INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES, INC., Petitioner, vs.

LPJ ENTERPRISES, INC., Respondent.

FACTS: Respondent LPJ Enterprises, Inc. had a contract to supply 300,000 bags of cement per year
to Atlas Consolidated Mining and Development Corporation (Atlas for short), a member of the
Soriano Group of Companies. The cement was delivered packed in kraft paper bags. Sometime in
October, 1970, Cesar Campos, a Vice-President of petitioner Industrial Textile Manufacturing
Company of the Philippines (or Itemcop, for brevity), asked Lauro Panganiban, Jr., President of
respondent corporation, if he would like to cooperate in an experiment to develop plastic cement
bags. Panganiban agreed because Itemcop is a sister corporation of Atlas, respondent's major client.
A few weeks later, Panganiban accompanied Paulino Ugarte, another Vice-President of Itemcop, to
the factory of respondent's supplier, Luzon Cement Corporation in Norzagaray, Bulacan, to test fifty
(50) pieces of plastic cement bags. The experiment, however, was unsuccessful. Cement dust oozed
out under pressure through the small holes of the woven plastic bags and the loading platform was
filled with dust. The second batch of plastic bags subjected to trial was likewise a failure. Although
the weaving of the plastic bags was already tightened, cement dust still spilled through the gaps.
Finally, with three hundred (300) "improved bags", the seepage was substantially reduced. Ugarte
then asked Panganiban to send 180 bags of cement to Atlas via commercial shipping. Campos,
Ugarte, and two other officials of petitioner company followed the 180 bags to the plant of Atlas in
Cebu where they professed satisfaction at the performance of their own plastic bags. Campos sent
Panganiban a letter proclaiming dramatic results in the experiment. Consequently, Panganiban
agreed to use the plastic cement bags. Four purchase orders were thereafter issued.

Petitioner delivered the orders consecutively on January 12, February 17, March 19, and April 17,
1971. Respondent, on the other hand, remitted the amounts of P1,640.00, P2,480.00. and
P13,230.00 on March 31, April 31, and May 3, 1971 respectively, thereby leaving a balance of
P84,123.80. No other payments were made, thus prompting A. Soriano y Cia of petitioner's Legal
Department to send demand letters to respondent corporation. Reiterations thereof were later sent
by petitioner's counsel. A collection suit was filed on April 11, 1973 when the demands remained
unheeded.
At the trial on the merits, respondent admitted its liability for the 53,800 polypropylene lime bags
covered by the first purchase order. With respect to the second, third, and fourth purchase orders,
respondent, however, denied full responsibility therefor. Respondent said that it will pay, as it did
pay for, only the 15,000 plastic bags it actually used in packing cement. As for the remaining 47,000
bags, the workers of Luzon Cement strongly objected to the use thereof due to the serious health
hazards posed by the continued seepage of cement dust.
The trial court rendered its decision sentencing the defendant to pay the sum of P84,123.80 with
l2% interest per annum from May, 1971 plus 15% of the total obligation as attorney's fees, and the
costs. Respondent corporation's appeal was upheld by the appellate court when it reversed the trial
court's decision and dismissed the case with costs against petitioner.

ISSUE: whether or not respondent may be held liable for the 47,000 plastic bags which were not
actually used for packing cement as originally intended.

HELD: The conditions which allegedly govern the transaction according to respondent may not be
considered. The trial court correctly observed that such conditions should have been distinctly
specified in the purchase orders and respondent's failure to do so is fatal to its cause. The Court
found that Article 1502 of the Civil Code, invoked by both parties herein, has no application at all to
this case. The provision in the Uniform Sales Act and the Uniform Commercial Code from which
Article 1502 was taken, clearly requires an express written agreement to make a sales contract
either a "sale or return" or a "sale on approval". Parol or extrinsic testimony could not be admitted
for the purpose of showing that an invoice or bill of sale that was complete in every aspect and
purporting to embody a sale without condition or restriction constituted a contract of sale or
return. If the purchaser desired to incorporate a stipulation securing to him the right of return, he
should have done so at the time the contract was made. On the other hand, the buyer cannot accept
part and reject the rest of the goods since this falls outside the normal intent of the parties in the
"on approval" situation.

Therefore, the transaction between respondent and petitioner constituted an absolute sale.
Accordingly, respondent is liable for the plastic bags delivered to it by petitioner.

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Jesus Teran v. Francisca Villanueva, Viuda De Riosa, Et Al.
G.R. No. L-34697, March 26, 1932
Villamor, J.:

FACTS: On October 6, 1928, the parties in this case executed the deed of sale, whereby
the defendants sold to the plaintiff for P4,000 the parcel of land therein described as
containing an area of 34 hectares, 52 ares, and 43 centares.

The plaintiff brought this action for rescission of the contract, with damages, upon
discovering that the parcel of land contained only about then hectares.

The trial court found no evidence of bad faith on the part of the defendants, and we
agree with this finding. This land, with the same area stated in the contract, was
inherited by the defendants from their late father, Mariano Villanueva; and the same
area appears in the tax declaration given to the plaintiff by an agent of the defendants,
named Rafael Villanueva. The latter, accompanied by the plaintiff, inspected the land.
Villanueva pointed out some of the boundaries, as they did not go over all of them.
Without further investigating the area of the land, the plaintiff agreed to purchase it for
the sum of four thousand pesos, paying the amount and taking possession thereof. The
plaintiff alleges that after the 1928 harvest he discovered that the boundaries pointed
out to him by Rafael Villanueva were not the real ones, and, in order to ascertain the
exact area of the land, he went to the cadastral office in Malinao and got a sketch of the
property which shows that the land in question contains only ten hectares, and not
thirty-four, as appears in the deed of sale.

In view of these facts, the plaintiff now seeks to rescind the contract on the ground that
the property contains a smaller area than that stated in the deed of sale. Evidently this is
a sale of real estate with area and boundaries given, for a lump sum and not so much
per unit of measure, provided for in article 1471 of the Civil Code.

ISSUE: Whether or not the contract may be rescinded.

HELD: No. Whenever a certain real estate is sold for a lump sum the rule in law is that
there shall be no increase or decrease in price even if the area or extent is found to be
more or less than that stated in the contract; but, if the vendor cannot deliver to the
vendee all that is included within the boundaries stated in the

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contract the latter has the option either to reduce the price in proportion to the
deficiency, or to set aside the contract. In this case the Civil Code presumes that the
purchaser had in mind a determined piece of land, and that he ascertained its area and
quality before the contract was perfected. If he did not do so, or it, having done so, he
made no objection and consented to the transaction, he can blame no one but himself;
and, because it is presumed that he intended to buy a determined object, any proof of
misrepresentation will not avail him, neither will it vitiate the transaction.

Furthermore, in Azarraga v. Gay (52 Phil., 599), it was held that When the purchaser
proceeds to make investigations by himself, and the vendor does nothing to prevent
such investigation from being as complete as the former might made false
representations to him. One who contracts for the purchase of real estate is reliance on
the representations and statements of the vendor as to its character and value, but after
he has visited and examined it for himself, and has had the means and opportunity of
verifying such statements, cannot avoid the contract on the ground that they were false
or exaggerate.

The plaintiff had ample opportunity to investigate the conditions of the land he was
purchasing, without the defendant's doing anything to prevent him from making as
many inquiries as he deemed expedient, for which reason he cannot now allege that the
vendors made false representations.

In the present case the parties did not consider the area as an essential element of the
contract. There is no evidence of record that the parties fixed the price at so much per
hectare. The contract is valid and binding upon the parties.

Consolidated Rural Bank (Cagayan Valley), Inc., v. Court of Appeals and Heirs
of Teodoro Dela Cruz
G.R. No. 132161. January 17, 2005
Tinga, J.:

FACTS: Rizal, Anselmo, Gregorio, Filomeno and Domingo, all surnamed Madrid
(hereafter the Madrid brothers), were the registered owners of Lot No. 7036-A of plan
Psd-10188, Cadastral Survey 211, situated in San Mateo, Isabela.

On 23 and 24 October 1956, Lot No. 7036-A was subdivided into several lots. On 15
August 1957, Rizal Madrid sold part of his share identified to Aleja Gamiao and Felisa
Dayag to which his brothers Anselmo, Gregorio, Filomeno and Domingo offered no
objection. The deed of sale was not registered with the Office of the Register of Deeds of
Isabela. However, Gamiao and Dayag declared the property for taxation purposes in
their names on March 1964 under Tax Declaration No. 7981.

On 28 May 1964, Gamiao and Dayag sold the southern half to Teodoro dela Cruz, and
the northern half to Restituto Hernandez. Thereupon, Teodoro dela Cruz and Restituto
Hernandez took possession of and cultivated the portions of the property respectively
sold to them.

Later, on 28 December 1986, Restituto Hernandez donated the northern half to his
daughter, Evangeline Hernandez-del Rosario. The children of Teodoro dela

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Cruz continued possession of the southern half after their fathers death on 7 June 1970.

In a Deed of Sale dated 15 June 1976, the Madrid brothers conveyed all their rights and
interests over Lot No. 7036-A-7 to Pacifico Marquez. The deed of sale was registered
with the Office of the Register of Deeds of Isabela on 2 March 1982.

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight (8) lots for which TCT
Nos. T-149375 to T-149382 were issued to him on 29 March 1984. On the same date,
Marquez and his spouse, Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036-
A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley (hereafter, CRB) to secure
a loan of One Hundred Thousand Pesos (P100,000.00). These deeds of real estate
mortgage were registered with the Office of the Register of Deeds on 2 April 1984.On 6
February 1985, Marquez mortgaged Lot No. 7036-A-7-E likewise to the Rural Bank of
Cauayan (RBC) to secure a loan of Ten Thousand Pesos (P10,000.00). As Marquez
defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its
favor and the lots were sold to it as the highest bidder on 25 April 1986.

On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to Romeo Calixto (Calixto). The
Heirs-now respondents herein-represented by Edronel dela Cruz, filed a case for
reconveyance and damages the southern portion of Lot No. 7036-A (hereafter, the
subject property) against Marquez, Calixto, RBC and CRB in December 1986.

Evangeline del Rosario, the successor-in-interest of Restituto Hernandez, filed with

leave of court a Complaint in Intervention wherein she claimed the northern portion of
Lot No. 7036-A-7.

In the Answer to the Amended Complaint, Marquez, as defendant, alleged that apart from
being the first registrant, he was a buyer in good faith and for value. He also argued
that the sale executed by Rizal Madrid to Gamiao and Dayag was not binding upon
him, it being unregistered. For his part, Calixto manifested that he had no interest in the
subject property as he ceased to be the owner thereof, the same having been reacquired
by defendant Marquez.

