
in favor of said plaintiffs. not initiate any move to invalidate the sale
for one reason or another. Hence, it stands
No pronouncement as to costs.
as a perfectly valid contract which defendant
must respect. Rufina Morales had a vested
SO ORDERED.18
right over the property. The plaintiffs being FINDING THAT WITH THE DEPOSIT AND
the heirs or successors-in-interest of Rufina PARTIAL PAYMENT MADE BY RUFINA
Morales, have the right to ask for the MORALES, THE SALE WAS IN EFFECT
conveyance of the property to them. While it CLOSED FOR ALL LEGAL PURPOSES, AND
may be true that the title of the property THAT THE TRANSACTION WAS PERFECTED
still remained in the name of the City of AND CONSUMMATED;
Cebu until full payment is made, and this
could be the reason why the lot in question FINDING THAT LACHES AND/OR
was among those reverted to the Province, PRESCRIPTION ARE NOT APPLICABLE
the seller's obligation under the contract AGAINST RESPONDENTS;
was, for all legal purposes, transferred to,
and assumed by, the defendant Province of FINDING THAT DUE TO THE PENDENCY OF
Cebu. It is then bound by such contract.19 CIVIL CASE NO. 238-BC, PLAINTIFFS WERE
NOT ABLE TO PAY THE AGREED
Petitioner appealed to the Court of Appeals INSTALLMENTS;
which affirmed the decision of the trial
court in toto. Upon denial of its motion for AFFIRMING THE DECISION OF THE TRIAL
reconsideration, petitioner filed the instant COURT IN FAVOR OF THE RESPONDENTS
petition under Rule 45 of the Rules of Court, AND AGAINST THE PETITIONERS.20
alleging that the appellate court erred in:
The petition lacks merit.
FINDING THAT RUFINA MORALES AND
The appellate court correctly ruled that
RESPONDENTS, AS HER HEIRS, HAVE THE
petitioner, as successor-in-interest of the
RIGHT TO EQUAL THE BID OF THE HIGHEST
City of Cebu, is bound to respect the
BIDDER OF THE SUBJECT PROPERTY AS
contract of sale entered into by the latter
LESSEES THEREOF;
pertaining to Lot No. 646-A-3. The City of
Cebu was the owner of the lot when it
awarded the same to respondents'
predecessor-in-interest, Morales, who later the appellate court did, that all requirements
became its owner before the same was for a valid public auction sale were complied
erroneously returned to petitioner under the with.
compromise judgment. The award is
tantamount to a perfected contract of sale A sale by public auction is perfected "when
between Morales and the City of Cebu, while the auctioneer announces its perfection by
partial payment of the purchase price and the fall of the hammer or in other customary
actual occupation of the property by Morales manner".21 It does not matter that Morales
and respondents effectively transferred merely matched the bid of the highest
ownership of the lot to the latter. This is bidder at the said auction sale. The contract
true notwithstanding the failure of Morales of sale was nevertheless perfected as to
and respondents to pay the balance of the Morales, since she merely stepped into the
purchase price. shoes of the highest bidder.

Petitioner can no longer assail the award of Consequently, there was a meeting of minds
the lot to Morales on the ground that she between the City of Cebu and Morales as to
had no right to match the highest bid during the lot sold and its price, such that each
the public auction. Whether Morales, as party could reciprocally demand
actual occupant and/or lessee of the lot, was performance of the contract from the
qualified and had the right to match the other.22 A contract of sale is a consensual
highest bid is a foregone matter that could contract and is perfected at the moment
have been questioned when the award was there is a meeting of minds upon the thing
made. When the City of Cebu awarded the which is the object of the contract and upon
lot to Morales, it is assumed that she met all the price. From that moment, the parties
qualifications to match the highest bid. The may reciprocally demand performance
subject lot was auctioned in 1965 or more subject to the provisions of the law
than four decades ago and was never governing the form of contracts. The
questioned. Thus, it is safe to assume, as elements of a valid contract of sale under
Article 1458 of the Civil Code are: (1) that there was really no contract of sale
consent or meeting of the minds; (2) over the lot between Morales and the City of
determinate subject matter; and (3) price Cebu. On the contrary, the fact that there
certain in money or its equivalent.23 All was an agreed price for the lot proves that a
these elements were present in the contract of sale was indeed perfected
transaction between the City of Cebu and between the parties. Failure to pay the
Morales. balance of the purchase price did not render
the sale inexistent or invalid, but merely
There is no merit in petitioner's assertion gave rise to a right in favor of the vendor to
that there was no perfected contract of sale either demand specific performance or
because no "Contract of Purchase and Sale" rescission of the contract of sale.25 It did not
was ever executed by the parties. As abolish the contract of sale or result in its
previously stated, a contract of sale is a automatic invalidation.
consensual contract that is perfected upon a
meeting of minds as to the object of the As correctly found by the appellate court,
contract and its price. Subject to the the contract of sale between the City of
provisions of the Statute of Frauds, a formal Cebu and Morales was also partially
document is not necessary for the sale consummated. The latter had paid the
transaction to acquire binding effect.24 For deposit and downpayment for the lot in
as long as the essential elements of a accordance with the terms of the bid award.
contract of sale are proved to exist in a She first occupied the property as a lessee
given transaction, the contract is deemed in 1961, built a house thereon and was
perfected regardless of the absence of a continuously in possession of the lot as its
formal deed evidencing the same. owner until her death in 1969. Respondents,
on the other hand, who are all surviving
Similarly, petitioner erroneously contends heirs of Morales, likewise occupied the
that the failure of Morales to pay the property during the latter's lifetime and
balance of the purchase price is evidence
continue to reside on the property to this petitioner pursuant to the compromise
day.26 agreement in Civil Case No. 238-BC. The
City of Cebu had sold the property to
The stages of a contract of sale are as Morales even though there remained a
follows: (1) negotiation, covering the period balance on the purchase price and a formal
from the time the prospective contracting contract of sale had yet to be executed.
parties indicate interest in the contract to Incidentally, the failure of respondents to
the time the contract is perfected; pay the balance on the purchase price and
(2) perfection, which takes place upon the the non-execution of a formal agreement
concurrence of the essential elements of the was sufficiently explained by the fact that
sale which are the meeting of the minds of the trial court, in Civil Case No. 238-BC,
the parties as to the object of the contract issued a writ of preliminary injunction
and upon the price; and (3) consummation, enjoining the city from further disposing the
which begins when the parties perform their donated lots. According to respondents,
respective undertakings under the contract there was confusion as to the circumstances
of sale, culminating in the extinguishment of payment considering that both the city
thereof.27 In this case, respondents' and petitioner had refused to accept
predecessor had undoubtedly commenced payment by virtue of the injunction.28 It
performing her obligation by making a down appears that the parties simply mistook Lot
payment on the purchase price. 646-A-3 as among those not yet sold by the
Unfortunately, however, she was not able to city.
complete the payments due to legal
complications between petitioner and the The City of Cebu was no longer the owner of
city. Lot 646-A-3 when it ceded the same to
petitioner under the compromise agreement
Thus, the City of Cebu could no longer in Civil Case No. 238-BC. At that time, the
dispose of the lot in question when it was city merely retained rights as an unpaid
included as among those returned to seller but had effectively transferred
ownership of the lot to Morales. As Article 1592. In the sale of immovable
successor-in-interest of the city, petitioner property, even though it may have been
could only acquire rights that its predecessor stipulated that upon failure to pay the price
had over the lot. These rights include the at the time agreed upon the rescission of
right to seek rescission or fulfillment of the the contract shall of right take place, the
terms of the contract and the right to vendee may pay, even after the expiration
damages in either case.29 of the period, as long as no demand for
rescission of the contract has been made
In this regard, the records show that upon him either judicially or by notarial act.
respondent Quesada wrote to then Cebu After the demand, the court may not grant
Governor Eduardo R. Gullas on March 11, him a new term. (Underscoring supplied) cralawlibrary

