G.R. No.

149750 June 16, 2003

AURORA ALCANTARA-DAUS, Petitioner,

vs.
Spouses HERMOSO and SOCORRO DE LEON, Respondents.

DECISION

PANGANIBAN, J.:

While a contract of sale is perfected by mere consent, ownership of the thing sold is
acquired only upon its delivery to the buyer. Upon the perfection of the sale, the seller
assumes the obligation to transfer ownership and to deliver the thing sold, but the real
right of ownership is transferred only "by tradition" or delivery thereof to the buyer.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set
aside the February 9, 2001 Decision and the August 31, 2001 Resolution of the Court of
Appeals2 (CA) in CA-GR CV No. 47587. The dispositive portion of the assailed
Decision reads as follows:

"WHEREFORE, premises considered, the decision of the trial court is hereby

REVERSED, and judgment rendered:

1. Declaring null and void and of no effect, the [D]eed of [A]bsolute [S]ale dated
December 6, 1975, the [D]eed of [E]xtra-judicial [P]artition and [Q]uitclaim dated July 1,
1985, and T.C.T. No. T-31262;

2. Declaring T.C.T. No. 42238 as valid and binding;

3. Eliminating the award of ₱5,000.00 each to be paid to defendants-appellees."3

The assailed Resolution4 denied petitioner’s Motion for Reconsideration.

The Facts

The antecedents of the case were summarized by the Regional Trial Court (RTC) and
adopted by the CA as follows:

"This is a [C]omplaint for annulment of documents and title, ownership, possession,

injunction, preliminary injunction, restraining order and damages.

"[Respondents] alleged in their [C]omplaint that they are the owners of a parcel of land
hereunder described as follows, to wit:
‘A parcel of land (Lot No. 4786 of the Cadastral Survey of San Manuel) situated in the
Municipality of San Manuel, Bounded on the NW., by Lot No. 4785; and on the SE., by
Lot Nos. 11094 & 11096; containing an area of Four Thousand Two Hundred Twelve
(4,212) sq. m., more or less. Covered by Original Certificate of Title No. 22134 of the
Land Records of Pangasinan.’

which [Respondent] Hermoso de Leon inherited from his father Marcelino de Leon by
virtue of a [D]eed of [E]xtra-judicial [P]artition. Sometime in the early 1960s,
[respondents] engaged the services of the late Atty. Florencio Juan to take care of the
documents of the properties of his parents. Atty. Juan let them sign voluminous
documents. After the death of Atty. Juan, some documents surfaced and most revealed
that their properties had been conveyed by sale or quitclaim to [Respondent] Hermoso’s
brothers and sisters, to Atty. Juan and his sisters, when in truth and in fact, no such
conveyances were ever intended by them. His signature in the [D]eed of [E]xtra-judicial
[P]artition with [Q]uitclaim made in favor of x x x Rodolfo de Leon was forged. They
discovered that the land in question was sold by x x x Rodolfo de Leon to [Petitioner]
Aurora Alcantara. They demanded annulment of the document and reconveyance but
defendants refused x x x.

xxx xxx xxx

"[Petitioner] Aurora Alcantara-Daus [averred] that she bought the land in question in
good faith and for value on December 6, 1975. [She] has been in continuous, public,
peaceful, open possession over the same and has been appropriating the produce
thereof without objection from anyone."5

On August 23, 1994, the RTC (Branch 48) of Urdaneta, Pangasinan6 rendered its
Decision7 in favor of herein petitioner. It ruled that respondents’ claim was barred by
laches, because more than 18 years had passed since the land was sold. It further ruled
that since it was a notarial document, the Deed of Extrajudicial Partition in favor of
Rodolfo de Leon was presumptively authentic.

Ruling of the Court of Appeals

In reversing the RTC, the CA held that laches did not bar respondents from pursuing
their claim.1âwphi1 Notwithstanding the delay, laches is a doctrine in equity and may
not be invoked to resist the enforcement of a legal right.

The appellate court also held that since Rodolfo de Leon was not the owner of the land
at the time of the sale, he could not transfer any land rights to petitioner. It further
declared that the signature of Hermoso de Leon on the Deed of Extrajudicial Partition
and Quitclaim -- upon which petitioner bases her claim -- was a forgery. It added that
under the above circumstances, petitioner could not be said to be a buyer in good
faith.1âwphi1

Hence, this Petition.8

The Issues

Petitioner raises the following issues for our consideration:

"1. Whether or not the Deed of Absolute Sale dated December 6, 1975 executed
by Rodolfo de Leon (deceased) over the land in question in favor of petitioner
was perfected and binding upon the parties therein?

"2. Whether or not the evidentiary weight of the Deed of Extrajudicial Partition
with Quitclaim, executed by [R]espondent Hermoso de Leon, Perlita de Leon and
Carlota de Leon in favor of Rodolfo de Leon was overcome by more than [a]
preponderance of evidence of respondents?

"3. Whether or not the possession of petitioner including her predecessor-in-

interest Rodolfo de Leon over the land in question was in good faith?

"4. And whether or not the instant case initiated and filed by respondents on
February 24, 1993 before the trial court has prescribed and respondents are
guilty of laches?"9

The Court’s Ruling

The Petition has no merit.

First Issue:

Validity of the Deed of Absolute Sale

Petitioner argues that, having been perfected, the Contract of Sale executed on
December 6, 1975 was thus binding upon the parties thereto.

A contract of sale is consensual. It is perfected by mere consent,10 upon a meeting of

the minds11 on the offer and the acceptance thereof based on subject matter, price and
terms of payment.12 At this stage, the seller’s ownership of the thing sold is not an
element in the perfection of the contract of sale.

The contract, however, creates an obligation on the part of the seller to transfer
ownership and to deliver the subject matter of the contract.13 It is during the delivery
that the law requires the seller to have the right to transfer ownership of the thing
sold.14 In general, a perfected contract of sale cannot be challenged on the ground of
the seller’s non-ownership of the thing sold at the time of the perfection of the
contract.15

Further, even after the contract of sale has been perfected between the parties, its
consummation by delivery is yet another matter. It is through tradition or delivery that
the buyer acquires the real right of ownership over the thing sold.16
Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not the owner of
the land he delivered to petitioner. Thus, the consummation of the contract and the
consequent transfer of ownership would depend on whether he subsequently acquired
ownership of the land in accordance with Article 1434 of the Civil Code.17 Therefore,
we need to resolve the issue of the authenticity and the due execution of the
Extrajudicial Partition and Quitclaim in his favor.

Second Issue:

Authenticity of the Extrajudicial Partition

Petitioner contends that the Extrajudicial Partition and Quitclaim is authentic, because it
was notarized and executed in accordance with law. She claims that there is no clear
and convincing evidence to set aside the presumption of regularity in the issuance of
such public document. We disagree.

As a general rule, the due execution and authenticity of a document must be reasonably
established before it may be admitted in evidence.18 Notarial documents, however,
may be presented in evidence without further proof of their authenticity, since the
certificate of acknowledgment is prima facie evidence of the execution of the instrument
or document involved.19 To contradict facts in a notarial document and the presumption
of regularity in its favor, the evidence must be clear, convincing and more than merely
preponderant.20

The CA ruled that the signature of Hermoso de Leon on the Extrajudicial Partition and
Quitclaim was forged. However, this factual finding is in conflict with that of the RTC.
While normally this Court does not review factual issues,21 this rule does not apply
when there is a conflict between the holdings of the CA and those of the trial court,22 as
in the present case.

After poring over the records, we find no reason to reverse the factual finding of the
appellate court. A comparison of the genuine signatures of Hermoso de Leon23 with his
purported signature on the Deed of Extrajudicial Partition with Quitclaim24 will readily
reveal that the latter is a forgery. As aptly held by the CA, such variance cannot be
attributed to the age or the mechanical acts of the person signing.25

Without the corroborative testimony of the attesting witnesses, the lone account of the
notary regarding the due execution of the Deed is insufficient to sustain the authenticity
of this document. He can hardly be expected to dispute the authenticity of the very
Deed he notarized.26 For this reason, his testimony was -- as it should be --minutely
scrutinized by the appellate court, and was found wanting.

Third Issue:

Possession in Good Faith

Petitioner claims that her possession of the land is in good faith and that, consequently,
she has acquired ownership thereof by virtue of prescription. We are not persuaded.

It is well-settled that no title to registered land in derogation of that of the registered

owner shall be acquired by prescription or adverse possession.27 Neither can
prescription be allowed against the hereditary successors of the registered owner,
because they merely step into the shoes of the decedent and are merely the
continuation of the personality of their predecessor in interest.28 Consequently, since a
certificate of registration29 covers it, the disputed land cannot be acquired by
prescription regardless of petitioner’s good faith.

Fourth Issue:

Prescription of Action and Laches

Petitioner also argues that the right to recover ownership has prescribed, and that
respondents are guilty of laches. Again, we disagree.

Article 1141 of the New Civil Code provides that real actions over immovable properties
prescribe after thirty years. This period for filing an action is interrupted when a
complaint is filed in court.30 Rodolfo de Leon alleged that the land had been allocated
to him by his brother Hermoso de Leon in March 1963,31 but that the Deed of
Extrajudicial Partition assigning the contested land to the latter was executed only on
September 16, 1963.32 In any case, the Complaint to recover the land from petitioner
was filed on February 24, 1993,33 which was within the 30-year prescriptive period.

On the claim of laches, we find no reason to reverse the ruling of the CA. Laches is
based upon equity and the public policy of discouraging stale claims.34 Since laches is
an equitable doctrine, its application is controlled by equitable considerations.35 It
cannot be used to defeat justice or to perpetuate fraud and injustice.36 Thus, the
assertion of laches to thwart the claim of respondents is foreclosed, because the Deed
upon which petitioner bases her claim is a forgery.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.

SO ORDERED.

G.R. No. L-43059 October 11, 1979

SAMPAGUITA PICTURES, INC., plaintiff-appellant,

vs.
JALWINDOR MANUFACTURERS, INC., defendant-appellee.

DE CASTRO, J:
This case was certified to this Court by the Court of Appeals pursuant to the provisions
of Section 17, paragraph (6) in relation to Section 31 of the Judiciary Act of 1948.

Plaintiff-appellant Sampaguita Pictures, Inc. (hereinafter referred to as Sampaguita) is

the owner of the Sampaguita Pictures Building located at the corner of General Araneta
and General Roxas Streets, Cubao, Quezon City. The roofdeck of the building and all
existing improvements thereon were leased by Sampaguita to Capitol "300" Inc.
(Capitol for short), and it was agreed, among other things, that the premises shall be
used by said club for social purposes exclusively for its members and guests; that all
permanent improvements made by the lessee on the leased premises shall belong to
the lessor without any obligation on the part of the lessor to reimburse the lessee for the
sum spent for said improvements; that the improvements made by lessee have been
considered as part of the consideration of the monthly rental and said improvements
belong to the lessor; that any remodelling, alterations and/or addition to the premises
shall be at the expense of the lessee and such improvements belong to the lessor,
without any obligation to reimburse the lessee of any sum spent for said improvements.
(pp. 29-32, Record on Appeal).

Capitol "300" purchased on credit from defendant-appellee Jalwindor Manufacturers,

Inc. (hereinafter referred to as Jalwindor) glass and wooden jalousies which were
delivered and installed in the leased premises by Jalwindor replacing the existing
windows. On June 1, 1964, Jalwindor filed with the Court of First Instance of Rizal,
Quezon City, an action for collection of a sum of money with a petition for preliminary
attachment against Capitol for its failure to pay its purchases. The parties submitted to
the trial court a Compromise Agreement wherein Capitol acknowledged its
indebtedness to Jalwindor in the amount of P9,531.09, exclusive of attorney's fees and
interest, payable in monthly installments of at least P300.00 a month beginning
December 15, 1964; and pending liquidation of the said obligation, all the materials
purchased by Capitol will be considered as security for such undertaking. (p. 13, Record
on Appeal).

In the meantime, Capitol "300" was not able to pay rentals to Sampaguita from March 1,
1964 to April 30, 1965, water, electric and telephone services. Sampaguita filed a
complaint for ejectment and for collection of a sum of money against Capitol and on
June 8, 1965, the City Court of Quezon City rendered judgment ordering Capitol to
vacate the premises and to pay Sampaguita.

On the other hand, Capitol likewise failed to comply with the terms of the Compromise
Agreement, and on July 31, 1965, the Sheriff of Quezon City made levy on the glass
and wooden jalousies in question. Sampaguita filed a third party claim alleging that it is
the owner of said materials and not Capitol, Jalwindor however, filed an indemnity bond
in favor of the Sheriff and the items were sold et public auction on August 30, 1965 with
Jalwindor as the highest bidder for P6,000.00.

Sampaguita filed with the Court of First Instance of Rizal, Branch IV of Quezon City, an
action to nullify the Sheriff's Sale and for the issuance of a writ of preliminary injunction
against Jalwindor from detaching the glass and wooden jalousies. Jalwindor was
ordered to maintain the status quo pending final determination of the case. No actual
hearing was held and the parties submitted the following stipulation of facts for the
consideration of the court.

1. That plaintiff and defendant are both domestic corporations duly

organized and existing by and under the laws of the Philippines:

2. That plaintiff leased to the CAPITOL "300", Inc. the roofdeck of the
Sampaguita building and all the existing improvements thereon for a
monthly, rental of P650.00; that the parties to the lease contract agreed
that all permanent improvements made by the lessee on the leased
premises shall belong to the lessor without any obligation on the part of
the lessor to reimburse the lessee for the sum spent for said
improvements; that it was agreed upon by the parties that the
improvements made by the lessee have been considered as part of the
consideration of the monthly rental;

3. That CAPITOL "300", Inc. made alterations on the leased premises;

that it removed the then existing windows and replaced 'them with the
following items bought on credit from the JALWINDOR
MANUFACTURERS INC.. valued at P9,531.09, to wit:

J-21(lever-type) Solex Bluepane

Glass Jaluosies

11 Sets 15'-1 3/4" x 47-7/8" (5 units)

4 Sets 13'-5 3/4" x 47-7/8" (5 units)

3 Sets 10'-9 3/4" x 47-7/7" (4 units)

2 Sets 18'-1 3/3" x 56-3/8" (6 units)

1 Set 9'-1 3/4" x 65-3/8" (3 units)

115 Pcs. Roto Operators for J-21

MODEL J-21 (Roto-type) Glass

and Wood Jalousies

8 Sets 32-1/2" x 60" Solex Bluepane

19 Sets 31-1/4" x 48" Solex Bluepane

 18 Sets 34" x 48" Wood

4. That after the CAPITOL "300", Inc. failed to pay the price of the items
mentioned in the preceding paragraph, JALWINDOR MANUFACTURERS,
Inc, filed a case for collection of a sum of money against CAPITOL "300",
Inc. with the Court of First Instance of Rizal (Branch IV Quezon City), Civil
Case No. Q-8040; that by virtue of a Compromise Agreement, CAPITOL
"300", Inc. acknowledged indebtedness in favor of JALWINDOR in the
amount of P9,531,09, with a stipulation in the said Compromise
Agreement, that the items forming part of the improvements will form as
security for such an undertaking;

5. That due to non-compliance by CAPITOL "300", Inc., JALWINDOR

executed judgment that the Sheriff of Quezon City made levy on the items
above-stated in paragraph 3 hereof and sold them at a public auction to
JALWINDOR MANUFACTURERS, INC. as the highest bidder, on August
30, 1965, for the total amount of P 6,000.00:

6. That after CAPITOL "300", Inc. failed to pay the rentals in arrears from
March 1, 1964 to April 30, 1965, water, electric and telephone services
amounting to P 10,772.90, the plaintiff SAMPAGUITA PICTURES, INC.
filed with the City Court of Quezon City, Civil Case No. 11-13161 for
ejectment and collection of a sum of money against the CAPITOL "300",
Inc,; that the City Court rendered judgment in favor of the Sampaguita
Pictures, Inc., on June 8, 1965, ordering the CAPITOL "300", Inc. to
vacate the premises located at the Sampaguita Building and to pay the
Sampaguita Pictures, Inc.;

7. That after the Sheriff of Quezon City made levy on the items above-
stated in paragraph 3 hereof situated on the roofdeck of the Sampaguita
Building, plaintiff filed a Third Party Claim stated in its affidavit on the
ground of its right and title to the possession of the items and that
CAPITOL "300", Inc. has no right or title whatsoever to the possession
over said items; that defendant filed a bond to indemnify the Sheriff
against the claim, and the Sheriff sold the items to the defendant; that the
JALWINDOR MANUFACTURERS, Inc., being the highest bidder and the
execution creditor, considered itself paid to the amount of P6,000.00;

8. That the parties herein agree that the matter of attorney's fees be left to
the sound discretion of the Court, which shall not be less than P500.00.
(Record on Appeal, pp. 11-14).

On October 20, 1967, based on said Stipulation of Facts, the lower court dismissed the
complaint and ordered Sampaguita to pay Jalwindor the amount of P500.00 as
attorney's fees. Sampaguita filed a motion for reconsideration which was likewise
denied, hence, the instant appeal.
Petitioner-appellant raised the following assignment of errors:

The lower court erred in holding that Capitol "300" Inc. could not legally
transfer or assign the glass and wooden jalousies in question to the
plaintiff-appellant.

II

The lower court erred in not holding that plaintiff-appellant was the rightful
owner of the glass and wooden jalousies when they were sold by the
Sheriff at the public auction,

III

The lower court erred in not declaring as null and void the levy on
execution and the Sheriff's sale at public auction of the glass and wooden
jalousies.

IV

The lower court erred in holding that defendant-appellee became the

rightful owner of the glass and wooden jalousies.

When the glass and wooden jalousies in question were delivered and installed in the
leased premises, Capitol became the owner thereof. Ownership is not transferred by
perfection of the contract but by delivery, either actual or constructive. This is true even
if the purchase has been made on credit, as in the case at bar. Payment of the
purchase price is not essential to the transfer of ownership as long as the property sold
has been delivered. Ownership is acquired from the moment the thing sold was
delivered to vendee, as when it is placed in his control and possession. (Arts. 1477,
1496 and 1497, Civil Code of the Phil.)

Capitol entered into a lease Contract with Sampaguita in 1964, and the latter became
the owner of the items in question by virtue of the agreement in said contract "that all
permanent improvements made by lessee shall belong to the lessor and that said
improvements have been considered as part of the monthly rentals." When levy or said
items was made on July 31, 1965, Capitol, the judgment debtor, was no longer the
owner thereof.

The action taken by Sampaguita to protect its interest is sanctioned by Section 17, Rule
39 of the Rules of Court, which reads:

Section 17, Proceedings where property claimed by third person.

 ... The officer is not liable for damages for the taking or keeping of the
property to any third-party claimant unless a claim is made by the latter
and unless an action for damages is brought by him against the officer
within one hundred twenty (120) days from the date of the filing of the
bond. But nothing herein contained shall prevent claimant from vindicating
his claim to the property by any action.

It is, likewise, recignized in the case of Bayer Phil., Inc. vs. Agana, et al., 63 SCRA 358,
wherein the Court declared, "that the rights of third party claimants over certain
properties levied upon by the sheriff to satisfy the judgment, may not be taken up in the
case where such claims are presented but in a separate and independent action
instituted by claimants. ... and should a third-party appear to claim is denied, the remedy
contemplated by the rules in the filing by said party of a reinvicatiry action against the
execution creditor or the purchaser of the property after the sale is completed or that a
complaint for damages to be charged against the bond filed by the creditor in favor of
the sheriff. ... Thus, when a property levied upon by the sheriff pursuant to a writ of
execution is claimed by a third person in a sworn statement of ownership thereof, as
prescribed by the rules, an entirely different matter calling for a new adjudication arises."

The items in question were illegally levied upon since they do not belong to the
judgemnt debtor. The power of the Court in execution of judgment extends only to
properties unquestionably belonging to the judgment debtor. The fact that Capitol failed
to pay Jalwindor the purchase price of the items levied upon did not prevent the transfer
of ownership to Capitol. The complaint of Sampaguita to nullify the Sheriff's sale well-
founded, and should prosper. Execution sales affect the rights of judgment debtor only,
and the purchaser in the auction sale acquires only the right as the debtor has at the
time of sale. Since the items already belong to Sampaguita and not to Capitol, the
judgment debtor, the levy and auction sale are, accordingly, null and void. It is well-
settled in this jurisdiction that the sheriff is not authorized to attach property not
belonging to the judgment debtor. (Arabay, Inc. vs. Salvador, et al., 3 PHILAJUR, 413
[1978], Herald Publishing vs. Ramos, 88 Phil. 94, 100).

WHEREFORE, the decision appealed from is hereby reversed, and plaintiff-appellant

Sampaguita is declared the lawful owner of the disputed glass and wooden jalousies.
Defendant-appellee Jalwindor is permanently enjoined from detaching said items from
the roofdeck of the Sampaguita Pictures Building, and is also ordered to pay plaintiff-
appellant the sum of P1,000.00 for and as attorney's fees, and costs.

SO ORDERED.

G.R. No. L-26937 October 5, 1927

PHILIPPINE NATIONAL BANK, plaintiff-appellee,

vs.
SEVERO EUGENIO LO, ET AL., defendants.
SEVERIO EUGENIO LO, NG KHEY LING and YEP SENG, appellants.
Jose Lopez Vito for appellants.
Roman Lacson for appellee.

VILLAMOR, J.:

On September 29, 1916, the appellants Severo Eugenio Lo and Ng Khey Ling, together
with J. A. Say Lian Ping, Ko Tiao Hun, On Yem Ke Lam and Co Sieng Peng formed a
commercial partnership under the name of "Tai Sing and Co.," with a capital of P40,000
contributed by said partners. In the articles of copartnership, Exhibit A, it appears that
the partnership was to last for five years from after the date of its organization, and that
its purpose was to do business in the City of Iloilo, Province of Iloilo, or in any other part
of the Philippine Islands the partners might desire, under the name of "Tai Sing & Co.,"
for the purchase and sale of merchandise, goods, and native, as well as Chinese and
Japanese, products, and to carry on such business and speculations as they might
consider profitable. One of the partners, J. A. Say Lian Ping was appointed general
manager of the partnership, with the appointed general manager of the partnership, with
the powers specified in said articles of copartnership.

On June 4, 1917, general manager A. Say Lian Ping executed a power of attorney
(Exhibit C-1) in favor of A. Y. Kelam, authorizing him to act in his stead as manager and
administrator of "Tai Sing & Co.," on July 26, 1918, for, and obtained a loan of P8,000 in
current account from the plaintiff bank. (Exhibit C). As security for said loan, he
mortgaged certain personal property of "Tai Sing & Co., (Exhibit C.)

This credit was renew several times and on March 25, 1919, A. Y. Kelam, as attorney-
in-fact of "Tai Sing & Co., executed a chattel mortgage in favor of plaintiff bank as
security for a loan of P20,000 with interest (Exhibit D). This mortgage was again
renewed on April 16, 1920 and A. Y. Kelam, as attorney-in-fact of "Tai Sing & Co.,
executed another chattel mortgage for the said sum of P20,000 in favor of plaintiff bank.
(Exhibit E.) According to this mortgage contract, the P20,000 loan was to earn 9 per
cent interest per annum.

On April 20, 1920, Yap Seng, Severo Eugenio Lo, A. Y. Kelam and Ng Khey Ling, the
latter represented by M. Pineda Tayenko, executed a power of attorney in favor of Sy
Tit by virtue of which Sy Tit, representing "Tai Sing & Co., obtained a credit of P20,000
from plaintiff bank on January 7, 1921, executing a chattel mortgage on certain personal
property belonging to "Tai Sing & Co.

Defendants had been using this commercial credit in a current account with the plaintiff
bank, from the year 1918, to May 22, 1921, and the debit balance of this account, with
interest to December 31, 1924, is as follows:

TAI SING & CO.

 To your outstanding account (C. O. D.) with us
on June 30, 1922 P16,518.74
Interest on same from June 30, 1922 to
December 31,1924, at 9 per cent per annum 3,720.86

Total 20, 239.00

=========

This total is the sum claimed in the complaint, together with interest on the P16,518.74
debt, at 9 per cent per annum from January 1, 1925 until fully paid, with the costs of the
trial.

Defendant Eugenio Lo sets up, as a general defense, that "Tai Sing & Co. was not a
general partnership, and that the commercial credit in current account which "Tai Sing &
Co. obtained from the plaintiff bank had not been authorized by the board of directors of
the company, nor was the person who subscribed said contract authorized to make the
same, under the article of copartnership. The other defendants, Yap Sing and Ng Khey
Ling, answered the complaint denying each and every one of the allegations contained
therein.

After the hearing, the court found:

(1) That defendants Eugenio Lo, Ng Khey Ling and Yap Seng Co., Sieng Peng
indebted to plaintiff Philippine National Bank in sum of P22,595.26 to July 29,
1926, with a daily interest of P4.14 on the balance on account of the partnership
"Tai Sing & Co. for the sum of P16,518.74 until September 9, 1922;

(2) Said defendants are ordered jointly and severally to pay the Philippine
National Bank the sum of P22,727.74 up to August 31, 1926, and from the date,
P4.14 daily interest on the principal; and

(3) The defendants are furthermore ordered to pay the costs of the
action.1awph!l.net

Defendants appealed, making the following assignments of error:

I. The trial court erred in finding that article 126 of the Code of Commerce at
present in force is not mandatory.

II. The trial court erred in finding that the partnership agreement of "Tai Sing &
Co., (Exhibit A), is in accordance with the requirements of article 125 of the Code
of Commerce for the organization of a regular partnership.

III. The trial court erred in not admitting J. A. Sai Lian Ping's death in China in
November, 1917, as a proven fact.
 IV. The trial court erred in finding that the death of J. A. Say Lian Ping cannot
extinguish the defendants' obligation to the plaintiff bank, because the last debt
incurred by the commercial partnership "Tai Sing & Co., was that evidence by
Exhibit F, signed by Sy Tit as attorney-in-fact of the members of "Tai Sing & Co.,
by virtue of Exhibit G.

V. The trial court erred in not finding that plaintiff bank was not able to collect its
credit from the goods of "Tai Sing & Co., given as security therefor through its
own fault and negligence; and that the action brought by plaintiff is a manifest
violation of article 237 of the present Code of Commerce.

VI. The trial court erred in finding that the current account of "Tai Sing & Co. with
plaintiff bank shows a debit balance of P16,518.74, which in addition to interest
at 9 per cent per annum from July 29, 1926, amount to P16,595.26, with a daily
interest of P4.14 on the sum of P16,518.74.