CRB, as defendant, and co-defendant RBC insisted that they were mortgagees in good
faith and that they had the right to rely on the titles of Marquez which were free from
any lien or encumbrance.

ISSUE: Whether or not the rule on double sale is applicable in the case.

HELD: The petition is devoid of merit. Like the lower court, the appellate court
resolved the present controversy by applying the rule on double sale provided in
Article 1544 of the Civil Code. They, however, arrived at different conclusions. The RTC
made CRB and the other defendants win, while the Court of Appeals decided the case
in favor of the Heirs.

The provision is not applicable in the present case. It contemplates a case of double or
multiple sales by a single vendor. More specifically, it covers a situation where a single
vendor sold one and the same immovable property to two or more buyers. According
to a noted civil law author, it is necessary that the conveyance must have been made by
a party who has an existing right in the

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thing and the power to dispose of it. It cannot be invoked where the two different
contracts of sale are made by two different persons, one of them not being the owner of
the property sold. And even if the sale was made by the same person, if the second sale
was made when such person was no longer the owner of the property, because it had
been acquired by the first purchaser in full dominion, the second purchaser cannot
acquire any right.

In the case at bar, the subject property was not transferred to several purchasers by a
single vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose
right to the subject property originated from their acquisition thereof from Rizal Madrid
with the conformity of all the other Madrid brothers in 1957, followed by their
declaration of the property in its entirety for taxation purposes in their names. On the
other hand, the vendors in the other or later deed were the Madrid brothers but at that
time they were no longer the owners since they had long before disposed of the
property in favor of Gamiao and Dayag.

In a situation where not all the requisites are present which would warrant the
application of Art. 1544, the principle of prior tempore, potior jure or simply he who is
first in time is preferred in right, should apply. The only essential requisite of this rule
is priority in time; in other words, the only one who can invoke this is the first vendee.
Undisputedly, he is a purchaser in good faith because at the time he bought the real
property, there was still no sale to a second vendee. In the instant case, the sale to the
Heirs by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the
sale by the Madrid brothers to Marquez. The Heirs also had possessed the subject
property first in time. Thus, applying the principle, the Heirs, without a scintilla of
doubt, have a superior right to the subject property.

Moreover, it is an established principle that no one can give what one does not have
nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized
to sell, and the buyer can acquire no more than what the seller can transfer legally. In
this case, since the Madrid brothers were no longer the owners of the subject property at
the time of the sale to Marquez, the latter did not acquire any right to it.

In any event, assuming arguendo that Article 1544 applies to the present case, the claim
of Marquez still cannot prevail over the right of the Heirs since according to the
evidence he was not a purchaser and registrant in good faith.

In the instant case, the actions of Marquez have not satisfied the requirement of good
faith from the time of the purchase of the subject property to the time of registration.
Found by the Court of Appeals, Marquez knew at the time of the sale that the subject
property was being claimed or taken by the Heirs. This was a detail which could
indicate a defect in the vendors title which he failed to inquire into.

Martinez v. Court of Appeals

G.R. No. 123547; 21 May 2001
Mendoza, J.:

ISSUE: Can the second purchaser in a case of double sales of immovable property
(under Article 1544 of the New Civil Code) claim the presence of good

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faith despite the fact that he had previously seen the construction of a house on the
same lot?

HELD: NO. A purchaser who is aware of facts which should put a reasonable man
upon his guard cannot turn a blind eye and later claim that he acted in good faith. The
fact that there are persons, other than the vendors, in actual possession of the disputed
lot should have put the purchaser on inquiry as to the nature of the builders right over
the property. Mere reliance on the assurance of a third person regarding the assertion
that the lot had not been previously sold to another purchaser does not meet the
standard of good faith required under Article 1544.

Ten Forty Realty and Development Corporation v. Marina Cruz

G.R. No. 151212, September 10, 2003

FACTS: Ten Forty Realty filed an ejectment suit against Cruz before the MTC. The
corporation argued that the property in issue was purchased by them from Galino on
December 1996, and that the same property was again sold to Cruz on April 1998. Cruz,
in answer, argued that Ten Forty Realty never occupied the said property. In addition,
the property was a public land and the action for ejectment cannot succeed where it
shows that she has been in possession of the property prior to Ten Forty.

On October 2000, the trial court ruled in favour of Ten Forty, thereby ordering her to
leave the land and surrender to Ten Forty the possession thereof. The decision was
reversed by the RTC, which was thereafter affirmed by the CA.

ISSUE: Whether or not Marina Cruz should be declared as the rightful owner of the
property in issue considering that she has prior possession of the same?

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HELD: Yes. The Supreme Court ruled on several issues. First, the property involved
had not yet been delivered to the corporation, therefore, it did not acquire possession
either materially or symbolically. Under the Civil Code, as between two buyers, the first
who acquires actual possession shall have better right over the property.

Second, the corporation failed to prove before the Court that when Cruz subsequently
acquired the property, she was aware that her acquisition was defective. During such
time, the property had not yet been registered in the name of Galino, it was still in
record, a public property. She relied on the tax declaration under the name of Galino,
and the fact that the latter is occupying the property when she took over the possession.
Hence, there was no circumstance which would have placed her into doubt that
required her to further investigate Galinos ownership.

Lillian M. Mercado, et al. v. Allied Banking Corporation

GR No. 171460. July 24, 2007
Chico-Nazario, J.:

FACTS: Perla executed a Special Power of Attorney in favor of her husband, Julian
Mercado over several pieces of real property registered under her name, authorizing
the latter to perform several acts.

On the strength of the aforesaid SPA, Julian obtained a loan from the respondent. Still
using the subject property as security, Julian obtained additional loan from the
respondent. It appears, however, that there was no property identified in the SPA and
registered with the Registry of Deeds. What was identified in the SPA instead was the
property different from the one used as security for loan.

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Julian defaulted on the payment of his loan obligations. Thus, respondent initiated
extra-judicial foreclosure proceedings over the subject property which was
subsequently sold at public auction wherein respondent was the highest bidder.

ISSUE: Is there a valid mortgage constituted over the subject property?

HELD: It was Julian who obtained the loan obligations from respondent which he
secured with the mortgage of the subject property. The property mortgaged was
owned by his wife Perla, considered a third party to the loan obligations between
Julian and respondent. It was, thus, a situation recognized by the last paragraph of
Article 2085 of the Civil Code that third persons who are not parties to the principal
obligation may secure the latter by pledging or mortgaging their own property. There
is no question therefore that Julian was vested with the power to mortgage the pieces
of property indentified in the SPA, however, the subject property was not among
those enumerated therein. Julian was not conferred by Perla with the authority to
mortgage the subject property under the terms of the SPA, the real estate mortgages
Julian executed over the said property are therefore unenforceable.

Spouses Amancio et al. v. Court of Appeals, et al.

G.R. No. 152627. September 16, 2005.
Chico-Nazario, J.:

FACTS: A parcel of land situated in Marikina was previously owned by the

Sarmiento spouses by virtue of a deed of absolute sale executed on July 17, 1972. The
subject land was mortgaged by the Sarmiento spouses to Carlos Moran Sison as a
security for a sixty-five thousand three hundred seventy pesos and 25/100 loan
obtained by the Sarmiento spouses from Mr. Sison. Upon failure of the Sarmiento
spouses to pay the loan, Mr. Sison initiated the extra-judicial foreclosure sale of the
mortgaged property, and the said property was foreclosed.

Jose Puzon purchased the same property in an auction sale conducted by the
Municipal Treasurer of Marikina for non-payment of taxes. After paying P3,400.00, he
was issued a certificate of sale and caused it to be registered in the Registry of Deeds
of Marikina. No redemption having been made by the Sarmiento spouses, a final bill
of sale was issued in his favor.

On August 16, 1986, Mr. Puzon sold the property in question to herein plaintiff-
appellee. By virtue of such sale, a transfer certificate of title over the subject property
was issued in favor of the plaintiff-appellee. Records show that Mr. Puzon assured the
plaintiff-appellee that he will take care of the squatters in the subject property by
filing an ejectment case against them. However, Mr. Puzon failed to comply with his
promise.

ISSUE: Is there good faith on the part of the purchaser?

HELD: Verily, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefor and the law will in no way oblige
him to go behind the certificate to determine the condition of the property. Thus, the
general rule is that a purchaser may be considered a

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purchaser in good faith when he has examined the latest certificate of title. An
exception to this rule is when there exist important facts that would create suspicion
in an otherwise reasonable man to go beyond the present title and to investigate those
that preceded it. Thus, it has been said that a person who deliberately ignores a
significant fact which would create suspicion in an otherwise reasonable man is not an
innocent purchaser for value. A purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor.

The fact that private respondent RRC did not investigate the Sarmiento spouses claim
over the subject land despite its knowledge that Pedro Ogsiner, as their overseer, was
in actual possession thereof means that it was not an innocent purchaser for value
upon said land. Article 524 of the Civil Code directs that possession may be exercised
in ones name or in that of another. In herein case, Pedro Ogsiner had informed RRC
that he was occupying the subject land on behalf of the Sarmiento spouses. Being a
corporation engaged in the business of buying and selling real estate, it was gross
negligence on its part to merely rely on Mr. Puzons assurance that the occupants of
the property were mere squatters considering the invaluable information it acquired
from Pedro Ogsiner and considering further that it had the means and the
opportunity to investigate for itself the accuracy of such information.

Alejandro Gabriel and Alfredo Gabriel, v. Spouses Pablo Mabanta et al.

G.R. No. 142403. March 26, 2003
Sandoval-Gutierrez, J.:

FACTS: Spouses Pablo and Escolastica Mabanta were the registered owners of two lots
located in Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square
meters, covered by Transfer Certificates of Title (TCT) Nos. 72705 and 72707,
respectively. On October 25, 1975, they mortgaged both lots with the Development
Bank of the Philippines (DBP) as collateral for a loan of P14,000.00.

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana
Soriano by way of a Deed of Sale of Parcels of Land With Assumption of Mortgage.[4]
Included in the Deed is an agreement that they could repurchase the lots within a
period of two (2) years.

Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to
convince Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration,
Alejandro delivered to Susana a 500-square meter residential lot with an actual value of
P40,000.00 and paid spouses Mabanta the sum of P5,000.00. On May 15, 1984, spouses
Mabanta executed a Deed of Sale with Assumption of Mortgagein favor of Alejandro.
For her part, Susana executed a document entitled Cancellation of Contract whereby
she transferred to Alejandro all her rights over the two lots.

Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of
spouses Mabantas loan with the DBP. However, when they were ready to pay the
entire loan, they found that spouses Benito and Pura Tan had paid it and that the
mortgage was already cancelled.