1983, asking for the formal conveyance of

Lot 646-A-3 pursuant to the award and sale Thus, respondents could still tender
earlier made by the City of Cebu. On payment of the full purchase price as no
October 10, 1986, she again wrote to demand for rescission had been made upon
Governor Osmundo G. Rama reiterating her them, either judicially or through notarial
previous request. This means that petitioner act. While it is true that it took a long time
had known, at least as far back as 1983, for respondents to bring suit for specific
that the city sold the lot to respondents' performance and consign the balance of the
predecessor and that the latter had paid the purchase price, it is equally true that
deposit and the required down payment. petitioner or its predecessor did not take
Despite this knowledge, however, petitioner any action to have the contract of sale
did not avail of any rightful recourse to rescinded. Article 1592 allows the vendee to
resolve the matter. pay as long as no demand for rescission has
been made.30 The consignation of the
Article 1592 of the Civil Code pertinently balance of the purchase price before the trial
provides: court thus operated as full payment, which
resulted in the extinguishment of
respondents' obligation under the contract
of sale.

Finally, petitioner cannot raise the issue of

prescription and laches at this stage of the
proceedings. Contrary to petitioner's
assignment of errors, the appellate court
made no findings on the issue because
petitioner never raised the matter of
prescription and laches either before the
trial court or Court of Appeals. It is basic
that defenses and issues not raised below
cannot be considered on appeal.31 Thus,
petitioner cannot plead the matter for the
first time before this Court.

WHEREFORE, in view of the foregoing, the

petition is hereby DENIED and the decision
and resolution of the Court of Appeals in CA-
G.R. CV No. 53632 are AFFIRMED.

SO ORDERED.
 — With respect to the non-delivery of the possession of
the subject property to the private respondent, suffice it
to say that ownership of the thing sold is acquired only
from the time of delivery thereof, either actual or
constructive. Article 1498 of the Civil Code provides that
— when the sale is made through a public instrument,
SECOND DIVISION the execution thereof shall be equivalent to the delivery
of the thing which is the object of the contract, if from
[G.R. No. 109410. August 28, 1996.] the deed the contrary does not appear or cannot be
inferred. The execution of the public instrument, without
CLARA M. BALATBAT, Petitioner, v. COURT OF actual delivery of the thing, transfers the ownership from
APPEALS and Spouses JOSE REPUYAN and AURORA the vendor to the vendee, who may thereafter exercise
REPUYAN, Respondents. the rights of an owner over the same. In the instant
case, vendor Roque delivered the owner’s certificate of
title to herein private Respondent. It is not necessary
SYLLABUS that vendee be physically present at every square inch of
the land bought by him, possession of the public
instrument of the land is sufficient to accord him the
1. CIVIL LAW; SPECIAL CONTRACTS; SALES; TRANSFER rights of ownership. Thus, delivery of a parcel of land
OF OWNERSHIP; CONSUMMATED UPON ACTUAL OR may be done by placing the vendee in control and
CONSTRUCTIVE DELIVERY THEREOF. — Devoid of any possession of the land (real) or by embodying the sale in
stipulation that "ownership in the thing shall not pass to a public instrument (constructive). The provision of
the purchaser until he has fully paid the price," Article 1358 on the necessity of a public document is only
ownership in the thing shall pass from the vendor to the for convenience, not for validity or enforceability. It is not
vendee upon actual or constructive delivery of the thing a requirement for the validity of a contract of sale of a
sold even if the purchase price has not yet been fully parcel of land that this be embodied in a public
paid. The failure of the buyer to make good the price instrument.
does not, in law, cause the ownership to revest to the
seller unless the bilateral contract of sale is first 3. ID.; ID.; ID.; PERFECTED BY MERE CONSENT OF THE
rescinded or resolved pursuant to Article 1191 of the New PARTIES. — A contract of sale being consensual, it is
Civil Code. Non-payment only creates a right to demand perfected by the mere consent of the parties. Delivery of
the fulfillment of the obligation or to rescind the contract. the thing bought or payment of the price is not necessary
for the perfection of the contract; and failure of the
2. ID.; ID.; ID.; ID.; WHEN THE SALE IS MADE vendee to pay the price after the execution of the
THROUGH A PUBLIC INSTRUMENT, THE EXECUTION contract does not make the sale null and void for lack of
THEREOF SHALL BE EQUIVALENT TO THE DELIVERY OF consideration but results at most in default on the part of
THE THING WHICH IS THE OBJECT OF THE CONTRACT.
the vendee, for which the vendor may exercise his legal against the true owner of the land or of an interest
remedies. therein; and the same rule must be applied to one who
has knowledge of facts which should have put him upon
4. ID.; ID.; ID.; RULE IN CASE OF DOUBLE SALE OF AN such inquiry and investigation as might be necessary to
IMMOVABLE PROPERTY. — Article 1544 of the Civil Code acquaint him with the defects in the title of his vendor.
provides that in case of double sale of an immovable Good faith, or the want of it is not a visible, tangible fact
property, ownership shall be transferred (1) to the that can be seen or touched, but rather a state or
person acquiring it who in good faith first recorded it in condition of mind which can only be judged of by actual
the Registry of Property; (2) in default thereof, to the or fancied tokens or signs. In fine, petitioner had nobody
person who in good faith was first in possession; and (3) to blame but herself in dealing with the disputed property
in default thereof, to the person who presents the oldest for failure to inquire or discover a flaw in the title to the
title, provided there is good faith. This is an instance of a property, thus, it is axiomatic that — culpa lata dolo
instance of a double sale of an immovable property aequiparatur — gross negligence is equivalent to
hence, the ownership shall vests in the person acquiring intentional wrong.
it who in good faith first recorded it in the Registry of
Property. Evidently, private respondents Repuyan’s
caused the annotation of an adverse claim on the title of
the subject property denominated as Entry No. 5627/T- DECISION
135671 on July 21, 1980. The annotation of the adverse
claim on TCT No. 135671 in the Registry of Property is
sufficient compliance as mandated by law and serves TORRES, JR., J.:
notice to the whole world.