VII. The trial court erred in ordering the defendants appellants to pay jointly and
severally to the Philippine National Bank the sum of P22,727.74 up to August 31,
1926, and interest on P16,518.74 from that date until fully paid, with the costs of
the action.

VIII. The trial court erred in denying the motion for a new trial filed by defendants-
appellants.

Appellants admit, and it appears from the context of Exhibit A, that the defendant
association formed by the defendants is a general partnership, as defined in article 126
of the Code Commerce. This partnership was registered in the mercantile register of the
Province of Iloilo. The only anomaly noted in its organization is that instead of adopting
for their firm name the names of all of the partners, of several of them, or only one of
them, to be followed in the last two cases, by the words "and to be followed in the last
two cases, by the words "and company" the partners agreed upon "Tai Sing & Co." as
the firm name.

In the case of Hung-Man-Yoc, under the name of Kwong-Wo-Sing vs. Kieng-Chiong-

Seng, cited by appellants, this court held that, as the company formed by defendants
had existed in fact, though not in law due to the fact that it was not recorded in the
register, and having operated and contracted debts in favor of the plaintiff, the same
must be paid by someone. This applies more strongly to the obligations contracted by
the defendants, for they formed a partnership which was registered in the mercantile
register, and carried on business contracting debts with the plaintiff bank. The
anomalous adoption of the firm name above noted does not affect the liability of the
general partners to third parties under article 127 of the Code of Commerce. And the
Supreme Court so held in the case of Jo Chung Cang vs. Pacific Commercial Co., (45
Phil., 142), in which it said that the object of article 126 of the Code of Commerce in
requiring a general partnership to transact business under the name of all its members,
of several of them, or of one only, is to protect the public from imposition and fraud; and
that the provision of said article 126 is for the protection of the creditors rather than of
the partners themselves. And consequently the doctrine was enunciated that the law
must be unlawful and unenforceable only as between the partners and at the instance
of the violating party, but not in the sense of depriving innocent parties of their rights
who may have dealt with the offenders in ignorance of the latter having violated the law;
and that contracts entered into by commercial associations defectively organized are
valid when voluntarily executed by the parties, and the only question is whether or not
they complied with the agreement. Therefore, the defendants cannot invoke in their
defense the anomaly in the firm name which they themselves adopted.

As to the alleged death of the manager of the company, Say Lian Ping, before the
attorney-in-fact Ou Yong Kelam executed Exhibits C, D and E, the trial court did not find
this fact proven at the hearing. But even supposing that the court had erred, such an
error would not justify the reversal of the judgment, for two reasons at least: (1)
Because Ou Yong Kelam was a partner who contracted in the name of the partnership,
without any objection of the other partners; and (2) because it appears in the record that
the appellant-partners Severo Eugenio Lo, Ng Khey Ling and Yap Seng, appointed Sy
Tit as manager, and he obtained from the plaintiff bank the credit in current account, the
debit balance of which is sought to be recovered in this action.

Appellants allege that such of their property as is not included in the partnership assets
cannot-be seized for the payment of the debts contracted by the partnership until after
the partnership property has been exhausted. The court found that the partnership
property described in the mortgage Exhibit F no loner existed at the time of the filing of
the herein complaint nor has its existence been proven, nor was it offered to the plaintiff
for sale. We find no just reason to reverse this conclusion of the trial court, and this
being so, it follows that article 237 of the Code of Commerce, invoked by the appellant,
can in no way have any application here.

Appellants also assign error to the action of the trial court in ordering them to pay
plaintiff, jointly and severally, the sums claimed with 9 per cent interest on P16,518.74,
owing from them.

The judgment against the appellants is in accordance with article 127 of the Code of
Commerce which provides that all the members of a general partnership, be they
managing partners thereof or not, shall be personally and solidarily liable with all their
property, for the results of the transactions made in the name and for the account of the
partnership, under the signature of the latter, and by a person authorized to use it.

As to the amount of the interest suffice it to remember that the credit in current account
sued on in this case as been renewed by the parties in such a way that while it appears
in the mortgage Exhibit D executed on March 25, 1919 by the attorney-in-fact Ou Yong
Kelam that the P20,000 credit would earn 8 per cent interest annually, yet from that
executed on April 16, 1920, Exhibit E, it appears that the P20,000 would earn 9 per cent
interest per annum. The credit was renewed in January, 1921, and in the deed of
pledge, Exhibit F, executed by "Tai Sing & Co., represented by the attorney-in-fact Sy
Tit, it appears that this security is for the payment of the sums received by the
partnership, not to exceed P20,000 with interest and collection fees. There can be no
doubt that the parties agreed upon the rate of interest fixed in the document Exhibit E,
namely 9 per cent per annum.

The judgment appealed from is in accordance with the law, and must therefore be, as it
is hereby, affirmed with costs against the appellants. So ordered.

G.R. No. 91029 February 7, 1991

NORKIS DISTRIBUTORS, INC., petitioner,

vs.
THE COURT OF APPEALS & ALBERTO NEPALES, respondents.

Jose D. Palma for petitioner.

Public Attorney's Office for private respondent.

GRIÑO-AQUINO, J.:

Subject of this petition for review is the decision of the Court of Appeals (Seventeenth
Division) in CA-G.R. No. 09149, affirming with modification the judgment of the Regional
Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in
Civil Case No. 1272, which was private respondent Alberto Nepales' action for specific
performance of a contract of sale with damages against petitioner Norkis Distributors,
Inc.

The facts borne out by the record are as follows:

Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha
motorcycles in Negros Occidental with office in Bacolod City with Avelino Labajo as its
Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought
from the Norkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model
YL2DX with Engine No. L2-329401K Frame No. NL2-0329401, Color Maroon, then
displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a
Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan
Branch, which Norkis' Branch Manager Labajo agreed to accept. Hence, credit was
extended to Nepales for the price of the motorcycle payable by DBP upon release of his
motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on
the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice
No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been
perfected. Nepales signed the sales invoice to signify his conformity with the terms of
the sale. In the meantime, however, the motorcycle remained in Norkis' possession.
On November 6, 1979, the motorcycle was registered in the Land Transportation
Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in his
name was issued by the Land Transportation Commission on November 6, 1979 (Exh.
2-b). The registration fees were paid by him, evidenced by an official receipt, Exhibit 3.

On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who
was allegedly the agent of Alberto Nepales but the latter denies it (p. 15, t.s.n., August
2, 1984). The record shows that Alberto and Julian Nepales presented the unit to DBP's
Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros
Occidental Branch (p. 12, Rollo). The motorcycle met an accident on February 3, 1980
at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that
the unit was being driven by a certain Zacarias Payba at the time of the accident (p. 33,
Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was
returned, and stored inside Norkis' warehouse.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan
to Norkis in the total sum of P7,500. As the price of the motorcycle later increased to
P7,828 in March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and
demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an
action for specific performance with damages against Norkis in the Regional Trial Court
of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it
was docketed as Civil Case No. 1272. He alleged that Norkis failed to deliver the
motorcycle which he purchased, thereby causing him damages.

Norkis answered that the motorcycle had already been delivered to private respondent
before the accident, hence, the risk of loss or damage had to be borne by him as owner
of the unit.

After trial on the merits, the lower court rendered a decision dated August 27, 1985
ruling in favor of private respondent (p. 28, Rollo.) thus:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the

defendants. The defendants are ordered to pay solidarity to the plaintiff the
present value of the motorcycle which was totally destroyed, plus interest
equivalent to what the Kabankalan Sub-Branch of the Development Bank of the
Philippines will have to charge the plaintiff on fits account, plus P50.00 per day
from February 3, 1980 until full payment of the said present value of the
motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation. In
lieu of paying the present value of the motorcycle, the defendants can deliver to
the plaintiff a brand-new motorcycle of the same brand, kind, and quality as the
one which was totally destroyed in their possession last February 3, 1980. (pp.
28-29, Rollo.)

On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989,
but deleted the award of damages "in the amount of Fifty (P50.00) Pesos a day from
February 3, 1980 until payment of the present value of the damaged vehicle" (p35,
Rollo). The Court of Appeals denied Norkis' motion for reconsideration. Hence, this
Petition for Review.

The principal issue in this case is who should bear the loss of the motorcycle. The
answer to this question would depend on whether there had already been a transfer of
ownership of the motorcycle to private respondent at the time it was destroyed.

Norkis' theory is that:

. . . After the contract of sale has been perfected (Art. 1475) and even before
delivery, that is, even before the ownership is transferred to the vendee, the risk
of loss is shifted from the vendor to the vendee. Under Art. 1262, the obligation of
the vendor to deliver a determinate thing becomes extinguished if the thing is lost
by fortuitous event (Art. 1174), that is, without the fault or fraud of the vendor and
before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the
loss or destruction does not extinguish the obligation (Art. 1263). A thing is
determinate when it is particularly designated or physically segregated from all
others of the same class (Art. 1460). Thus, the vendor becomes released from
his obligation to deliver the determinate thing sold while the vendee's obligation
to pay the price subsists. If the vendee had paid the price in advance the vendor
may retain the same. The legal effect, therefore, is that the vendee assumes the
risk of loss by fortuitous event (Art. 1262) after the perfection of the contract to
the time of delivery. (Civil Code of the Philippines, Ambrosio Padilla, Vol. 5,1987
Ed., p. 87.)

Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists
that there was constructive delivery of the unit upon: (1) the issuance of the Sales
Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of his
signature thereon; (2) the registration of the vehicle on November 6, 1979 with the Land
Transportation Commission in private respondent's name (Exh. 2); and (3) the issuance
of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo).

That argument is not well taken. As pointed out by the private respondent, the issuance
of a sales invoice does not prove transfer of ownership of the thing sold to the buyer. An
invoice is nothing more than a detailed statement of the nature, quantity and cost of the
thing sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).

In all forms of delivery, it is necessary that the act of delivery whether constructive or
actual, be coupled with the intention of delivering the thing. The act, without the
intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing
Manresa, p. 94).

When the motorcycle was registered by Norkis in the name of private respondent,
Norkis did not intend yet to transfer the title or ownership to Nepales, but only to
facilitate the execution of a chattel mortgage in favor of the DBP for the release of the
buyer's motorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals
that the execution in its favor of a chattel mortgage over the purchased vehicle is a pre-
requisite for the approval of the buyer's loan. If Norkis would not accede to that
arrangement, DBP would not approve private respondent's loan application and,
consequently, there would be no sale.

In other words, the critical factor in the different modes of effecting delivery, which gives
legal effect to the act, is the actual intention of the vendor to deliver, and its acceptance
by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA
759).

In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:

The Code imposes upon the vendor the obligation to deliver the thing sold. The
thing is considered to be delivered when it is "placed in the hands and
possession of the vendee." (Civil Code, Art. 1462). It is true that the same article
declares that the execution of a public instrument is equivalent to the delivery of
the thing which is the object of the contract, but, in order that this symbolic
delivery may produce the effect of tradition, it is necessary that the vendor shall
have had such control over the thing sold that, at the moment of the sale, its
material delivery could have been made. It is not enough to confer upon the
purchaser the ownership and the right of possession. The thing sold must be
placed in his control. When there is no impediment whatever to prevent the thing
sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if
notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or
through another in his name, because such tenancy and enjoyment are opposed
by the interposition of another will, then fiction yields to reality-the delivery has
riot been effects .(Emphasis supplied.)

The Court of Appeals correctly ruled that the purpose of the execution of the sales
invoice dated September 20, 1979 (Exh. B) and the registration of the vehicle in the
name of plaintiff-appellee (private respondent) with the Land Registration Commission
(Exhibit C) was not to transfer to Nepales the ownership and dominion over the
motorcycle, but only to comply with the requirements of the Development Bank of the
Philippines for processing private respondent's motorcycle loan. On March 20, 1980,
before private respondent's loan was released and before he even paid Norkis, the
motorcycle had already figured in an accident while driven by one Zacarias Payba.
Payba was not shown by Norkis to be a representative or relative of private respondent.
The latter's supposed relative, who allegedly took possession of the vehicle from Norkis
did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis' claim
that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the
motorcycle (p. 20, Appellants' Brief), is controverted by the latter. Alberto denied having
authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enter into
any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6, 1985).
This circumstances more than amply rebut the disputable presumption of delivery upon
which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).

Article 1496 of the Civil Code which provides that "in the absence of an express
assumption of risk by the buyer, the things sold remain at seller's risk until the
ownership thereof is transferred to the buyer," is applicable to this case, for there was
neither an actual nor constructive delivery of the thing sold, hence, the risk of loss
should be borne by the seller, Norkis, which was still the owner and possessor of the
motorcycle when it was wrecked. This is in accordance with the well-known doctrine of
res perit domino.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-
G.R. No. 09149, we deny the petition for review and hereby affirm the appealed
decision, with costs against the petitioner.

SO ORDERED.

G.R. No. L-19545 April 18, 1975

PHILIPPINE SUBURBAN DEVELOPMENT CORPORATION, petitioner,

vs.
THE AUDITOR GENERAL, PEDRO M. GIMENEZ, respondent.

Magno L. Dajao for petitioner.

First Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo
for respondent.

ANTONIO, J.:ñé+.£ªwph!1

Appeal by certiorari from the decision dated December 11, 1961, of then Auditor
General Pedro M. Gimenez, disallowing the request of petitioner for the refund of real
estate tax in the amount of P30,460.90 paid to the Provincial Treasurer of Bulacan.

The facts of the case are as follows:

On June 8, 1960, at a meeting with the Cabinet, the President of the Philippines, acting
on the reports of the Committee created to survey suitable lots for relocating squatters
in Manila and suburbs, and of the Social Welfare Administrator together with the
recommendation of the Manager of the Government Service Insurance System,
approved in principle the acquisition by the People's Homesite and Housing Corporation
of the unoccupied portion of the Sapang Palay Estate in Sta. Maria, Bulacan for
relocating the squatters who desire to settle north of Manila, and of another area either
in Las Piñas or Parañaque, Rizal, or Bacoor, Cavite for those who desire to settle south
of Manila. The project was to be financed through the flotation of bonds under the
charter of the PHHC in the amount of P4.5 million, the same to be absorbed by the
Government Service Insurance System. The President, through the Executive
Secretary, informed the PHHC of such approval by letter bearing the same date (Annex
"B").

On June 10, 1960, the Board of Directors of the PHHC passed Resolution No. 700
(Annex "C") authorizing the purchase of the unoccupied portion of the Sapang Palay
Estate at P0.45 per square meter "subject to the following conditions precedent:
têñ.£îhqwâ£

1. That the confirmation by the OEC and the President of the purchase
price of P0.45 per sq. m. shall first be secured, pursuant to OEC
Memorandum Circular No. 114, dated May 6, 1957.

2. That the portion of the estate to be acquired shall first be defined and
delineated.

3. That the President of the Philippines shall first provide the PHHC with
the necessary funds to effect the purchase and development of this
property from the proposed P4.5 million bond issue to be absorbed by the
GSIS.

4. That the contract of sale shall first be approved by the Auditor General
pursuant to Executive Order dated February 3, 1959.

5. The vendor shall agree to the dismissal with prejudice of Civil Case No.
Q-3332 C.F.I. Quezon City, entitled "Phil. Suburban Dev. Corp. V. Ortiz, et
al."

On July 13, 1960, the President authorized the floating of bonds under Republic Act
Nos. 1000 and 1322 in the amount of P7,500,000.00 to be absorbed by the GSIS, in
order to finance the acquisition by the PHHC of the entire Sapang Palay Estate at a
price not to exceed P0.45 per sq. meter.

On December 29,1960, after an exchange of communications, Petitioner Philippine

Suburban Development Corporation, as owner of the unoccupied portion of the Sapang
Palay Estate (specifically two parcels covered by TCT Nos. T-23807 and T-23808), and
the People's Homesite and Housing Corporation, entered into a contract embodied in a
public instrument entitled "Deed of Absolute Sale" (Annex "F") whereby the former
conveyed unto the latter the two parcels of land abovementioned, under the following
terms and conditions, among others: têñ.£îhqwâ£

1. That for and in consideration of the sum of THREE MILLION THREE

HUNDRED EIGHTY-SIX THOUSAND TWO HUNDRED TWENTY THREE
(P3,386,223.00) PESOS, Philippine currency, to be paid by the VENDEE
to the herein VENDOR in the manner outlined hereinbelow, the VENDOR
by these presents does hereby sell, transfer and convey by way of
absolute sale unto the VENDEE, its successors, administrators or assigns,
the above described two (2) parcels of land, together with all the
improvements existing thereon;

2. That the payment of the consideration mentioned in paragraph 1 above

shall be made as follows:

(a) The vendee is presently negotiating or securing from the

GOVERNMENT SERVICE INSURANCE SYSTEM, by virtue of a directive
of the President of the Philippines, a loan for the purchase of the above
described two (2) parcels of land in anticipation of the purchase by the
said GOVERNMENT SERVICE INSURANCE SYSTEM of the bonds to be
floated by the National Government to enable the VENDEE to make this
purchase, and from whatever amount may be granted as loan by the
GOVERNMENT SERVICE INSURANCE SYSTEM to the VENDEE, ONE
MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS
shall be retained by the said VENDEE for the purpose of paying and
clearing the existing lien annotated at the back of the aforesaid Transfer
Certificates of Title Nos. T-23807 and T-23808, said payment to be made
directly to the MORTGAGEES and the difference shall be paid to the
VENDOR, provided that this first payment shall not be less than ONE
MILLION SEVEN HUNDRED TEN THOUSAND (P1,710,000.00) PESOS
and the VENDOR is hereby constituted as Attorney-in-fact and authorized
to receive from, and the GOVERNMENT SERVICE INSURANCE
SYSTEM is directed to pay the balance of the loan direct to the herein
VENDOR chargeable against VENDEE's loan from the GOVERNMENT
SERVICE INSURANCE SYSTEM; provided, however, That should this
amount be more than sufficient to cover the said mortgage lien, the
VENDEE shall pay the difference to the VENDOR; and provided, further,
That the VENDOR shall take charge of the preparation and registration of
the documents necessary in clearing the above referred to mortgage lien,
with the understanding that the expenses for preparation, notarization,
registration, including documentary stamps, and other expenses for the
cancellation of said mortgage lien shall be for the account of the VENDOR
and shall be advanced by the VENDEE to the VENDOR;

(b) That out of the sum of P1,710,000.00 to be retained by the VENDEE

mentioned in the immediately preceding paragraph 2(a) for the purpose of
discharging the said mortgage lien, the VENDEE shall deduct and further
retain or keep as a trust fund the amount of FORTY THOUSAND
(P40,000) PESOS, Philippine Currency, to answer for the remaining
Notice of Lis Pendens annotated at the back of Transfer Certificate of Title
Nos. T-23807 and T-23808 until such lien shall have been discharged or
cancelled, the VENDEE binding itself to deliver forthwith the said amount
 of P40,000.00 unto the successful party involved in said Notice of Lis
Pendens;

(c) The remaining balance of the total consideration in the amount of ONE
MILLION SIX HUNDRED SEVENTY-SIX THOUSAND TWO HUNDRED
TWENTY-THREE PESOS (P1,676,223.00), Philippine Currency, or
whatever amount is not paid by virtue of the first payment mentioned in
paragraph (a) above, shall be paid by the VENDEE unto the VENDOR
immediately upon the VENDEE's obtaining sufficient funds from proceeds
of bonds floated by the VENDEE or the Government for the purchase of
the properties subject of this transaction; provided, however, That full and
complete payment of the balance mentioned in this particular paragraph
2(c) shall be made or paid by the VENDEE within a period of sixty (60)
days from date of delivery of title by the VENDOR in the name of the
VENDEE; and provided, further, That this sixty (60) days period may be
extended for another period of sixty (60) days upon written request by the
VENDEE at least five (5) days prior to the expiration of the said sixty (60)
days period. Should there be instituted any legal action, however, for the
collection of any amounts due from the VENDEE in favor of the VENDOR,
the VENDEE binds itself to pay unto the VENDOR a sum equivalent to
twenty-five (25%) per centum of the total balance due from the, VENDEE
in favor of the VENDOR as and by way of attorney's fees, and the costs of
suit;

3. That the VENDOR hereby warrants to defend the title and ownership of
the VENDEE to the two (2) parcels of land above described from any
claim or claims of third parties whomsoever;

(4.) That all expenses for the preparation and notarization of this
document shall be for the account of the VENDOR; provided, however,
That registration and issuance of certificates of title in the name of the
VENDEE shall be for the account of the VENDEE." (Annex "F")

The above document was not registered in the Office of the Register of Deeds until
March 14, 1961, due to the fact, petitioner claims, that the PHHC could not at once
advance the money needed for registration expenses. In the meantime, the Auditor
General, to whom a copy of the contract had been submitted for approval in conformity
with Executive Order No. 290, expressed objections thereto and requested a re-
examination of the contract, in view of the fact that from 1948 to December 20, 1960,
the entire hacienda was assessed at P131,590.00, and reassessed beginning
December 21, 1960 in the greatly increased amount of P4,898,110.00. Said objections
were embodied in a letter to the President, dated January 9, 1961, but this
notwithstanding, the President, through the Executive Secretary, approved the Deed of
Absolute Sale on February 1, 1961.
It appears that as early as the first week of June, 1960, prior to the signing of the deed
by the parties, the PHHC acquired possession of the property, with the consent of
petitioner, to enable the said PHHC to proceed immediately with the construction of
roads in the new settlement and to resettle the squatters and flood victims in Manila
who were rendered homeless by the floods or ejected from the lots which they were
then occupying (Annexes "D" and "D-1").

On April 12, 1961, the Provincial Treasurer of Bulacan requested the PHHC to withhold
the amount of P30,099.79 from the purchase price to be paid by it to the Philippine
Suburban Development Corporation. Said amount represented the realty tax due on the
property involved for the calendar year 1961 (Annex "G").

Petitioner, through the PHHC, paid under protest the abovementioned amount to the
Provincial Treasurer of Bulacan and thereafter, or on June 13, 1961, by letter,
requested then Secretary of Finance Dominador Aytona to order a refund of the amount
so paid. Petitioner claimed that it ceased to be the owner of the land in question upon
the execution of the Deed of Absolute Sale on December 29, 1960. Upon
recommendation of the Provincial Treasurer of Bulacan, said request was denied by the
Secretary of Finance in a letter-decision dated August 22, 1961. Pertinent portions of
this decision are quoted hereunder: têñ.£îhqwâ£

.... the records show that the deed of sale executed on December 29,
1960 ... was approved by the President upon favorable recommendation
of the Cabinet and the Committee created for the purpose of surveying
suitable lots which may be acquired for relocating squatters in Manila on
February 1, 1961 only and that said instrument of sale was registered with
the Register of Deeds on March 14, 1961.

That Corporation, as vendor, maintains that in view of the execution of the

deed of sale on December 29, 1960 it ceased to be the owner of the
property involved and that consequently it was under no obligation to pay
the real property tax thereon effective January 1, 1961. In support of its
stand, that Corporation cites Article 1498 of the New Civil Code of the
Philippines which provides that "when the sale is made through a public
instrument, the execution thereof shall be equivalent to the delivery of the
thing which is the object of the contract, if from the deed the contrary does
not appear or cannot clearly be inferred" and Article 1496 of the same
Code which states that "the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified
in Articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." On the
other hand, the Provincial Treasurer contends that, as under the Land
Registration Act (Act No. 496) the Philippine Suburban Development
Corporation is still the owner of the property until the deed of sale covering
the same has been actually registered, the vendor is still liable to the
payment of real property tax for the calendar year 1961.
It is now claimed in this appeal that the Auditor General erred in disallowing the refund
of the real estate tax in the amount of P30,460.90 because aside from the presumptive
delivery of the property by the execution of the deed of sale on December 29, 1960, the
possession of the property was actually delivered to the vendee prior to the sale, and,
therefore, by the transmission of ownership to the vendee, petitioner has ceased to be
the owner of the property involved, and, consequently, under no obligation to pay the
real property tax for the year 1961.

Respondent, however, argues that the presumptive delivery of the property under
Article 1498 of the Civil Code does not apply because of the requirement in the contract
that the sale shall first be approved by the Auditor General, pursuant to the Executive
Order dated February 3, 1959 and later by the President, and that the petitioner should
register the deed and secure a new title in the name of the vendee before the
government can be compelled to pay the balance of P1,676,223.00 of the purchase
price. Respondent further contends that since the property involved is a land registered
under the Land Registration Act (Act No. 496), until the deed of sale has been actually
registered, the vendor remains as the owner of the said property, and, therefore, liable
for the payment of real property tax.

We find the petition meritorious.

I.

It cannot be denied that the President of the Philippines, on June 8, 1960, at his Cabinet
meeting, approved and authorized the purchase by the national government, through
the PHHC, of the unoccupied portion of the property of petitioner; that on June 10,
1960, the PHHC, acting pursuant to the aforecited approval of the President, passed its
Resolution No. 700 approving and authorizing the purchase of the unoccupied portion of
said property; and that after the PHHC took possession of the aforementioned property
on the first week of June, 1960 to use it as a resettlement area for squatters and flood
victims from Manila and suburbs, the President of the Philippines at his Cabinet meeting
on June 13, 1960, approved and authorized the purchase by the PHHC of the entire
property consisting of 752.4940 hectares, instead of only the unoccupied portion thereof
as was previously authorized.

Considering the aforementioned approval and authorization by the President of the

Philippines of the specific transaction in question, and the fact that the contract here
involved — which is for a special purpose to meet a special situation — was entered
into precisely to implement the Presidential directive, the prior approval by the Auditor
General envisioned by Administrative Order No. 290, dated February 3, 1959, would
therefore, not be necessary.

As We held in Federation of the United NAMARCO Distributors v. National Marketing

Corporation,1 the approval by the Auditor General contemplated by Administrative
Order No. 290 dated February 3, 1959, refers to contracts in general, ordinarily entered
into by government offices and government-owned or controlled corporations, and not
to a contract for a special purpose, to meet a special situation and entered into in
implementation of a Presidential directive to solve and emergency. In other words,
where the contract already bears the approval of the President, the action of the Auditor
General would no longer be necessary because under the said Administrative Order,
the President has, at any rate, the final say.