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On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official,
approached Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta.
Alejandro refused because Tan was unwilling to return the formers 500-square meter
lot delivered to Susana as purchase price for the lots. Thereafter, spouses Tan tried to
eject Alejandro from the lot covered by TCT No. 72707.

On September 17, 1985, Alejandro and Alfredo filed with the Regional TrialCourt,
Branch 21, Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707)
for specific performance, reconveyance and damages with an application for a
preliminary injunction against spouses Mabanta, spouses Tan, the DBP and barangay
officials Dominador Maylem and Alejandro Tridanio.
In due time, these defendants filed their respective answers.

During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-
Reyes who bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on
August 21, 1985. Not having been impleaded as a party-defendant, she filed an answer-
in-intervention alleging that she is the registered owner of the lot covered by TCT No.
72707; that she purchased it from spouses Mabanta in good faith and for value; that
she paid their loan with the DBP in the amounts of P17,580.88 and P16,845.17 per
Official Receipts Nos. 1749539 and 1749540, respectively; that the mortgage with the
DBP was cancelled and spouses Mabanta executed a Deed of Absolute Sale in her
favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-160391
was issued in her name.

On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro
and Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391)

ISSUE: Whether or not the second sale of the disputed lot executed by spouses Mabanta
in favor of Zenaida Tan-Reyes is valid under Article 1544 of the Civil Code.

HELD: We have consistently held that in cases of double sale of immovables, what
finds relevance and materiality is not whether or not the second buyer was a buyer in
good faith but whether or not said second buyer registers such second sale in good
faith, that is, without knowledge of any defect in the title of the property sold. In
Salvoro vs. Tanega, we had the occasion to rule that if a vendee in a double sale
registers the sale after he has acquired knowledge that there was a previous sale of the
same property to a third party or that another person claims said property in a previous
sale, the registration will constitute a registration in bad faith and will not confer upon
him any right.

Mere registration of title is not enough, good faith must concur with the registration. To
be entitled to priority, the second purchaser must not only establish prior recording of
his deed, but must have acted in good faith, without knowledge of the existence of
another alienation by the vendor to the other. In the old case of Leung Yee vs. F. L.
Strong Machinery, Co. and Williamson, this Court ruled: One who purchases a real
estate with knowledge of a defect 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

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upon such inquiry and investigation as might be necessary to acquaint him with the
defects in the title of his vendor. A purchaser cannot close his eyes to facts which should
put a reasonable man upon his guard, and then claim that he acted in good faith under
the belief that there was no defect in the title of the vendor. His mere refusal to believe
that such a defect exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendors title will not make him an innocent purchaser for
value, if it afterwards develops that the title was in fact defective, and it appears that he
had such notice of the defect as would have led to its discovery had he acted with that
measure of precaution which may reasonably be required of a prudent man in a like
situation.

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when
she bought the lot and had the sale registered.

Carlos Palanca vs. The Director of Lands, et al.,

G.R. No. 15950, March 9, 1922

FACTS: Carlos Palanca is the applicant for the registration of the parcel of land marked
lot No. 2 described in the plan accompanying his application. Roman Santos opposes
the registration of the eastern portion of this lot which is more fully described in this
written opposition.

Lot No. 2 together with lot No. 1, which is the subject of antoehr proceeding, form one
piece of land, lot No. 1 being located within the Province of Pampanga and lot No. 2 in
the Province of Bulacan.

On October 31, 1917, the sisters Irene Mojica and Consuelo Mojica sold the hacienda
composed of these two lots to Felipe Buncamino Suntay and in December of the same
year said Suntay sold the same lands to Carlos Palanca. In the description of this
hacienda in the document of sale to Suntay the portion claimed by Roman Santos
appears to have been excluded. In January, 1918, Irene and Consuelo Mojica sold to the
opponent Roman Santos the said portion that had been excluded. The deeds of sale of
Felipe Buencamino Suntay and of the applicant Carlos Palanca were recorded in the
registry on January 26, 1918, and the document of sale to Santos was also recorded on
August 6, 1918.

ISSUE: Whether or not there was a double sale.

HELD: Yes. It results, therefore, that the land under discussion was twice sold to two
different purchasers. In accordance with article 1473 of the Civil Code the sale that was
first recorded must be given preference. Although the sale to Suntay and the sale by the
latter to Palanca wre recorded, it must be deemed that no record was made as to the
portion of land in question. For the purposes of articles 1473, the record in the registry is
tantamount to a notice of the fact of the existence of the contract. But, as in the deeds
containing these contracts the portions of land under discussion does not appear, the
registration of the documents cannot be considered as a notice of the sale of the said
portion. On the other hand, although the sale to Roman Santos was also recorded, it
was only effected in August, 1918, after the herein applicant had already filed his
application for this land claiming to have bought it from the sisters Irene and Conseulo
Mojica and after the said Palanca had filed an oppostion to the application of Roman
Santos for the registration of the said parcel of land, it being noted that Palanca, before
that time, had brought an action for injunction against Santos on account of the same
portion of land. Wherefore, when Santos recorded his sale he knew that Palanca was
claiming the land in question by virtue of a former purchase. consequently the record
made by Santos was not in good faith and he cannot base his preference of title thereon.

11
The record to which article 1473 of the Civil Code refers is that made in good faith, for
the law will not protect anything done in bad faith.

The preference, therefore, as between these two sales must be adjudged to Palanca in
accordance with said article 1473 of the Civil Code, on account of priority of possession.
Palanca had possession of the land as a lessee before the land was sold and after the
consummation of the sale he continued in such possession uninterruptedly, not as
lessee, but, as owner of the property.

12
 CIVIL LAW REVIEW II
SALES AND LEASE

Sigaya v. Mayuga
G.R. No. 143254, August 18, 2005
Austria-Martinez, J.:

FACTS: The parties in this case are both claiming their right over a parcel of
land. Petitioners argued that their predecessor, upon whom they inherited the
title, is a purchaser in good faith who has merely relied on the certificate of title
of the land sold to their predecessor. On the other hand, the respondents argued
that they have a better right over the said land since they were then occupying
the same even before the alleged sale made in favor the petitioner's predecessor.
They further argued that the petitioner's predecessor is not a purchaser in good
faith knowing that there is occupant on the land to be sold to him and yet he did
not made any suspicion.

ISSUE: Is the petitioner's predecessor a purchaser in good faith who can rely on
the title of the said land?

HELD: No. Indeed, it is a well-settled rule that every person dealing with
registered land may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go beyond the certificate to
determine the condition of the property. Where there is nothing in the certificate
of title to indicate any cloud or vice in the ownership of the property, or any
encumbrance thereon, the purchaser is not required to explore further than what
the Torrens Title upon its face indicates in quest for any hidden defects or
inchoate right that may subsequently defeat his right thereto.

However, this rule shall not apply when the party has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such
inquiry or when the purchaser has knowledge of a defect or the lack of title in his
vendor or of sufficient facts to induce a reasonably prudent man to inquire into
the status of the title of the property in litigation.

There being occupants of the property, the Court cannot ascribe good faith to
petitioner's predecessor who has not shown any diligence in protecting his
rights.

Leoncio and Barrera v CA

In this petition for certiorari,[1] petitioners seek to annul the decision of the Court of
Appeals[2] affirming the decision of the Regional Trial Court,[3] Makati, Branch 66, as well as its
resolution[4]denying reconsideration thereof.
The Facts
Azalia Salome (Salome) owned a house and lot located at No. 2641 Bonifacio St., Bangkal,
Makati City, covered by Transfer Certificate of Title No. 61772. Salome mortgaged the property
to Country Bankers Insurance and Surety Company to secure a P10,000.00 loan.
On July 1, 1966, Salome sold the property to Rosendo C. Palabasan.[5] Transfer Certificate
of Title No. 61772 was cancelled and a new one, Transfer Certificate of Title No. 167387, [6] was
issued in the name of Rosendo C. Palabasan and Bella S. Palabasan.
On April 19, 1989, Leoncio and Enriqueta Barrera (spouses Barrera) filed with the Regional
Trial Court, Makati City, Branch 138, a complaint[7] against Palabasan for reconveyance with
damages. They alleged that they had been in possession of the property since 1962 by virtue of a
Deed of Sale with Assumption of Mortgage which was not notarized; that Salome executed a
notarized Deed of Sale with Assumption of Mortgage in their favor on March 31, 1966; that,
pursuant to this notarized deed, they settled Salomes obligations with the Country Bankers
13
Insurance and Surety Company; that they tried to redeem the property but were not able to do so
because Palabasan had done so and the title to the property was released to Palabasan; that in
1970, they signed a blank document which was supposed to become Palabasan's authority to sell
the land for them; that in 1975, they were surprised to learn that the blank document which they
had signed turned out to be a contract of lease wherein they were the lessees and Palabasan was
the lessor of the property; and that Palabasan registered the property in his name and was able to
secure Transfer Certificate of Title No. 167387.
In his answer to the complaint, Palabasan asserted that he bought the property from Salome
on June 30, 1966, after he had paid the obligation of Salome with Country Bankers Insurance
and Surety Company; that he had been issued Transfer Certificate of Title No. 167387 in his
name after he had the deed of sale registered; that the spouses Barrera were in possession of the
property as lessees of Salome; and that a contract of lease was executed by and between the
spouses Barrera and Palabasan in 1970. Consequently, he claimed that the spouses Barrera had
no legal right to claim reconveyance of the property in question.
On February 23, 1993, after trial, the lower court rendered a
[8]
decision declaring Palabasan to have validly acquired title to the property in question. The trial
court, ruling that the case is one of double sale of an immovable, applied the second paragraph of
Article 1544[9] of the Civil Code.
In time, the spouses Barrera appealed[10] the decision to the Court of Appeals.[11]
On October 25, 1995, the Court of Appeals promulgated a decision affirming in toto the
decision of the trial court. The appellate court, however, found Article 1544 of the Civil Code
inapplicable to the case as there was no sale between the spouses Barrera and Salome because
Salomes testimony given in a previous case[12] to this effect was stricken off the record since she
died prior to cross-examination; the testimony of Cenon Mateo, the common-law husband of
Salome showed that he was not aware of the transaction entered into on March 31,
1966; and counsel for spouses Barrera admitted that the sale transaction in 1962 did not
materialize as the property was mortgaged to Country Bankers Insurance and Surety Company.
On December 4, 1995, the spouses Barrera filed a motion for reconsideration[13] of the
decision; however, on February 21, 1996, the Court of Appeals denied the same.[14]
Hence, this petition.[15]
The Issues: The issues raised are: whether respondent Palabasan is the owner of the property
in question; and whether there was double sale of an immovable property covered by Article
1544 of the Civil Code.

The Court's Ruling: The petition is without merit.