5. ID.; ID.; ID.; IT IS INCUMBENT UPON THE VENDEE Petitioner Clara M. Balatbat instituted this petition for
TO ASK FOR THE DELIVERY OF THE OWNER’S review pursuant to Rule 45 of the Revised Rules of Court
DUPLICATE COPY OF THE TITLE IN ORDER TO INQUIRE seeking to set aside the decision dated August 12, 1992
OR DISCOVER A FLAW THEREOF. — It is incumbent upon of the respondent Court of Appeals in CA-G.R. CV No.
the vendee of the property to ask for the delivery of the 29994 entitled "Alejandro Balatbat and Clara Balatbat,
owner’s duplicate copy of the title from the vendor. A plaintiffs-appellants versus Jose Repuyan and Aurora
purchaser of a valued piece of property cannot just close Repuyan, defendants-appellees", the dispositive portion
his eyes to facts which should put a reasonable man of which reads: 1
upon his guard and then claim that he acted in good faith
and under the belief that there were no defect in the title "WHEREFORE, the judgment appealed from is affirmed
of the vendor. One who purchases real estate with with the modification that the awards of P10,000.00 for
knowledge of a defect or lack of title in his vendor cannot attorney’s fees and P5,000.00 as costs of litigation are
claim that he has acquired title thereto in good faith as deleted.
 1. Of the house and lot forming the conjugal properties,
SO ORDERED." cralaw virtua1aw library plaintiff is entitled to one-half share pro-indiviso thereof
while the other half forms the estate of the deceased
The records show the following factual antecedents: chanrob1es virtual 1aw library Maria Mesina;

It appears that on June 15, 1977, Aurelio A. Roque filed 2. Of the Estate of deceased Maria Mesina, the same is to
a complaint for partition docketed as Civil Case No. be divided into five (5) shares and plaintiff and his four
109032 against Corazon Roque, Alberto de los Santos, children are entitled each to one-fifth share thereof pro-
Feliciano Roque, Severa Roque and Osmundo Roque indiviso.
before the then Court of First Instance of Manila, Branch
IX. 2 Defendants therein were declared in default and Plaintiff claim for moral, exemplary and actual damages
plaintiff presented evidence ex-parte. On March 29, and attorney’s fees not having been established to the
1979, the trial court rendered a decision in favor of satisfaction of the Court, the same is hereby denied.
plaintiff Aurelio A. Roque, the pertinent portion of which
reads: 3 Without pronouncement as to costs.

"From the evidence, it has been clearly established that SO ORDERED.”

the lot in question covered by Transfer Certificate of Title
No. 51330 was acquired by plaintiff Aurelio Roque and On June 2, 1979, the decision became final and
Maria Mesina during their conjugal union and the house executory. The corresponding entry of judgment was
constructed thereon was likewise built during their made on March 29, 1979. 4
marital union. Out of their union, plaintiff and Maria
Mesina had four children, who are the defendants in this On October 5, 1979, the Register of Deeds of Manila
case. When Maria Mesina died on August 28, 1966, the issued a Transfer Certificate of Title No. 135671 in the
only conjugal properties left are the house and lot above name of the following persons in the following
stated of which plaintiff herein, as the legal spouse, is proportions: 5
entitled to one-half share pro-indiviso thereof. With
respect to the one-half share pro-indiviso now forming Aurelio A. Roque 6/10 share
the estate of Maria Mesina, plaintiff and the four children,
the defendants here, are each entitled to one-fifth (1/5) Severina M. Roque 1/10 share
share pro-indiviso. The deceased wife left no debt.
Osmundo M. Roque 1/10 share
Wherefore, judgment is hereby rendered ordering the
partition of the properties, subject matter of this case Feliciano M. Roque 1/10 share
consisting of the house and lot, in the following manner:
virtual 1aw library
chanrob1es

Corazon M. Roque 1/10 share

On April 1, 1980, Aurelio A. Roque sold his 6/10 share in On August 20, 1980, Aurelio A. Roque filed a complaint
T.C.T. No. 135671 to spouses Aurora Tuazon-Repuyan for "Rescission of Contract" docketed as Civil Case No.
and Jose Repuyan as evidenced by a "Deed of Absolute 134131 against spouses Aurora Tuazon-Repuyan and
Sale." 6 Jose Repuyan before Branch IV of the then Court of First
Instance of Manila. The complaint is grounded on
On July 21, 1980, Aurora Tuazon Repuyan caused the spouses Repuyan’s failure to pay the balance of
annotation of her affidavit of adverse claim 7 on the P45,000.00 of the purchase price. 9 On September 5,
Transfer Certificate of Title No. 135671, 8 to wit:
jgc:chanrobles.com.ph 1980, spouses Repuyan filed their answer with
counterclaim. 10
"Entry No. 5627/T-135671 — NOTICE OF ADVERSE
CLAIM — Filed by Aurora Tuazon Repuyan, married, In the meantime, the trial court issued an order in Civil
claiming among others that she bought 6/10 portion of Case No. 109032 (Partition case) dated February 2,
the property herein described from Aurelio Roque for the 1982, to wit: 11
amount of P50,000.00 with a down payment of
P5,000.00 and the balance of P45,000.00 to be paid after "In view of all the foregoing and finding that the amount
the partition and subdivision of the property herein of P100,000.00 as purchase price for the sale of the
described, other claims set forth in Doc. No. 954, page parcel of land covered by TCT No. 51330 of the Registry
18, Book 94 of _________________ 64 of Deeds of Manila consisting of 84 square meters
__________________ PEDRO DE CASTRO, Notary Public situated in Callejon Sulu, District of Santa Cruz, Manila,
of Manila. to be reasonable and fair, and considering the
opportunities given defendants to sign the deed of
Date of instrument — July 21, 1980 absolute sale voluntarily, the Court has no alternative but
to order, as it hereby orders, the Deputy Clerk of this
Date of inscription -July 21, 1980 at 3:35 p.m. Court to sign the deed of absolute sale for and in behalf
of defendants pursuant to Sec. 10, Rule 39 of the Rules
TERESITA H. NOBLEJAS of Court, in order to effect the partition of the property
involved in this case.
Acting Register of Deeds
SO ORDERED." cralaw virtua1aw library

By: chanrob1es virtual 1aw library

A deed of absolute sale was executed on February 4,

RAMON D. MACARICAN 1982 between Aurelio S. Roque, Corazon Roque,
Feliciano Roque, Severa Roque and Osmundo Roque and
Acting Second Deputy" Clara Balatbat, married to Alejandro Balatbat. 12 On
April 14, 1982, Clara Balatbat filed a motion for the
issuance of a writ of possession which was granted by
the trial court on September 14, 1982 "subject, however,
to valid rights and interest of third persons over the has the effect of being the law between the parties and
same portion thereof, other than vendor or any other should be complied with. The obligation of the plaintiff
person or persons privy to or claiming any rights or under the contract being to have the land covered by
interest under it." The corresponding writ of possession TCT No. 135671 partitioned and subdivided, and title
was issued on September 20, 1982. 13 issued in the name of the defendant buyer (see page 2
par. C of Exh. 7-A) plaintiff had to comply thereto to give
On May 20, 1982, petitioner Clara Balatbat filed a motion effect to the contract.
to intervene in Civil Case No. 134131 14 which was
granted as per court’s resolution of October 21, 1982. 15 "WHEREFORE, judgment is rendered against the plaintiff,
However, Clara Balatbat failed to file her complaint in Aurelio A. Roque, and the plaintiff in intervention, Clara
intervention. 16 On April 15, 1986, the trial court Balatbat, and in favor of the defendants, dismissing the
rendered a decision dismissing the complaint, the complaint for lack of merit, and declaring the Deed of
pertinent portion of which reads: 17 Absolute Sale dated April 1, 1980 as valid and
enforceable and the plaintiff is, as he is hereby ordered,
"The rescission of contracts are provided for in the laws to partition and subdivide the land covered by T.C.T. No.
and nowhere in the provision of the Civil Code under the 135671, and to aggregate therefrom a portion equivalent
title Rescissible Contracts does the circumstances in the to 6/10 thereof, and cause the same to be titled in the
case at bar appear to have occurred, hence, the prayer name of the defendants, and after which, the defendants
for rescission is outside the ambit for which rescissible to pay the plaintiff the sum of P45,000.00. Considering
[sic] could be granted. further that the defendants suffered damages since they
were forced to litigate unnecessarily, by way of their
"The Intervenor — Plaintiff, Clara Balatbat, although counterclaim, plaintiff is hereby ordered to pay
allowed to intervene, did not file her complaint in defendants the sum of P15,000.00 as moral damages,
intervention. attorney’s fees in the amount of P5,000.00.