II

Under the civil law, delivery (tradition) as a mode of transmission of ownership maybe
actual (real tradition) or constructive (constructive tradition).2 When the sale of real
property is made in a public instrument, the execution thereof is equivalent to the
delivery of the thing object of the contract, if from the deed the contrary does not appear
or cannot clearly be inferred.3

In other words, there is symbolic delivery of the property subject of the sale by the
execution of the public instrument, unless from the express terms of the instrument, or
by clear inference therefrom, this was not the intention of the parties. Such would be the
case, for instance, when a certain date is fixed for the purchaser to take possession of
the property subject of the conveyance, or where, in case of sale by installments, it is
stipulated that until the last installment is made, the title to the property should remain
with the vendor, or when the vendor reserves the right to use and enjoy the properties
until the gathering of the pending crops,4 or where the vendor has no control over the
thing sold at the moment of the sale, and, therefore, its material delivery could not have
been made.5

In the case at bar, there is no question that the vendor had actually placed the vendee
in possession and control over the thing sold, even before the date of the sale. The
condition that petitioner should first register the deed of sale and secure a new title in
the name of the vendee before the latter shall pay the balance of the purchase price, did
not preclude the transmission of ownership. In the absence of an express stipulation to
the contrary, the payment of the purchase price of the good is not a condition,
precedent to the transfer of title to the buyer, but title passes by the delivery of the
goods.6

III .

We fail to see the merit in respondent's insistence that, although possession was
transferred to the vendee and the deed of sale was executed in a public instrument on
December 29, l960, the vendor still remains as owner of the property until the deed of
sale is actually registered with the Office of the Register of Deeds, because the land
sold is registered under the Torrens System. In a long line of cases already decided by
this Court, the constant doctrine has been that, as between the parties to a contract of
sale, registration is not necessary to make it valid and effective, for actual notice is
equivalent to registration.7 Indeed, Section 50 of the Land Registration Act provides
that, even without the act of registration, a deed purporting to convey or affect
registered land shall operate as a contract between the parties. The registration is
intended to protect the buyer against claims of third persons arising from subsequent
alienations by the vendor, and is certainly not necessary to give effect to the deed of
sale, as between the parties to the contract.8

The case of Vargas v. Tancioco, 9 cited by respondent, refers to a case involving

conflicting rights over registered property and those of innocent transferees who relied
on the clean titles of the properties in question. It is, therefore, not relevant to the case
at bar.

In the case at bar, no rights of third persons are involved, much less is there any
subsequent alienation of the same property. It is undisputed that the property is in the
possession of the vendee, even as early as the first week of June, 1960, or six (6)
months prior to the execution of the Deed of Absolute Sale on December 29, 1960.
Since the delivery of possession, coupled with the execution of the Deed of Absolute
Sale, had consummated the sale and transferred the title to the purchaser, 10 We,
therefore, hold that the payment of the real estate tax after such transfer is the
responsibility of the purchaser. However, in the case at bar, the purchaser PHHC is a
government entity not subject to real property tax. 11

WHEREFORE, the appealed decision is hereby reversed, and the real property tax paid
under protest to the Provincial Treasurer of Bulacan by petitioner Philippine Suburban
Development Corporation, in the amount of P30,460,90, is hereby ordered refunded.
Without any pronouncement as to costs.

G.R. No. L-12342 August 3, 1918

A. A. ADDISON, plaintiff-appellant,
vs.
MARCIANA FELIX and BALBINO TIOCO, defendants-appellees.

Thos. D. Aitken for appellant.

Modesto Reyes and Eliseo Ymzon for appellees.

FISHER, J.:

By a public instrument dated June 11, 1914, the plaintiff sold to the defendant Marciana
Felix, with the consent of her husband, the defendant Balbino Tioco, four parcels of
land, described in the instrument. The defendant Felix paid, at the time of the execution
of the deed, the sum of P3,000 on account of the purchase price, and bound herself to
pay the remainder in installments, the first of P2,000 on July 15, 1914, and the second
of P5,000 thirty days after the issuance to her of a certificate of title under the Land
Registration Act, and further, within ten years from the date of such title P10, for each
coconut tree in bearing and P5 for each such tree not in bearing, that might be growing
on said four parcels of land on the date of the issuance of title to her, with the condition
that the total price should not exceed P85,000. It was further stipulated that the
purchaser was to deliver to the vendor 25 per centum of the value of the products that
she might obtain from the four parcels "from the moment she takes possession of them
until the Torrens certificate of title be issued in her favor."

It was also covenanted that "within one year from the date of the certificate of title in
favor of Marciana Felix, this latter may rescind the present contract of purchase and
sale, in which case Marciana Felix shall be obliged to return to me, A. A. Addison, the
net value of all the products of the four parcels sold, and I shall obliged to return to her,
Marciana Felix, all the sums that she may have paid me, together with interest at the
rate of 10 per cent per annum."

In January, 1915, the vendor, A. A. Addison, filed suit in Court of First Instance of
Manila to compel Marciana Felix to make payment of the first installment of P2,000,
demandable in accordance with the terms of the contract of sale aforementioned, on
July 15, 1914, and of the interest in arrears, at the stipulated rate of 8 per cent per
annum. The defendant, jointly with her husband, answered the complaint and alleged by
way of special defense that the plaintiff had absolutely failed to deliver to the defendant
the lands that were the subject matter of the sale, notwithstanding the demands made
upon him for this purpose. She therefore asked that she be absolved from the
complaint, and that, after a declaration of the rescission of the contract of the purchase
and sale of said lands, the plaintiff be ordered to refund the P3,000 that had been paid
to him on account, together with the interest agreed upon, and to pay an indemnity for
the losses and damages which the defendant alleged she had suffered through the
plaintiff's non-fulfillment of the contract.

The evidence adduced shows that after the execution of the deed of the sale the
plaintiff, at the request of the purchaser, went to Lucena, accompanied by a
representative of the latter, for the purpose of designating and delivering the lands sold.
He was able to designate only two of the four parcels, and more than two-thirds of these
two were found to be in the possession of one Juan Villafuerte, who claimed to be the
owner of the parts so occupied by him. The plaintiff admitted that the purchaser would
have to bring suit to obtain possession of the land (sten. notes, record, p. 5). In August,
1914, the surveyor Santamaria went to Lucena, at the request of the plaintiff and
accompanied by him, in order to survey the land sold to the defendant; but he surveyed
only two parcels, which are those occupied mainly by the brothers Leon and Julio
Villafuerte. He did not survey the other parcels, as they were not designated to him by
the plaintiff. In order to make this survey it was necessary to obtain from the Land Court
a writ of injunction against the occupants, and for the purpose of the issuance of this
writ the defendant, in June, 1914, filed an application with the Land Court for the
registration in her name of four parcels of land described in the deed of sale executed in
her favor by the plaintiff. The proceedings in the matter of this application were
subsequently dismissed, for failure to present the required plans within the period of the
time allowed for the purpose.

The trial court rendered judgment in behalf of the defendant, holding the contract of sale
to be rescinded and ordering the return to the plaintiff the P3,000 paid on account of the
price, together with interest thereon at the rate of 10 per cent per annum. From this
judgment the plaintiff appealed.

In decreeing the rescission of the contract, the trial judge rested his conclusion solely on
the indisputable fact that up to that time the lands sold had not been registered in
accordance with the Torrens system, and on the terms of the second paragraph of
clause (h) of the contract, whereby it is stipulated that ". . . within one year from the date
of the certificate of title in favor of Marciana Felix, this latter may rescind the present
contract of purchase and sale . . . ."

The appellant objects, and rightly, that the cross-complaint is not founded on the
hypothesis of the conventional rescission relied upon by the court, but on the failure to
deliver the land sold. He argues that the right to rescind the contract by virtue of the
special agreement not only did not exist from the moment of the execution of the
contract up to one year after the registration of the land, but does not accrue until the
land is registered. The wording of the clause, in fact, substantiates the contention. The
one year's deliberation granted to the purchaser was to be counted "from the date of the
certificate of title ... ." Therefore the right to elect to rescind the contract was subject to a
condition, namely, the issuance of the title. The record show that up to the present time
that condition has not been fulfilled; consequently the defendant cannot be heard to
invoke a right which depends on the existence of that condition. If in the cross-complaint
it had been alleged that the fulfillment of the condition was impossible for reasons
imputable to the plaintiff, and if this allegation had been proven, perhaps the condition
would have been considered as fulfilled (arts. 1117, 1118, and 1119, Civ. Code); but
this issue was not presented in the defendant's answer.

However, although we are not in agreement with the reasoning found in the decision
appealed from, we consider it to be correct in its result. The record shows that the
plaintiff did not deliver the thing sold. With respect to two of the parcels of land, he was
not even able to show them to the purchaser; and as regards the other two, more than
two-thirds of their area was in the hostile and adverse possession of a third person.

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the
vendee." (Civ. Code, art. 1462.) It is true that the same article declares that the
execution of a public instruments is equivalent to the delivery of the thing which is the
object of the contract, but, in order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over the thing sold
that, at the moment of the sale, its material delivery could have been made. It is not
enough to confer upon the purchaser the ownership and the right of possession. The
thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is sufficient. But
if, notwithstanding the execution of the instrument, the purchaser cannot have the
enjoyment and material tenancy of the thing and make use of it himself or through
another in his name, because such tenancy and enjoyment are opposed by the
interposition of another will, then fiction yields to reality — the delivery has not been
effected.

As Dalloz rightly says (Gen. Rep., vol. 43, p. 174) in his commentaries on article 1604 of
the French Civil code, "the word "delivery" expresses a complex idea . . . the
abandonment of the thing by the person who makes the delivery and the taking control
of it by the person to whom the delivery is made."

The execution of a public instrument is sufficient for the purposes of the abandonment
made by the vendor; but it is not always sufficient to permit of the apprehension of the
thing by the purchaser.

The supreme court of Spain, interpreting article 1462 of the Civil Code, held in its
decision of November 10, 1903, (Civ. Rep., vol. 96, p. 560) that this article "merely
declares that when the sale is made through the means of a public instrument, the
execution of this latter is equivalent to the delivery of the thing sold: which does not and
cannot mean that this fictitious tradition necessarily implies the real tradition of the thing
sold, for it is incontrovertible that, while its ownership still pertains to the vendor (and
with greater reason if it does not), a third person may be in possession of the same
thing; wherefore, though, as a general rule, he who purchases by means of a public
instrument should be deemed . . . to be the possessor in fact, yet this presumption gives
way before proof to the contrary."

It is evident, then, in the case at bar, that the mere execution of the instrument was not
a fulfillment of the vendors' obligation to deliver the thing sold, and that from such non-
fulfillment arises the purchaser's right to demand, as she has demanded, the rescission
of the sale and the return of the price. (Civ. Code, arts. 1506 and 1124.)

Of course if the sale had been made under the express agreement of imposing upon
the purchaser the obligation to take the necessary steps to obtain the material
possession of the thing sold, and it were proven that she knew that the thing was in the
possession of a third person claiming to have property rights therein, such agreement
would be perfectly valid. But there is nothing in the instrument which would indicate,
even implicitly, that such was the agreement. It is true, as the appellant argues, that the
obligation was incumbent upon the defendant Marciana Felix to apply for and obtain the
registration of the land in the new registry of property; but from this it cannot be
concluded that she had to await the final decision of the Court of Land Registration, in
order to be able to enjoy the property sold. On the contrary, it was expressly stipulated
in the contract that the purchaser should deliver to the vendor one-fourth "of the
products ... of the aforesaid four parcels from the moment when she takes possession
of them until the Torrens certificate of title be issued in her favor." This obviously shows
that it was not forseen that the purchaser might be deprived of her possession during
the course of the registration proceedings, but that the transaction rested on the
assumption that she was to have, during said period, the material possession and
enjoyment of the four parcels of land.
Inasmuch as the rescission is made by virtue of the provisions of law and not by
contractual agreement, it is not the conventional but the legal interest that is
demandable.

It is therefore held that the contract of purchase and sale entered into by and between
the plaintiff and the defendant on June 11, 1914, is rescinded, and the plaintiff is
ordered to make restitution of the sum of P3,000 received by him on account of the
price of the sale, together with interest thereon at the legal rate of 6 per annum from the
date of the filing of the complaint until payment, with the costs of both instances against
the appellant. So ordered.

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

TEN FORTY REALTY AND DEVELOPMENT CORP., Represented by its President,

VERONICA G. LORENZANA, Petitioner, v. MARINA CRUZ, Respondent.

DECISION

PANGANIBAN, J.:

In an ejectment suit, the question of ownership may be provisionally ruled upon for the
sole purpose of determining who is entitled to possession de facto. In the present case,
both parties base their alleged right to possess on their right to own. Hence, the Court of
Appeals did not err in passing upon the question of ownership to be able to decide who
was entitled to physical possession of the disputed land.chanrob1es virtua1 1aw 1ibrary

The Case

Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to
nullify the August 31, 2001 Decision 2 and December 19, 2001 Resolution 3 of the
Court of Appeals (CA) in CA-G.R. SP No. 64861. The dispositive portion of the assailed
Decision is as follows:jgc:chanrobles.com.ph

"WHEREFORE, premises considered, the petition is hereby DISMISSED and the

Decision dated May 4, 2001 is hereby AFFIRMED." 4

The assailed Resolution denied petitioner’s Motion for Reconsideration.

The Facts

The facts of the case are narrated by the CA as follows:jgc:chanrobles.com.ph

"A complaint for ejectment was filed by [Petitioner Ten Forty Realty and Development
Corporation] against . . . [Respondent Marina Cruz] before the Municipal Trial Court in
Cities (MTCC) of Olongapo City, docketed as Civil Case 4269, which alleged that:
petitioner is the true and absolute owner of a parcel of lot and residential house situated
in #71 18th Street, E.B.B. Olongapo City, particularly described as:chanrob1es virtual
1aw library

‘A parcel of residential house and lot situated in the above-mentioned address

containing an area of 324 square meters more or less bounded on the Northeast by 041
(Lot 255, Ts-308); on the Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043
(Lot 226-A & 18th street) and on the Northwest by 045 (Lot 227, Ts-308) and declared
for taxation purposes in the name of [petitioner] under T.D. No. 002-4595-R and 002-
4596.chanrob1es virtua1 1aw 1ibrary

having acquired the same on December 5, 1996 from Barbara Galino by virtue of a
Deed of Absolute Sale; the sale was acknowledged by said Barbara Galino through a
‘Katunayan’; payment of the capital gains tax for the transfer of the property was
evidenced by a Certification Authorizing Registration issued by the Bureau of Internal
Revenue; petitioner came to know that Barbara Galino sold the same property on April
24, 1998 to Cruz, who immediately occupied the property and which occupation was
merely tolerated by petitioner; on October 16, 1998, a complaint for ejectment was filed
with the Barangay East Bajac-Bajac, Olongapo City but for failure to arrive at an
amicable settlement, a Certificate to File Action was issued; on April 12, 1999 a demand
letter was sent to [respondent] to vacate and pay reasonable amount for the use and
occupation of the same, but was ignored by the latter; and due to the refusal of
[respondent] to vacate the premises, petitioner was constrained to secure the services
of a counsel for an agreed fee of P5,000.00 as attorney’s fee and P500.00 as
appearance fee and incurred an expense of P5,000.00 for litigation.

"In respondent’s Answer with Counterclaim, it was alleged that: petitioner is not qualified
to own the residential lot in dispute, being a public land; according to Barbara Galino,
she did not sell her house and lot to petitioner but merely obtained a loan from Veronica
Lorenzana; the payment of the capital gains tax does not necessarily show that the
Deed of Absolute Sale was at that time already in existence; the court has no
jurisdiction over the subject matter because the complaint was filed beyond the one (1)
year period after the alleged unlawful deprivation of possession; there is no allegation
that petitioner had been in prior possession of the premises and the same was lost thru
force, stealth or violence; evidence will show that it was Barbara Galino who was in
possession at the time of the sale and vacated the property in favor of respondent;
never was there an occasion when petitioner occupied a portion of the premises, before
respondent occupied the lot in April 1998, she caused the cancellation of the tax
declaration in the name of Barbara Galino and a new one issued in respondent’s name;
petitioner obtained its tax declaration over the same property on November 3, 1998,
seven (7) months [after] the respondent [obtained hers]; at the time the house and lot
[were] bought by respondent, the house was not habitable, the power and water
connections were disconnected; being a public land, respondent filed a miscellaneous
sales application with the Community Environment and Natural Resources Office in
Olongapo City; and the action for ejectment cannot succeed where it appears that
respondent had been in possession of the property prior to the petitioner." 5

In a Decision 6 dated October 30, 2000, the Municipal Trial Court in Cities (MTCC)
ordered respondent to vacate the property and surrender to petitioner possession
thereof. It also directed her to pay, as damages for its continued unlawful use, P500 a
month from April 24, 1999 until the property was vacated, P5,000 as attorney’s fees,
and the costs of the suit.

On appeal, the Regional Trial Court 7 (RTC) of Olongapo City (Branch 72) reversed the
MTCC. The RTC ruled as follows: 1) respondents entry into the property was not by
mere tolerance of petitioner, but by virtue of a Waiver and Transfer of Possessory
Rights and Deed of Sale in her favor; 2) the execution of the Deed of Sale without
actual transfer of the physical possession did not have the effect of making petitioner
the owner of the property, because there was no delivery of the object of the sale as
provided for in Article 1438 of the Civil Code; and 3) being a corporation, petitioner was
disqualified from acquiring the property, which was public land.

Ruling of the Court of Appeals

Sustaining the RTC, the CA held that petitioner had failed to make a case for unlawful
detainer, because no contract — express or implied — had been entered into by the
parties with regard to possession of the property. It ruled that the action should have
been for forcible entry, in which prior physical possession was indispensable — a
circumstance petitioner had not shown either.

The appellate court also held that petitioner had challenged the RTC’s ruling on the
question of ownership for the purpose of compensating for the latter’s failure to counter
such ruling. The RTC had held that, as a corporation, petitioner had no right to acquire
the property which was alienable public land.

Hence, this Petition. 8

Issues

Petitioner submits the following issues for our consideration:jgc:chanrobles.com.ph

"1. The Honorable Court of Appeals had clearly erred in not holding that [r]espondent’s
occupation or possession of the property in question was merely through the tolerance
or permission of the herein [p]etitioner;

" [2.] The Honorable Court of Appeals had likewise erred in holding that the ejectment
case should have been a forcible entry case where prior physical possession is
indispensable; and
" [3.] The Honorable Court of Appeals had also erred when it ruled that the herein
[r]espondent’s possession or occupation of the said property is in the nature of an
exercise of ownership which should put the herein [p]etitioner on guard." 9

The Court’s Ruling

The Petition has no merit.

First Issue:chanrob1es virtual 1aw library

Alleged Occupation by Tolerance

Petitioner faults the CA for not holding that the former merely tolerated respondent’s
occupation of the subject property. By raising this issue, petitioner is in effect asking this
Court to reassess factual findings. As a general rule, this kind of reassessment cannot
be done through a petition for review on certiorari under Rule 45 of the Rules of Court,
because this Court is not a trier of facts; it reviews only questions of law. 10 Petitioner
has not given us ample reasons to depart from the general rule.

On the basis of the facts found by the CA and the RTC, we find that petitioner failed to
substantiate its case for unlawful detainer. Admittedly, no express contract existed
between the parties. Not shown either was the corporation’s alleged tolerance of
respondent’s possession.chanrob1es virtua1 1aw 1ibrary

While possession by tolerance may initially be lawful, it ceases to be so upon the

owner’s demand that the possessor by tolerance vacate the property. 11 To justify an
action for unlawful detainer, the permission or tolerance must have been present at the
beginning of the possession. 12 Otherwise, if the possession was unlawful from the
start, an action for unlawful detainer would be an improper remedy. Sarona v. Villegas
13 elucidates thus:jgc:chanrobles.com.ph

"A close assessment of the law and the concept of the word ‘tolerance’ confirms our
view heretofore expressed that such tolerance must be present right from the start of
possession sought to be recovered, to categorize a cause of as one of unlawful detainer
not of forcible entry. Indeed, to hold otherwise would espouse a dangerous doctrine.
And for two reasons. First. Forcible entry into the land is an open challenge to the right
of the possessor. Violation of that right authorizes the speedy redress — in the inferior
court — provided for in the rules. If one year from the forcible entry is allowed to lapse
before suit is filed, then the remedy ceases to be speedy; and the possessor is deemed
to have waived his right to seek relief in the inferior court. Second, if a forcible entry
action in the inferior court is allowed after the lapse of a number of years, then the result
may well be that no action for forcible entry can really prescribe. No matter how long
such defendant is in physical possession, plaintiff will merely make a demand, bring suit
in the inferior court — upon a plea of tolerance to prevent prescription to set in — and
summarily throw him out of the land. Such a conclusion is unreasonable. Especially if
we bear in mind the postulates that proceedings of forcible entry and unlawful detainer
are summary in nature, and that the one year time bar to suit is but in pursuance of the
summary nature of the action." 14

In this case, the Complaint and the other pleadings do not recite any, averment of fact
that would substantiate the claim of petitioner that it permitted or tolerated the
occupation of the property by Respondent Cruz. The Complaint contains only bare
allegations that 1) respondent immediately occupied the subject property after its sale to
her, an action merely tolerated by petitioner; 15 and 2) her allegedly illegal occupation
of the premises was by mere tolerance. 16

These allegations contradict, rather than support, petitioner’s theory that its cause of
action is for unlawful detainer. First, these arguments advance the view that
respondent’s occupation of the property was unlawful at its inception. Second, they
counter the essential requirement in unlawful detainer cases that petitioner’s supposed
act of sufferance or tolerance must be present right from the start of a possession that is
later sought to be recovered. 17

As the bare allegation of petitioner’s tolerance of respondent’s occupation of the

premises has not been proven, the possession should be deemed illegal from the
beginning. Thus, the CA correctly ruled that the ejectment case should have been for
forcible entry — an action that had already prescribed, however, when the Complaint
was filed on May 12, 1999. The prescriptive period of one year for forcible entry cases is
reckoned from the date of respondent’s actual entry into the land, which in this case
was on April 24, 1998.

Second Issue:chanrob1es virtual 1aw library

Nature of the Case

Much of the difficulty in the present controversy stems from the legal characterization of
the ejectment Complaint filed by petitioner. Specifically, was it for unlawful detainer or
for forcible entry?

The answer is given in Section 1 of Rule 70 of the Rules of Court, which we reproduce
as follows:jgc:chanrobles.com.ph

"SECTION 1. Who may institute proceedings, and when. — Subject to the provisions of
the next succeeding section, a person deprived of the possession of any land or
building by force, intimidation, threat, strategy, or stealth, or a vendor, vendee, or other
person against whom the possession of any land or building is unlawfully withheld after
expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper Municipal Trial
Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession,
together with damages and costs.’’

While both causes of action deal only with the sole issue of physical or de facto
possession, 18 the two cases are really separate and distinct, as explained
below:jgc:chanrobles.com.ph

". . . . In forcible entry, one is deprived of physical possession of land or building by

means of force, intimidation, threat, strategy, or stealth. In unlawful detainer, one
unlawfully withholds possession thereof after the expiration or termination of his right to
hold possession under any contract, express or implied. In forcible entry, the
possession is illegal from the beginning and the basic inquiry centers on who has the
prior possession de facto. In unlawful detainer, the possession was originally lawful but
became unlawful by the expiration or termination of the right to possess, hence the
issue of rightful possession is decisive for, in such action, the defendant is in actual
possession and the plaintiff’s cause of action is the termination of the defendant’s right
to continue in possession.

"What determines the cause of action is the nature of defendant’s entry into the land. If
the entry is illegal, then the action which may be filed against the intruder within one
year therefrom is forcible entry. If, on the other hand, the entry is legal but the
possession thereafter became illegal, the case is one of unlawful detainer which must
be filed within one year from the date of the last demand." 19

It is axiomatic that what determines the nature of an action as well as which court has
jurisdiction over it are the allegations in the complaint 20 and the character of the relief
sought. 21

In its Complaint, petitioner alleged that, having acquired the subject property from
Barbara Galino on December 5 1996, 22 it was the true and absolute owner 23 thereof;
that Galino had sold the property to Respondent Cruz on April 24, 1998; 24 that after
the sale, the latter immediately occupied the property, an action that was merely
tolerated by petitioner; 25 and that, in a letter given to respondent on April 12, 1999, 26
petitioner had demanded that the former vacate the property, but that she refused to do
so. 27 Petitioner thereupon prayed for judgment ordering her to vacate the property and
to pay reasonable rentals for the use of the premises, attorney’s fees and the costs of
the suit. 28

The above allegations appeared to show the elements of unlawful detainer. They also
conferred initiatory jurisdiction on the MTCC, because the case was filed a month after
the last demand to vacate — hence, within the one-year prescriptive period.

However, what was actually proven by petitioner was that possession by respondent
had been illegal from the beginning. While the Complaint was crafted to be an unlawful
detainer suit, petitioner’s real cause of action was for forcible entry, which had already
prescribed. Consequently, the MTCC had no more jurisdiction over the action.
The appellate court, therefore, did not err when it ruled that petitioner’s Complaint for
unlawful detainer was a mere subterfuge or a disguised substitute action for forcible
entry, which had already prescribed. To repeat, to maintain a viable action for forcible
entry, plaintiff must have been in prior physical possession of the property; this is an
essential element of the suit. 29

Third Issue:chanrob1es virtual 1aw library

Alleged Acts of Ownership

Petitioner next questions the CA’s pronouncement that respondent’s occupation of the
property was an exercise of a right flowing from a claim of ownership. It submits that the
appellate court should not have passed upon the issue of ownership, because the only
question for resolution in an ejectment suit is that of possession de facto.

Clearly, each of the parties claimed the right to possess the disputed property because
of alleged ownership of it. Hence, no error could have been imputed to the appellate
court when it passed upon the issue of ownership only for the purpose of resolving the
issue of possession de facto. 30 The CA’s holding is moreover in accord with
jurisprudence and the law.

Execution of a Deed of Sale Not Sufficient as Delivery

In a contract of sale, the buyer acquires the thing sold only upon its delivery "in any of
the ways specified in Articles 1497 to 1501, or any other manner signifying an
agreement that the possession is transferred from the vendor to the vendee." 31 With
respect to incorporeal property, Article 1498 lays down the general rule: the execution of
a public instrument shall be equivalent to the delivery of the thing that is the object of
the contract if, from the deed, the contrary does not appear or cannot be clearly
inferred.chanrob1es virtua1 1aw 1ibrary

However, ownership is transferred not by contract but by tradition or delivery. 32

Nowhere in the Civil Code is it provided that the execution of a Deed of Sale is a
conclusive presumption of delivery of possession of a piece of real estate. 33

This Court has held that the execution of a public instrument gives rises only to a prima
facie presumption of delivery. Such presumption is destroyed when the delivery is not
effected because of a legal impediment. 34 Pasagui v. Villablanca 35 had earlier ruled
that such constructive or symbolic delivery, being merely presumptive, was deemed
negated by the failure of the vendee to take actual possession of the land sold.