An action for reconveyance of a property is the sole remedy of a landowner whose property
has been wrongfully or erroneously registered in anothers name after one year from the date of
the decree so long as the property has not passed to an innocent purchaser for value.[16] The
action does not seek to reopen the registration proceedings and set aside the decree of
registration but only purports to show that the person who secured the registration of the property
in controversy is not the real owner thereof.[17] Fraud may be a ground for reconveyance. For an
action for reconveyance based on fraud to prosper, the party seeking reconveyance must prove
by clear and convincing evidence his title to the property and the fact of fraud.[18]
It must be stressed that mere allegations of fraud are not enough. Intentional acts to deceive
and deprive another of his right, or in some manner, injure him, must be specifically alleged and
proved.[19]The burden of proof rests on petitioners; this, the petitioners failed to do.
Petitioners offered no proof that there was misrepresentation or concealment in the
registration of the deed that led to the issuance of Transfer Certificate of Title No. 167387. With
the presumption of regularity in the performance of official functions, the claim of petitioners
that the issuance of Transfer Certificate of Title No. 167387 was tainted with fraud must fail.
As to proof of title to the property, respondent Palabasan offered the following: Transfer
Certificate of Title No. 167387,[20] Tax Declaration No. 03251,[21] the Deed of Absolute
Sale[22] dated June 30, 1966, executed by Salome in favor of respondent Palabasan, the Contract
of Lease,[23] with respondent Palabasan as the lessor and petitioner Leoncio Barrera as the lessee,
and the decision of the Court of First Instance, Pasig, Branch XIX in Civil Case No.

14
38608,[24] finding respondent Palabasan to be the lawful owner of the property covered by
Transfer Certificate of Title No. 167387.
On the other hand, petitioner spouses Barrera only have the Deed of Absolute Sale with
Assumption of Real Estate Mortgage[25] evidencing a transaction which occurred in 1962, a Deed
of Sale with Assumption of Mortgage[26] dated March 31, 1966 and the testimonies of Cenon
Mateo[27] and petitioner Leoncio Barrera.[28] The spouses Barrera attempted to offer in evidence
the transcript of stenographic notes taken of the testimony of Salome in Civil Case No.
14009.[29] Respondent objected to the offer which opposition the trial court sustained.[30]
We find respondent Palabasan to be the owner of the property.
The decision of the then Court of First Instance, Pasig, Branch XIX in Civil Case No.
38608, promulgated on September 4, 1981[31] and reinstated on August 10, 1990,[32] finding
respondent Palabasan to be the lawful owner of the property covered by Transfer Certificate of
Title No. 167387 may not be invoked in this case since said decision had become stale.[33]
Article 1144(3) of the Civil Code provides that an action upon a judgment must be brought
within ten years from the time the right of action accrues.
On the other hand, Section 6, Rule 39, Revised Rules of Court, states:

A final and executory judgment or order may be executed on motion within five
(5) years from the date of its entry. After the lapse of such time, and before it is
barred by the statute of limitations, a judgment may be enforced by motion within
five (5) years from the date of its entry and thereafter by action before it is barred
by the statute of limitations.

The rule is that the court could issue a writ of execution by motion within five (5) years
from finality of the decision.[34] A writ of execution issued after the expiration of that period is
null and void.[35]There is a need for the interested party to file an independent action for revival
of judgment. The judgment may be enforced after the lapse of this period and before the same is
barred by the statute of limitations, by instituting an ordinary civil action. [36] The reason is that
after the lapse of the five-year period, the judgment is reduced to a mere right of action, which
judgment must be enforced, as all other ordinary actions, by the institution of a complaint in the
regular form. Such action must be filed within ten (10) years from the date the judgment became
final.[37]
The decision having become stale, any action to enforce or revive it has prescribed.[38]
This notwithstanding, the greater weight of evidence lies in favor of respondent Palabasans
claim of ownership over the land. Surely, Transfer Certificate of Title No. 167387 and Tax
Declaration No. 03251 which respondent Palabasan offered in evidence is more convincing than
petitioners evidence.
The certificate of title issued is an absolute and indefeasible evidence of ownership of the
property in favor of the person whose name appears therein. It is binding and conclusive upon
the whole world.[39]
Anent the question of whether this case is one of double sale, suffice it to say that there is no
sufficient proof on the sale between Salome and petitioners. There is no double sale that would
warrant the application of Article 1544 of the Civil Code.
As mentioned at the outset, the evidence petitioners adduced to prove the sale was the
notarized deed executed on March 31, 1966. However, a perusal of the deed would show that the
sale is conditioned on the payment by the petitioners of Salomes obligation with the Country
Bankers Insurance and Surety Company under the contract of mortgage.
Petitioners submitted no evidence to show that they complied with the condition given.
Hence, there was no consummation of the contract which would transfer ownership of the
property to thepetitioners. All that they presented was the self-serving testimony of petitioner
Leoncio Barrera[40] to the effect that the obligations were paid by them. Notable is Cenon Mateos
testimony that he has no knowledge of any transaction entered into by Salome on March 31,
1966.[41]
Likewise, there is no sufficient evidence to show that the earlier transaction in 1962 ever
materialized. The testimony of Salome in Civil Case No. 14009 confirming the existence of this
transaction is inadmissible for lack of cross-examination. Likewise, the Deed of Absolute Sale
with Assumption of Real Estate Mortgage[42] not having been notarized, its genuineness and due
15
execution will have to be proven. In this case, the petitioners only presented the testimony of
petitioner Leoncio Barrera and Cenon Mateo, which are, again, self-serving assertions if not
corroborated by any other evidence. Notable is the counsel of petitioners own admission that the
said transaction however did not in any way materialize for the reason that the property, subject
of the transaction was mortgaged to Country Bankers and Surety Company.[43]
The only sale that materialized in this case was the sale by Salome to respondent Palabasan
that was evidenced by a deed of absolute sale that enabled respondent Palabasan to redeem the
property from Country Bankers Insurance and Surety Company and consequently to secure
Transfer Certificate of Title No. 167387 in his favor over the same property.

SAN LORENZO DEVELOPMENT CORPORATION v CA

G.R. No. 124242 January 21, 2005

FACTS
On 20 August 1986, the Spouses Lu purportedly sold two parcelsof land to respondent Pablo
Babasanta, for the price of fifteenpesos (P15.00) per square meter. Babasanta made adownpayment
of (P50,000.00) as evidenced by a memorandumreceipt issued by Pacita Lu of the same date.
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 fullpayment of the purchase price. In response, Pacita Lu wrote aletter to
Babasanta wherein she reminded Babasanta that whenthe balance of the purchase price became
due, he requested for areduction of the price and when she refused, Babasanta backed out of the
sale
herein petitioner San Lorenzo Development Corporation (SLDC)filed a Motion for Intervention.
SLDC alleged that it had legalinterest in the subject matter under litigation because on 3 May1989,
the two parcels of land involved had been sold to it in aDeed of Absolute Sale with Mortgage.
It alleged that it was abuyer in good faith and for value and therefore it had a betterright over the
property in litigation
Respondent Babasanta, however, argued that SLDC could nothave acquired ownership of the
property because it failed tocomply with the requirement of registration of the sale in goodfaith. He
emphasized that at the time SLDC registered the sale inits favor on 30 June 1990, there
was already a notice of lis pendens annotated on the titles of the property made as early as2 June
1989. Hence, petitioners registration of the sale did notconfer upon it any right.

ISSUE:
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects
of delivery and possession in good
faithwhich admittedly had occurred prior to SLDCs knowledge of thetransaction in favor
of Babasanta?

HELD:NO
It must be stressed that as early as 11 February 1989, theSpouses Lu executed the
Option to Buy in favor of SLDC uponreceiving P316,160.00 as option money from SLDC. After
SLDChad paid more than one half of the agreed purchase price, theSpouses Lu subsequently
executed on 3 May 1989 a
Deed of Absolute Sale in favor or SLDC. At the time both deeds wereexecuted, SLDC had no
knowledge of the prior transactionof the Spouses Lu with Babasanta. Simply stated,from thetime of
execution of the first deed up to the moment of transfer and delivery of possession of the lands to
SLDC, it had acted in good faith and the subsequent annotation of lis pendens has no effect at all on
the consummated salebetween SLDC and the Spouses Lu.

A purchaser in good faith is one who buys property of another without notice that some other
person has a right to, or interestin, such property and pays a full and fair price for the same at
thetime of such purchase, or
Before he has noticeof the claim orinterest of some other person in the property.

We rule that SLDC qualifies as a buyer in good faith since there isno evidence extant in the records
that it had knowledge of theprior transaction in favor of Babasanta. At the time of the sale of the
property to SLDC, the vendors were still the registered ownersof the property and were in fact in
possession of the lands.

In assailing knowledge of the transaction between him and theSpouses

Lu, Babasanta apparently relies on the principle of constructive notice incorporated in Section
52 of the PropertyRegistration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration.

16
 Every conveyance,mortgage, lease, lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered, filed, or entered in the office of the Register of
Deeds for the province or city where the land to which it relates lies, be constructive notice to all
persons from the time of suchregistering, filing, or entering.

However, the constructive notice operates as such by the expresswording of Section 52 from the
time of the registration of thenotice of lis pendens which in this case was effected only on 2June
1989, at which time the sale in favor of SLDC had long beenconsummated insofar as the obligation
of the Spouses Lu totransfer ownership over the property to SLDC is concerned.

PREMIERE DEVELOPMENT BANK, vs. CA et al

G.R. No. 128122
March 18, 2005

FACTS: 2 different persons with exactly the same name, i.e., Vicente T. Garaygay, each claimed
exclusive ownership of Lot 23 by virtue of an owners duplicate certificate each had possession of
during the period material covering said lot. One held TCT No. 9780, supra, and the other, TCT
No. 9780(693), supra. The technical description of the land appearing in one copy corresponds
exactly with that in the other. The date June 14, 1944 appears on the face of both copies as a
common date of entry. One, however, contained certain features, markings, and/or entries not
found in the other and vice versa.

On April 17, 1979, Garaygay of Cebu executed a deed of sale concerning subject lot in favor of his
nephew Joselito. The sale notwithstanding, the owners duplicate certificate remained for some
time in the sellers possession.

In another transaction, Garaygay of Rizal sold to Yambao and Rodriguez the same property.
Buyers Yambao and Rodriquez would later sell a portion of their undivided interests on the land
to Morales.

Then came the June 11, 1988 fire that gutted a portion of the Quezon City hall and destroyed in
the process the original copy of TCT No. 9780 (693) on file with the Registry of Deeds of Quezon
City. Barely a month later, a certain Engr. Hobre filed an application, signed by Garaygay of
Cebu, for the reconstitution of the burned original on the basis of the latters owners duplicate
certificate. One Engr. Cortez of the LRA did the follow-up on the application. After due
proceedings, the LRA issued an order of reconstitution, by virtue of
which Garaygay of Cebu acquired a reconstituted title.