"Consequently, the plaintiff having failed to prove with Costs against plaintiff.
sufficient preponderance his action, the relief prayed for
had to be denied. The contract of sale denominated as SO ORDERED." cralaw virtua1aw library

"Deed of Absolute Sale" (Exh. 7 and sub-markings) being

valid and enforceable, the same pursuant to the On March 3, 1987, petitioner Balatbat filed a notice of lis
provisions of Art. 1159 of the Civil Code which says: jgc:chanrobles.com.ph pendens in Civil Case No. 109032 before the Register of
Deeds of Manila. 18
"Obligations arising from contracts have the force of law
between the contracting parties and should be complied On December 9, 1988, petitioner Clara Balatbat and her
with in good faith."
cralaw virtua1aw library husband, Alejandro Balatbat filed the instant complaint
for delivery of the owners duplicate copy of T.C.T. No. attorney’s fees and P5,000.00 as costs of litigation are
135671 docketed as Civil Case No. 88-47176 before deleted.
Branch 24 of the Regional Trial Court of Manila against
private respondents Jose Repuyan and Aurora Repuyan. SO ORDERED." cralaw virtua1aw library

19
On March 22, 1993, the respondent Court of Appeals
On January 27, 1989, private respondents filed their denied petitioner’s motion for reconsideration.25 cralaw:red

answer with affirmative defenses and compulsory

counterclaim. 20 Hence, this petition for review.

On November 13, 1989, private respondents filed their Petitioner raised the following issues for this Court’s
memorandum 21 while petitioners filed their resolution:chanrob1es virtual 1aw library

memorandum on November 23, 1989. 22

I
On August 2, 1990, the Regional Trial Court of Manila,
Branch 24, rendered a decision dismissing the complaint,
the dispositive portion of which reads: 23 WHETHER OR NOT THE ALLEGED SALE TO THE PRIVATE
RESPONDENTS WAS MERELY EXECUTORY AND NOT A
"Considering all the foregoing, this Court finds that the CONSUMMATED TRANSACTION?
plaintiffs have not been able to establish their cause of
action against the defendants and have no right to the II
reliefs demanded in the complaint and the complaint of
the plaintiff against the defendants is hereby
DISMISSED. On the counterclaim, the plaintiff are WHETHER OR NOT THERE WAS A DOUBLE SALE AS
ordered to pay defendants the amount of Ten Thousand CONTEMPLATED UNDER ART. 1544 OF THE CIVIL CODE?
Pesos by way of attorney’s fees, Five Thousand Pesos as
costs of litigation and further to pay the costs of the suit. III

SO ORDERED." cralaw virtua1aw library

WHETHER OR NOT PETITIONER WAS A BUYER IN GOOD

Dissatisfied, petitioner Balatbat filed an appeal before the FAITH AND FOR VALUE?
respondent Court of Appeals which rendered the assailed
decision on August 12, 1992, to wit: 24 IV