It is undisputed that petitioner did not occupy the property from the time it was allegedly
sold to it on December 5, 1996 or at any time thereafter. Nonetheless, it maintains that
Galino’s continued stay in the premises from the time of the sale up to the time
respondent’s occupation of the same on April 24, 1998, was possessions held on its
behalf and had the effect of delivery under the law. 36
Both the RTC and the CA disagreed. According to the RTC, petitioner did not gain
control and possession of the property, because Galino had continued to exercise
ownership rights over the realty. That is, she had remained in possession, continued to
declare it as her property for tax purposes and sold it to respondent in 1998.

For its part, the CA found it highly unbelievable that petitioner — which claims to be the
owner of the disputed property — would tolerate possession of the property by
respondent from April 24, 1998 up to October 16, 1998. How could it have been so
tolerant despite its knowledge that the property had been sold to her, and that it was by
virtue of that sale that she had undertaken major repairs and improvements on it?

Petitioner should have likewise been put on guard by respondent’s declaration of the
property for tax purposes on April 23, 1998, 37 as annotated in the tax certificate filed
seven months later. 38 Verily, the tax declaration represented an adverse claim over the
unregistered property and was inimical to the right of petitioner.

Indeed, the above circumstances derogated its claim of control and possession of the
property.

Order of Preference in Double Sale of Immovable Property

The ownership of immovable property sold to two different buyers at different times is
governed by Article 1544 of the Civil Code, which reads as
follows:jgc:chanrobles.com.ph

"Article 1544. . . .

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

"Should there be no inscription, the ownership shall pertain to the person who in good
faith was first in possession; and, in the absence thereof, to the person who presents
the oldest title, provided there is good faith."cralaw virtua1aw library

Galino allegedly sold the property in question to petitioner on December 5, 1996 and,
subsequently, to respondent on April 24, 1998. Petitioner thus argues that being the first
buyer, it has a better right to own the realty. However, it has not been able to establish
that its Deed of Sale was recorded in the Registry of Deeds of Olongapo City. 39 Its
claim of an unattested and unverified notation on its Deed of Absolute Sale 40 is not
equivalent to registration. It admits that, indeed, the sale has not been recorded in the
Registry of Deeds. 41

In the absence of the required inscription, the law gives preferential right to the buyer
who in good faith is first in possession. In determining the question of who is first in
possession, certain basic parameters have been established by jurisprudence.
First, the possession mentioned in Article 1544 includes not only material but also
symbolic possession. 42 Second, possessors in good faith are those who are not aware
of any flaw in their title or mode of acquisition. 43 Third, buyers of real property that is in
the possession of persons other than the seller must be wary — they must investigate
the rights of the possessors. 44 Fourth, good faith is always presumed; upon those who
allege bad faith on the part of the possessors rests the burden of proof. 45

Earlier, we ruled that the subject property had not been delivered to petitioner; hence, it
did not acquire possession either materially or symbolically. As between the two buyers,
therefore, respondent was first in actual possession of the property.

Petitioner has not proven that respondent was aware that her mode of acquiring the
property was defective at the time she acquired it from Galino. At the time, the property
— which was public land — had not been registered in the name of Galino; thus,
respondent relied on the tax declarations thereon. As shown, the former’s name
appeared on the tax declarations for the property until its sale to the latter in 1998.
Galino was in fact occupying the realty when respondent took over possession. Thus,
there was no circumstance that could have placed the latter upon inquiry or required her
to further investigate petitioner’s right of ownership.

Disqualification from Ownership of Alienable Public Land

Private corporations are disqualified from acquiring lands of the public domain, as
provided under Section 3 of Article XII of the Constitution, which we
quote:jgc:chanrobles.com.ph

"Sec. 3. Lands of the public domain are classified into agricultural, forest or timber,
mineral lands, and national parks. Agricultural lands of the public domain may be further
classified by law according to the uses to which they may be devoted. Alienable lands of
the public domain shall be limited to agricultural lands. Private corporations or
associations may not hold such alienable lands of the public domain except by lease,
for a period not exceeding twenty-five years, and not to exceed one thousand hectares
in area. Citizens of the Philippines may not lease not more than five hundred hectares,
or acquire not more than twelve hectares thereof by purchase, homestead, or grant. . . .
." (Emphasis supplied)

While corporations cannot acquire land of the public domain, they can however acquire
private land. 46 Hence, the next issue that needs to be resolved is the determination of
whether the disputed property is private land or of the public domain.

According to the certification by the City Planning and Development Office of Olongapo
City, the contested property in this case is alienable and disposable public land. 47 It
was for this reason that respondent filed a miscellaneous sales application to acquire it.
48
On the other hand, petitioner has not presented proof that, at the time it purchased the
property from Galino, the property had ceased to be of the public domain and was
already private land. The established rule is that alienable and disposable land of the
public domain held and occupied by a possessor — personally or through
predecessors-in-interest, openly, continuously, and exclusively for 30 years — is ipso
jure converted to private property by the mere lapse of time. 49

In view of the foregoing, we affirm the appellate court’s ruling that respondent is entitled
to possession de facto. This determination, however, is only provisional in nature. 50
Well-settled is the rule that an award of possession de facto over a piece of property
does not constitute res judicata as to the issue of its ownership. 51

WHEREFORE, this Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.chanrob1es virtua1 1aw 1ibrary

SO ORDERED.

G.R. No. 176474 November 27, 2008

HEIRS OF ARTURO REYES, represented by Evelyn R. San Buenaventura,

petitioners,
vs.
ELENA SOCCO-BELTRAN, respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing
the Decision1 dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP
No. 87066, which affirmed the Decision2 dated 30 June 2003 of the Office of the
President, in O.P. Case No. 02-A-007, approving the application of respondent Elena
Socco-Beltran to purchase the subject property.

The subject property in this case is a parcel of land originally identified as Lot No. 6-B,
situated in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters.
It was originally part of a larger parcel of land, measuring 1,022 square meters,
allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses Laquian),
who paid for the same with Japanese money. When Marcelo died, the property was left
to his wife Constancia. Upon Constancia’s subsequent death, she left the original parcel
of land, along with her other property, with her heirs – her siblings, namely: Filomena
Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena Socco-Beltran.3
Pursuant to an unnotarized document entitled "Extrajudicial Settlement of the Estate of
the Deceased Constancia R. Socco," executed by Constancia’s heirs sometime in 1965,
the parcel of land was partitioned into three lots–Lot No. 6-A, Lot No. 6-B, and Lot No.
6-C.4 The subject property, Lot No. 6-B, was adjudicated to respondent, but no title had
been issued in her name.

On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase
of Lot No. 6-B before the Department of Agrarian Reform (DAR), alleging that it was
adjudicated in her favor in the extra-judicial settlement of Constancia Socco’s estate.5

Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondent’s
petition before the DAR on the ground that the subject property was sold by
respondent’s brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as
evidenced by the Contract to Sell, dated 5 September 1954, stipulating that: 6

That I am one of the co-heirs of the Estate of the deceased Constancia Socco;
and that I am to inherit as such a portion of her lot consisting of Four Hundred
Square Meters (400) more or less located on the (sic) Zamora St., Municipality of
Dinalupihan, Province of Bataan, bounded as follows:

xxxx

That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter,
hereby sell, convey and transfer by way of this conditional sale the said 400
sq.m. more or less unto Atty. Arturo C. Reyes, his heirs, administrator and
assigns x x x. (Emphasis supplied.)

Petitioners averred that they took physical possession of the subject property in 1954
and had been uninterrupted in their possession of the said property since then.

Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office
conducted an investigation, the results of which were contained in her Report/
Recommendation dated 15 April 1999. Other than recounting the afore-mentioned facts,
Legal Officer Pinlac also made the following findings in her Report/Recommendation: 7

Further investigation was conducted by the undersigned and based on the

documentary evidence presented by both parties, the following facts were
gathered: that the house of [the] Reyes family is adjacent to the landholding in
question and portion of the subject property consisting of about 15 meters [were]
occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were]
constructed therein; on the remaining portion a skeletal form made of hollow
block[s] is erected and according to the heirs of late Arturo Reyes, this was
constructed since the year (sic) 70’s at their expense; that construction of the
said skeletal building was not continued and left unfinished which according to
the affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena
Socco in their attempt of occupancy of the subject landholding; (affidavit of
Patricia Hipolito is hereto attached as Annex "F"); that Elena Socco cannot
physically and personally occupy the subject property because of the skeletal
 building made by the Reyes family who have been requesting that they be paid
for the cost of the construction and the same be demolished at the expense of
Elena Socco; that according to Elena Socco, [she] is willing to waive her right on
the portion where [the] kitchen and bathroom is (sic) constructed but not the
whole of Lot [No.] 6-B adjudicated to her; that the Reyes family included the
subject property to the sworn statement of value of real properties filed before the
municipality of Dinalupihan, Bataan, copies of the documents are hereto attached
as Annexes "G" and "H"; that likewise Elena Socco has been continuously and
religiously paying the realty tax due on the said property.

In the end, Legal Officer Pinlac recommended the approval of respondent’s petition for
issuance of title over the subject property, ruling that respondent was qualified to own
the subject property pursuant to Article 1091 of the New Civil Code. 8 Provincial Agrarian
Reform Officer (PARO) Raynor Taroy concurred in the said recommendation in his
Indorsement dated 22 April 1999.9

In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta,

however, dismissed respondent’s petition for issuance of title over the subject property
on the ground that respondent was not an actual tiller and had abandoned the said
property for 40 years; hence, she had already renounced her right to recover the
same.10 The dispositive part of the Order reads:

1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna

Socco for lack of merit;

2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square
meters, more or less, situated Zamora Street, Dinalupihan, Bataan, in favor of
the heirs of Arturo Reyes.

3. ORDERING the complainant to refrain from any act tending to disturb the
peaceful possession of herein respondents.

4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent

documents for the issuance of CLOA in favor of the heirs of Arturo Reyes. 11

Respondent filed a Motion for Reconsideration of the foregoing Order, which was
denied by DAR Regional Director Acosta in another Order dated 15 September 1999. 12

Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9
November 2001, the DAR Secretary reversed the Decision of DAR Regional Director
Acosta after finding that neither petitioners’ predecessor-in-interest, Arturo Reyes, nor
respondent was an actual occupant of the subject property. However, since it was
respondent who applied to purchase the subject property, she was better qualified to
own said property as opposed to petitioners, who did not at all apply to purchase the
same. Petitioners were further disqualified from purchasing the subject property
because they were not landless. Finally, during the investigation of Legal Officer Pinlac,
petitioners requested that respondent pay them the cost of the construction of the
skeletal house they built on the subject property. This was construed by the DAR
Secretary as a waiver by petitioners of their right over the subject property. 13 In the said
Order, the DAR Secretary ordered that:

WHEREFORE, premises considered, the September 15, 1999 Order is hereby

SET ASIDE and a new Order is hereby issued APPROVING the application to
purchase Lot [No.] 6-B of Elena Socco-Beltran.14

Petitioners sought remedy from the Office of the President by appealing the 9
November 2001 Decision of the DAR Secretary. Their appeal was docketed as O.P.
Case No. 02-A-007. On 30 June 2003, the Office of the President rendered its Decision
denying petitioners’ appeal and affirming the DAR Secretary’s Decision. 15 The fallo of
the Decision reads:

WHEREFORE, premises considered, judgment appealed from is AFFIRMED

and the instant appeal DISMISSED.16

Petitioners’ Motion for Reconsideration was likewise denied by the Office of the
President in a Resolution dated 30 September 2004.17 In the said Resolution, the Office
of the President noted that petitioners failed to allege in their motion the date when they
received the Decision dated 30 June 2003. Such date was material considering that the
petitioners’ Motion for Reconsideration was filed only on 14 April 2004, or almost nine
months after the promulgation of the decision sought to be reconsidered. Thus, it ruled
that petitioners’ Motion for Reconsideration, filed beyond fifteen days from receipt of the
decision to be reconsidered, rendered the said decision final and executory.

Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-
G.R. SP No. 87066. Pending the resolution of this case, the DAR already issued on 8
July 2005 a Certificate of Land Ownership Award (CLOA) over the subject property in
favor of the respondent’s niece and representative, Myrna Socco-Beltran.18 Respondent
passed away on 21 March 2001,19 but the records do not ascertain the identity of her
legal heirs and her legatees.

Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its
Decision, dated 31 January 2006, affirming the Decision dated 30 June 2003 of the
Office of the President. It held that petitioners could not have been actual occupants of
the subject property, since actual occupancy requires the positive act of occupying and
tilling the land, not just the introduction of an unfinished skeletal structure thereon. The
Contract to Sell on which petitioners based their claim over the subject property was
executed by Miguel Socco, who was not the owner of the said property and, therefore,
had no right to transfer the same. Accordingly, the Court of Appeals affirmed
respondent’s right over the subject property, which was derived form the original
allocatees thereof.20 The fallo of the said Decision reads:
 WHEREFORE, premises considered, the instant PETITION FOR REVIEW is
DISMISSED. Accordingly, the Decision dated 30 June 2003 and the Resolution
dated 30 December 2004 both issued by the Office of the President are hereby
AFFIRMED in toto.21

The Court of Appeals denied petitioners’ Motion for Reconsideration of its Decision in a
Resolution dated 16 August 2006.22

Hence, the present Petition, wherein petitioners raise the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE
SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT ACTUAL
OCCUPANTS THEREOF BY DENYING THE LATTER’S CLAIM THAT THEY
HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE, NOTORIOUS AND
AVDERSE POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN
THIRTY (30) YEARS.

II

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT

PETITIONERS "CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS
THEY ARE NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX
DECLARATION."

III

WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT

"…WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF MYRNA
SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN
MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS)
EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19, 2005 OVER THE
SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO.

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED

PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE
FACT THAT MYRNA V. SOCCO-ARIZO GROSSLY MISREPRESENTED IN
HER INFORMATION SHEET OF BENEFICIARIES AND APPLICATION TO
PURCHASE LOT IN LANDED ESTATES THAT SHE IS A FILIPINO CITIZEN,
WHEN IN TRUTH AND IN FACT, SHE IS ALREADY AN AMERICAN
NATIONAL.23
The main issue in this case is whether or not petitioners have a better right to the
subject property over the respondent. Petitioner’s claim over the subject property is
anchored on the Contract to Sell executed between Miguel Socco and Arturo Reyes on
5 September 1954. Petitioners additionally allege that they and their predecessor-in-
interest, Arturo Reyes, have been in possession of the subject lot since 1954 for an
uninterrupted period of more than 40 years.

The Court is unconvinced.

Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It
was unmistakably stated in the Contract and made clear to both parties thereto that the
vendor, Miguel R. Socco, was not yet the owner of the subject property and was merely
expecting to inherit the same as his share as a co-heir of Constancia’s estate.24 It was
also declared in the Contract itself that Miguel R. Socco’s conveyance of the subject to
the buyer, Arturo Reyes, was a conditional sale. It is, therefore, apparent that the sale of
the subject property in favor of Arturo Reyes was conditioned upon the event that
Miguel Socco would actually inherit and become the owner of the said property. Absent
such occurrence, Miguel R. Socco never acquired ownership of the subject property
which he could validly transfer to Arturo Reyes.

Under Article 1459 of the Civil Code on contracts of sale, "The thing must be licit and
the vendor must have a right to transfer ownership thereof at the time it is delivered."
The law specifically requires that the vendor must have ownership of the property at the
time it is delivered. Petitioners claim that the property was constructively delivered to
them in 1954 by virtue of the Contract to Sell. However, as already pointed out by this
Court, it was explicit in the Contract itself that, at the time it was executed, Miguel R.
Socco was not yet the owner of the property and was only expecting to inherit it. Hence,
there was no valid sale from which ownership of the subject property could have
transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the
subject property, Arturo Reyes also could not have conveyed the same to his heirs,
herein petitioners.

Petitioners, nevertheless, insist that they physically occupied the subject lot for more
than 30 years and, thus, they gained ownership of the property through acquisitive
prescription, citing Sandoval v. Insular Government 25 and San Miguel Corporation v.
Court of Appeals. 26

In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of

Act No. 926, otherwise known as the Land Registration Act, which required -- for the
issuance of a certificate of title to agricultural public lands -- the open, continuous,
exclusive, and notorious possession and occupation of the same in good faith and
under claim of ownership for more than ten years. After evaluating the evidence
presented, consisting of the testimonies of several witnesses and proof that fences were
constructed around the property, the Court in the afore-stated case denied the petition
on the ground that petitioners failed to prove that they exercised acts of ownership or
were in open, continuous, and peaceful possession of the whole land, and had caused it
to be enclosed to the exclusion of other persons. It further decreed that whoever claims
such possession shall exercise acts of dominion and ownership which cannot be
mistaken for the momentary and accidental enjoyment of the property. 27

In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and
undisputed possession of alienable public land for the period prescribed by law creates
the legal fiction whereby land ceases to be public land and is, therefore, private
property. It stressed, however, that the occupation of the land for 30 years must be
conclusively established. Thus, the evidence offered by petitioner therein – tax
declarations, receipts, and the sole testimony of the applicant for registration,
petitioner’s predecessor-in-interest who claimed to have occupied the land before
selling it to the petitioner – were considered insufficient to satisfy the quantum of proof
required to establish the claim of possession required for acquiring alienable public
land.28

As in the two aforecited cases, petitioners herein were unable to prove actual
possession of the subject property for the period required by law. It was underscored in
San Miguel Corporation that the open, continuous, exclusive, and notorious occupation
of property for more than 30 years must be no less than conclusive, such quantum of
proof being necessary to avoid the erroneous validation of actual fictitious claims of
possession over the property that is being claimed. 29

In the present case, the evidence presented by the petitioners falls short of being
conclusive. Apart from their self-serving statement that they took possession of the
subject property, the only proof offered to support their claim was a general statement
made in the letter30 dated 4 February 2002 of Barangay Captain Carlos Gapero,
certifying that Arturo Reyes was the occupant of the subject property "since peace time
and at present." The statement is rendered doubtful by the fact that as early as 1997,
when respondent filed her petition for issuance of title before the DAR, Arturo Reyes
had already died and was already represented by his heirs, petitioners herein.

Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes
occupied the premises for an unspecified period of time, i.e., since peace time until the
present, cannot prevail over Legal Officer Pinlac’s more particular findings in her
Report/Recommendation. Legal Officer Pinlac reported that petitioners admitted that it
was only in the 1970s that they built the skeletal structure found on the subject property.
She also referred to the averments made by Patricia Hipolito in an Affidavit,31 dated 26
February 1999, that the structure was left unfinished because respondent prevented
petitioners from occupying the subject property. Such findings disprove petitioners’
claims that their predecessor-in-interest, Arturo Reyes, had been in open, exclusive,
and continuous possession of the property since 1954. The adverted findings were the
result of Legal Officer Pinlac’s investigation in the course of her official duties, of matters
within her expertise which were later affirmed by the DAR Secretary, the Office of the
President, and the Court of Appeals. The factual findings of such administrative officer,
if supported by evidence, are entitled to great respect.32
In contrast, respondent’s claim over the subject property is backed by sufficient
evidence. Her predecessors-in-interest, the spouses Laquian, have been identified as
the original allocatees who have fully paid for the subject property. The subject property
was allocated to respondent in the extrajudicial settlement by the heirs of Constancia’s
estate. The document entitled "Extra-judicial Settlement of the Estate of the Deceased
Constancia Socco" was not notarized and, as a private document, can only bind the
parties thereto. However, its authenticity was never put into question, nor was its legality
impugned. Moreover, executed in 1965 by the heirs of Constancia Socco, or more than
30 years ago, it is an ancient document which appears to be genuine on its face and
therefore its authenticity must be upheld.33 Respondent has continuously paid for the
realty tax due on the subject property, a fact which, though not conclusive, served to
strengthen her claim over the property.34

From the foregoing, it is only proper that respondent’s claim over the subject property
be upheld. This Court must, however, note that the Order of the DAR Secretary, dated 9
November 2001, which granted the petitioner’s right to purchase the property, is flawed
and may be assailed in the proper proceedings. Records show that the DAR affirmed
that respondent’s predecessors-in-interest, Marcelo Laquian and Constancia Socco,
having been identified as the original allocatee, have fully paid for the subject property
as provided under an agreement to sell. By the nature of a contract or agreement to
sell, the title over the subject property is transferred to the vendee upon the full payment
of the stipulated consideration. Upon the full payment of the purchase price, and absent
any showing that the allocatee violated the conditions of the agreement, ownership of
the subject land should be conferred upon the allocatee. 35 Since the extrajudicial
partition transferring Constancia Socco’s interest in the subject land to the respondent is
valid, there is clearly no need for the respondent to purchase the subject property,
despite the application for the purchase of the property erroneously filed by respondent.
The only act which remains to be performed is the issuance of a title in the name of her
legal heirs, now that she is deceased.

Moreover, the Court notes that the records have not clearly established the right of
respondent’s representative, Myrna Socco-Arizo, over the subject property. Thus, it is
not clear to this Court why the DAR issued on 8 July 2005 a CLOA 36 over the subject
property in favor of Myrna Socco-Arizo. Respondent’s death does not automatically
transmit her rights to the property to Myrna Socco-Beltran. Respondent only authorized
Myrna Socco-Arizo, through a Special Power of Attorney37 dated 10 March 1999, to
represent her in the present case and to administer the subject property for her benefit.
There is nothing in the Special Power of Attorney to the effect that Myrna Socco-Arizo
can take over the subject property as owner thereof upon respondent’s death. That
Miguel V. Socco, respondent’s only nephew, the son of the late Miguel R. Socco, and
Myrna Socco-Arizo’s brother, executed a waiver of his right to inherit from respondent,
does not automatically mean that the subject property will go to Myrna Socco-Arizo,
absent any proof that there is no other qualified heir to respondent’s estate. Thus, this
Decision does not in any way confirm the issuance of the CLOA in favor of Myrna
Socco-Arizo, which may be assailed in appropriate proceedings.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006, is
AFFIRMED with MODIFICATION. This Court withholds the confirmation of the validity
of title over the subject property in the name of Myrna Socco-Arizo pending
determination of respondent’s legal heirs in appropriate proceedings. No costs.

G.R. No. 122463 December 19, 2005

RUDOLF LIETZ, INC., Petitioner,

vs.
THE COURT OF APPEALS, AGAPITO BURIOL, TIZIANA TURATELLO & PAOLA
SANI, Respondents.

DECISION

Tinga, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court,
praying for the annulment of the Decision1 dated April 17, 1995 and the Resolution2
dated October 25, 1995 of the Court of Appeals in CA-G.R. CV No. 38854. The Court of
Appeals affirmed the Decision3 in Civil Case No. 2164 of the Regional Trial Court
(RTC), Branch 48, of Palawan and Puerto Princesa City with the modification that
herein respondents Tiziana Turatello and Paola Sani are entitled to damages, attorney’s
fees, and litigation expenses.

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing and as prayed for by the defendants, the instant
complaint is hereby DISMISSED. Defendant’s counterclaim is likewise DISMISSED.
Plaintiff, however, is ordered to pay defendant Turatello and Sani’s counsel the sum of
₱3,010.38 from August 9, 1990 until fully paid representing the expenses incurred by
said counsel when the trial was cancelled due to the non-appearance of plaintiff’s
witnesses. With costs against the plaintiff.

SO ORDERED.4

As culled from the records, the following antecedents appear:

Respondent Agapito Buriol previously owned a parcel of unregistered land situated at

Capsalay Island, Port Barton, San Vicente, Palawan. On August 15, 1986, respondent
Buriol entered into a lease agreement with Flavia Turatello and respondents Turatello
and Sani, all Italian citizens, involving one (1) hectare of respondent Buriol’s property.
The lease agreement was for a period of 25 years, renewable for another 25 years. The
lessees took possession of the land after paying respondent Buriol a down payment of
₱10,000.00.5 The lease agreement, however, was reduced into writing only in January
1987.
On November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same
parcel of land for the amount of ₱30,000.00. The Deed of Absolute Sale embodying the
agreement described the land as follows:

A parcel of land, consisting of FIVE (5) hectares, more or less, a portion of that parcel of
land declared in the name of Agapito Buriol, under Tax Declaration No. 0021, revised in
the year 1985, together with all improvements thereon, situated at the Island of
Capsalay, Barangay Port Barton, municipality of San Vicente, province of Palawan
which segregated from the whole parcel described in said tax declaration, has the
following superficial boundaries: NORTH, Sec. 01-017; and remaining property of the
vendor; EAST, by Seashore; SOUTH, 01-020; and WEST, by 01-018 (now Elizabeth
Lietz).6

Petitioner later discovered that respondent Buriol owned only four (4) hectares, and with
one more hectare covered by lease, only three (3) hectares were actually delivered to
petitioner. Thus, petitioner instituted on April 3, 1989 a complaint for Annulment of
Lease with Recovery of Possession with Injunction and Damages against respondents
and Flavia Turatello before the RTC. The complaint alleged that with evident bad faith
and malice, respondent Buriol sold to petitioner five (5) hectares of land when
respondent Buriol knew for a fact that he owned only four (4) hectares and managed to
lease one more hectare to Flavia Turatello and respondents Tiziana Turatello and Paola
Sani. The complaint sought the issuance of a restraining order and a writ of preliminary
injunction to prevent Flavia Turatello and respondents Turatello and Sani from
introducing improvements on the property, the annulment of the lease agreement
between respondents, and the restoration of the amount paid by petitioner in excess of
the value of the property sold to him. Except for Flavia Turatello, respondents filed
separate answers raising similar defenses of lack of cause of action and lack of
jurisdiction over the action for recovery of possession. Respondents Turatello and Sani
also prayed for the award of damages and attorney’s fees.7

After trial on the merits, the trial court rendered judgment on May 27, 1992, dismissing
both petitioner’s complaint and respondents’ counterclaim for damages. Petitioner and
respondents Turatello and Sani separately appealed the RTC Decision to the Court of
Appeals, which affirmed the dismissal of petitioner’s complaint and awarded
respondents Turatello and Sani damages and attorney’s fees. The dispositive portion of
the Court of Appeals Decision reads:

WHEREFORE, the decision appealed from is hereby AFFIRMED, with the following
modification:

Plaintiff-appellant Rudolf Lietz, Inc. is hereby (1) ordered to pay defendants-appellants

Turatello and Sani, the sum of ₱100,000.00 as moral damages; (2) ₱100,000.00 as
exemplary damages; (3) ₱135,728.73 as attorney’s fees; and (4) ₱10,000.00 as
litigation expenses.