Meanwhile, or on May 26, 1989, the deed of sale executed by Garaygay of Cebuin favor of his
nephew Joselito was registered, paving the issuance in the latters name. Thereafter, thru the
efforts of same Engr. Cortez, Lot 23 was subdivided into three (3) lots. Joselito posthaste sold
the first lot to Toundjiswho, pursuant to a Contract to Sell undertook to pay Joselito the P.5
Million balance of the P2.5 Million purchase price once she is placed in possession of a fenced-
off property. And, for shares of stock, Joselito assigned the other two (2) lots
to Century Realty which, after securing TCTs therefor, mortgaged the same to Premiere Bank to
secure a loan.

Clashing claims of ownership first came to a head when, sometime in May 1990, Yambao and his
agents forcibly prevented Joselitos hired hands from concrete-fencing the subject property. The
police and eventually the National Bureau of Investigation (NBI) entered into the picture.

In the meantime, Yambao, Rodriquez and Morales as pro indiviso buyers of the subject lot,
caused the of their respective adverse claims on Joselitos TCT They then filed with the Regional
Trial Court at Quezon City suit against Joselito, Century Realty and Premiere Bank for quieting
of title and annulment of said defendants fake titles with prayer for damages.

Eventually, the trial court rendered judgment finding for the plaintiffs and against the
defendants, declaring Joselitos TCT No. 9780 (693) and all subsequent titles traceable to it and
transactions involving its derivatives as null and void. The trial court further observed dubious
circumstances surrounding the reconstitution of TCT 9780 (693), the more disturbing of which
is the admitted participation of LRA personnel in the reconstitution process.

In time, herein petitioners appealed to the CA, which affirmed in toto the appealed decision of
the trial court.
Their motion for reconsideration having been denied by the appellate court petitioners have
separately come to the Supreme Court. the three (3) separate petitions were, upon private
respondents motion, ordered consolidated.

17
ISSUE:
1. WON the Court of Appeals erred in holding Garaygay of Rizal, instead of Garaygay of Cebu, as
the real owner of Lot 23.
2. WON the same court erred in finding Garaygay of Rizals owners copy, TCT No. 9780, instead of
the Garaygay of Cebus copy, TCT No. 9780 (693), as the authentic title covering Lot 23.
3. WON Toundjis and Premiere bank are buyers in good faith

HELD: The instant petitions are DENIED and the impugned Decision of the CA AFFIRMED.
Both defining documents, Exhibit 1[cebu] and Exhibit B [rizal], appear to have been issued
by the appropriate Registry of Deeds and as such would ordinarily enjoy the guarantees flowing
from the legal presumption of regularity of issuance. But how and precisely when the legal
aberration occurred where two (2) owners duplicate certificates ended up in the hands of two
(2) distinct persons, complete strangers to each other, are questions which the records do not
provide clear answer. It may not be idle to speculate, though, that fraud or other improper
manipulations had been employed along the way, with likely the willing assistance of land
registry official/s, to secure what for the nonce may be tagged as the other title. Consistent with
the presumption of regularity of issuance, however, the authenticity of one copy has to be
recognized. And necessarily, one of the two (2) outstanding owners copies has to be struck
down as wrongly issued, if not plainly spurious, under the governing Torrens system of land
registration

1. The categorical conclusion of the Court of Appeals confirmatory of that of the trial court is
that Exhibit B is genuine and that Garaygay of Rizal is a real person. On the other
hand, Exhibit 1 was adjudged spurious. These factual determinations as a matter of long and
sound appellate practice must be accorded great weight, and, as rule, should not be disturbed on
appeal, save for the most compelling and cogent reasons.

The courts finding that Garaygay of Rizal is an authentic person, once residing in and a
registered voter of Angono, Rizal has adequate evidentiary support in his voters ID, the
COMELEC and barangay certifications aforementioned and the testimony of an occupant of Lot
23.

Moreover, facts and reasonable inferences drawn therefrom point to Exhibit 1 as being
spurious, necessarily leaving Exhibit B as the authentic duplicate copy. For starters, there is
the appearance and physical condition of the owners copies in question which would help in
determining which is genuine and which is sham. As aptly observed by the appellate court,
rationalizing its conclusion adverted to above, Exhibit B has no defect, except for its partly
being torn. Respondents explanation for the defective state of Exhibit B, as related to them
by Garaygay of Rizal, i.e., it was due to exposure of the document to the elements during the
Japanese occupation, merited approval from the trial court and the CA Both courts, being in a
better position to pass upon the credibility of petitioners witness and appreciate his testimony
respecting the less than usual appearance of Exhibit B, their findings command the respect of
this Court.

However, unlike Exhibit B, Exhibit 1 contained entries and other uncommon markings or
features which could not have existed without human intervention. Although any one of them
may perhaps not be appreciable in isolation, these features and/or markings, taken together,
indeed put the integrity of Exhibit 1 under heavy cloud and indeed cast doubt on its
genuineness.

In the same token, the payment by Garaygay of Cebu of land taxes on Lot 23 does not also
necessary detract from the spurious nature of his title. After all, any one can pay real estate taxes
on a given property without being quizzed by the local treasury whether or not the payor owns
the real property in question.

Other than paying taxes from 1949 to 1990, however, Garaygay of Cebu and this holds true for
his nephew Joselito did not appear before the current stand-off to have exercised dominion
over Lot 23. For one, it has not been shown that Garaygay of Cebu was at any time in possession
of the property in question, unlike his namesake from Rizal who managed to place the property
under the care of certain individuals who built semi-permanent structure-dwelling houses
thereon without so much of a protest from Garaygay of Cebu or his nephew Joselito after the
latter purportedly bought the property. For another, neither Garaygay of Cebu nor his nephew
Joselito ever instituted any action to eject or recover possession from the occupants of Lot 23.
This passivity bespeaks strongly against their claim of ownership. Not lost on this Court are
circumstances noted by the trial court which negatively reflect on Garaygay of Cebus and his
nephews claim of ownership.

18
In short, it appears to the Court that without doing anything, Vicente T. Garaygay of Cebu has
his title (Exh. 1) reconstituted. On the other hand, without knowing anything, JOSELITO
obtained TCT 12183 in his name and had the land subdivided and sold.These circumstances
demonstrate that neither JOSELITO nor his uncle, Vicente T. Garaygay of Cebu acted ante litem
motam like the true owners they claim to be in their respective times.
Several questions confound the Courts curiosity. Why were some LRA officials so interested in
the speedy reconstitution and in the subdivision of the land in excess of their bureaucratic
duties? Where did Vicente T. Garaygay of Cebu get his owners copy, Exh. 1? Why was
JOSELITO so evasive about his cousin in the LRA as shown in his examination?

As the Court sees it, the Deed of Sale was a simulated transaction because both JOSELITO and
his uncle admit this was a joint venture to sell the property in question. However, the facts
suggest that the joint venture was not limited to the two of them. The persons who prepared
and filed the application for reconstitution, and those officers in the LRA who followed it up and
who thereafter subdivided the land into three lots for easier sale, those at the NBI who tried to
persuade Yambao and Morales to settle the dispute . . . are apparently part of the joint venture
or stand to profit from it

NOTES:
1. Petitioners insistence that the inscription on Garaygay of Cebus copy of the deed of mortgage
and the discharge of mortgage he constituted over Lot 23 in favor of Meralco Employees Savings
and Loan Association proves the authenticity of the latters owner duplicate is valid to a point.
But, to suggest that such inscription could not have been possible were his title spurious is
altogether a different matter. We need not cite cases memorialized in books of jurisprudence
where land dealings are annotated on reconstituted certificates secured thru fraud or otherwise
issued irregularly. Stated a little differently, an annotation of what is otherwise a bona-fide land
transaction is not a peremptory argument against the spurious character, if that be the case, of
the document on which it is annotated.

This brings us to the core of Toundjis and Premiere Banks petitions. The first asserts the rights
of a purchaser and the other, that of a mortgagee, in good faith and for value of Lot 23, a status
respectively denied them by the appellate court.
The rule that a subsequent declaration of a title as null and void is not a ground for nullifying the
contractual right of a purchaser, rmortgagee or other transferees in good faith, with the
exceptions thereto, is well-settled. Tested by the above norm, may Toundjis be considered, as
she has claimed, an innocent purchaser for value?

The Court of Appeals rejected the claim of Toundjis, and rightly so.

A study of the record shows that the TCT Lot. 23-A that Toundjis contracted to buy from
Joselito carried an annotation that it was administratively reconstituted. Records also indicate
that Toundjis knew at the time of the sale that Joselito did not have possession of the lot
inasmuch as she agreed to pay the balance of the purchase price as soon as the seller can fence
off the property and surrender physical possession thereof to her.

Even for these two (2) reasons alone, which should have placed Toundjis on guard respecting
Joselitos title, her claim of being a bona fide purchaser for value must fail. Likewise acceptable is
the appellate courts holding, citing Republic vs. Court of Appeals, that a purchaser of a property
cannot be in good faith where the title thereof shows that it was reconstituted. Noted with
approval, too, is the appellate courts observation that the contract to sell which is unregistered
and not annotated at the back of the title of the property [cannot adversely affect appellees] for
the reason that under Sec. 51 of PD 1529 (Property Registration Act), the act of registration
shall be the operative act to convey or affect the land in so far (sic) as third parties are
concerned.

Premiere Bank cannot also be accorded the status of an innocent mortgagee for value vis--
vis the mortgage of the lots constituted in its favor by CenturyRealty. Apart from the annotations
that said titles are only administratively reconstituted, the appellate court provided the ensuing
compelling reasons:
Premiere inspected the property to be mortgaged The adverse claim of Jesus Rodriguez was
cancelled on March 26, 1991 xxx Hence, when Premiere inspected the property xxx, it was aware
of the existence of Rodriquez adverse claim. . The adverse claim of Rodriquez annotated at the
back of the TCTs declares that he is the vendee of the land described.

There are buildings of strong material on the land in disputePremiere is aware of the existence
of these structures as can be seen in its real estate report But despite the existence of alleged
19
shanties which are in fact and in truth big structures Premiere Bank proceeded in the
execution of the mortgage contract. xxx.

If the land mortgaged is in the possession of a person other than the mortgagor, the mortgagee
is required to go beyond the certificate of title and make inquiries as to the rights of the actual
possessors. Failure to do so would make him a mortgagee in bad faith.