"WHEREFORE, the judgment appealed from is affirmed

with the modification that the awards of P10,000.00 for WHETHER OR NOT THE COURT OF APPEALS ERRED IN
GIVING WEIGHT AND CONSIDERATION TO THE Roque cannot demand payment of the balance unless
EVIDENCE OF THE PRIVATE RESPONDENTS WHICH and until the property has been subdivided and titled in
WERE NOT OFFERED? the name of the private respondents. Devoid of any
stipulation that "ownership in the thing shall not pass to
Petitioner asseverates that the respondent Court of the purchaser until he has fully paid the price", 26
Appeals committed grave abuse of discretion tantamount ownership in the thing shall pass from the vendor to the
to lack or excess of jurisdiction in affirming the appealed vendee upon actual or constructive delivery of the thing
judgment considering (1) that the alleged sale in favor of sold even if the purchase price has not yet been fully
the private respondents Repuyan was merely executory; paid. The failure of the buyer to make good the price
(2) that there is no double sale; (3) that petitioner is a does not, in law, cause the ownership to revest to the
buyer in good faith and for value; and (4) that private seller unless the bilateral contract of sale is first
respondents did not offer their evidence during the trial. rescinded or resolved pursuant to Article 1191 of the New
Civil Code. 27 Non-payment only creates a right to
Contrary to petitioner’s contention that the sale dated demand the fulfillment of the obligation or to rescind the
April 1, 1980 in favor of private respondents Repuyan contract.
was merely executory for the reason that there was no
delivery of the subject property and that With respect to the non-delivery of the possession of the
consideration/price was not fully paid, we find the sale as subject property to the private respondent, suffice it to
consummated, hence, valid and enforceable. In a say that ownership of the thing sold is acquired only from
decision dated April 15, 1986 of the Regional Trial Court the time of delivery thereof, either actual or constructive.
of Manila, Branch IV in Civil Case No. 134131, the Court 28 Article 1498 of the Civil Code provides that — when
dismissed vendor’s Aurelio Roque complaint for rescission the sale is made through a public instrument, the
of the deed of sale and declared that the sale dated April execution thereof shall be equivalent to the delivery of
1, 1980, as valid and enforceable. No appeal having been the thing which is the object of the contract, if from the
made, the decision became final and executory. It must deed the contrary does not appear or cannot be inferred.
be noted that herein petitioner Balatbat filed a motion for 29 The execution of the public instrument, without actual
intervention in that case but did not file her complaint in delivery of the thing, transfers the ownership from the
intervention. In that case wherein Aurelio Roque sought vendor to the vendee, who may thereafter exercise the
to rescind the April 1, 1980 deed of sale in favor of the rights of an owner over the same. 30 In the instant case,
private respondents for non-payment of the P45,000.00 vendor Roque delivered the owner’s certificate of title to
balance, the trial court dismissed the complaint for herein private Respondent. It is not necessary that
rescission. Examining the terms and conditions of the vendee be physically present at every square inch of the
"Deed of Sale" dated April 1, 1980, the P45,000.00 land bought by him, possession of the public instrument
balance is payable only "after the property covered by of the land is sufficient to accord him the rights of
T.C.T No. 135671 has been partitioned and subdivided, ownership. Thus, delivery of a parcel of land may be
and title issued in the name of the BUYER" hence, vendor done by placing the vendee in control and possession of
the land (real) or by embodying the sale in a public faith first recorded it in the Registry of Property; (2) in
instrument (constructive). The provision of Article 1358 default thereof, to the person who in good faith was first
on the necessity of a public document is only for in possession; and (3) in default thereof, to the person
convenience, not for validity or enforceability. It is not a who presents the oldest title, provided there is good
requirement for the validity of a contract of sale of a faith. 34
parcel of land that this be embodied in a public
instrument. 31 In the case at bar, vendor Aurelio Roque sold 6/10
portion of his share in TCT No. 135671 to private
A contract of sale being consensual, it is perfected by the respondents Repuyan on April 1, 1980. Subsequently,
mere consent of the parties. 32 Delivery of the thing the same lot was sold again by vendor Aurelio Roque
bought or payment of the price is not necessary for the (6/10) and his children (4/10), represented by the Clerk
perfection of the contract; and failure of the vendee to of Court pursuant to Section 10, Rule 39 of the Rules of
pay the price after the execution of the contract does not Court, on February 4, 1982. Undoubtedly, this is a case
make the sale null and void for lack of consideration but of double sale contemplated under Article 1544 of the
results at most in default on the part of the vendee, for New Civil Code.
which the vendor may exercise his legal remedies. 33
This is an instance of a double sale of an immovable
Article 1544 of the New Civil Code provides: jgc:chanrobles.com.ph property hence, the ownership shall vests in the person
acquiring it who in good faith first recorded it in the
"If the same thing should have been sold to different Registry of Property. Evidently, private respondents
vendees, the ownership shall be transferred to the Repuyan’s caused the annotation of an adverse claim on
person who may have first taken possession thereof in the title of the subject property denominated as Entry
good faith, if it should be movable property. No. 5627/T-135671 on July 21, 1980. 35 The annotation
of the adverse claim on TCT No. 135671 in the Registry
"Should it be movable property, the ownership shall of Property is sufficient compliance as mandated by law
belong to the person acquiring it who in good faith first and serves notice to the whole world.
recorded it in the Registry of Property.
On the other hand, petitioner filed a notice of lis pendens
"Should there be no inscription, the ownership shall only on February 2, 1982. Accordingly, private
pertain to the person who in good faith was first in the respondents who first caused the annotation of the
possession and in the absence thereof, to the person who adverse claim in good faith shall have a better right over
present the oldest title, provided there is good faith." cralaw virtua1aw library herein petitioner. Moreover, the physical possession of
herein petitioners by virtue of a writ of possession issued
Article 1544 of the Civil Code provides that in case of by the trial court on September 20, 1982 is "subject to
double sale of an immovable property, ownership shall the valid rights and interest of third persons over the
be transferred (1) to the person acquiring it who in good same portion thereof, other than vendor or any other
person or persons privy to or claiming any rights to such inquiry and investigation as might be necessary to
interest under it." 36 As between two purchasers, the acquaint him with the defects in the title of his vendor.
one who has registered the sale in his favor, has a Good faith, or the want of it is not a visible, tangible fact
preferred right over the other who has not registered his that can be seen or touched, but rather a state or
title even if the latter is in actual possession of the condition of mind which can only be judged of by actual
immovable property. 37 Further, even in default of the or fancied tokens or signs. 40
first registrant or first in possession, private respondents
have presented the oldest title. 38 Thus, private In fine, petitioner had nobody to blame but herself in
respondents who acquired the subject property in good dealing with the disputed property for failure to inquire or
faith and for valuable consideration established a discover a flaw in the title to the property, thus, it is
superior right as against the petitioner. axiomatic that — culpa lata dolo aequiparatur — gross
negligence is equivalent to intentional wrong.
Evidently, petitioner cannot be considered as a buyer in
good faith. In the complaint for rescission filed by vendor IN VIEW OF THE FOREGOING PREMISES, this petition for
Aurelio Roque on August 20, 1980, herein petitioner filed review is hereby DISMISSED for lack of merit. No
a motion for intervention on May 20, 1982 but did not file pronouncement as to costs.
her complaint in intervention, hence, the decision was
rendered adversely against her. If petitioner did IT IS SO ORDERED.
investigate before buying the land on February 4, 1982,
she should have known that there was a pending case
and an annotation of adverse claim was made in the title
of the property before the Register of Deeds and she
could have discovered that the subject property was
already sold to the private respondents. It is incumbent
upon the vendee of the property to ask for the delivery of
the owner’s duplicate copy of the title from the vendor. A
purchaser of a valued piece of property cannot just close
his eyes to facts which should put a reasonable man
upon his guard and then claim that he acted in good faith
and under the belief that there were no defect in the title
of the vendor. 39 One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest
therein; and the same rule must be applied to one who
has knowledge of facts which should have put him upon
 Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to
demand the execution of a final deed of sale in his favor so that
he could effect full payment of the purchase price. In the same
letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another
without his knowledge and consent. He demanded that the
second sale be cancelled and that a final deed of sale be issued
in his favor.

SECOND DIVISION In response, Pacita Lu wrote a letter to Babasanta wherein she

acknowledged having agreed to sell the property to him at fifteen
G.R. No. 124242             January 21, 2005 pesos (₱15.00) per square meter. She, however, reminded
Babasanta that when the balance of the purchase price became
SAN LORENZO DEVELOPMENT CORPORATION, petitioner, due, he requested for a reduction of the price and when she
vs. refused, Babasanta backed out of the sale. Pacita added that she
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL returned the sum of fifty thousand pesos (₱50,000.00) to
LU and PACITA ZAVALLA LU, respondents. Babasanta through Eugenio Oya.

DECISION On 2 June 1989, respondent Babasanta, as plaintiff, filed before

the Regional Trial Court (RTC), Branch 31, of San Pedro,
TINGA, J.: Laguna, a Complaint for Specific Performance and
Damages1 against his co-respondents herein, the Spouses Lu.
From a coaptation of the records of this case, it appears that Babasanta alleged that the lands covered by TCT No. T- 39022
respondents Miguel Lu and Pacita Zavalla, (hereinafter, the and T-39023 had been sold to him by the spouses at fifteen
Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, pesos (₱15.00) per square meter. Despite his repeated demands
Laguna covered by TCT No. T-39022 and TCT No. T-39023 both for the execution of a final deed of sale in his favor, respondents
measuring 15,808 square meters or a total of 3.1616 hectares. allegedly refused.