SO ORDERED.8
Petitioner brought to this Court the instant petition after the denial of its motion for
reconsideration of the Court of Appeal Decision. The instant petition imputes the
following errors to the Court of Appeals.

I. IN DEFENDING AGAPITO BURIOL’S GOOD FAITH AND IN STATING THAT

ASSUMING THAT HE (BURIOL) WAS IN BAD FAITH PETITIONER WAS SOLELY
RESPONSIBLE FOR ITS INEXCUSABLE CREDULOUSNESS.

II. IN ASSERTING THAT ARTICLES 1542 AND 1539 OF THE NEW CIVIL CODE ARE,
RESPECTIVELY, APPLICABLE AND INAPPLICABLE IN THE CASE AT BAR.

III. IN NOT GRANTING PETITIONER’S CLAIM FOR ACTUAL AND EXEMPLARY

DAMAGES.

IV. IN GRANTING RESPONDENTS TIZIANA TURATELLO AND PAOLA SANI

EXHORBITANT [sic] AMOUNTS AS DAMAGES WHICH ARE EVEN BEREFT OF
EVIDENTIARY BASIS.9

Essentially, only two main issues confront this Court, namely: (i) whether or not
petitioner is entitled to the delivery of the entire five hectares or its equivalent, and (ii)
whether or not damages may be awarded to either party.

Petitioner contends that it is entitled to the corresponding reduction of the purchase

price because the agreement was for the sale of five (5) hectares although respondent
Buriol owned only four (4) hectares. As in its appeal to the Court of Appeals, petitioner
anchors its argument on the second paragraph of Article 1539 of the Civil Code, which
provides:

Art. 1539. The obligation to deliver the thing sold includes that of placing in the control
of the vendee all that is mentioned in the contract, in conformity with the following rules:

If the sale of real estate should be made with a statement of its area, at the rate of a
certain price for a unit of measure or number, the vendor shall be obliged to deliver to
the vendee, if the latter should demand it, all that may have been stated in the contract;
but, should this be not possible, the vendee may choose between a proportional
reduction of the price and the rescission of the contract, provided that, in the latter case,
the lack in the area be not less than one-tenth of that stated.

....

The Court of Appeals Decision, however, declared as inapplicable the abovequoted

provision and instead ruled that petitioner is no longer entitled to a reduction in price
based on the provisions of Article 1542 of the Civil Code, which read:

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain
sum for a unit of measure or number, there shall be no increase or decrease of the
price, although there be a greater or lesser area or number than that stated in the
contract.

The same rule shall be applied when two or more immovables are sold for a single
price; but if, besides mentioning the boundaries, which is indispensable in every
conveyance of real estate, its area or number should be designated in the contract, the
vendor shall be bound to deliver all that is included within said boundaries, even when it
exceeds the area or number specified in the contract; and, should he not be able to do
so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or
number, unless the contract is rescinded because the vendee does not accede to the
failure to deliver what has been stipulated.

Article 1539 governs a sale of immovable by the unit, that is, at a stated rate per unit
area. In a unit price contract, the statement of area of immovable is not conclusive and
the price may be reduced or increased depending on the area actually delivered. If the
vendor delivers less than the area agreed upon, the vendee may oblige the vendor to
deliver all that may be stated in the contract or demand for the proportionate reduction
of the purchase price if delivery is not possible. If the vendor delivers more than the
area stated in the contract, the vendee has the option to accept only the amount agreed
upon or to accept the whole area, provided he pays for the additional area at the
contract rate.10

In some instances, a sale of an immovable may be made for a lump sum and not at a
rate per unit. The parties agree on a stated purchase price for an immovable the area of
which may be declared based on an estimate or where both the area and boundaries
are stated.

In the case where the area of the immovable is stated in the contract based on an
estimate, the actual area delivered may not measure up exactly with the area stated in
the contract. According to Article 154211 of the Civil Code, in the sale of real estate,
made for a lump sum and not at the rate of a certain sum for a unit of measure or
number, there shall be no increase or decrease of the price although there be a greater
or lesser area or number than that stated in the contract. However, the discrepancy
must not be substantial. A vendee of land, when sold in gross or with the description
"more or less" with reference to its area, does not thereby ipso facto take all risk of
quantity in the land. The use of "more or less" or similar words in designating quantity
covers only a reasonable excess or deficiency.12

Where both the area and the boundaries of the immovable are declared, the area
covered within the boundaries of the immovable prevails over the stated area. In cases
of conflict between areas and boundaries, it is the latter which should prevail. What
really defines a piece of ground is not the area, calculated with more or less certainty,
mentioned in its description, but the boundaries therein laid down, as enclosing the land
and indicating its limits. In a contract of sale of land in a mass, it is well established that
the specific boundaries stated in the contract must control over any statement with
respect to the area contained within its boundaries. It is not of vital consequence that a
deed or contract of sale of land should disclose the area with mathematical accuracy. It
is sufficient if its extent is objectively indicated with sufficient precision to enable one to
identify it. An error as to the superficial area is immaterial.13 Thus, the obligation of the
vendor is to deliver everything within the boundaries, inasmuch as it is the entirety
thereof that distinguishes the determinate object.14

As correctly noted by the trial court and the Court of Appeals, the sale between
petitioner and respondent Buriol involving the latter’s property is one made for a lump
sum. The Deed of Absolute Sale shows that the parties agreed on the purchase price
on a predetermined area of five hectares within the specified boundaries and not based
on a particular rate per area. In accordance with Article 1542, there shall be no
reduction in the purchase price even if the area delivered to petitioner is less than that
stated in the contract. In the instant case, the area within the boundaries as stated in the
contract shall control over the area agreed upon in the contract.

The Court rejects petitioner’s contention that the property’s boundaries as stated in the
Deed of Absolute Sale are superficial and unintelligible and, therefore, cannot prevail
over the area stated in the contract. First, as pointed out by the Court of Appeals, at an
ocular inspection prior to the perfection of the contract of sale, respondent Buriol
pointed to petitioner the boundaries of the property. Hence, petitioner gained a fair
estimate of the area of the property sold to him. Second, petitioner cannot now assail
the contents of the Deed of Absolute Sale, particularly the description of the boundaries
of the property, because petitioner’s subscription to the Deed of Absolute Sale indicates
his assent to the correct description of the boundaries of the property.

Petitioner also asserts that respondent Buriol is guilty of misleading petitioner into
believing that the latter was buying five hectares when he knew prior to the sale that he
owned only four hectares. The review of the circumstances of the alleged
misrepresentation is factual and, therefore, beyond the province of the Court. Besides,
this issue had already been raised before and passed upon by the trial court and the
Court of Appeals. The factual finding of the courts below that no sufficient evidence
supports petitioner’s allegation of misrepresentation is binding on the Court.

The Court of Appeals reversed the trial court’s dismissal of respondents Turatello and
Sani’s counterclaim for moral and exemplary damages, attorney’s fees and litigation
expenses. In awarding moral damages in the amount of ₱100,000 in favor of Turatello
and Sani, the Court of Appeals justified the award to alleviate the suffering caused by
petitioner’s unfounded civil action. The filing alone of a civil action should not be a
ground for an award of moral damages in the same way that a clearly unfounded civil
action is not among the grounds for moral damages.15

Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory
damages.16 With the deletion of the award for moral damages, there is no basis for the
award of exemplary damages.
WHEREFORE, the instant petition for review on certiorari is GRANTED in PART. The
Court of Appeals Decision in CA-G.R. CV No. 38854 is AFFIRMED with the
MODIFICATION that the award of moral and exemplary damages is DELETED.

SO ORDERED.

DOLORES SALINAS, assisted by G.R. No. 153077

her husband, JUAN CASTILLO,
Present:
Petitioner,
QUISUMBING, J., Chairperson,
- versus -
CARPIO MORALES,
SPS. BIENVENIDO S. FAUSTINO
and ILUMINADA G. FAUSTINO, TINGA,

Respondents. VELASCO, JR., and

BRION, JJ.

Promulgated:

September 19, 2008

x-------------------------------------------x

DECISION

CARPIO MORALES, J.:

It appears that respondent Bienvenido S. Faustino (Faustino), by a Deed of Absolute

Sale (Deed of Sale)1 dated June 27, 1962, purchased from his several co-heirs,
including his first cousins Benjamin Salinas and herein petitioner Dolores Salinas, their
respective shares to a parcel of land covered by Tax Declaration No. 14687, in the
name of their grandmother Carmen Labitan, located in Subic, Zambales, with a
"superficial area of 300.375 square meters [sq. m.] more or less," and with
boundaries "in the North: Carmen Labitan; in the South: Calle, in the East: Callejon and
in the West: Roque Demetrio."

On March 15, 1982, respondent Faustino, joined by his wife, filed before the then Court
of First Instance of Zambales a complaint for recovery of possession with damages
against petitioner, assisted by her husband, docketed as Civil Case No. 3382-0, alleging
that the parcel of land he bought via the June 27, 1962 Deed of Sale from his co-heirs
consisted of 1,381 sq. m. and is more particularly described as follows:
A residential land located at Barrio Matain, Subic, Zambales now know as Lot 3, Block
5-K, Psd-8268 bounded on the NORTH by Road Lot 1, Block 5-1, PSD-8268; on the
SOUTH by Road Lot 2, Block 5-1, Psd-8268; on the EAST by Road Lot 2, Block 5-1,
Psd-8286; and, on the WEST by the property of Roque Demetrio Lot 2, Block 5-k, Psd
8268; containing an area of ONE THOSUAND THREE HUNDRED EIGHTY-ONE
(1,381) SQUARE METERS, more or less. Declared for taxation purposes under Tax
Declaration No. 1896 in the name of Spouses Bienvenido S. Faustino and Iluminada G.
Faustino.2 (Emphasis and underscoring supplied)

Respondent spouses further alleged that they allowed petitioner and co-heirs to occupy
and build a house on a 627 sq. m. portion of the land, particularly described as follows:

The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this
complaint; bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the East by
Road Lot 2, Block 5-1, Psd-8268; and on the SOUTH and WEST by the remaining
portion of Lot 5, Block 5-1, PSD-8268 of herein plaintiffs which is the land described in
Paragraph 2 of this complaint owned by the plaintiffs and that this portion in question
has an area of SIX HUNDRED TWENTY-SEVEN (627) SQUARE METERS, more or
less;3 (Emphasis and underscoring supplied),

on the condition that they would voluntarily and immediately remove the house and
vacate that portion of the land should they (respondents) need the land; and that when
they asked petitioner and her co-heir-occupants to remove the house and restore the
possession of the immediately-described portion of the land, they refused, hence, the
filing of the complaint.

In her Answer,4 petitioner claimed that she is the owner of a 628 sq. m. lot covered by
Tax Declaration No. 1017 in her name, particularly described as follows:

A residential lot, together with the two (2) storey house thereon constructed, and all
existing improvements thereon, situated at Matain, Subic, Zambales, containing an area
of 628 square meters, more or less. Bounded on the North, by Lot 12313 [sic]; on the
East, by Lot 12413 (Road Lot); on the South, by Lot 12005-Cecilia Salinas; and on the
West, by Lot 12006, Loreto Febre. Declared under Tax No. 1017, in the name of
Dolores Salinas Castillo. (Emphasis and underscoring supplied);

that if respondents refer to the immediately described lot, then they have no right or
interest thereon;5 and that her signature in the June 27, 1962 Deed of Sale is forged.

After trial, Branch 73 of the Regional Trial Court (RTC) of Olongapo City, by Decision of
August 31, 1993, found petitioner’s claim of forgery unsupported. It nevertheless
dismissed the complaint,6 it holding that, inter alia, the Deed of Sale indicated that only
300.375 sq. m. was sold to petitioner.

. . . [I]n the . . . Deed of Sale [dated June 27, 1962] (Exhibit "B"), the area of the land
sold was only 300.375 square meters while the plaintiffs[-herein respondents] in their
complaint claim 1,381 square meters or the whole of the lot shown by exhibit "A" (Lot 3,
Block 5-A, Psd-8268). Since the document is the best evidence, and the deed of sale
indicates only 300.375 square meters, so then, only the area as stated in the Deed of
Sale should be owned by the plaintiffs. The allegations [sic] that there might be a
typographical error is again mere conjecture and not really supported by evidence.

The boundaries of the land indicated in the Deed of Sale (Exhibit "B") [are] different
from that of Exhibit "A" claimed by the plaintiff[s-herein respondents] to be the plan of
the lot which they allegedly bought. The Deed of Sale states [that the boundary of the
lot in the] North is the lot of Carmen Labitan while Exhibit "A" indicated that North of the
land is Lot 3, Block 5-A, Psd-8268 (Exhibit "A") is a Road Lot (Lot 1, Block 5-1, Psd-
8268). This Court believes that after examining the documents presented, that the land
bought by the plaintiff is only a portion of the land appearing in Exhibit "A" and not the
whole lot. The land bought being situated at the southern portion of Lot 3, Block 5-K,
Psd-8268. This explains why the northern portion of the lot sold indicated in the Deed of
Sale is owned by Carmen Labitan, the original owner of the whole Lot 3, Block 5-K,
Psd-8268 (Exhibit "C-1").

Even the tax declaration submitted by the plaintiff indicates different boundaries with
that of the land indicated in the Deed of Sale. The law states in Art. 434 of the Civil
Code:

"Art. 434. In an action to recover, the property must be identified, and the plaintiff must
rely on the weakness of the defendant’s claim."

xxxx

Herein plaintiffs[-respondents] only own the area of 300.375 square meters of the said
lot and not the whole area of 1,381 square meters as claimed by them. There is no
evidence to substantiate the plaintiffs’ claim for the area of 1,381 square meters.

x x x x7 (Emphasis and underscoring supplied)

On respondents’ appeal,8 the Court of Appeals, by Decision of December 20, 2001, 9

modified the RTC decision. It held that since respondents are claiming the whole lot
containing 1,381 sq. m. but that petitioner is claiming 628 sq. m. thereof, then
respondents are "entitled to the remaining portion . . . of 753 square meters." The
appellate court explained:

x x x [T]he Court agrees with the court a quo that only a portion of the whole lot was
indeed sold to the plaintiffs-appellants by the heirs of deceased Isidro Salinas and
Carmen Labitan. What remains to be determined is the particular portion of the area
that was sold to the plaintiffs-appellants.

x x x [W]hat really defines a piece of land is not the area calculated with more or less
certainty mentioned in the description but the boundaries therein laid down as enclosing
the land and indicating its limits. Where the land is sold for a lump sum and not so much
per unit of measure or number, the boundaries of the land stated in the contract
determine the effects and scope of the sale not the area thereof.

Based on these rules, plaintiffs-appellants are not strictly bound by the area stated in
the Deed of Sale which is merely 300.375 square meters, but by the metes and bounds
stated therein. As found by the court a quo, the land bought by the plaintiffs-appellants
is a portion of the land appearing in Exhibit "A", situated at the southern portion of Lot 3,
Block 5-K, Psd 8268 where the northern portion of the land sold as indicated in the
Deed of Sale is owned by Carmen Labitan, the original owner of the whole Lot 3, Block
5-K, Psd-8268 (Exhibit "C-1".) None of the other heirs questioned the sale of the
property as described in the Deed of Sale.

Considering the foregoing, this Court believes that plaintiffs-appellants[-herein

respondents] own more than 300.375 square meters of the land in question. However,
said ownership does not extend to the northern portion of the land being claimed by the
defendants-appellees, consisting of 628 (erroneously stated in the decision of the court
a quo as 268) square meters and covered by Tax Declaration No. 1017 in the name of
defendant-appellee[-herein petitioner] Dolores Salinas. Plaintiffs-appellants are[,]
however, entitled to the remaining portion of the property consisting of seven hundred
fifty-three (753) square meters, more or less. (Emphasis and underscoring supplied)

The appellate court thus disposed:

WHEREFORE, based on the foregoing premises, the judgment appealed from is hereby
MODIFIED, as follows:

1. Plaintiffs-appellants Bienvenido S. Faustino and Iluminada G. Faustin[o] are declared

owners of seven hundred fifty-three (753) square meters, more or less, of the parcel of
land subject of this case.

2. Plaintiffs-appellants and defendants-appellees are directed to cause the segregation

of their respective shares in the property as determined by this Court, with costs equally
shared between them.

x x x x10 (Underscoring supplied)

Petitioner’s motion for reconsideration having been denied, 11 she filed the present
petition12 faulting the Court of Appeals

a. x x x IN MODIFYING THE DECISION OF THE COURT A QUO DISMISSING THE

COMPLAINT FOR INSUFFICIENCY OF EVIDENCE;

b. x x x IN DECLARING THE PRIVATE RESPONDENTS OWNERS OF 753 SQUARE

METERS, MORE OR LESS, OF THE PARCEL OF LAND SUBJECT OF THE CASE[;]
c. x x x IN NOT AFFIRMING THE DECISION OF THE COURT A QUO AND XXX IN
NOT DECLARING THE PETITIONER AS OWNER OF HER PROPERTY WHICH,
SINCE THEN UP TO THE PRESENT, SHE HAD BEEN OCCUPYING AND DESPITE
PREPONDERANCE OF EVIDENCE OF HER OWNERSHIP THERETO.13
(Underscoring in the original)

The petition is meritorious.

Indeed, in a contract of sale of land in a mass, the specific boundaries stated in the
contract must control over any statement with respect to the area contained within its
boundaries.14 Thus, it is the boundaries indicated in a deed of absolute sale, and not the
area in sq. m. mentioned therein – 300.375 sq. m. in the Deed of Sale in respondents’
favor – that control in the determination of which portion of the land a vendee acquires.

In concluding that respondents acquired via the June 27, 1962 Deed of Sale the total
land area of 753 sq. m., the Court of Appeals subtracted from the total land area of
1,381 sq. m. reflected in Exh. "A," which is "Plan of Lot 3, Block 5-k, Psd-8268, as
prepared for Benjamin R. Salinas" containing an area of 1,381 sq. m. and which was
prepared on February 10, 1960 by a private land surveyor, the 628 sq. m. area of the lot
claimed by petitioner as reflected in Tax Declaration No. 1017 in her name. As will be
shown shortly, however, the basis of the appellate court’s conclusion is erroneous.

As the immediately preceding paragraph reflects, the "Plan of Lot 3, Bk 5-K, Psd-82"
was prepared for respondent Faustino’s and petitioner’s first cousin co-heir Benjamin
Salinas on February 10, 1960.

Why the appellate court, after excluding the 628 sq. m. lot covered by a Tax Declaration
in the name of petitioner from the 1,381 sq. m. lot surveyed for Benjamin P. Salinas in
1960, concluded that what was sold via the 1962 Deed of Sale to respondent Faustino
was the remaining 753 sq. m., despite the clear provision of said Deed of Sale that what
was conveyed was 300.375 sq. m., escapes comprehension. It defies logic, given that
respondents base their claim of ownership of the questioned 628 sq. m. occupied by
petitioner on that June 27, 1962 Deed of Sale covering a 300.375 sq. m. lot.

The trial court in fact noted in its Pre-trial Order that "the parties cannot agree as to the
identity of the property sought to be recovered by the plaintiff."15 (Emphasis and
underscoring supplied.) Indeed, in her Answer to the Complaint, petitioner alleged "[t]hat
if the plaintiffs refer to [the lot covered by Tax Declaration No. 1017], then they have no
right or interest or participation whatsoever over the same x x x."16 (Emphasis and italics
supplied.)

Even the boundaries of the 628 sq. m. area covered by Tax Declaration No. 1017 in
petitioner’s name and those alleged by respondents to be occupied by petitioner are
different. Thus, the boundaries of the lot covered by Tax Declaration No. 1017 are: Lot
No. 12302 on the North; Lot No. 12005 (Cecilia Salinas) on the South; Lot No. 12413
(road lot) on the East; and Lot No. 12006 (Loreto Febre) on the West. 17 Whereas,
following respondents’ claim, the 627 sq. m. area occupied by petitioner has the
following boundaries, viz:

The northeastern portion of the land of the plaintiffs described in Paragraph 2 of this
complaint; bounded on the NORTH by Road Lot 1, Block 5-1, Psd-8268; on the EAST
by Road Lot 2, Block 5-1, Psd-8268; and on the SOUTH and WEST by the remaining
portion of Lot 5, Block 5-1, PSD-8268 of herein plaintiffs which is the land described in
Paragraph 2 of this complaint owned by the plaintiffs and that this portion in question
has an area of SIX HUNDRED TWENTY-SEVEN (627) SQUARE METERS, more or
less.18 (Emphasis and underscoring supplied)

The Court of Appeals thus doubly erred in concluding that 1) what was sold to
respondents via the June 27, 1962 Deed of Sale was the 1,381 sq. m. parcel of land
reflected in the Plan-Exh. "A" prepared in 1960 for Benjamin Salinas, and 2) petitioner
occupied 628 sq. m. portion thereof, hence, respondents own the remaining 753 sq. m.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated
December 20, 2001 is REVERSED and SET ASIDE, and the Decision of Branch 73 of
the Regional Trial Court of Olongapo City dated August 31, 1993 DISMISSING Civil
Case No. 3382-0 is REINSTATED.

SO ORDERED.

G.R. No. 170405 February 2, 2010

RAYMUNDO S. DE LEON, Petitioner,

vs.
BENITA T. ONG.1 Respondent.

DECISION

CORONA, J.:

On March 10, 1993, petitioner Raymundo S. de Leon sold three parcels of land2 with
improvements situated in Antipolo, Rizal to respondent Benita T. Ong. As these
properties were mortgaged to Real Savings and Loan Association, Incorporated
(RSLAI), petitioner and respondent executed a notarized deed of absolute sale with
assumption of mortgage3 stating:

xxx xxx xxx

That for and in consideration of the sum of ONE MILLION ONE HUNDRED
THOUSAND PESOS (₱1.1 million), Philippine currency, the receipt whereof is hereby
acknowledged from [RESPONDENT] to the entire satisfaction of [PETITIONER], said
[PETITIONER] does hereby sell, transfer and convey in a manner absolute and
irrevocable, unto said [RESPONDENT], his heirs and assigns that certain real estate
together with the buildings and other improvements existing thereon, situated in [Barrio]
Mayamot, Antipolo, Rizal under the following terms and conditions:

1. That upon full payment of [respondent] of the amount of FOUR HUNDRED

FIFTEEN THOUSAND FIVE HUNDRED (₱415,000), [petitioner] shall execute
and sign a deed of assumption of mortgage in favor of [respondent] without any
further cost whatsoever;

2. That [respondent] shall assume payment of the outstanding loan of SIX

HUNDRED EIGHTY FOUR THOUSAND FIVE HUNDRED PESOS (₱684,500)
with REAL SAVINGS AND LOAN,4 Cainta, Rizal… (emphasis supplied)

xxx xxx xxx

Pursuant to this deed, respondent gave petitioner ₱415,500 as partial payment.

Petitioner, on the other hand, handed the keys to the properties and wrote a letter
informing RSLAI of the sale and authorizing it to accept payment from respondent and
release the certificates of title.

Thereafter, respondent undertook repairs and made improvements on the properties.5

Respondent likewise informed RSLAI of her agreement with petitioner for her to assume
petitioner’s outstanding loan. RSLAI required her to undergo credit investigation.

Subsequently, respondent learned that petitioner again sold the same properties to one
Leona Viloria after March 10, 1993 and changed the locks, rendering the keys he gave
her useless. Respondent thus proceeded to RSLAI to inquire about the credit
investigation. However, she was informed that petitioner had already paid the amount
due and had taken back the certificates of title.

Respondent persistently contacted petitioner but her efforts proved futile.

On June 18, 1993, respondent filed a complaint for specific performance, declaration of
nullity of the second sale and damages6 against petitioner and Viloria in the Regional
Trial Court (RTC) of Antipolo, Rizal, Branch 74. She claimed that since petitioner had
previously sold the properties to her on March 10, 1993, he no longer had the right to
sell the same to Viloria. Thus, petitioner fraudulently deprived her of the properties.

Petitioner, on the other hand, insisted that respondent did not have a cause of action
against him and consequently prayed for the dismissal of the complaint. He claimed that
since the transaction was subject to a condition (i.e., that RSLAI approve the
assumption of mortgage), they only entered into a contract to sell. Inasmuch as
respondent did apply for a loan from RSLAI, the condition did not arise. Consequently,
the sale was not perfected and he could freely dispose of the properties. Furthermore,
he made a counter-claim for damages as respondent filed the complaint allegedly with
gross and evident bad faith.
Because respondent was a licensed real estate broker, the RTC concluded that she
knew that the validity of the sale was subject to a condition. The perfection of a contract
of sale depended on RSLAI’s approval of the assumption of mortgage. Since RSLAI did
not allow respondent to assume petitioner’s obligation, the RTC held that the sale was
never perfected.

In a decision dated August 27, 1999,7 the RTC dismissed the complaint for lack of
cause of action and ordered respondent to pay petitioner ₱100,000 moral damages,
₱20,000 attorney’s fees and the cost of suit.

Aggrieved, respondent appealed to the Court of Appeals (CA), 8 asserting that the court
a quo erred in dismissing the complaint.

The CA found that the March 10, 2003 contract executed by the parties did not impose
any condition on the sale and held that the parties entered into a contract of sale.
Consequently, because petitioner no longer owned the properties when he sold them to
Viloria, it declared the second sale void. Moreover, it found petitioner liable for moral
and exemplary damages for fraudulently depriving respondent of the properties.

In a decision dated July 22, 2005,9 the CA upheld the sale to respondent and nullified
the sale to Viloria. It likewise ordered respondent to reimburse petitioner ₱715,250 (or
the amount he paid to RSLAI). Petitioner, on the other hand, was ordered to deliver the
certificates of titles to respondent and pay her ₱50,000 moral damages and ₱15,000
exemplary damages.

Petitioner moved for reconsideration but it was denied in a resolution dated November
11, 2005.10 Hence, this petition,11 with the sole issue being whether the parties entered
into a contract of sale or a contract to sell.