It cannot be overemphasized that Premiere Bank, being in the business of extending loans
secured by real estate mortgage, is familiar with rules on land registration. As such, it was, as
here, expected to exercise more care and prudence than private individuals in their dealing with
registered lands. That Premiere Bank accepted in mortgage the property in question
notwithstanding the existence of structures on the property and which were in actual, visible
and public possession of a person other than the mortgagor, constitutes gross negligence
amounting to bad faith. Premier Bank is thus not entitled to have its lien annotated on the
genuine title.

2. A final consideration: Petitioners maintain that the appellate court erred in annulling the LRA
order of reconstitution even if such relief was not prayed for in private respondents amended
complaint and notwithstanding the fact that the LRA was not impleaded as an indispensable
party.

The contention is far from tenable. An action for quieting of title, as here, is equivalent to an
action for reconveyance of title wrongfully or erroneously registered in anothers name. The
successful outcome of such action would in most cases necessarily entail the cancellation of
existing title wrongly issued to another, which in turn requires the action of the LRA and/or the
proper Register of Deeds. As in the past, this Court, to obviate multiplicity of suits, had ordered
the LRA or the RD, albeit not impleaded below, to cancel such erroneously issued titles.

ULEP V CA G.R. No. 125254 October 11, 2005

Under consideration is this petition for review under Rule 45 of the Rules of Court seeking
the reversal and setting aside of the Decision1 dated August 15, 1995 of the Court of
Appeals (CA) in CA-G.R. CV. No. 39333, and its Resolution2 dated April 25, 1996, denying
petitioners motion for reconsideration.

The assailed decision modified the June 17, 1991 decision3 of the Regional Trial Court at
Urdaneta, Pangasinan, Branch 48, in its Civil Case No. U-3929, an action for Quieting of
Title, Reconveyance and Declaration of Nullity of Titles and Subdivision Plan, with
Damages, thereat commenced by the petitioners against the herein private respondents.

The factual antecedents:

Principal petitioners SAMUEL ULEP, now deceased and substituted by his heirs, and
VALENTINA ULEP are brother-and-sister. Together with their siblings, namely, Atinedoro
Ulep and Rosita Ulep, they are children of the late Valentin Ulep.

During his lifetime, the father Valentin Ulep owned a parcel of land, identified as Lot
840 with an area of 3,270 square meters, located at Asingan, Pangasinan.

Sometime in 1950, the older Ulep sold the one-half (1/2) eastern portion of Lot 840,
comprising an area of 1,635 square meters, to respondent Maxima Rodico, while the
remaining one-half (1/2) western portion with the same area, to his son Atinedoro Ulep
married to Beatriz Ulep, and to his other daughter Valentina Ulep.

On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico (for the eastern
portion) and Atinedoro Ulep and Valentina Ulep (for the western portion), were jointly issued
in their names Transfer Certificate of Title No. 12525.

On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep sold the one-
half (1/2) portion of the area sold to them by their father to their brother Samuel Ulep and
the latters wife, Susana Repogia-Ulep. The portion sold to Samuel and Susana has an
area of 817.5 square meters. The document of sale was registered with the Office of the
Registry of Deeds of Pangasinan on February 20, 1973.
20
Later, an area of 507.5 square meters of the western portion of Lot 840 was sold by the
spouses Atinedoro Ulep and Beatriz Ulep to respondent Warlito Paringit and the latters
spouse Encarnacion Gante, who were then issued TCT No. 12688 on September 23,
1975.

Evidently, all the foregoing transactions were done and effected without an actual ground
partition or formal subdivision of Lot 840.

In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its chapel on Lot 840.
In the process, INC encroached portions thereof allegedly pertaining to petitioners and
blocked their pathways.

This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with the Office of the
Register of Deeds of Pangasinan. To their consternation, they discovered from the records
of said office that a deed of sale bearing date December 21, 1954, was

purportedly executed by their brother Atinedoro Ulep his, wife Beatriz and their sister
Valentina Ulep in favor of INC over a portion of 620 square meters, more or less, of Lot
840, and that on the basis of said deed, INC was issued TCT No. 12689 on September 23,
19754 over the portion allegedly sold to it by the three. Samuel was further shocked to find
out that on July 9, 1975, an affidavit of subdivision was executed by
respondents INC, Maxima Rodico and the spouses Warlito Paringit and Encarnation
Gante, on the basis of which affidavit Lot 840 was subdivided into four (4) lots, namely: (1)
Lot 840-A, covered by TCT No. 16205 in his (Samuels) name that of his wife, Susana
Repogia-Ulep; (2) Lot 840-B, covered by TCT No. 12688 in the names of Warlito Paringit
and the latters wife Encarnacion Gante; (3) Lot-C 840-C, covered by TCT No. 12689 in the
name of INC; and (4) Lot 840-D, covered by TCT No. 126905 in the name of Maxima
Rodico.

Such was the state of things when, on March 29, 1983, in the Regional Trial Court at
Pangasinan, the spouses Samuel Ulep and Susana Repogia-Ulep, the spouses
Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep, filed their complaint
for Quieting of Title, Reconveyance and Declaration of Nullity of Title and Subdivision Plan
with Damages against respondents INC, Maxima Rodico and the spouses Warlito
Paringit and Encarnacion Gante. In their complaint, docketed as Civil Case No. U-3929,
the Uleps basically alleged that they and respondents are co-owners of Lot 840 in the
following proportions:

1,635 square meters to Maxima Rodico;

817.5 square meters to spouses Samuel Ulep and Susana Repogia-Ulep;

507.5 square meters to spouses Warlito Paringit and Encarnacion Gante;

210 square meters to spouses Atinedoro Ulep and Beatriz Ulep, and Valentina Ulep;

100 square meters to Iglesia Ni Cristo.6

In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep and their sister
Valentina Ulep denied having executed a deed of sale in favor of INC over a portion of 620
square meters of Lot 840, claiming that their signatures appearing on the deed were
forged. At the most, so they claimed, what they sold to INC was only 100 square meters
and not 620 square meters. Petitioners Samuel Ulep and Valentina Ulep, along with the
spouses Atinedoro Ulep and Beatriz Ulep, likewise averred that the subject lot was
subdivided without their knowledge and consent.

In their common "Answer," respondents Maxima Rodico and the spouses Warlito Paringit
and Encarnacion Gante maintained that the segregation of their shares was known to
petitioners and that it was done with the consent of Samuel Ulep himself.

For its part, INC, in its separate "Answer", asserted that it purchased from the spouses
Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep the portion containing 620
square meters of Lot 840 on December 21, 1954, as evidenced by a deed of sale duly
registered with the Registry of Deeds of Pangasinan.

21
During the pendency of the proceedings in Civil Case No. U-3929, Atinedoro Ulep died.
Less than a month thereafter, or more specifically on November 16, 1987, Atinedoros
widow Beatriz Ulep and their children executed a deed of renunciation, thereunder waiving
all their rights and interests over Lot 840 and relinquishing the same in favor of the spouses
Samuel Ulep and Susana Repogia-Ulep.7

Eventually, in a decision dated June 17, 1991, the trial court rendered judgment, as follows:

There being no res adjudicata in this case as already decided by the Court of Appeals, this
Court renders judgment as borne out by the evidence presented in favor of the [petitioners]
and against the [respondents], ordering the latter and all persons claiming title under them
to vacate and surrender a portion of 520 sq. m. of the land in question in favor of the
[petitioners] in such a way that [respondent] INC owns only 100 sq. m.; declaring and
annulling the following documents;

1. Deed of sale dated December 21, 1954 allegedly executed by plaintiffs-spouses

Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC, (Exh.
A);

2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh. K-1);

3. The affidavit of confirmation of subdivision, (Exh. K and Exh. 2); and

4. TCT No. 12605 (Exh. K-4) and a new TCT No. be issued to include the original 817.5 sq.
m. in favor of Samuel Ulep and Susan Repogia;

Declaring Lot No. 840 to be owned by the following parties in the following proportions:

(a) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT
No. 12690 (Exh. K-3);

(b) 817.5 sq. m. to [petitioners] Samuel Ulep and Susana Repogia and a new TCT to be
issued;

(c) of 210 sq. m. to [petitioners] Samuel Ulep and Susana Repogia; and the other one-
half or 105 sq. m. to [petitioner] Valentina Ulep in accordance with Exh. "C," a deed of
renunciation executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving
spouse Beatriz Aguilar and a new Transfer Certificate of Title be issued;

(d) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered
by TCT No. 12688 (Exh. K-2);

(e) 100 sq. m. to [respondent] Iglesia Ni Cristo; and a new title to be issued;

and ordering the Register of Deeds of Pangasinan, to issue new Transfer Certificate of Title
in favor of [petitioners] Samuel Ulep and Susana Repogia covering 817.5 sq. m.; and
another new Transfer Certificate of Title covering 105 sq. m. in favor of Valentina Ulep and
the other of 210 sq. m. or 105 sq. m. in favor of Samuel Ulep and Susana Repogia
pursuant to Exh. "C"; and still another new Transfer Certificate of Title covering 100 sq. m.
in favor of Iglesia Ni Cristo and for the latter to pay the costs.

SO ORDERED.8 (Words in bracket ours).

Dissatisfied, respondent INC interposed an appeal to the Court of Appeals (CA), which
appellate recourse was thereat docketed as CA-G.R. CV No. 39333. For their part,
respondents Maxima Rodico and the spouses Warlito Paringit and Encarnacion Gante
opted not to appeal.

As stated at the threshold hereof, the appellate court, in its Decision dated August 15,
1995, modified that of the trial court, thus:

WHEREFORE, premises considered, the appealed judgment is MODIFIED as above

indicated. Accordingly, the decretal portion of said judgment should read as follows:

22
"1. The Deed of Absolute Sale dated December 21, 1954 executed by plaintiffs-spouses
Atinedoro Ulep and Beatriz Aguilar and Valentina Ulep in favor of [respondent] INC is
declared valid (Exh. K-1).

"2. Lot No. 840 is declared as owned by the following parties in the following proportions:

(f) 1,635 sq. m. eastern portion to [respondent] Maxima Rodico already covered by TCT No.
12690 (Exh. K-3);

(g) 297.5 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia;

(h) of 210 sq. m. to [petitioner]-spouses Samuel Ulep and Susana Repogia; and the other
one-half or 105 sq. m. to Valentina Ulep in accordance with Exh. "C," a deed of renunciation
executed by the heirs of Atinedoro Ulep who died in 1987 and his surviving spouse Beatriz
Aguilar;

(i) 507.5 sq. m. to [respondents] Warlito Paringit and Encarnacion Gante, already covered
by TCT No. 12688 (Exh. K-2);

(j) 620 sq. m. to [respondent] INC, already covered by TCT No. 12689 (Exh. K-1).

"3. TCT No. 16205 registered in the names of [petitioner-spouses] Samuel and Susan Ulep
(Exh. K-4) is annulled.