On 20 August 1986, the Spouses Lu purportedly sold the two In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained
parcels of land to respondent Pablo Babasanta, (hereinafter, loans from Babasanta and when the total advances of Pacita
Babasanta) for the price of fifteen pesos (₱15.00) per square reached fifty thousand pesos (₱50,000.00), the latter and
meter. Babasanta made a downpayment of fifty thousand pesos Babasanta, without the knowledge and consent of Miguel Lu, had
(₱50,000.00) as evidenced by a memorandum receipt issued by verbally agreed to transform the transaction into a contract to sell
Pacita Lu of the same date. Several other payments totaling two the two parcels of land to Babasanta with the fifty thousand pesos
hundred thousand pesos (₱200,000.00) were made by (₱50,000.00) to be considered as the downpayment for the
Babasanta. property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total
payments made by Babasanta amounted to only two hundred In his Opposition to SLDC’s motion for intervention,8 respondent
thousand pesos (₱200,000.00) and the latter allegedly failed to Babasanta demurred and argued that the latter had no legal
pay the balance of two hundred sixty thousand pesos interest in the case because the two parcels of land involved
(₱260,000.00) despite repeated demands. Babasanta had herein had already been conveyed to him by the Spouses Lu and
purportedly asked Pacita for a reduction of the price from fifteen hence, the vendors were without legal capacity to transfer or
pesos (₱15.00) to twelve pesos (₱12.00) per square meter and dispose of the two parcels of land to the intervenor.
when the Spouses Lu refused to grant Babasanta’s request, the
latter rescinded the contract to sell and declared that the original Meanwhile, the trial court in its Order dated 21 March 1990
loan transaction just be carried out in that the spouses would be allowed SLDC to intervene. SLDC filed its Complaint-in-
indebted to him in the amount of two hundred thousand pesos Intervention on 19 April 1990.9 Respondent Babasanta’s motion
(₱200,000.00). Accordingly, on 6 July 1989, they purchased for the issuance of a preliminary injunction was likewise granted
Interbank Manager’s Check No. 05020269 in the amount of two by the trial court in its Order dated 11 January 199110 conditioned
hundred thousand pesos (₱200,000.00) in the name of upon his filing of a bond in the amount of fifty thousand pesos
Babasanta to show that she was able and willing to pay the (₱50,000.00).
balance of her loan obligation.
SLDC in its Complaint-in-Intervention alleged that on 11 February
Babasanta later filed an Amended Complaint dated 17 January 1989, the Spouses Lu executed in its favor an Option to Buy the
19903 wherein he prayed for the issuance of a writ of preliminary lots subject of the complaint. Accordingly, it paid an option money
injunction with temporary restraining order and the inclusion of in the amount of three hundred sixteen thousand one hundred
the Register of Deeds of Calamba, Laguna as party defendant. sixty pesos (₱316,160.00) out of the total consideration for the
He contended that the issuance of a preliminary injunction was purchase of the two lots of one million two hundred sixty-four
necessary to restrain the transfer or conveyance by the Spouses thousand six hundred forty pesos (₱1,264,640.00). After the
Lu of the subject property to other persons. Spouses Lu received a total amount of six hundred thirty-two
thousand three hundred twenty pesos (₱632,320.00) they
The Spouses Lu filed their Opposition4 to the amended complaint executed on 3 May 1989 a Deed of Absolute Sale with
contending that it raised new matters which seriously affect their Mortgage in its favor. SLDC added that the certificates of title
substantive rights under the original complaint. However, the trial over the property were delivered to it by the spouses clean and
court in its Order dated 17 January 19905 admitted the amended free from any adverse claims and/or notice of lis pendens. SLDC
complaint. further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to
On 19 January 1990, herein petitioner San Lorenzo Development file the motion to intervene without delay. Claiming that it was a
Corporation (SLDC) filed a Motion for Intervention6 before the trial buyer in good faith, SLDC argued that it had no obligation to look
court. SLDC alleged that it had legal interest in the subject matter beyond the titles submitted to it by the Spouses Lu particularly
under litigation because on 3 May 1989, the two parcels of land because Babasanta’s claims were not annotated on the
involved, namely Lot 1764-A and 1764-B, had been sold to it in a certificates of title at the time the lands were sold to it.
Deed of Absolute Sale with Mortgage.7 It alleged that it was a
buyer in good faith and for value and therefore it had a better right After a protracted trial, the RTC rendered its Decision on 30 July
over the property in litigation. 1993 upholding the sale of the property to SLDC. It ordered the
Spouses Lu to pay Babasanta the sum of two hundred thousand On 4 October 1995, the Court of Appeals rendered
pesos (₱200,000.00) with legal interest plus the further sum of its Decision11 which set aside the judgment of the trial court. It
fifty thousand pesos (₱50,000.00) as and for attorney’s fees. On declared that the sale between Babasanta and the Spouses Lu
the complaint-in-intervention, the trial court ordered the Register was valid and subsisting and ordered the spouses to execute the
of Deeds of Laguna, Calamba Branch to cancel the notice of lis necessary deed of conveyance in favor of Babasanta, and the
pendens annotated on the original of the TCT No. T-39022 (T- latter to pay the balance of the purchase price in the amount of
7218) and No. T-39023 (T-7219). two hundred sixty thousand pesos (₱260,000.00). The appellate
court ruled that the Absolute Deed of Sale with Mortgage in favor
Applying Article 1544 of the Civil Code, the trial court ruled that of SLDC was null and void on the ground that SLDC was a
since both Babasanta and SLDC did not register the respective purchaser in bad faith. The Spouses Lu were further ordered to
sales in their favor, ownership of the property should pertain to return all payments made by SLDC with legal interest and to pay
the buyer who first acquired possession of the property. The trial attorney’s fees to Babasanta.
court equated the execution of a public instrument in favor of
SLDC as sufficient delivery of the property to the latter. It SLDC and the Spouses Lu filed separate motions for
concluded that symbolic possession could be considered to have reconsideration with the appellate court.12 However, in
been first transferred to SLDC and consequently ownership of the a Manifestation dated 20 December 1995,13 the Spouses Lu
property pertained to SLDC who purchased the property in good informed the appellate court that they are no longer contesting
faith. the decision dated 4 October 1995.

Respondent Babasanta appealed the trial court’s decision to the In its Resolution dated 11 March 1996,14 the appellate court
Court of Appeals alleging in the main that the trial court erred in considered as withdrawn the motion for reconsideration filed by
concluding that SLDC is a purchaser in good faith and in the Spouses Lu in view of their manifestation of 20 December
upholding the validity of the sale made by the Spouses Lu in favor 1995. The appellate court denied SLDC’s motion for
of SLDC. reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant modification
Respondent spouses likewise filed an appeal to the Court of or reversal of the court’s decision dated 4 October 1995.
Appeals. They contended that the trial court erred in failing to
consider that the contract to sell between them and Babasanta Hence, this petition.
had been novated when the latter abandoned the verbal contract
of sale and declared that the original loan transaction just be SLDC assigns the following errors allegedly committed by the
carried out. The Spouses Lu argued that since the properties appellate court:
involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta THE COURT OF APPEALS ERRED IN HOLDING THAT SAN
null and void ab initio for lack of knowledge and consent of Miguel LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE
Lu. They further averred that the trial court erred in not dismissing WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM
the complaint filed by Babasanta; in awarding damages in his IT THE CASH ADVANCE OF ₱200,000.00, SAN LORENZO
favor and in refusing to grant the reliefs prayed for in their
answer.
WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE added that at no instance did Pacita Lu inform it that the lands
PROPERTY. had been previously sold to Babasanta.

THE COURT OF APPEALS ERRED IN FAILING TO Moreover, SLDC stressed that after the execution of the sale in
APPRECIATE THE ESTABLISHED FACT THAT THE ALLEGED its favor it immediately took possession of the property and
FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN asserted its rights as new owner as opposed to Babasanta who
POSSESSION OF THE DISPUTED PROPERTY WHEN SAN has never exercised acts of ownership. Since the titles bore no
LORENZO BOUGHT AND TOOK POSSESSION OF THE adverse claim, encumbrance, or lien at the time it was sold to it,
PROPERTY AND NO ADVERSE CLAIM, LIEN, SLDC argued that it had every reason to rely on the correctness
ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON of the certificate of title and it was not obliged to go beyond the
THE TITLES. certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on
THE COURT OF APPEALS ERRED IN FAILING TO Babasanta to prove that it was aware of the prior sale to him but
APPRECIATE THE FACT THAT RESPONDENT BABASANTA the latter failed to do so. SLDC pointed out that the notice of lis
HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN pendens was annotated only on 2 June 1989 long after the sale
LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN of the property to it was consummated on 3 May 1989. 1awphi1.nét

THE DISPUTED PROPERTY.

Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August
THE COURT OF APPEALS ERRED IN HOLDING THAT 1999, the Spouses Lu informed the Court that due to financial
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE constraints they have no more interest to pursue their rights in the
FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED instant case and submit themselves to the decision of the Court
AND SET ASIDE THE DECISION OF THE TRIAL COURT of Appeals.16
UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND
FIRST POSSESSOR IN GOOD FAITH. 15 On the other hand, respondent Babasanta argued that SLDC
could not have acquired ownership of the property because it
SLDC contended that the appellate court erred in concluding that failed to comply with the requirement of registration of the sale in
it had prior notice of Babasanta’s claim over the property merely good faith. He emphasized that at the time SLDC registered the
on the basis of its having advanced the amount of two hundred sale in its favor on 30 June 1990, there was already a notice of lis
thousand pesos (₱200,000.00) to Pacita Lu upon the latter’s pendens annotated on the titles of the property made as early as
representation that she needed the money to pay her obligation 2 June 1989. Hence, petitioner’s registration of the sale did not
to Babasanta. It argued that it had no reason to suspect that confer upon it any right. Babasanta further asserted that
Pacita was not telling the truth that the money would be used to petitioner’s bad faith in the acquisition of the property is evident
pay her indebtedness to Babasanta. At any rate, SLDC averred from the fact that it failed to make necessary inquiry regarding the
that the amount of two hundred thousand pesos (₱200,000.00) purpose of the issuance of the two hundred thousand pesos
which it advanced to Pacita Lu would be deducted from the (₱200,000.00) manager’s check in his favor.
balance of the purchase price still due from it and should not be
construed as notice of the prior sale of the land to Babasanta. It The core issue presented for resolution in the instant petition is
who between SLDC and Babasanta has a better right over the
two parcels of land subject of the instant case in view of the Babasanta’s letter dated 22 May 1989 was quite telling. He stated
successive transactions executed by the Spouses Lu. therein that despite his repeated requests for the execution of the
final deed of sale in his favor so that he could effect full payment
To prove the perfection of the contract of sale in his favor, of the price, Pacita Lu allegedly refused to do so. In effect,
Babasanta presented a document signed by Pacita Lu Babasanta himself recognized that ownership of the property
acknowledging receipt of the sum of fifty thousand pesos would not be transferred to him until such time as he shall have
(₱50,000.00) as partial payment for 3.6 hectares of farm lot effected full payment of the price. Moreover, had the sellers
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, intended to transfer title, they could have easily executed the
Laguna.17 While the receipt signed by Pacita did not mention the document of sale in its required form simultaneously with their
price for which the property was being sold, this deficiency was acceptance of the partial payment, but they did not. Doubtlessly,
supplied by Pacita Lu’s letter dated 29 May 1989 18 wherein she the receipt signed by Pacita Lu should legally be considered as a
admitted that she agreed to sell the 3.6 hectares of land to perfected contract to sell.
Babasanta for fifteen pesos (₱15.00) per square meter.
The distinction between a contract to sell and a contract of sale is
An analysis of the facts obtaining in this case, as well as the quite germane. In a contract of sale, title passes to the vendee
evidence presented by the parties, irresistibly leads to the upon the delivery of the thing sold; whereas in a contract to sell,
conclusion that the agreement between Babasanta and the by agreement the ownership is reserved in the vendor and is not
Spouses Lu is a contract to sell and not a contract of sale. to pass until the full payment of the price.22 In a contract of sale,
the vendor has lost and cannot recover ownership until and
Contracts, in general, are perfected by mere consent, 19 which is unless the contract is resolved or rescinded; whereas in a
manifested by the meeting of the offer and the acceptance upon contract to sell, title is retained by the vendor until the full
the thing which are to constitute the contract. The offer must be payment of the price, such payment being a positive suspensive
certain and the acceptance absolute. 20 Moreover, contracts shall condition and failure of which is not a breach but an event that
be obligatory in whatever form they may have been entered into, prevents the obligation of the vendor to convey title from
provided all the essential requisites for their validity are present. 21 becoming effective.23

The receipt signed by Pacita Lu merely states that she accepted The perfected contract to sell imposed upon Babasanta the
the sum of fifty thousand pesos (₱50,000.00) from Babasanta as obligation to pay the balance of the purchase price. There being
partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, an obligation to pay the price, Babasanta should have made the
Laguna. While there is no stipulation that the seller reserves the proper tender of payment and consignation of the price in court
ownership of the property until full payment of the price which is a as required by law. Mere sending of a letter by the vendee
distinguishing feature of a contract to sell, the subsequent acts of expressing the intention to pay without the accompanying
the parties convince us that the Spouses Lu never intended to payment is not considered a valid tender of
transfer ownership to Babasanta except upon full payment of the payment.24 Consignation of the amounts due in court is essential
purchase price. in order to extinguish Babasanta’s obligation to pay the balance
of the purchase price. Glaringly absent from the records is any
indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part two principal modes of delivery, to wit: (1) actual delivery; and (2)
of the sellers to convey title never acquired obligatory force. legal or constructive delivery.

On the assumption that the transaction between the parties is a Actual delivery consists in placing the thing sold in the control and
contract of sale and not a contract to sell, Babasanta’s claim of possession of the vendee.31 Legal or constructive delivery, on the
ownership should nevertheless fail. other hand, may be had through any of the following ways: the
execution of a public instrument evidencing the sale; 32 symbolical
Sale, being a consensual contract, is perfected by mere tradition such as the delivery of the keys of the place where the
consent25 and from that moment, the parties may reciprocally movable sold is being kept;33 traditio longa manu or by mere
demand performance.26 The essential elements of a contract of consent or agreement if the movable sold cannot yet be
sale, to wit: (1) consent or meeting of the minds, that is, to transferred to the possession of the buyer at the time of the
transfer ownership in exchange for the price; (2) object certain sale;34 traditio brevi manu if the buyer already had possession of
which is the subject matter of the contract; (3) cause of the the object even before the sale;35 and traditio constitutum
obligation which is established.27 possessorium, where the seller remains in possession of the
property in a different capacity.36
The perfection of a contract of sale should not, however, be
confused with its consummation. In relation to the acquisition and Following the above disquisition, respondent Babasanta did not
transfer of ownership, it should be noted that sale is not a mode, acquire ownership by the mere execution of the receipt by Pacita
but merely a title. A mode is the legal means by which dominion Lu acknowledging receipt of partial payment for the property. For
or ownership is created, transferred or destroyed, but title is only one, the agreement between Babasanta and the Spouses Lu,
the legal basis by which to affect dominion or ownership. 28 Under though valid, was not embodied in a public instrument. Hence, no
Article 712 of the Civil Code, "ownership and other real rights constructive delivery of the lands could have been effected. For
over property are acquired and transmitted by law, by donation, another, Babasanta had not taken possession of the property at
by testate and intestate succession, and in consequence of any time after the perfection of the sale in his favor or exercised
certain contracts, by tradition." Contracts only constitute titles or acts of dominion over it despite his assertions that he was the
rights to the transfer or acquisition of ownership, while delivery or rightful owner of the lands. Simply stated, there was no delivery to
tradition is the mode of accomplishing the same.29 Therefore, sale Babasanta, whether actual or constructive, which is essential to
by itself does not transfer or affect ownership; the most that sale transfer ownership of the property. Thus, even on the assumption
does is to create the obligation to transfer ownership. It is tradition that the perfected contract between the parties was a sale,
or delivery, as a consequence of sale, that actually transfers ownership could not have passed to Babasanta in the absence of
ownership. delivery, since in a contract of sale ownership is transferred to the
vendee only upon the delivery of the thing sold. 37
Explicitly, the law provides that the ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in However, it must be stressed that the juridical relationship
any of the ways specified in Article 1497 to 1501. 30 The word between the parties in a double sale is primarily governed by
"delivered" should not be taken restrictively to mean transfer of Article 1544 which lays down the rules of preference between the
actual physical possession of the property. The law recognizes two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different Did the registration of the sale after the annotation of the notice
vendees, the ownership shall be transferred to the person who of lis pendens obliterate the effects of delivery and possession in
may have first taken possession thereof in good faith, if it should good faith which admittedly had occurred prior to SLDC’s
be movable property. knowledge of the transaction in favor of Babasanta?