Petitioner insists that he entered into a contract to sell since the validity of the
transaction was subject to a suspensive condition, that is, the approval by RSLAI of
respondent’s assumption of mortgage. Because RSLAI did not allow respondent to
assume his (petitioner’s) obligation, the condition never materialized. Consequently,
there was no sale.

Respondent, on the other hand, asserts that they entered into a contract of sale as
petitioner already conveyed full ownership of the subject properties upon the execution
of the deed.

We modify the decision of the CA.

Contract of Sale or Contract to Sell?

The RTC and the CA had conflicting interpretations of the March 10, 1993 deed. The
RTC ruled that it was a contract to sell while the CA held that it was a contract of sale.
In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. Should the buyer default in the payment of the purchase
price, the seller may either sue for the collection thereof or have the contract judicially
resolved and set aside. The non-payment of the price is therefore a negative resolutory
condition.12

On the other hand, a 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.
For this reason, if the buyer defaults in the payment thereof, the seller can only sue for
damages.13

The deed executed by the parties (as previously quoted) stated that petitioner sold the
properties to respondent "in a manner absolute and irrevocable" for a sum of ₱1.1
million.14 With regard to the manner of payment, it required respondent to pay ₱415,500
in cash to petitioner upon the execution of the deed, with the balance 15 payable directly
to RSLAI (on behalf of petitioner) within a reasonable time. 16 Nothing in said instrument
implied that petitioner reserved ownership of the properties until the full payment of the
purchase price.17 On the contrary, the terms and conditions of the deed only affected
the manner of payment, not the immediate transfer of ownership (upon the execution of
the notarized contract) from petitioner as seller to respondent as buyer. Otherwise
stated, the said terms and conditions pertained to the performance of the contract, not
the perfection thereof nor the transfer of ownership.

Settled is the rule that the seller is obliged to transfer title over the properties and deliver
the same to the buyer.18 In this regard, Article 1498 of the Civil Code19 provides that, as
a rule, the execution of a notarized deed of sale is equivalent to the delivery of a thing
sold.

In this instance, petitioner executed a notarized deed of absolute sale in favor of

respondent. Moreover, not only did petitioner turn over the keys to the properties to
respondent, he also authorized RSLAI to receive payment from respondent and release
his certificates of title to her. The totality of petitioner’s acts clearly indicates that he had
unqualifiedly delivered and transferred ownership of the properties to respondent.
Clearly, it was a contract of sale the parties entered into.

Furthermore, even assuming arguendo that the agreement of the parties was subject to
the condition that RSLAI had to approve the assumption of mortgage, the said condition
was considered fulfilled as petitioner prevented its fulfillment by paying his outstanding
obligation and taking back the certificates of title without even notifying respondent. In
this connection, Article 1186 of the Civil Code provides:

Article 1186. The condition shall be deemed fulfilled when the obligor voluntarily
prevents its fulfillment.

Void Sale Or Double Sale?

Petitioner sold the same properties to two buyers, first to respondent and then to Viloria
on two separate occasions.20 However, the second sale was not void for the sole
reason that petitioner had previously sold the same properties to respondent. On this
account, the CA erred.

This case involves a double sale as the disputed properties were sold validly on two
separate occasions by the same seller to the two different buyers in good faith.

Article 1544 of the Civil Code provides:

Article 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. (emphasis supplied)

This provision clearly states that the rules on double or multiple sales apply only to
purchasers in good faith. Needless to say, it disqualifies any purchaser in bad faith.

A purchaser in good faith is one who buys the property of another without notice that
some other person has a right to, or an interest in, such property and pays a full and fair
price for the same at the time of such purchase, or before he has notice of some other
person’s claim or interest in the property.21 The law requires, on the part of the buyer,
lack of notice of a defect in the title of the seller and payment in full of the fair price at
the time of the sale or prior to having notice of any defect in the seller’s title.

Was respondent a purchaser in good faith? Yes.

Respondent purchased the properties, knowing they were encumbered only by the
mortgage to RSLAI. According to her agreement with petitioner, respondent had the
obligation to assume the balance of petitioner’s outstanding obligation to RSLAI.
Consequently, respondent informed RSLAI of the sale and of her assumption of
petitioner’s obligation. However, because petitioner surreptitiously paid his outstanding
obligation and took back her certificates of title, petitioner himself rendered respondent’s
obligation to assume petitioner’s indebtedness to RSLAI impossible to perform.

Article 1266 of the Civil Code provides:

Article 1266. The debtor in obligations to do shall be released when the prestation
become legally or physically impossible without the fault of the obligor.
Since respondent’s obligation to assume petitioner’s outstanding balance with RSLAI
became impossible without her fault, she was released from the said obligation.
Moreover, because petitioner himself willfully prevented the condition vis-à-vis the
payment of the remainder of the purchase price, the said condition is considered fulfilled
pursuant to Article 1186 of the Civil Code. For purposes, therefore, of determining
whether respondent was a purchaser in good faith, she is deemed to have fully
complied with the condition of the payment of the remainder of the purchase price.

Respondent was not aware of any interest in or a claim on the properties other than the
mortgage to RSLAI which she undertook to assume. Moreover, Viloria bought the
properties from petitioner after the latter sold them to respondent. Respondent was
therefore a purchaser in good faith. Hence, the rules on double sale are applicable.

Article 1544 of the Civil Code provides that when neither buyer registered the sale of the
properties with the registrar of deeds, the one who took prior possession of the
properties shall be the lawful owner thereof.

In this instance, petitioner delivered the properties to respondent when he executed the
notarized deed22 and handed over to respondent the keys to the properties. For this
reason, respondent took actual possession and exercised control thereof by making
repairs and improvements thereon. Clearly, the sale was perfected and consummated
on March 10, 1993. Thus, respondent became the lawful owner of the properties.

Nonetheless, while the condition as to the payment of the balance of the purchase price
was deemed fulfilled, respondent’s obligation to pay it subsisted. Otherwise, she would
be unjustly enriched at the expense of petitioner.

Therefore, respondent must pay petitioner ₱684,500, the amount stated in the deed.
This is because the provisions, terms and conditions of the contract constitute the law
between the parties. Moreover, the deed itself provided that the assumption of
mortgage "was without any further cost whatsoever." Petitioner, on the other hand, must
deliver the certificates of title to respondent. We likewise affirm the award of damages.

WHEREFORE, the July 22, 2005 decision and November 11, 2005 resolution of the
Court of Appeals in CA-G.R. CV No. 59748 are hereby AFFIRMED with
MODIFICATION insofar as respondent Benita T. Ong is ordered to pay petitioner
Raymundo de Leon ₱684,500 representing the balance of the purchase price as
provided in their March 10, 1993 agreement.

Costs against petitioner.

G.R. No. 167195 May 8, 2009

ASSET PRIVATIZATION TRUST, Petitioner,

vs.
T.J. ENTERPRISES, Respondent.
 DECISION

TINGA, J.:

This is a Rule 45 petition1 which seeks the reversal of the Court of Appeals’ decision2
and resolution3 affirming the RTC’s decision4 holding petitioner liable for actual
damages for breach of contract.

Petitioner Asset Privatization Trust5 (petitioner) was a government entity created for the
purpose to conserve, to provisionally manage and to dispose assets of government
institutions.6 Petitioner had acquired from the Development Bank of the Philippines
(DBP) assets consisting of machinery and refrigeration equipment which were then
stored at Golden City compound, Pasay City. The compound was then leased to and in
the physical possession of Creative Lines, Inc., (Creative Lines). These assets were
being sold on an as-is-where-is basis.

On 7 November 1990, petitioner and respondent entered into an absolute deed of sale
over certain machinery and refrigeration equipment identified as Lots Nos. 2, 3 and 5.
Respondent paid the full amount of ₱84,000.00 as evidenced by petitioner’s Receipt
No. 12844. After two (2) days, respondent demanded the delivery of the machinery it
had purchased. Sometime in March 1991, petitioner issued Gate Pass No. 4955.
Respondent was able to pull out from the compound the properties designated as Lots
Nos. 3 and 5. However, during the hauling of Lot No. 2 consisting of sixteen (16) items,
only nine (9) items were pulled out by respondent. The seven (7) items that were left
behind consisted of the following: (1) one (1) Reefer Unit 1; (2) one (1) Reefer Unit 2;
(3) one (1) Reefer Unit 3; (4) one (1) unit blast freezer with all accessories; (5) one (1)
unit chest freezer; (6) one (1) unit room air-conditioner; and (7) one (1) unit air
compressor. Creative Lines’ employees prevented respondent from hauling the
remaining machinery and equipment.

Respondent filed a complaint for specific performance and damages against petitioner
and Creative Lines.7 During the pendency of the case, respondent was able to pull out
the remaining machinery and equipment. However, upon inspection it was discovered
that the machinery and equipment were damaged and had missing parts.

Petitioner argued that upon the execution of the deed of sale it had complied with its
obligation to deliver the object of the sale since there was no stipulation to the contrary.
It further argued that being a sale on an as-is-where-is basis, it was the duty of
respondent to take possession of the property. Petitioner claimed that there was already
a constructive delivery of the machinery and equipment.

The RTC ruled that the execution of the deed of absolute sale did not result in
constructive delivery of the machinery and equipment. It found that at the time of the
sale, petitioner did not have control over the machinery and equipment and, thus, could
not have transferred ownership by constructive delivery. The RTC ruled that petitioner is
liable for breach of contract and should pay for the actual damages suffered by
respondent.

On petitioner’s appeal, the Court of Appeals affirmed in toto the decision of the RTC.

Hence this petition.

Before this Court, petitioner raises issues by attributing the following errors to the Court
of Appeals, to wit:

I.

The Court of Appeals erred in not finding that petitioner had complied with its obligation
to make delivery of the properties subject of the contract of sale.

II.

The Court of Appeals erred in not considering that the sale was on an "as-is-where-is"
basis wherein the properties were sold in the condition and in the place where they
were located.

III.

The Court of Appeals erred in not considering that respondent’s acceptance of

petitioner’s disclaimer of warranty forecloses respondent’s legal basis to enforce any
right arising from the contract.

IV.

The reason for the failure to make actual delivery of the properties was not attributable
to the fault and was beyond the control of petitioner. The claim for damages against
petitioner is therefore bereft of legal basis.8

The first issue hinges on the determination of whether there was a constructive delivery
of the machinery and equipment upon the execution of the deed of absolute sale
between petitioner and respondent.

The ownership of a thing sold shall be transferred to the vendee upon the actual or
constructive delivery thereof.9 The thing sold shall be understood as delivered when it is
placed in the control and possession of the vendee.10

As a general rule, when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract,
if from the deed the contrary does not appear or cannot clearly be inferred. And with
regard to movable property, its delivery may also be made by the delivery of the keys of
the place or depository where it is stored or kept. 11 In order for the execution of a public
instrument to effect tradition, the purchaser must be placed in control of the thing sold. 12

However, the execution of a public instrument only gives rise to a prima facie
presumption of delivery. Such presumption is destroyed when the delivery is not
effected because of a legal impediment.13 It is necessary that the vendor shall have
control over the thing sold that, at the moment of sale, its material delivery could have
been made.14 Thus, a person who does not have actual possession of the thing sold
cannot transfer constructive possession by the execution and delivery of a public
instrument.15

In this case, there was no constructive delivery of the machinery and equipment upon
the execution of the deed of absolute sale or upon the issuance of the gate pass since it
was not petitioner but Creative Lines which had actual possession of the property. The
presumption of constructive delivery is not applicable as it has to yield to the reality that
the purchaser was not placed in possession and control of the property.

On the second issue, petitioner posits that the sale being in an as-is-where-is basis,
respondent agreed to take possession of the things sold in the condition where they are
found and from the place

where they are located. The phrase as-is where-is basis pertains solely to the physical
condition of the thing sold, not to its legal situation.16 It is merely descriptive of the state
of the thing sold. Thus, the as-is where-is basis merely describes the actual state and
location of the machinery and equipment sold by petitioner to respondent. The depiction
does not alter petitioner’s responsibility to deliver the property to
respondent.1awphi1.zw+

Anent the third issue, petitioner maintains that the presence of the disclaimer of
warranty in the deed of absolute sale absolves it from all warranties, implied or
otherwise. The position is untenable.

The vendor is bound to transfer the ownership of and deliver, as well as warrant the
thing which is the object of the sale.17 Ownership of the thing sold is acquired by the
vendee from the moment it its delivered to him in any of the ways specified in articles
1497 to 1501, or in any other manner signifying an agreement that the possession is
transferred from the vendor to the vendee.18 A perusal of the deed of absolute sale
shows that both the vendor and the vendee represented and warranted to each other
that each had all the requisite power and authority to enter into the deed of absolute
sale and that they shall perform each of their respective obligations under the deed of
absolute in accordance with the terms thereof. 19 As previously shown, there was no
actual or constructive delivery of the things sold. Thus, petitioner has not performed its
obligation to transfer ownership and possession of the things sold to respondent.
As to the last issue, petitioner claims that its failure to make actual delivery was beyond
its control. It posits that the refusal of Creative Lines to allow the hauling of the
machinery and equipment was unforeseen and constituted a fortuitous event.

The matter of fortuitous events is governed by Art. 1174 of the Civil Code which
provides that except in cases expressly specified by the law, or when it is otherwise
declared by stipulation, or when the nature of the obligation requires assumption of risk,
no person shall be responsible for those events which could not be foreseen, or which
though foreseen, were inevitable. The elements of a fortuitous event are: (a) the cause
of the unforeseen and unexpected occurrence, must have been independent of human
will; (b) the event that constituted the caso fortuito must have been impossible to
foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such
as to render it impossible for the debtors to fulfill their obligation in a normal manner,
and; (d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.20

A fortuitous event may either be an act of God, or natural occurrences such as floods or
typhoons, or an act of man such as riots, strikes or wars. 21 However, when the loss is
found to be partly the result of a person’s participation–whether by active intervention,
neglect or failure to act—the whole occurrence is humanized and removed from the
rules applicable to a fortuitous event.22

We quote with approval the following findings of the Court of Appeals, to wit:

We find that Creative Lines’ refusal to surrender the property to the vendee does not
constitute force majeure which exculpates APT from the payment of damages. This
event cannot be considered unavoidable or unforeseen. APT knew for a fact that the
properties to be sold were housed in the premises leased by Creative Lines. It should
have made arrangements with Creative Lines beforehand for the smooth and orderly
removal of the equipment. The principle embodied in the act of God doctrine strictly
requires that the act must be one occasioned exclusively by the violence of nature and
all human agencies are to be excluded from creating or entering into the cause of the
mischief. When the effect, the cause of which is to be considered, is found to be in part
the result of the participation of man, whether it be from active intervention or neglect, or
failure to act, the whole occurrence is thereby humanized, as it were, and removed from
the rules applicable to the acts of God.23

Moreover, Art. 1504 of the Civil Code provides that where actual delivery has been
delayed through the fault of either the buyer or seller the goods are at the risk of the
party in fault. The risk of loss or deterioration of the goods sold does not pass to the
buyer until there is actual or constructive delivery thereof. As previously discussed,
there was no actual or constructive delivery of the machinery and equipment. Thus, the
risk of loss or deterioration of property is borne by petitioner. Thus, it should be liable for
the damages that may arise from the delay.1avvphi1
Assuming arguendo that Creative Lines’ refusal to allow the hauling of the machinery
and equipment is a fortuitous event, petitioner will still be liable for damages. This Court
agrees with the appellate court’s findings on the matter of damages, thus:

Article 1170 of the Civil Code states: "Those who in the performance of their obligations
are guilty of fraud, negligence, or delay and those who in any manner contravene the
tenor thereof are liable for damages." In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those that are the natural and
probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was constituted. 24
The trial court correctly awarded actual damages as pleaded and proven during trial.25

WHEREFORE, the Court AFFIRMS in toto the Decision of the Court of Appeals dated
31 August 2004. Cost against petitioner.

SO ORDERED.

G.R. No. L-15155 December 29, 1960

BOARD OF LIQUIDATORS, petitioner-appellant,

vs.
EXEQUIEL FLORO, ET AL., oppositors-appellees.

Godofredo Zandueta for appellant.

Isidero A. Vera for appellee.

REYES, J.B.L., J.:

From the order of the Court of First Instance of Manila, dated August 10, 1955, denying
its petition to exclude certain pieces of steel matting from the assets of the insolvent M.
P. Malabanan, the Board of Liquidators appealed to the Court of Appeals. The latter
certified the case to this Court on the ground that only questions of law are involved.

The Board of Liquidators (hereinafter referred to as the Board) is an agency of the

Government created under Executive Order No. 372 (November 24, 1950), and,
pursuant to Executive Order No. 377 (December 1, 1950), took over the functions of the
defunct Surplus Property Liquidating Committee.

On June 14, 1952 Melecio Malabanan entered into an agreement with the Board for the
salvage of surplus properties sunk in territorial waters off the provinces of Mindoro, La
Union, and Batangas (Exhibit "A"). By its terms, Malabanan was to commence
operations within 30 days from execution of said contract, which was to be effective for
a period of one (1) year from the start of operations, extendible for a total period of not
more than six (6) months. On June 10, 1953, Malabanan requested for an extension of
one (1) year for the salvage in waters of Mindoro and Batangas; and the Board
extended the contract up to November 30, 1953. On November 18, 1953, Malabanan
requested a second extension of one more year for the waters of Occidental Mindoro,
and Board again extended the contract up to August 31, 1954. Malabanan submitted a
recovery report dated July 26, 1954, wherein it is stated that he had recovered a total of
13,107 pieces of steel mattings, as follows:

1. December, 1953-April 30, 1954 2,5552

2. May 1, 1954-June 30, 1954 10,552

13,107 (pieces)

Four months previously, Malabanan had entered into an agreement with Exequiel Floro,
dated March 31, 1954 (Exhibit 1, Floro), in which, among other things, it was agreed
that Floro would advance to Malabanan certain sums of money, not to exceed
P25,000.00, repayment, thereof being secured by quantities of steel mattings which
Malabanan would consign to Floro; that said advances were to paid within a certain
period, and upon default at the expiration thereof, Floro was, authorized to sell whatever
steel mattings were in his possession under said contract, in amount sufficient to satisfy
the advances. Pursuant thereto, Floro claims to have made total advances to the sum of
P24,224.50.

It appears that as Malabanan was not able to repay Floro's advances, the latter, by a
document dated August 4, 1954, sold 11,047 pieces of steel mattings to Eulalio Legaspi
for the sum of P24,803.40.

Seventeen days later, on August 21, 1954, Malabanan filed in the Court of First
Instance of Manila a petition for voluntary insolvency, attaching thereto a Schedule of
Accounts, in which the Board was listed as one of the creditors for P10,874.46, and
Exequiel Floro for P24,220.50, the origin of the obligations being described as "Manila
Royalty" and "Salvaging Operations", respectively. Also attached was an Inventory of
Properties, listing certain items of personal property allegedly aggregating P33,707.00
in value. In this list were included 11,167 pieces of steel mattings with an alleged
estimated value of P33,501.00.

Soon after, the Board, claiming to be the owner of the listed steel matting, filed a petition
to exclude them from the inventory; and to make the insolvent account for a further
1,940 pieces of steel matting, the difference between the number stated in the
insolvent's recovery report of July 26, 1954 and that stated in the inventory. Exequiel
Floro opposed the Board's petition and claimed that the steel matting listed had become
the property of Eulalio Legaspi by virtue of a deed of sale in his favor, executed by Floro
pursuant to the latter's contract with Malabanan on March 31, 1954. The court below,
after reception of evidence as to the genuineness and due execution of the deed of sale
to Legaspi, as well as of the contract between Malabanan and Floro, denied the Board's
petition, declaring that Malabanan had acquired ownership over the steel mattings
under his contract with the Board; that Exequiel Floro was properly authorized to
dispose of the steel mattings under Floro's contract with Malabanan; and that the sale to
Eulalio Legaspi was valid and not contrary to the Insolvency Law.

In this appeal, the Board contends that Malabanan did not acquire ownership over the
steel mattings due to his failure to comply with the terms of the contract, allegedly
constituting conditions precedent for the transfer of title, namely: payment of the price;
audit and check as to the nature, quantity and value of properties salvaged; weighing of
the salvaged properties to be conducted jointly by representatives of the Board and of
Malabanan; determination of the site for storage; audit and verification of the recovery
reports by government auditors; and firing of performance bond.

We are of the opinion, and so hold, that the contract (Exhibit "A") between Malabanan
and the Board had effect of vesting Malabanan with title to, or ownership of the steel
mattings in question as soon as they were brought up from the bottom of the sea. This
is shown by pertinent provisions of the contract as follows:

10. For and in consideration of the assignment by the BOARD OF

LIQUIDATORS to the CONTRACTOR (Malabanan) of all right, title and interest
in and to all surplus properties salvaged by the CONTRACTOR under this
contract, the CONTRACTOR shall pay to the Government Ninety Pesos (P90.00)
per long ton(2,240 lbs.) of surplus properties recovered.

11. Payment of the agreed price shall be made monthly during the first ten (10)
days of every month on the basis of recovery reports of sunken surplus
properties salvaged during the preceding month, duly verified and audited by the
authorized representative of the BOARD OF LIQUIDATORS.

That Malabanan was required under the contract to post a bond of P10,000.00 to
guarantee compliance with the terms and conditions of the contract; that the operation
for salvage were entirely at Malabanan's expense and risks; that gold, silver, copper,
coins, currency, jewelry, precious stones, etc. were excepted from the contract, and
were instead required to be turned over to the Board for disposition; that the expenses
for storage, including guard service, were for Malabanan's account — all these
circumstances indicated that ownership of the goods passed to Malabanan as soon as
they were recovered or salvaged (i.e., as soon as the salvor had gained effective
possession of the goods), and not only after payment of the stipulated price. .

While there can be reservation of title in the seller until full payment of the price (Article
1478, N.C.C.), or, until fulfillment of a condition (Article 1505, N.C.C.); and while
execution of a public instrument amounts to delivery only when from the deed the
contrary does not appear or cannot clearly be inferred (Article 1498, supra), there is
nothing in the said contract which may be deemed a reservation of title, or from which it
may clearly be inferred that delivery was not intended.
The contention that there was no delivery is incorrect. While there was no physical
tradition, there was one by agreement (traditio longa manu) in conformity with Article
1499 of the Civil Code.lawphil.net

Art. 1499 — The delivery of movable property may likewise be made by the mere
consent or agreement of the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time of the sale. . . .

As observed earlier, there is nothing in the terms of the public instrument in question
from which an intent to withhold delivery or transfer of title may be inferred.

The Board also contends that as no renewal of the bond required was filed for the
extension of the contract, it ceased to have any force and effect; and, as the steel
mattings were recovered during the extended period of the contract, Malabanan did not
acquire any rights thereto. The pertinent portion of the contract provides:

12. Jointly with the execution of this contract, the CONTRACTOR shall file a
bond in the amount of TEN THOUSAND (P10,000.00) PESOS to guarantee his
faithful compliance with the terms and conditions herein; Provided, that this
contract shall not be considered to have been executed notwithstanding the
signing hereof by the parties until said bond shall have been properly filed.

Malabanan filed a bond dated June 10, 1952, effective for one (1) year, or up to June
10, 1953. The principal contract, executed on June 14, 1952, was first extended to
November 30, 1953, and finally, to August 31, 1954. As can be seen, there was no
longer any bond from June 11, 1953 to August 31, 1954.

The lapse of the bond did not extinguish the contract between Malabanan and the
Board. The requirement that a bond be posted was already complied with when
Malabanan filed the bond dated June 10, 1952. A bond merely stands as guaranty for a
principal obligation which exist independently of said bond, the latter being an
accessory contract (Valencia vs. RFC & C.A., 103 Phil., 444). Significantly, its purpose,
as per the terms of the contract, was "to guarantee his (Malabanan's) faithful
compliance with the terms and conditions herein" and, for violation of the contract, the
Board may declare "the bond forfeited" (par. 13). Being for its benefit, the Board could
legally waive the bond requirement (Valencia vs. RFC, et al., supra.), and it did so
when, the bond already having expired, it extended the contract not only once, but
twice. In none of the resolutions extending contract (Annexes "C" & "E", pp. 108-112,
Record on Appeal) was there a requirement that the bond be renewed, in the face of the
first indorsement by the Executive Officer recommending that Malabanan's request for a
second extension be granted "provided the bond be originally posted should continue."

There is no merit to the suggestion that there being a novation, Article 1299 of the Civil
Code should govern. Novation is never presumed, it being required that the intent to
novate be expressed clearly and unequivocally, or that the terms of the new agreement
be incompatible with the old contract (Article 1292, N.C.C.; Martinez vs. Cavives, 25
Phil. 581; Tiu Siuce vs. Habaña, 45 Phil. 707; Pablo vs. Sapungan, 71 Phil. 145; Young
vs. Villa, 93 Phil., 21; 49 Off. Gaz., [5] 1818.) Here there was neither express novation
nor incompatibility from which it could be implied. Moreover, a mere extension of the
term (period) for payment or performance is not novation (Inchausti vs. Yulo, 34 Phil.
978; Zapanta vs. De Rotaeche, 21 Phil. 154; Pablo vs. Sapungan, Supra); and, while
the extension covered only some of the areas originally agreed upon, this change did
not alter the essence of the contract (cf. Ramos vs. Gibbon, 67 Phil., 371; Bank of P.I.
vs. Herridge, 47 Phil., 57).

It is next contended that the sale by Floro to Legaspi on August 4, 1954 (within 30 days
prior to petition for insolvency) was void as a fraudulent transfer under Section 70 of the
Insolvency Law. The court below held that the sale to Legaspi was valid and not
violative of Section 70; but there having been no proceedings to determine whether the
sale was fraudulent, we think it was premature for the court below to decide this point,
especially because under section 36, No. 8. of the Insolvency Act, all proceedings to set
aside fraudulent transfers should be brought and prosecuted by the assignee, who can
legally represent all the creditors of the insolvent (Maceda, et al., vs. Hernandez, et al.,
70 Phil., 261). To allow a single creditor to bring such a proceeding would invite a
multiplicity of suits, since the resolution of his case would not bind the other creditors,
who may refile the same claim independently, with diverse proofs, and possibly give rise
to contradictory rulings by the courts.