"The Register of Deeds of Pangasinan is ordered to issue a new TCT in favor of [petitioner-
spouses] Samuel Ulep and Susana Repogia covering only 297.5 sq. m.; and another new
TCT covering 105 sq. m. in favor of Valentina Ulep and the other of 210 sq. m. or 105 sq.
m. in favor of [petitioner-spouses] Samuel Ulep and Susana Repogia pursuant to Exh.
"C". No Costs."

SO ORDERED.9 (Words in brackets ours).

In so ruling, the Court of Appeals explained:

There is no adequate evidentiary demonstration in the record that the deed of sale (dated
December 21, 1954 executed by Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep
in favor of INC over the 620 square-meter area of the western portion of Lot 840) is void
and inefficacious on account of forgery.

As a public instrument which enjoys the presumption of regularity, clear and convincing
evidence is necessary to contradict the terms thereof.

xxx xxx xxx

In the present case, the biased, interested testimony of [petitioners] cannot overcome the
evidentiary force of the deed of sale which was acknowledged before a notary public, and
hence, a public document.

xxx xxx xxx

The sale of 620 sq. m. in favor of [respondent] INC executed by vendors Atinedoro and
Valentina Ulep is dated December 21, 1954, while the sale of 817.50 sq. meters by the
same vendors to [petitioners] Samuel and Susana Ulep was made on June 18, 1971.
[Respondent] INC registered its 620 sq. meters on December 21, 1954 by reason of which
TCT No. 12689 was issued in its name. [Petitioner-spouses] Samuel and Susana Ulep
registered the land sold to them on February 9, 1977 and TCT No. 16205 was issued in
their names. Evidently, applying Article 1544, [petitioner] INCs ownership and title over the
620 sq. meters prevail. The land consisting of 620 sq. meters was first sold to INC and its
title was registered first. Thus, the same vendors could have sold only the remaining 297.50
sq. meters of Lot 840 to [petitioner-spouses] Samuel and Susana Ulep and TCT No. 16205
issued in the latters name for 817.50 sq. meters is null and void. There is no evidence that
[respondent] INC is guilty of bad faith in acquiring the 620 sq. meters portion of Lot 840.
(Words in bracket ours).

23
Their motion for reconsideration having been denied by the same court in its equally
challenged Resolution of April 25, 1996, petitioners are now with us via the present
recourse, faulting the appellate court as follows:

I.

THE HONORABLE COURT OF APPEALS ERRED IN NOT AFFIRMING THE DECISION

DATED JUNE 17, 1991 (ANNEX A) OF THE TRIAL COURT, REGIONAL TRIAL COURT,
FIRST JUDICIAL REGION, BRANCH 48, URDANETA PANGASINAN IN CIVIL CASE NO.
3929.

II.

AND IN THE ALTERNATIVE, THE HONORABLE COURT OF APPEALS ERRED IN NOT

AWARDING PETITIONERS SAMUEL ULEP AND SUSANA REPOGIA THE AREA OF
817.5 SQUARE METERS AND IN NOT REDUCING THE SHARE OF PRIVATE
RESPONDENTS, SPOUSES WARLITO PARINGIT AND ENCARNACION GANTE FROM
507.5 SQUARE METERS TO 197 SQUARE METERS.10

Petitioners initially submit that the factual findings of the trial court should not have been
disturbed by the appellate court, the same being entitled to great weight and respect.

We have consistently held that factual findings of the Court of Appeals and other lower
courts are, as a rule, final and conclusive upon this Court, except, inter alia, where their
findings are at odd with each other,11 as here.

Simply put, the issue before us is whether or not the Court of Appeals committed reversible
error in modifying the decision of the trial court.

Evidently, the issue necessitates an inquiry into the facts. While, as a rule, factual issues
are not within the province of this Court, nonetheless, in light of the conflicting factual
findings of the two (2) courts below, an examination of the facts obtaining in this case is in
order.

Petitioners contend that respondent INC is entitled to only 100 square meters and not 620
square meters of the western portion of Lot 840. To them, the deed of sale conveying 620
square meters thereof to INC was void as the signatures of the vendors therein, namely, the
spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep, were forged. They submit
that what should instead be upheld was the sale of 817.5 square meters in their favor by the
same vendors.

As the Court sees it, the present controversy is a classic case of double sale.
On December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep and sister Valentina Ulep
sold the disputed area (620 square-meter) of Lot 840 to INC. Subsequently, on January 18,
1971, a second sale was executed by the same vendors in favor of spouses Samuel Ulep
and Susana Ulep. The Court is, therefore, called upon to determine which of the two groups
of buyers has a better right to the area in question.

Article 1544 of the Civil Code provides the statutory solution:

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

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

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

Otherwise stated, the law provides that a double sale of immovable transfers ownership to
(1) the first registrant in good faith; (2) then, the first possessor in good faith; and (3) finally,
the buyer who in good faith presents the oldest title.12

24
Jurisprudence teaches that the governing principle is primus tempore, potior jure (first in
time, stronger in right). Knowledge gained by the first buyer of the second sale cannot
defeat the first buyers rights except where the second buyer registers in good faith the
second sale ahead of the first, as provided by the aforequoted provision of the Civil Code.
Such knowledge of the first buyer does not bar him from availing of his rights under the law,
among them to register first his purchase as against the second buyer. In
converso, knowledge gained by the second buyer of the first sale defeats his rights even if
he is first to register the second sale, since such knowledge taints his prior registration with
bad faith. This is the price exacted by the same provision of the Civil Code for the second
buyer to be able to displace the first buyer; before the second buyer can obtain priority over
the first, he must show that he acted in good faith throughout (i.e. ignorance of the first sale
and of the first buyers rights) from the time of acquisition until the title is transferred to him
by registration, or, failing registration, by delivery of possession.13

Per records, the sale of the disputed 620 square-meter portion of Lot 840 to respondent INC
was made on December 21, 1954 and registered with the Registry of Deeds of Pangasinan
on January 5, 1955. In fact, INC was issued a title over the same portion on September 23,
1975. On the other hand, the conveyance to the spouses Samuel Ulep and Susana
Repogia-Ulep happened on January 18, 1971 and the spouses registered their document
of conveyance only on February 22, 1973.14

Clearly, not only was respondent INC the first buyer of the disputed area. It was also the
first to register the sale in its favor long before petitioners Samuels and Susanas intrusion
as second buyers. Although Samuel and Susana thereafter registered the sale made to
them, they did so only after 18 years from the time INC caused the registration of its own
document of sale.

"Registration" means any entry made in the books of the Registry which records solemnly
and permanently the right of ownership and other real rights.15 However, mere registration
is not sufficient. Good faith must concur with registration, else registration becomes an
exercise in futility.16 In the instant case, the registration made by respondent INC of its deed
of sale more than satisfies this requirement. The same thing cannot be said of petitioners
Samuel Ulep and Susana Ulep. Said petitioners, by their own admission, were aware that
there existed an agreement between INC and vendors Atinedoro Ulep, his wife Beatriz and
sister Valentina Ulep involving a portion of 100 square meters of Lot 840. Knowledge of
such transaction should have put the spouses Samuel Ulep and Susana Ulep upon such
inquiry or investigation as might be necessary to acquaint them with the possible defects in
the title of their vendors. They should have acted with that measure of precaution which
may reasonably be required of a prudent man in a similar situation. After all, good faith, or
the lack of it, is, in the last analysis, a question of intention. But in ascertaining the intention
by which one is actuated on a given occasion, courts are necessarily controlled by the
evidence as to the conduct and outward acts by which the inward motive may, with safety,
be determined. So it is that the honesty of intention, the honest lawful intent, which
constitutes good faith implies a freedom from knowledge and circumstances which ought to
put a person on inquiry. 17 Hence, proof of such knowledge overcomes the presumption of
good faith.

Here, the spouses Samuel Ulep and Susana Ulep were fully aware, or could have been, if
they had chosen to inquire, of the rights of INC under the deed of sale duly annotated on
the common title of the spouses Atinedoro Ulep and Beatriz Ulep and Valentina Ulep.
Verily, the sale to INC should prevail over the sale made to spouses Samuel and Susana
because INC was the first registrant in good faith.

Petitioners allegation of forgery relative to the deed of sale executed on December 21,
1954 by the spouses Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep over the 620
square-meter portion of Lot 840 cannot be sustained. As a rule, forgery cannot be
presumed and must be proved by clear, positive and convincing evidence, the burden for
which lies on the party alleging it. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic and genuine signature
of the person whose signature is theorized to have been forged.18

Here, petitioners claim of forgery is unsupported by any substantial evidence other than
their own self-serving testimonies. As it were, they failed to present handwriting experts and
other persons familiar with the handwriting of the spouses Atinedoro Ulep, his wife Beatriz
and sister Valentina Ulep that would show that their signatures appearing in the questioned
deed of sale in favor of respondent INC were forged. Due to the technicality of the
25
procedure involved in the examination of forged documents, the expertise of questioned
document examiners is usually helpful. These handwriting experts can help determine
fundamental, significant differences in writing characteristics between the questioned and
the standard or sample specimen signatures, as well as the movement and manner of
execution strokes.

Petitioners insist that the conveyance of only 100 square meters to INC was in fact
evidenced by a deed of sale notarized by a certain Atty. Benjamin Fernandez. 19 However,
they sorely failed to produce in court the said alleged deed of sale. They could have, at the
very least, presented Atty. Fernandez to prove the existence of that deed, but they did not.
The only plausible conclusion is that no such deed exists.

On the other hand, to bolster its claim of ownership, respondent INC presented the
December 21, 1954 deed of sale executed in its favor by the spouses Atinedoro and Beatriz
Ulep and Valentina Ulep over a portion of 620 square meters of Lot 840. To be sure, INCs
deed of sale was duly notarized by Atty. Bernabe Salcedo Calimlim.20Generally, a notarized
document carries the evidentiary weight conferred upon it with respect to its due execution,
and documents acknowledged before a notary public have in their favor the presumption of
regularity.21 Thus, the notarized deed of sale executed on December 21, 1954 by Atinedoro
Ulep, his wife Beatriz and sister Valentina Ulep over the contested area in favor of
respondent INC deserves full credence and is valid and enforceable in the absence, as
here, of overwhelming evidence to the contrary.

In a last-ditch but futile attempt to persuade the Court, petitioners alternatively pray that
INCs portion of 620 square meters of Lot 840, assuming that INC is entitled to it, should be
taken from the western portion of the same lot sold to respondent spouses Warlito Paringit
and Encarnacion Gante, and not from them. To petitioners, the share of the spouses Warlito
and Encarnacion should accordingly be reduced from 507.5 square meters to only 197
square meters.