Should it be immovable property, the ownership shall belong to We do not hold so.
the person acquiring it who in good faith first recorded it in the
Registry of Property. It must be stressed that as early as 11 February 1989, the
Spouses Lu executed the Option to Buy in favor of SLDC upon
Should there be no inscription, the ownership shall pertain to the receiving ₱316,160.00 as option money from SLDC. After SLDC
person who in good faith was first in the possession; and, in the had paid more than one half of the agreed purchase price of
absence thereof, to the person who presents the oldest title, ₱1,264,640.00, the Spouses Lu subsequently executed on 3 May
provided there is good faith. 1989 a Deed of Absolute Sale in favor or SLDC. At the time both
deeds were executed, SLDC had no knowledge of the prior
The principle of primus tempore, potior jure (first in time, stronger transaction of the Spouses Lu with Babasanta. Simply stated,
in right) gains greater significance in case of double sale of from the time of execution of the first deed up to the moment of
immovable property. When the thing sold twice is an immovable, transfer and delivery of possession of the lands to SLDC, it had
the one who acquires it and first records it in the Registry of acted in good faith and the subsequent annotation of lis
Property, both made in good faith, shall be deemed the pendens has no effect at all on the consummated sale between
owner.38 Verily, the act of registration must be coupled with good SLDC and the Spouses Lu.
faith— that is, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware A purchaser in good faith is one who buys property of
of facts which should have put him upon such inquiry and another without notice that some other person has a right to, or
investigation as might be necessary to acquaint him with the interest in, such property and pays a full and fair price for the
defects in the title of his vendor.39 same at the time of such purchase, or before he has notice of the
claim or interest of some other person in the property. 40 Following
Admittedly, SLDC registered the sale with the Registry of Deeds the foregoing definition, we rule that SLDC qualifies as a buyer in
after it had acquired knowledge of Babasanta’s claim. Babasanta, good faith since there is no evidence extant in the records that it
however, strongly argues that the registration of the sale by had knowledge of the prior transaction in favor of Babasanta. At
SLDC was not sufficient to confer upon the latter any title to the the time of the sale of the property to SLDC, the vendors were
property since the registration was attended by bad faith. still the registered owners of the property and were in fact in
Specifically, he points out that at the time SLDC registered the possession of the lands.  Time and again, this Court has ruled
l^vvphi1.net

sale on 30 June 1990, there was already a notice of lis that a person dealing with the owner of registered land is not
pendens on the file with the Register of Deeds, the same having bound to go beyond the certificate of title as he is charged with
been filed one year before on 2 June 1989. notice of burdens on the property which are noted on the face of
the register or on the certificate of title. 41 In assailing knowledge of
the transaction between him and the Spouses Lu, Babasanta
apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree transaction between the Spouses Lu and Babasanta for what
(P.D. No. 1529) which reads, thus: they attest to is that the amount was supposed to pay off the
advances made by Babasanta to Pacita Lu. In any event, the
Sec. 52. Constructive notice upon registration. – Every incident took place after the Spouses Lu had already executed
conveyance, mortgage, lease, lien, attachment, order, judgment, the Deed of Absolute Sale with Mortgage in favor of SLDC and
instrument or entry affecting registered land shall, if registered, therefore, as previously explained, it has no effect on the legal
filed, or entered in the office of the Register of Deeds for the position of SLDC.
province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such Assuming ex gratia argumenti that SLDC’s registration of the sale
registering, filing, or entering. had been tainted by the prior notice of lis pendens and assuming
further for the same nonce that this is a case of double sale, still
However, the constructive notice operates as such¾by the Babasanta’s claim could not prevail over that of SLDC’s.
express wording of Section 52¾from the time of the registration In Abarquez v. Court of Appeals,46 this Court had the occasion to
of the notice of lis pendens which in this case was effected only rule that if a vendee in a double sale registers the sale after he
on 2 June 1989, at which time the sale in favor of SLDC had long has acquired knowledge of a previous sale, the registration
been consummated insofar as the obligation of the Spouses Lu to constitutes a registration in bad faith and does not confer upon
transfer ownership over the property to SLDC is concerned. him any right. If the registration is done in bad faith, it is as if there
is no registration at all, and the buyer who has taken possession
More fundamentally, given the superiority of the right of SLDC to first of the property in good faith shall be preferred.
the claim of Babasanta the annotation of the notice of lis
pendens cannot help Babasanta’s position a bit and it is irrelevant In Abarquez, the first sale to the spouses Israel was notarized
to the good or bad faith characterization of SLDC as a purchaser. and registered only after the second vendee, Abarquez,
A notice of lis pendens, as the Court held in Nataño v. registered their deed of sale with the Registry of Deeds, but the
Esteban,42 serves as a warning to a prospective purchaser or Israels were first in possession. This Court awarded the property
incumbrancer that the particular property is in litigation; and that to the Israels because registration of the property by Abarquez
he should keep his hands off the same, unless he intends to lacked the element of good faith. While the facts in the instant
gamble on the results of the litigation." Precisely, in this case case substantially differ from that in Abarquez, we would not
SLDC has intervened in the pending litigation to protect its rights. hesitate to rule in favor of SLDC on the basis of its prior
Obviously, SLDC’s faith in the merit of its cause has been possession of the property in good faith. Be it noted that delivery
vindicated with the Court’s present decision which is the ultimate of the property to SLDC was immediately effected after the
denouement on the controversy. execution of the deed in its favor, at which time SLDC had no
knowledge at all of the prior transaction by the Spouses Lu in
The Court of Appeals has made capital 43 of SLDC’s averment in favor of Babasanta. 1a\^/phi1.net

its Complaint-in-Intervention44 that at the instance of Pacita Lu it

issued a check for ₱200,000.00 payable to Babasanta and the The law speaks not only of one criterion. The first criterion is
confirmatory testimony of Pacita Lu herself on cross- priority of entry in the registry of property; there being no priority
examination.45 However, there is nothing in the said pleading and of such entry, the second is priority of possession; and, in the
the testimony which explicitly relates the amount to the absence of the two priorities, the third priority is of the date of title,
with good faith as the common critical element. Since SLDC
acquired possession of the property in good faith in contrast to
Babasanta, who neither registered nor possessed the property at
any time, SLDC’s right is definitely superior to that of
Babasanta’s.

At any rate, the above discussion on the rules on double sale

would be purely academic for as earlier stated in this decision,
the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v.
Roxas,47 we had the occasion to rule that Article 1544 does not
apply to a case where there was a sale to one party of the land
itself while the other contract was a mere promise to sell the land
or at most an actual assignment of the right to repurchase the
same land. Accordingly, there was no double sale of the same
land in that case.

WHEREFORE, the instant petition is hereby GRANTED. The

decision of the Court of Appeals appealed from is REVERSED
and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.

SO ORDERED.