The order appealed from is hereby affirmed in so far as it declares the disputed goods
to be the property of the insolvent; but without prejudice to the right of the assignee in
insolvency to take whatever action may be proper to attack the alleged fraudulent
transfer of the steel matting to Eulalio Legaspi, and to make the proper parties account
for the difference between the number of pieces of steel matting stated in the insolvent's
recovery report, Annex "B" (13,107), and that stated in his inventory (11,167). Costs
against appellant.

G.R. No. 124242 January 21, 2005

SAN LORENZO DEVELOPMENT CORPORATION, petitioner,

vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA
ZAVALLA LU, respondents.

DECISION

TINGA, J.:

From a coaptation of the records of this case, it appears that respondents Miguel Lu
and Pacita Zavalla, (hereinafter, the Spouses Lu) owned two (2) parcels of land situated
in Sta. Rosa, Laguna covered by TCT No. T-39022 and TCT No. T-39023 both
measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to
respondent Pablo Babasanta, (hereinafter, Babasanta) for the price of fifteen pesos
(₱15.00) per square meter. Babasanta made a downpayment of fifty thousand pesos
(₱50,000.00) as evidenced by a memorandum receipt issued by Pacita Lu of the same
date. Several other payments totaling two hundred thousand pesos (₱200,000.00) were
made by Babasanta.

Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution
of a final deed of sale in his favor so that he could effect full payment of the purchase
price. In the same letter, Babasanta notified the spouses about having received
information that the spouses sold the same property to another without his knowledge
and consent. He demanded that the second sale be cancelled and that a final deed of
sale be issued in his favor.

In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having

agreed to sell the property to him at fifteen pesos (₱15.00) per square meter. She,
however, reminded Babasanta that when the balance of the purchase price became
due, he requested for a reduction of the price and when she refused, Babasanta backed
out of the sale. Pacita added that she returned the sum of fifty thousand pesos
(₱50,000.00) to Babasanta through Eugenio Oya.

On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial
Court (RTC), Branch 31, of San Pedro, Laguna, a Complaint for Specific Performance
and Damages1 against his co-respondents herein, the Spouses Lu. Babasanta alleged
that the lands covered by TCT No. T- 39022 and T-39023 had been sold to him by the
spouses at fifteen pesos (₱15.00) per square meter. Despite his repeated demands for
the execution of a final deed of sale in his favor, respondents allegedly refused.

In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta
and when the total advances of Pacita reached fifty thousand pesos (₱50,000.00), the
latter and Babasanta, without the knowledge and consent of Miguel Lu, had verbally
agreed to transform the transaction into a contract to sell the two parcels of land to
Babasanta with the fifty thousand pesos (₱50,000.00) to be considered as the
downpayment for the property and the balance to be paid on or before 31 December
1987. Respondents Lu added that as of November 1987, total payments made by
Babasanta amounted to only two hundred thousand pesos (₱200,000.00) and the latter
allegedly failed to pay the balance of two hundred sixty thousand pesos (₱260,000.00)
despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of
the price from fifteen pesos (₱15.00) to twelve pesos (₱12.00) per square meter and
when the Spouses Lu refused to grant Babasanta’s request, the latter rescinded the
contract to sell and declared that the original loan transaction just be carried out in that
the spouses would be indebted to him in the amount of two hundred thousand pesos
(₱200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Manager’s
Check No. 05020269 in the amount of two hundred thousand pesos (₱200,000.00) in
the name of Babasanta to show that she was able and willing to pay the balance of her
loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he
prayed for the issuance of a writ of preliminary injunction with temporary restraining
order and the inclusion of the Register of Deeds of Calamba, Laguna as party
defendant. He contended that the issuance of a preliminary injunction was necessary to
restrain the transfer or conveyance by the Spouses Lu of the subject property to other
persons.

The Spouses Lu filed their Opposition4 to the amended complaint contending that it
raised new matters which seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17 January 19905 admitted the
amended complaint.

On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC)

filed a Motion for Intervention6 before the trial court. SLDC alleged that it had legal
interest in the subject matter under litigation because on 3 May 1989, the two parcels of
land involved, namely Lot 1764-A and 1764-B, had been sold to it in a Deed of Absolute
Sale with Mortgage.7 It alleged that it was a buyer in good faith and for value and
therefore it had a better right over the property in litigation.

In his Opposition to SLDC’s motion for intervention,8 respondent Babasanta demurred

and argued that the latter had no legal interest in the case because the two parcels of
land involved herein had already been conveyed to him by the Spouses Lu and hence,
the vendors were without legal capacity to transfer or dispose of the two parcels of land
to the intervenor.

Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene.
SLDC filed its Complaint-in-Intervention on 19 April 1990.9 Respondent Babasanta’s
motion for the issuance of a preliminary injunction was likewise granted by the trial court
in its Order dated 11 January 199110 conditioned upon his filing of a bond in the amount
of fifty thousand pesos (₱50,000.00).

SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu

executed in its favor an Option to Buy the lots subject of the complaint. Accordingly, it
paid an option money in the amount of three hundred sixteen thousand one hundred
sixty pesos (₱316,160.00) out of the total consideration for the purchase of the two lots
of one million two hundred sixty-four thousand six hundred forty pesos (₱1,264,640.00).
After the Spouses Lu received a total amount of six hundred thirty-two thousand three
hundred twenty pesos (₱632,320.00) they executed on 3 May 1989 a Deed of Absolute
Sale with Mortgage in its favor. SLDC added that the certificates of title over the
property were delivered to it by the spouses clean and free from any adverse claims
and/or notice of lis pendens. SLDC further alleged that it only learned of the filing of the
complaint sometime in the early part of January 1990 which prompted it to file the
motion to intervene without delay. Claiming that it was a buyer in good faith, SLDC
argued that it had no obligation to look beyond the titles submitted to it by the Spouses
Lu particularly because Babasanta’s claims were not annotated on the certificates of
title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the
sale of the property to SLDC. It ordered the Spouses Lu to pay Babasanta the sum of
two hundred thousand pesos (₱200,000.00) with legal interest plus the further sum of
fifty thousand pesos (₱50,000.00) as and for attorney’s fees. On the complaint-in-
intervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch
to cancel the notice of lis pendens annotated on the original of the TCT No. T-39022 (T-
7218) and No. T-39023 (T-7219).

Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta
and SLDC did not register the respective sales in their favor, ownership of the property
should pertain to the buyer who first acquired possession of the property. The trial court
equated the execution of a public instrument in favor of SLDC as sufficient delivery of
the property to the latter. It concluded that symbolic possession could be considered to
have been first transferred to SLDC and consequently ownership of the property
pertained to SLDC who purchased the property in good faith.

Respondent Babasanta appealed the trial court’s decision to the Court of Appeals
alleging in the main that the trial court erred in concluding that SLDC is a purchaser in
good faith and in upholding the validity of the sale made by the Spouses Lu in favor of
SLDC.

Respondent spouses likewise filed an appeal to the Court of Appeals. They contended
that the trial court erred in failing to consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the verbal contract of sale and
declared that the original loan transaction just be carried out. The Spouses Lu argued
that since the properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for
lack of knowledge and consent of Miguel Lu. They further averred that the trial court
erred in not dismissing the complaint filed by Babasanta; in awarding damages in his
favor and in refusing to grant the reliefs prayed for in their answer.

On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the
judgment of the trial court. It declared that the sale between Babasanta and the
Spouses Lu was valid and subsisting and ordered the spouses to execute the
necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance
of the purchase price in the amount of two hundred sixty thousand pesos
(₱260,000.00). The appellate court ruled that the Absolute Deed of Sale with Mortgage
in favor of SLDC was null and void on the ground that SLDC was a purchaser in bad
faith. The Spouses Lu were further ordered to return all payments made by SLDC with
legal interest and to pay attorney’s fees to Babasanta.

SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate
court.12 However, in a Manifestation dated 20 December 1995,13 the Spouses Lu
informed the appellate court that they are no longer contesting the decision dated 4
October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn
the motion for reconsideration filed by the Spouses Lu in view of their manifestation of
20 December 1995. The appellate court denied SLDC’s motion for reconsideration on
the ground that no new or substantial arguments were raised therein which would
warrant modification or reversal of the court’s decision dated 4 October 1995.

Hence, this petition.

SLDC assigns the following errors allegedly committed by the appellate court:

THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A
BUYER IN GOOD FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU
OBTAINED FROM IT THE CASH ADVANCE OF ₱200,000.00, SAN LORENZO WAS
PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE

ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER, RESPONDENT
BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED PROPERTY WHEN
SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON
THE TITLES.

THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT

RESPONDENT BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT
SAN LORENZO WAS AWARE OF HIS RIGHTS OR INTERESTS IN THE DISPUTED
PROPERTY.

THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS

FULL CONCURRENCE ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT
REVERSED AND SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR IN GOOD
FAITH. 15

SLDC contended that the appellate court erred in concluding that it had prior notice of
Babasanta’s claim over the property merely on the basis of its having advanced the
amount of two hundred thousand pesos (₱200,000.00) to Pacita Lu upon the latter’s
representation that she needed the money to pay her obligation to Babasanta. It argued
that it had no reason to suspect that Pacita was not telling the truth that the money
would be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that
the amount of two hundred thousand pesos (₱200,000.00) which it advanced to Pacita
Lu would be deducted from the balance of the purchase price still due from it and
should not be construed as notice of the prior sale of the land to Babasanta. It added
that at no instance did Pacita Lu inform it that the lands had been previously sold to
Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately
took possession of the property and asserted its rights as new owner as opposed to
Babasanta who has never exercised acts of ownership. Since the titles bore no adverse
claim, encumbrance, or lien at the time it was sold to it, SLDC argued that it had every
reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the
presumption of good faith, it added that the burden rests on Babasanta to prove that it
was aware of the prior sale to him but the latter failed to do so. SLDC pointed out that
the notice of lis pendens was annotated only on 2 June 1989 long after the sale of the
property to it was consummated on 3 May 1989.1awphi1.nét

Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu

informed the Court that due to financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the decision of the Court of
Appeals.16

On the other hand, respondent Babasanta argued that SLDC could not have acquired
ownership of the property because it failed to comply with the requirement of
registration of the sale in good faith. He emphasized that at the time SLDC registered
the sale in its favor on 30 June 1990, there was already a notice of lis pendens
annotated on the titles of the property made as early as 2 June 1989. Hence,
petitioner’s registration of the sale did not confer upon it any right. Babasanta further
asserted that petitioner’s bad faith in the acquisition of the property is evident from the
fact that it failed to make necessary inquiry regarding the purpose of the issuance of the
two hundred thousand pesos (₱200,000.00) manager’s check in his favor.

The core issue presented for resolution in the instant petition is who between SLDC and
Babasanta has a better right over the two parcels of land subject of the instant case in
view of the successive transactions executed by the Spouses Lu.

To prove the perfection of the contract of sale in his favor, Babasanta presented a
document signed by Pacita Lu acknowledging receipt of the sum of fifty thousand pesos
(₱50,000.00) as partial payment for 3.6 hectares of farm lot situated at Barangay
Pulong, Sta. Cruz, Sta. Rosa, Laguna.17 While the receipt signed by Pacita did not
mention the price for which the property was being sold, this deficiency was supplied by
Pacita Lu’s letter dated 29 May 198918 wherein she admitted that she agreed to sell the
3.6 hectares of land to Babasanta for fifteen pesos (₱15.00) per square meter.

An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and
the Spouses Lu is a contract to sell and not a contract of sale.

Contracts, in general, are perfected by mere consent, 19 which is manifested by the

meeting of the offer and the acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance absolute. 20 Moreover, contracts
shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.21

The receipt signed by Pacita Lu merely states that she accepted the sum of fifty
thousand pesos (₱50,000.00) from Babasanta as partial payment of 3.6 hectares of
farm lot situated in Sta. Rosa, Laguna. While there is no stipulation that the seller
reserves the ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of the parties convince
us that the Spouses Lu never intended to transfer ownership to Babasanta except upon
full payment of the purchase price.

Babasanta’s letter dated 22 May 1989 was quite telling. He stated therein that despite
his repeated requests for the execution of the final deed of sale in his favor so that he
could effect full payment of the price, Pacita Lu allegedly refused to do so. In effect,
Babasanta himself recognized that ownership of the property would not be transferred
to him until such time as he shall have effected full payment of the price. Moreover, had
the sellers intended to transfer title, they could have easily executed the document of
sale in its required form simultaneously with their acceptance of the partial payment, but
they did not. Doubtlessly, the receipt signed by Pacita Lu should legally be considered
as a perfected contract to sell.

The distinction between a contract to sell and a contract of sale is quite germane. In a
contract of sale, title passes to the vendee upon the delivery of the thing sold; whereas
in a contract to sell, by agreement the ownership is reserved in the vendor and is not to
pass until the full payment of the price.22 In a contract of sale, the vendor has lost and
cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the
price, such payment being a positive suspensive condition and failure of which is not a
breach but an event that prevents the obligation of the vendor to convey title from
becoming effective.23

The perfected contract to sell imposed upon Babasanta the obligation to pay the
balance of the purchase price. There being an obligation to pay the price, Babasanta
should have made the proper tender of payment and consignation of the price in court
as required by law. Mere sending of a letter by the vendee expressing the intention to
pay without the accompanying payment is not considered a valid tender of payment. 24
Consignation of the amounts due in court is essential in order to extinguish Babasanta’s
obligation to pay the balance of the purchase price. Glaringly absent from the records is
any indication that Babasanta even attempted to make the proper consignation of the
amounts due, thus, the obligation on the part of the sellers to convey title never
acquired obligatory force.

On the assumption that the transaction between the parties is a contract of sale and not
a contract to sell, Babasanta’s claim of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere consent 25 and from that
moment, the parties may reciprocally demand performance. 26 The essential elements of
a contract of sale, to wit: (1) consent or meeting of the minds, that is, to transfer
ownership in exchange for the price; (2) object certain which is the subject matter of the
contract; (3) cause of the obligation which is established. 27

The perfection of a contract of sale should not, however, be confused with its
consummation. In relation to the acquisition and transfer of ownership, it should be
noted that sale is not a mode, but merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or destroyed, but title is only the legal
basis by which to affect dominion or ownership.28 Under Article 712 of the Civil Code,
"ownership and other real rights over property are acquired and transmitted by law, by
donation, by testate and intestate succession, and in consequence of certain contracts,
by tradition." Contracts only constitute titles or rights to the transfer or acquisition of
ownership, while delivery or tradition is the mode of accomplishing the same.29
Therefore, sale by itself does not transfer or affect ownership; the most that sale does is
to create the obligation to transfer ownership. It is tradition or delivery, as a
consequence of sale, that actually transfers ownership.

Explicitly, the law provides that the ownership of the thing sold is acquired by the
vendee from the moment it is delivered to him in any of the ways specified in Article
1497 to 1501.30 The word "delivered" should not be taken restrictively to mean transfer
of actual physical possession of the property. The law recognizes two principal modes
of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.

Actual delivery consists in placing the thing sold in the control and possession of the
vendee.31 Legal or constructive delivery, on the other hand, may be had through any of
the following ways: the execution of a public instrument evidencing the sale; 32
symbolical tradition such as the delivery of the keys of the place where the movable
sold is being kept;33 traditio longa manu or by mere consent or agreement if the
movable sold cannot yet be transferred to the possession of the buyer at the time of the
sale;34 traditio brevi manu if the buyer already had possession of the object even before
the sale;35 and traditio constitutum possessorium, where the seller remains in
possession of the property in a different capacity.36

Following the above disquisition, respondent Babasanta did not acquire ownership by
the mere execution of the receipt by Pacita Lu acknowledging receipt of partial payment
for the property. For one, the agreement between Babasanta and the Spouses Lu,
though valid, was not embodied in a public instrument. Hence, no constructive delivery
of the lands could have been effected. For another, Babasanta had not taken
possession of the property at any time after the perfection of the sale in his favor or
exercised acts of dominion over it despite his assertions that he was the rightful owner
of the lands. Simply stated, there was no delivery to Babasanta, whether actual or
constructive, which is essential to transfer ownership of the property. Thus, even on the
assumption that the perfected contract between the parties was a sale, ownership could
not have passed to Babasanta in the absence of delivery, since in a contract of sale
ownership is transferred to the vendee only upon the delivery of the thing sold. 37

However, it must be stressed that the juridical relationship between the parties in a
double sale is primarily governed by Article 1544 which lays down the rules of
preference between the two purchasers of the same property. It provides:

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.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of double sale of immovable property. When the thing sold twice is
an immovable, the one who acquires it and first records it in the Registry of Property,
both made in good faith, shall be deemed the owner. 38 Verily, the act of registration
must be coupled with good faith— that is, the registrant must have no knowledge of the
defect or lack of title of his vendor or must not have been aware of facts which should
have put him upon such inquiry and investigation as might be necessary to acquaint him
with the defects in the title of his vendor.39

Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired
knowledge of Babasanta’s claim. Babasanta, however, strongly argues that the
registration of the sale by SLDC was not sufficient to confer upon the latter any title to
the property since the registration was attended by bad faith. Specifically, he points out
that at the time SLDC registered the sale on 30 June 1990, there was already a notice
of lis pendens on the file with the Register of Deeds, the same having been filed one
year before on 2 June 1989.

Did the registration of the sale after the annotation of the notice of lis pendens obliterate
the effects of delivery and possession in good faith which admittedly had occurred prior
to SLDC’s knowledge of the transaction in favor of Babasanta?

We do not hold so.

It must be stressed that as early as 11 February 1989, the Spouses Lu executed the
Option to Buy in favor of SLDC upon receiving ₱316,160.00 as option money from
SLDC. After SLDC had paid more than one half of the agreed purchase price of
₱1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no
knowledge of the prior transaction of the Spouses Lu with Babasanta. Simply stated,
from the time 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 sale between 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 interest in, such property and pays a full and fair price for
the same at the time of such purchase, or before he has notice of the claim or interest of
some other person in the property.40 Following the foregoing definition, we rule that
SLDC qualifies as a buyer in good faith since there is no evidence extant in the records
that it had knowledge of the prior transaction in favor of Babasanta. At the time of the
sale of the property to SLDC, the vendors were still the registered owners of the
property and were in fact in possession of the lands.l^vvphi1.net Time and again, this
Court has ruled that a person dealing with the owner of registered land is not bound to
go beyond the certificate of title as he is charged with notice of burdens on the property
which are noted on the face of the register or on the certificate of title. 41 In assailing
knowledge of the transaction between him and the Spouses Lu, Babasanta apparently
relies on the principle of constructive notice incorporated in Section 52 of the Property
Registration Decree (P.D. No. 1529) which reads, thus:

Sec. 52. Constructive notice upon registration. – 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 such registering, filing, or entering.

However, the constructive notice operates as such¾by the express wording of Section
52¾from the time of the registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor of SLDC had long been
consummated insofar as the obligation of the Spouses Lu to transfer ownership over the
property to SLDC is concerned.

More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta
the annotation of the notice of lis pendens cannot help Babasanta’s position a bit and it
is irrelevant to the good or bad faith characterization of SLDC as a purchaser. A notice
of lis pendens, as the Court held in Nataño v. Esteban,42 serves as a warning to a
prospective purchaser or incumbrancer that the particular property is in litigation; and
that he should keep his hands off the same, unless he intends to gamble on the results
of the litigation." Precisely, in this case SLDC has intervened in the pending litigation to
protect its rights. Obviously, SLDC’s faith in the merit of its cause has been vindicated
with the Court’s present decision which is the ultimate denouement on the controversy.

The Court of Appeals has made capital43 of SLDC’s averment in its Complaint-in-
Intervention44 that at the instance of Pacita Lu it issued a check for ₱200,000.00
payable to Babasanta and the confirmatory testimony of Pacita Lu herself on cross-
examination.45 However, there is nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the Spouses Lu and Babasanta
for what they attest to is that the amount was supposed to pay off the advances made
by Babasanta to Pacita Lu. In any event, the incident took place after the Spouses Lu
had already executed the Deed of Absolute Sale with Mortgage in favor of SLDC and
therefore, as previously explained, it has no effect on the legal position of SLDC.

Assuming ex gratia argumenti that SLDC’s registration of the sale had been tainted by
the prior notice of lis pendens and assuming further for the same nonce that this is a
case of double sale, still Babasanta’s claim could not prevail over that of SLDC’s. In
Abarquez v. Court of Appeals,46 this Court had the occasion to rule that if a vendee in a
double sale registers the sale after he has acquired knowledge of a previous sale, the
registration constitutes a registration in bad faith and does not confer upon him any
right. If the registration is done in bad faith, it is as if there is no registration at all, and
the buyer who has taken possession first of the property in good faith shall be preferred.

In Abarquez, the first sale to the spouses Israel was notarized and registered only after
the second vendee, Abarquez, registered their deed of sale with the Registry of Deeds,
but the Israels were first in possession. This Court awarded the property to the Israels
because registration of the property by Abarquez lacked the element of good faith.
While the facts in the instant case substantially differ from that in Abarquez, we would
not hesitate to rule in favor of SLDC on the basis of its prior possession of the property
in good faith. Be it noted that delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time SLDC had no knowledge at all
of the prior transaction by the Spouses Lu in favor of Babasanta.1a\^/phi1.net

The law speaks not only of one criterion. The first criterion is priority of entry in the
registry of property; there being no priority of such entry, the second is priority of
possession; and, in the absence of the two priorities, the third priority is of the date of
title, with good faith as the common critical element. Since SLDC acquired possession
of the property in good faith in contrast to Babasanta, who neither registered nor
possessed the property at any time, SLDC’s right is definitely superior to that of
Babasanta’s.

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

WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of
Appeals appealed from is REVERSED and SET ASIDE and the decision of the
Regional Trial Court, Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
G.R. No. L-20091 July 30, 1965

PERPETUA ABUAN, ET AL., plaintiffs-appellants,

vs.
EUSTAQUIO S. GARCIA, ET AL., defendants-appellees.

Emilio R. Gombio for plaintiffs-appellants.

Ruperto G. Martin and Associates for defendants-appellees.

BENGZON, C.J.:

This is an action for legal redemption under Section 119 of the Public Land Law 1 which
provides that:

Every conveyance of land acquired under the free patient or homestead

provisions, when proper, shall be subject to re-purchase by the applicant, his
widow, or legal heirs, for a period of five years from the date of conveyance.

Acquired by Laureano Abuan the homestead passed after his death to his legal heirs,
the plaintiffs herein. Consequently, the Original Certificate of Title in his name was
cancelled, and in lieu thereof, Transfer Certificate of Title No. T-5486 was issued in their
names.

On August 7, 1953, plaintiffs sold the parcel of land to defendants, the sale being
evidenced by a public instrument entitled "Deed of Absolute Sale"; and by virtue thereof,
Transfer Certificate of Title No. T-5906 was issued to defendants.

Later, plaintiffs filed an action to recover the land, alleging that the deed of absolute sale
had been executed through fraud, without consideration. However, the case was
subsequently settled amicably, when the parties entered into an "Agreement" dated
February 28, 1955, under the terms of which defendants paid P500.00 on that day as
partial payment of the purchase price of the land, and promised to pay the balance of
P1,500.00 on or before April 30, 1955, with a grace period of thirty days. The parties
also stipulated in said Agreement that it "shall supersede all previous agreements or
contracts heretofore entered into and executed by and between plaintiff and defendants,
involving the same parcel of riceland ... .

Claiming that full payment had been effected only sometime in May, 1955, plaintiffs
instituted the present action on March 4, 1960.

Defendants moved to dismiss, on the ground that plaintiffs' right of action was already
barred, because the five-year redemption period had already expired.

Sustaining the motion, the Nueva Vizcaya court dismissed the complaint.
Plaintiffs appealed to the Court of Appeals, which certified the case to this Court
because only a legal issue remains to be determined.

The sole question is: When did the five-year period (within which plaintiffs may exercise
their right of repurchase) begin to run? Should it be August 7, 1953, when the Deed of
Absolute Sale was executed, or February 28, 1955, when the compromise "Agreement"
was entered into; or should it be in May, 1955, upon full payment of the purchase price?
It is obvious that counted from either of the first two dates more than five years had
elapsed when this action for redemption was brought (March 1960); whereas the action
would be well within the period, if computed from the date of full payment of the
purchase price.

The lower court, in dismissing plaintiffs' complaint, fixed the starting date as February
28, 1955, when the Agreement (Annex "B") was entered into. It is plaintiffs' contention,
on the other hand, that the prescriptive period should be counted from the full payment
of the purchase price, that is, from May, 1955, since it was on this date that the contract
was consummated.

Plaintiffs' contention is untenable. The law speaks of "five years from date of
conveyance." Conveyance means transfer of ownership; it means the date when the
title to the land is transferred from one person to another. 2 The five-year period should,
therefore, be reckoned with from the date that defendants acquired ownership of the
land. Now, when did defendants legally acquire ownership over the land?

Art. 1477 of the New Civil Code provides that ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof; and Art. 1496
points out that ownership of the thing sold is acquired by the vendee from the moment it
is delivered to him in any of the ways specified in articles 1497 to 1501. Under Art.
1498, When the sale is made through a public instrument — as in this case — the
execution thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot be clearly inferred.
3 This manner of delivery of the thing through the execution of a public document is

common to personal as well as real property. 4

It is clear, therefore, that defendants acquired ownership to the land in question upon
the execution of the deed of sale. The deed of sale was executed on August 7, 1953,
which was "superseded" by the Agreement of February 28, 1955, as to the terms and
conditions of payment of the purchase price. The latter agreement did not operate to
revest the ownership of the land in the plaintiffs. 5

It is apparent that five years had elapsed since the execution of the deed of sale at the
time plaintiffs filed this action for redemption. Our view finds support in a long line of
decisions holding, that the five-year period starts from the date of the execution of the
instrument of conveyance. 6
But assuming arguendo that Annex "A" is null and void, as plaintiffs aver, and did not
serve to effectuate delivery of the property, we can consider the date of the Agreement
(Annex "B"), at the latest, as the time within which ownership is vested in the
defendants. True, Annex "B" is a private instrument the execution of which could not be
construed as constructive delivery under Art. 1498 of the New Civil Code. But Art. 1496
explicitly provides that ownership of the thing sold is acquired by the vendee from the
moment it is delivered to him "in any other manner signifying an agreement that the
possession is transferred from the vendor to the vendee." The intention to give
possession (and ownership) is manifest in the agreement (Annex "B") entered into by
the parties, specially considering the following circumstances: (1) the payment of part of
the purchase price, there being no stipulation in the agreement that ownership will not
vest in the vendees until full payment of the price; and (2) the fact that the agreement
was entered into in consideration of plaintiffs' desistance, as in fact they did desist, in
prosecuting their reivindicatory action, thereby leaving the property in the hands of the
then and now defendants — as owners thereof, necessarily. This was delivery brevi
manu permissible under Articles 1499 and 1501 of the New Civil Code.