We note, however, that petitioners never raised before the trial court nor before the
appellate court the issue of Warlitos and Encarnacions entitlement to 507.5 square meters.
Quite the contrary, petitioners even alleged in their complaint that the spouses Warlito
Paringit and Encarnacion Gante are owners of 507.5 square meters of Lot 840. They never
questioned the spouses ownership of said portion. This issue was only posed by petitioners
in the instant petition before this Court. It is certainly too late for them to raise said issue for
the first time at this late stage of the proceedings.

Points of law, theories, issues and arguments not brought to the attention of the lower court
need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be
raised for the first time on appeal. Basic considerations of fair play, justice and due process
underlie the rule. It would be unfair to the adverse party who would have no opportunity to
present evidence in contra to the new theory, which it could have done had it been aware of
it at the time of the hearing before the trial court. 22

Of course, this rule admits of certain exceptions. For one, issues of lack of jurisdiction,
though not raised below, may be considered by the reviewing court as they may be raised
at any stage. For another, the reviewing court may also consider an issue not properly
raised during trial when there is plain error. Likewise, it may entertain such arguments when
there are jurisprudential developments affecting the issues, or when the issues raised
present a matter of public policy.23 Unfortunately for petitioners, however, none of these
exceptions exists in this case. It is thus too late in the day for petitioners to raise in this
recourse the sale made by the spouses Atinedoro Ulep and Beatriz Ulep of the 507.5
square-meter area of Lot 840 to the spouses Warlito Paringit and Encarnacion Gante. To
allow petitioners to do so would be utterly unfair to the latter.

WHEREFORE, the petition is DENIED and the assailed decision and resolution of the Court
of Appeals AFFIRMEDin toto.

Caram vs. Laureta G.R. No. L-28740February 24, 1981

FACTS:
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by OCT No.
3019 in favor of Claro Laureta,plaintiff, the respondent herein. The deed of absolute sale in
26
favor of the plaintiff was not registered because it was not acknowledgedbefore a notary public
or any other authorized officer. Since June 10,1945, the plaintiff Laureta had been and is in
continuous, adverse andnotorious occupation of said land, without being molested, disturbed
orstopped by any of the defendants or their representatives. In fact,Laureta had been paying
realty taxes due thereon and had introducedimprovements worth not less than P20,000.00 at
the time of the filingof the complaint. On May 5, 1947, the same land covered by OCT No.3019
was sold by Marcos Mata to defendant Fermin Z. Caram,Jr.,petitioner herein.
The deed of sale in favor of Caram wasacknowledged before Atty. Abelardo Aportadera. On Dec
ember 1947, the second sale between Marcos Mata and Fermin Caram, Jr. wasregistered with
the Register of Deeds. On the same date, TransferCertificate of Title No. 140 was issued in favor
of Fermin Caram Jr.The
defendant Fermin Caram Jr.claimed that he has no knowledge orinformation about the previou
s encumbrances, transactions, andalienations in favor of plaintiff until the filing of the
complaints.

ISSUE:
Whether or not the knowledge petitioner of a priorunregistered sale of a titled property attribu
table to petitioner andequivalent in law of registration of sale.

HELD:
Yes. There is no doubt then that Irespe and Aportadera, acting
as agents of Caram, purchased the property of Mata in bad faith.Applying the principle of
agency, Caram as principal, should also bedeemed to have acted in bad faith.Since Caram was a
registrant in bad faith, the situation is as if there was no registration at all. A possessorin good
faith is one who is not aware that there exists in his title ormode of acquisition any flaw which
invalidates it. Laureta was first inpossession of the property. He is also a possessor in good
faith. It istrue that Mata had alleged that the deed of sale in favor of Laureta wasprocured by
force. Such defect, however, was cured when, after thelapse of four years from the time the
intimidation ceased, Marcos Matalost both his rights to file an action for annulment or to set up
nullity of the contract as a defense in an action to enforce the same

G.R. No. 170405 February 2, 2010

DE LEON vs.ONG

Facts:
On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land to
Benita T. Ong(respondent). The said properties were mortgaged to a financial
institution; Real Savings & Loan Association Inc. (RSLAI). The parties then
executed a notarized deed of absolute sale with assumption of mortgage. As
indicated in the deed of mortgage, the parties stipulated that the petitioner (de
Leon) shall execute a deed of assumption of mortgage in favor of Ong
(respondent)after full payment of the P415,000. They also agreed that the
respondent (Ong) shall assume the mortgage. The respondent then subsequently
gave petitioner P415,000 as partial payment. On the other hand, de Leon handed the
keys to Ong and de Leon wrote a letter to inform RSLAI that the mortgage will be
assumed by Ong. Thereafter, the respondent took repairs and made improvements
in the properties. Subsequently, respondent learned that the same properties were
sold to a certain Viloria after March 10, 1993 and changed the locks, rendering the
keys given to her useless. Respondent proceeded to RSLAI but she was informed
that the mortgage has been fully paid and that the titles have been given to the
said person. Respondent then filed a complaint for specific performance and
declaration of nullity of the second sale and damages. The petitioner contended that
respondent does not have a cause of action against him because the sale was subject
to a condition which requires the approval of RSLAI of the mortgage. Petitioner
reiterated that they only entered into a contract to sell. The RTC dismissed the case.
On appeal, the CA upheld the sale to respondent and nullified the sale to Viloria.
Petitioner moved for reconsideration to the SC.

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Issue:
Whether the parties entered into a contract of sale or a contract to sell?

Held:
In a contract of sale, the seller conveys ownership of the property to the buyer upon
the perfection of the contract. The non-payment of the price is a negative resolutory
condition. Contract to sell is subject to a positive suspensive condition. The buyer
does not acquire ownership of the property until he fully pays the purchase price. In
the present case, the deed executed by the parties did not show that the owner
intends to reserve ownership of the properties. The terms and conditions affected
only the manner of payment and not the immediate transfer of ownership. It was
clear that the owner intended a sale because he unqualifiedly delivered and
transferred ownership of the properties to the respondent.

Yap Kim Chuan v. Tiaoqui

G.R. No. 10006, September 18, 1915

FACTS: The plaintiff in this case is a lessee of the defendant. During the period of lease,
his merchandise was damaged due to leaks in the roof of the storeroom in the leased
building. For this reason, he asked the defendant-lessor to indemnify him for damage
caused by the leaks in the roof. The defendant-lessor, on the other hand, argued that the
building being occupied by the plaintiff was new and was built based on standard
required by the government. The leak was due to a torrential rain the heaviest from the
month of January of that year. He further argued that the leak was not solely caused by
the heavy rain but also due to improper location of said merchandise inside the
building.

ISSUE: Can the lessor be held liable for indemnity for the damage caused to the goods
of lessee? Did he fail to perform his obligations as lessor?

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SALES AND LEASE
HELD: No. Article 1562 of the Civil Code reads: "If, at the time of the lease of the estate,
the condition of the same was not mentioned, the law presumes that the lessee received
it in good condition, unless there be proof to the contrary."

Moreover, there is no evidence in the case that he failed in the performance of the
obligations he assumed in executing the lease, nor does there appear to have been
stipulated therein the liability now imputed to him. The fact is that neither the lessor no
the lessees knew that the roof was defective and was going to leak when it rained, for
they only became aware of the leaks during the rainstorm; and therefore only on the
hypothesis that the lessor had known of such defect and had concealed it from the
plaintiffs could he be held responsible for the consequences thereof on account of the
leakages that occurred.

Indeed lessor is liable for warranty against any hidden defects. But this liability for
warranty of the thing leased does not amount to an obligation to indemnify the tenant
for damages, which is only to be allowed when there is proof that the lessor acted with
fraud and in bad faith by concealing to the lessee.

Moles vs. IAC

G.r. No. 73913, January 31, 1981

FACTS: Petitioner Moles commenced a suit against private respondent Diolosa for
rescission of contract with damages. Petitioner bought a linotype printing machine from
respondent for his printing business, and applied for an industrial loan with the
Development Bank of the Philippines. The transaction was basically verbal in nature
but to facilitate the loan with the DBP, a pro forma invoice was signed by petitioner
with addendum that payment had not yet been made but that he promised to pay the
full amount upon the release of his loan from the aforementioned bank on or before the
end of the month. The machine was later on found to have been defective and petitioner
had never been able to use the same since it was purchased. Petitioner claimed that he
felt he was cheated because the expert of the Linotype machine from Manila says that
the most he will buy the machine is at P5,000 only, but private respondent sold the
same to petitioner for P40,000.

ISSUES: (1) Whether or not a sales invoice is a contract evidencing the sale between the
parties.
(2) Whether or not there is an implied warranty of quality and fitness
when an article is sold as a secondhand item.
(3) Whether the hidden defects in the machine is sufficient to warrant
a rescission of the contract between the parties
(4) Whether or not the prescriptive period of six months for
redhibitory action applies in the case at bar.

HELD: (1) NO. A sales invoice is not the contract evidencing the sale in the case at bar,
it being merely a preliminary memorandum of a proposal to buy one linotype machine,
using for such purpose a printed form used for printing job orders in private
respondents printing business. The sales invoice is merely a pro forma memorandum.
Consequently, the printed provisions therein, especially since the printed form used
was for purposes of other types of

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transactions, could not have been intended by the parties to govern their transaction on the
printing machine. It is obvious that a venue stipulation, in order to bind the parties, must have
been intelligently and deliberately intended by them to exclude their case from the
reglementary rules on venue.

(2) YES. It is generally held that in the sale of a designated and specific article sold as
secondhand, there is no implied warranty as to its quality or fitness for the purpose intended,
at least where it is subject to inspection at the time of the sale. On the other hand, there is also
authority to the effect that in a sale of a secondhand article there may be, under some
circumstances, an implied warranty of fitness for the ordinary purpose of the article sold or for
the particular purpose of the buyer. Article 1562 of our Civil Code, which was taken from the
Uniform Sales Act, provides:

Art. 1562. In a sale of goods, there is an implied warranty or condition as to the quality
or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the seller the
particular purpose for which the goods are acquired, and it appears that the buyer relies
on the seller's skill or judgment (whether he be the grower or manufacturer or not),
there is an implied warranty that the goods shall be reasonably fit for such purpose; xxx

(3) The redhibitory defect contemplated in Article 1561 of the Civil Code must be an
imperfection or defect of such nature as to engender a certain degree of importance. An
imperfection or defect of little consequence does not come within the category of being
redhibitory.
(4) NO. While it is true that Article 1571 of the Civil Code provides for a prescriptive period of
six months for a redhibitory action a cursory reading of the ten preceding articles to which it
refers will reveal that said rule may be applied only in case of implied warranties. The present
case involves one with express warranty. Consequently, the general rule on rescission of
contract, which is four years shall apply.

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