The circumstance that full payment was made only, as plaintiffs allege, in May, 1955,
does not alter the fact that ownership of the land passed to defendants upon the
execution of the agreement with the intention of letting them hold it as owners. In the
absence of an express stipulation to the contrary, the payment of the price is not a
condition precedent to the transfer of ownership, which passes by delivery of the thing
to the buyer. 7

IN VIEW OF THE FOREGOING, the order of the court a quo dismissing the complaint is
hereby affirmed, with costs against plaintiffs-appellants.

G.R. No. 92989 July 8, 1991

PERFECTO DY, JR. petitioner,

vs.
COURT OF APPEALS, GELAC TRADING INC., and ANTONIO V. GONZALES,
respondents.

Zosa & Quijano Law Offices for petitioner.

Expedito P. Bugarin for respondent GELAC Trading, Inc.

GUTIERREZ, JR., J.:

This is a petition for review on certiorari seeking the reversal of the March 23, 1990
decision of the Court of Appeals which ruled that the petitioner's purchase of a farm
tractor was not validly consummated and ordered a complaint for its recovery
dismissed.
The facts as established by the records are as follows:

The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Sometime in 1979, Wilfredo
Dy purchased a truck and a farm tractor through financing extended by Libra Finance
and Investment Corporation (Libra). Both truck and tractor were mortgaged to Libra as
security for the loan.

The petitioner wanted to buy the tractor from his brother so on August 20, 1979, he
wrote a letter to Libra requesting that he be allowed to purchase from Wilfredo Dy the
said tractor and assume the mortgage debt of the latter.

In a letter dated August 27, 1979, Libra thru its manager, Cipriano Ares approved the
petitioner's request.

Thus, on September 4, 1979, Wilfredo Dy executed a deed of absolute sale in favor of

the petitioner over the tractor in question.

At this time, the subject tractor was in the possession of Libra Finance due to Wilfredo
Dy's failure to pay the amortizations.

Despite the offer of full payment by the petitioner to Libra for the tractor, the immediate
release could not be effected because Wilfredo Dy had obtained financing not only for
said tractor but also for a truck and Libra insisted on full payment for both.

The petitioner was able to convince his sister, Carol Dy-Seno, to purchase the truck so
that full payment could be made for both. On November 22, 1979, a PNB check was
issued in the amount of P22,000.00 in favor of Libra, thus settling in full the
indebtedness of Wilfredo Dy with the financing firm. Payment having been effected
through an out-of-town check, Libra insisted that it be cleared first before Libra could
release the chattels in question.

Meanwhile, Civil Case No. R-16646 entitled "Gelac Trading, Inc. v. Wilfredo Dy", a
collection case to recover the sum of P12,269.80 was pending in another court in Cebu.

On the strength of an alias writ of execution issued on December 27, 1979, the
provincial sheriff was able to seize and levy on the tractor which was in the premises of
Libra in Carmen, Cebu. The tractor was subsequently sold at public auction where
Gelac Trading was the lone bidder. Later, Gelac sold the tractor to one of its
stockholders, Antonio Gonzales.

It was only when the check was cleared on January 17, 1980 that the petitioner learned
about GELAC having already taken custody of the subject tractor. Consequently, the
petitioner filed an action to recover the subject tractor against GELAC Trading with the
Regional Trial Court of Cebu City.
On April 8, 1988, the RTC rendered judgment in favor of the petitioner. The dispositive
portion of the decision reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against

the defendant, pronouncing that the plaintiff is the owner of the tractor, subject
matter of this case, and directing the defendants Gelac Trading Corporation and
Antonio Gonzales to return the same to the plaintiff herein; directing the
defendants jointly and severally to pay to the plaintiff the amount of P1,541.00 as
expenses for hiring a tractor; P50,000 for moral damages; P50,000 for exemplary
damages; and to pay the cost. (Rollo, pp. 35-36)

On appeal, the Court of Appeals reversed the decision of the RTC and dismissed the
complaint with costs against the petitioner. The Court of Appeals held that the tractor in
question still belonged to Wilfredo Dy when it was seized and levied by the sheriff by
virtue of the alias writ of execution issued in Civil Case No. R-16646.

The petitioner now comes to the Court raising the following questions:

A.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

MISAPPREHENDED THE FACTS AND ERRED IN NOT AFFIRMING THE
TRIAL COURT'S FINDING THAT OWNERSHIP OF THE FARM TRACTOR HAD
ALREADY PASSED TO HEREIN PETITIONER WHEN SAID TRACTOR WAS
LEVIED ON BY THE SHERIFF PURSUANT TO AN ALIAS WRIT OF
EXECUTION ISSUED IN ANOTHER CASE IN FAVOR OF RESPONDENT
GELAC TRADING INC.

B.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS EMBARKED

ON MERE CONJECTURE AND SURMISE IN HOLDING THAT THE SALE OF
THE AFORESAID TRACTOR TO PETITIONER WAS DONE IN FRAUD OF
WILFREDO DY'S CREDITORS, THERE BEING NO EVIDENCE OF SUCH
FRAUD AS FOUND BY THE TRIAL COURT.

C.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS

MISAPPREHENDED THE FACTS AND ERRED IN NOT SUSTAINING THE
FINDING OF THE TRIAL COURT THAT THE SALE OF THE TRACTOR BY
RESPONDENT GELAC TRADING TO ITS CO-RESPONDENT ANTONIO V.
GONZALES ON AUGUST 2, 1980 AT WHICH TIME BOTH RESPONDENTS
ALREADY KNEW OF THE FILING OF THE INSTANT CASE WAS VIOLATIVE
OF THE HUMAN RELATIONS PROVISIONS OF THE CIVIL CODE AND
 RENDERED THEM LIABLE FOR THE MORAL AND EXEMPLARY DAMAGES
SLAPPED AGAINST THEM BY THE TRIAL COURT. (Rollo, p. 13)

The respondents claim that at the time of the execution of the deed of sale, no
constructive delivery was effected since the consummation of the sale depended upon
the clearance and encashment of the check which was issued in payment of the subject
tractor.

In the case of Servicewide Specialists Inc. v. Intermediate Appellate Court. (174 SCRA
80 [1989]), we stated that:

xxx xxx xxx

The rule is settled that the chattel mortgagor continues to be the owner of the
property, and therefore, has the power to alienate the same; however, he is
obliged under pain of penal liability, to secure the written consent of the
mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines,
(1972), Volume IV-B Part 1, p. 525). Thus, the instruments of mortgage are
binding, while they subsist, not only upon the parties executing them but also
upon those who later, by purchase or otherwise, acquire the properties referred
to therein.

The absence of the written consent of the mortgagee to the sale of the
mortgaged property in favor of a third person, therefore, affects not the validity of
the sale but only the penal liability of the mortgagor under the Revised Penal
Code and the binding effect of such sale on the mortgagee under the Deed of
Chattel Mortgage.

xxx xxx xxx

The mortgagor who gave the property as security under a chattel mortgage did not part
with the ownership over the same. He had the right to sell it although he was under the
obligation to secure the written consent of the mortgagee or he lays himself open to
criminal prosecution under the provision of Article 319 par. 2 of the Revised Penal
Code. And even if no consent was obtained from the mortgagee, the validity of the sale
would still not be affected.

Thus, we see no reason why Wilfredo Dy, as the chattel mortgagor can not sell the
subject tractor. There is no dispute that the consent of Libra Finance was obtained in
the instant case. In a letter dated August 27, 1979, Libra allowed the petitioner to
purchase the tractor and assume the mortgage debt of his brother. The sale between
the brothers was therefore valid and binding as between them and to the mortgagee, as
well.

Article 1496 of the Civil Code states that the ownership of the thing sold is acquired by
the vendee from the moment it is delivered to him in any of the ways specified in
Articles 1497 to 1501 or in any other manner signing an agreement that the possession
is transferred from the vendor to the vendee. We agree with the petitioner that Articles
1498 and 1499 are applicable in the case at bar.

Article 1498 states:

Art. 1498. When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be
inferred.

xxx xxx xxx

Article 1499 provides:

Article 1499. The delivery of movable property may likewise be made by the
mere consent or agreement of the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time of the sale, or if the latter
already had it in his possession for any other reason. (1463a)

In the instant case, actual delivery of the subject tractor could not be made. However,
there was constructive delivery already upon the execution of the public instrument
pursuant to Article 1498 and upon the consent or agreement of the parties when the
thing sold cannot be immediately transferred to the possession of the vendee. (Art.
1499)

The respondent court avers that the vendor must first have control and possession of
the thing before he could transfer ownership by constructive delivery. Here, it was Libra
Finance which was in possession of the subject tractor due to Wilfredo's failure to pay
the amortization as a preliminary step to foreclosure. As mortgagee, he has the right of
foreclosure upon default by the mortgagor in the performance of the conditions
mentioned in the contract of mortgage. The law implies that the mortgagee is entitled to
possess the mortgaged property because possession is necessary in order to enable
him to have the property sold.

While it is true that Wilfredo Dy was not in actual possession and control of the subject
tractor, his right of ownership was not divested from him upon his default. Neither could
it be said that Libra was the owner of the subject tractor because the mortgagee can not
become the owner of or convert and appropriate to himself the property mortgaged.
(Article 2088, Civil Code) Said property continues to belong to the mortgagor. The only
remedy given to the mortgagee is to have said property sold at public auction and the
proceeds of the sale applied to the payment of the obligation secured by the mortgagee.
(See Martinez v. PNB, 93 Phil. 765, 767 [1953]) There is no showing that Libra Finance
has already foreclosed the mortgage and that it was the new owner of the subject
tractor. Undeniably, Libra gave its consent to the sale of the subject tractor to the
petitioner. It was aware of the transfer of rights to the petitioner.
Where a third person purchases the mortgaged property, he automatically steps into the
shoes of the original mortgagor. (See Industrial Finance Corp. v. Apostol, 177 SCRA
521 [1989]). His right of ownership shall be subject to the mortgage of the thing sold to
him. In the case at bar, the petitioner was fully aware of the existing mortgage of the
subject tractor to Libra. In fact, when he was obtaining Libra's consent to the sale, he
volunteered to assume the remaining balance of the mortgage debt of Wilfredo Dy
which Libra undeniably agreed to.

The payment of the check was actually intended to extinguish the mortgage obligation
so that the tractor could be released to the petitioner. It was never intended nor could it
be considered as payment of the purchase price because the relationship between
Libra and the petitioner is not one of sale but still a mortgage. The clearing or
encashment of the check which produced the effect of payment determined the full
payment of the money obligation and the release of the chattel mortgage. It was not
determinative of the consummation of the sale. The transaction between the brothers is
distinct and apart from the transaction between Libra and the petitioner. The contention,
therefore, that the consummation of the sale depended upon the encashment of the
check is untenable.

The sale of the subject tractor was consummated upon the execution of the public
instrument on September 4, 1979. At this time constructive delivery was already
effected. Hence, the subject tractor was no longer owned by Wilfredo Dy when it was
levied upon by the sheriff in December, 1979. Well settled is the rule that only properties
unquestionably owned by the judgment debtor and which are not exempt by law from
execution should be levied upon or sought to be levied upon. For the power of the court
in the execution of its judgment extends only over properties belonging to the judgment
debtor. (Consolidated Bank and Trust Corp. v. Court of Appeals, G.R. No. 78771,
January 23, 1991).

The respondents further claim that at that time the sheriff levied on the tractor and took
legal custody thereof no one ever protested or filed a third party claim.

It is inconsequential whether a third party claim has been filed or not by the petitioner
during the time the sheriff levied on the subject tractor. A person other than the
judgment debtor who claims ownership or right over levied properties is not precluded,
however, from taking other legal remedies to prosecute his claim. (Consolidated Bank
and Trust Corp. v. Court of Appeals, supra) This is precisely what the petitioner did
when he filed the action for replevin with the RTC.

Anent the second and third issues raised, the Court accords great respect and weight to
the findings of fact of the trial court.1âwphi1 There is no sufficient evidence to show that
the sale of the tractor was in fraud of Wilfredo and creditors. While it is true that Wilfredo
and Perfecto are brothers, this fact alone does not give rise to the presumption that the
sale was fraudulent. Relationship is not a badge of fraud (Goquiolay v. Sycip, 9 SCRA
663 [1963]). Moreover, fraud can not be presumed; it must be established by clear
convincing evidence.
We agree with the trial court's findings that the actuations of GELAC Trading were
indeed violative of the provisions on human relations. As found by the trial court,
GELAC knew very well of the transfer of the property to the petitioners on July 14, 1980
when it received summons based on the complaint for replevin filed with the RTC by the
petitioner. Notwithstanding said summons, it continued to sell the subject tractor to one
of its stockholders on August 2, 1980.

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals
promulgated on March 23, 1990 is SET ASIDE and the decision of the Regional Trial
Court dated April 8, 1988 is REINSTATED.

SO ORDERED.

G.R. No. 66140 January 21, 1993

INDUSTRIAL TEXTILE MANUFACTURING COMPANY OF THE PHILIPPINES, INC.,

petitioner,
vs.
LPJ ENTERPRISES, INC., respondent.

Bengzon, Zarraga, Narciso, Cudala, Pecson, Azcuna & Bengzon Law Office for
petitioner.

MELO, J.:

Before Us is a petition for review on certiorari seeking the reversal of the November 9,
1983 decision of the then Intermediate Appellate Court in
CA-G.R. CV No. 68281, penned by the Honorable Justice Eduardo P. Caguioa, with
Justices Gaviola and Quetulio-Losa concurring, which dismissed petitioner's complaint
and absolved herein respondent from any liability to the former.

It appears on record that 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, then as now, in common use.

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 acquiesced, principally
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 Sangi, Toledo, Cebu where they professed satisfaction at the
performance of their own plastic bags. On December 29, 1970, Campos sent
Panganiban a letter proclaiming dramatic results in the experiment. Consequently,
Panganiban agreed to use the plastic cement bags. Four purchase orders (P.O.s) were
thereafter issued, to wit:

DATE NUMBER OF BAGS UNIT COST AMOUNT

5 January 1971 53,800 P .83 P44,654.00

24 February 1971 11,000 .90 9,900.00
March 1971 41,000 .92 37,720.00
6 April 1971 10,000 .92 9,200.00
————
TOTAL: P101,474.00

Petitioner delivered the above orders consecutively on January 12, February 17, March
19, and April 17, 1971 (p. 74, Rollo). 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 (p. 58, Ibid.). 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. (TSN, January 5, 1971, p. 131). 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.
Notwithstanding the measures adopted by respondent such as the use of masks,
gloves. and conveyor system, the workers still refused to utilize the plastic bags.
Respondent was, therefore, constrained to revert to the use of kraft paper bags in
packing cement. Thereafter, petitioner was asked to take back the unused plastic bags.
Considering however, that the bags were in the cement factory of respondent's supplier,
petitioner maintained that it was respondent's obligation to return the bags to them.
Apparently, this was not done and so petitioner demanded payment for the said bags.
On May 25, 1981, the trial court rendered its decision, the dispositive portion of which
reads:

WHEREFORE, judgment is hereby rendered 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.

SO ORDERED. (p. 80, Ibid.)

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. (p. 28,
Ibid.). Hence, the present recourse.

The first issue to be resolved is the propriety of this petition as it calls for a re-
examination of the factual findings of the appellate court.

As asserted by herein respondent, it is well-entrenched in Our jurisprudence that this

Court is not a trier of facts (Valdez v. CA, 194 SCRA 360 [1991]). As a rule, it is also
settled that the factual findings of the appellate court are final and conclusive
(Bustamante v. CA, 193 SCRA 603 [1991]; Radiowealth Finance Company v. Palileo,
197 SCRA 245 [1991]). However, in a long line of cases, We have pronounced certain
exceptions, as when the inference made is manifestly mistaken or when the judgment is
based on misapprehension of facts or when the appellate court overlooked relevant
facts not disputed by the parties and which if properly considered, would justify a
different conclusion (Aquino v. CA, 204 SCRA 247 [1991]; Manlapaz v. CA, 147 SCRA
236 [1987]; Sacay v. Sandiganbayan, 142 SCRA 593, [1986]; Moran v. CA, 133 SCRA
88 [1984]).

A review of the record instantly reveals that the case at bar falls under the last
exception. As earlier adverted to, respondent has repeatedly admitted its liability for the
53,800 plastic lime bags amounting to P44,654.00 yet the appellate court disregarded
this fact and totally cleared respondent from all responsibility. On this point alone, the
decision of the appellate court may be overturned, or at least modified.

Let Us now turn to the crux of the controversy, which is 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.

It is beyond dispute that prior to respondent's transaction with petitioner, the bags were
already tested and the results thereof, albeit initially unsuccessful, were nevertheless
favorably considered after due alterations were made. Verily, it is on the basis of such
experimental findings that respondent agreed to use the plastic cement bags and
thereafter issued the purchase orders heretofore mentioned. Significantly, the quantity
of bags ordered by respondent also negates its position that the bags were still under
experimentation. Indeed, if it were so, the bags ordered should have been considerably
lesser in number and would normally increase as the suitability of the plastic bags
became more definite. Likewise, it is worthy to note that as of the date of petitioner's
third delivery on March 19, 1971, respondent has received a total of 52,000 bags. By
then, it was very probable that the problems alluded to by respondent could no longer
be resolved, thus, only 15,000 bags were actually used and 37,000 bags were already
considered unfit for packing cement. Under such predicament, it was but logical for
respondent to cancel then the fourth purchase order for another 10,000 bags.
Surprisingly, respondent still accepted the same upon delivery on April 17, 1971 and
remitted its payments until May 3, 1971. When petitioner sent letters demanding the full
payment of the bags, respondent simply declared that it did not receive any because it
transferred its offices to another place. In the meantime, the bags remained in the
custody of Luzon Cement, respondent's supplier and virtually a stranger as far as
petitioner is concerned. It is for this reason that petitioner may not be expected to just
pull out its bags from Luzon Cement.

Not to be overlooked also is the fact that Panganiban, respondent corporation's

president, also collected due commissions for the four purchase orders issued in favor
of petitioner. (p. 79, Rollo).

Finally, 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. We find 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. (67 Am Jur 2d, pp. 733, 748).

In the light of these principles, We hold that the transaction between respondent and
petitioner constituted an absolute sale. Accordingly, respondent is liable for the plastic
bags delivered to it by petitioner.

WHEREFORE, premises considered, the decision appealed from is hereby SET ASIDE
and the decision of the trial court REINSTATED.

G.R. No. L-34697 March 26, 1932

JESUS TERAN, plaintiff-appellee,

vs.
FRANCISCA VILLANUEVA, VIUDA DE RIOSA, ET AL., defendants-appellants.
Domingo Imperial for appellants.
Bonto & Gutierrez Lora for appellee.

VILLAMOR, J.:

On October 6, 1928, the parties in this case executed the deed of sale Exhibit A,
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 (Exh. B), 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.

The plaintiff's allegation that Rafael Villanueva did not point out to him the real
boundaries, is but a half-truth; for, as has been stated, when the property was
inspected, Villanueva did not go over all the boundaries of the land, as testified to by
Leopoldo Teran. It is true that the owners of the adjoining lands mentioned in Exhibit B
are different from those mentioned in Exhibit A; but there is nothing in the record to
show that the property described in the deed Exhibit A was not delivered to the plaintiff.
The names of the adjoining landowners may of then change, for obvious reasons; but
the plaintiff's evidence does not establish that outside the boundaries mentioned in the
deed Exhibit A there are portions of the property not yet delivered to him, or that all the
land included within those boundaries have not been delivered to the vendee.

According to Manresa and Scaevola, illustration commentators of the Civil Code,

whenever a certain real estate is sold for a lump sum (case 1, article 1471) the rule in
law is that there shall be no increase or decreased 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 contract the
latter has the option either to reduce the price in proportion to the deficiency, or to set
aside the contract. (See Comm. Civ. Code. Manresa, ed. of 1905, vol. 10, pp. 146-148;
Scaevola, vol. 23, pp. 500-503.) 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, as Professor Antonio Gomez says, 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. (Scaevola, supra.)

Manresa expresses himself in similar terms, saying that, "if the sale was made for a
lump sum, the cause of the contract is the thing sold, irrespective of area or quantity,
the real estate as defined by the stipulated boundaries, known in law as the cuerpo
cierto. . . . If all that is included within the stipulated boundaries is not delivered, then the
object of the contract, its cause so far as the vendee is concerned, is not delivered:
hence, he is entitled to rescind it. He may however think (and of this there can be no
judge but himself), that although he did not receive the land within the stipulated
boundaries, he would like to have it: hence, his right to enforce the contract with the
corresponding decrease in price as provided in article 1471."

Furthermore, in Azarraga vs. Gay (52 Phil., 599), it was held:

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.

In Songco vs. Sellner (37 Phil., 254), the court said:

The law allows considerable latitude to seller's statements, or dealer's talk; and
experience teaches that it is exceedingly risky to accept it at its face value. . . .

Assertions concerning the property which is the subject of a contract of sale, or in

regard to its qualities and characteristics, are the usual and ordinary means used
by sellers to obtain a high price and are always understood as affording to buyers
no ground for omitting to make inquiries. A man who relies upon such an
affirmation made by a person whose interest might so readily prompted him to
exaggerate the value of his property does so at his peril, and must take the
consequences of his own imprudence.
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. (National Cash Register Co. vs. Townsend, 137 N.
C., 515.) The same doctrine is upheld by the courts of the United States, in the following
case among others: "Misrepresentation by a vendor of real property with reference to its
area are not actionable, where a correct description of the property was given in the
deed and recorded chain of title, which the purchaser's agent undertook to investigate
and report upon, and the vendor made no effort to prevent a full investigation."
(Shappirio vs. Goldberg, 48 Law. ed., 419.)

The Spanish cases decided the matter in the same way.

Doña Dolores Amoros Soler brought suit against Francisco Gisbert Richart to recover
two parcels of land which, she alleged, were lacking from the property her brother
Francisco sold her. The civil branch of the Valencia Audencia decided against the
plaintiff, who appealed to the Supreme Court. In dismissing the appeal, the Supreme
Court held that, "since the vendee has all the land included within the boundaries
mentioned in the titles shown to the bidders at the auction sale, the trial court must be
held to have rightly applied article 1471 of the Civil Code in its decision, if the stipulated
price was fixed in relation to the area of the land or cuerpo cierto which had to be, or
was delivered to the vendee." (Decision of the Supreme Court of April 20th, published
June 2, 1913.)

Francisco Fernandez Parra filed a complaint against Pedro Joaquin del Portillo to
recover some parcels of land which formed part of those which he had sold to the latter.
The civil branch of the Albacete Audience decided against the plaintiff, and on appeal
this judgment was affirmed by the Supreme Court, which held that, "as the court found
that the parcels of land which the plaintiff sought to recover were within the boundaries
of the property sold as a cuerpo cierto, and that the sale was made for a lump sum, and
not at a certain price for each unit of measure, it did not violate article 1471 of the Civil
Code in absolving the vendee from the complaint." (Decision of the Supreme Court of
July 2, 1914, published January 4, 1915.)

Martinez Ruiz (El Codigo Civil, 2d ed., vol. XV, pp. 298- 299) proposes the following
question: If real estate is sold for a lump sum and not at so much per unit of measure,
may the vendee allege error in giving consent, based upon its inferior quality or
deficiency in area?

The Supreme Court decided this question negatively in its decision dated May 9, 1914.

By deed of August 21, 1901, Mariano de Cieza sold a piece of property 204 fanegas in
area for 35,000 pesetas to Bernardino Rodriguez. Several years later Rodriguez
brought suit against the Cieza heirs to annul the contract on the ground of
misrepresentation in the deed of sale, with reference to the area, which was less than
that stated, and not of the first-class quality, so that the price fixed was exorbitant and
unjust — according to the data obtained, it should have been less than one-third of that
shown in the contract. An answer was filed and the Audience of Valladolid absolved the
defendants, whereupon Rodriguez appealed, invoking articles 1265 and 1266 of the
Civil Code which, he contended, under the first assignment of error, had been violated,
in that the trial court had not held the contract of sale void due to error in the subject
matter and principal conditions of the transaction; for the vendee had believed, upon the
strength of statements made by the vendor and other persons connected with the sale,
and of the deed of sale, that he was getting a piece of land of good quality from which,
by employing capital and labor, he would reap a legitimate return, which however, he
failed to realize. The Supreme Court dismissed the appeal, "inasmuch as the error
which invalidates contractual consent must, in order to effect nullity, necessarily relate
to the very substance or the essential qualities of the thing agreed upon, according to a
correct understanding of articles 1265 and 1266 of the Civil Code; and this being
granted, the first and second grounds are untenable, inasmuch as when the court a quo
held, from the evidence adduced, that there was no such error, against the contention of
the appellant, who had the burden of proof to show the contrary, it acted correctly
because the property appears to have been sold for a lump sum, thereby excluding
every argument about quality and area."

In Irureta Goyena vs. Tambunting (1 Phil., 490), the matter dealt with was the sale of a
piece of land and the building thereon, situated at No. 20 San Jose Street, Ermita,
Manila. This land contained 152.46 square meters. The vendee signed a private
document stating that he had purchased of Francisco Irureta Goyena a lot at No. 20
San Jose Street, Ermita, for the sum of three thousand pesos, payable as soon as the
deed of sale was signed. The proper notarial document was drawn up, setting the price
of the realty at P3,200. The vendee requested a reduction because the land did not
have the area that the plaintiff had, through a broker, told him it contained. The vendor
would not reduce the price, and hence the litigation between the parties, decided by the
trial court in favor of the plaintiff. Upon appeal, the Supreme court, applying article 1471
of the Civil Code, affirmed the judgement appealed from on the ground that the sale
was made for a lump sum and not at so much per unit of measure.

In Azarraga vs. Gay (52 Phil., 599), Leodegario Azarraga sold two parcels of land to
Maria Gay for the lump sum of P47,000 to be paid as provided aid the contract. The
contract recites that the parties agreed upon the sale of two parcels of land, the first
containing 102 hectares, 67 ares, and 32 centares, and the second, 98 hectares, more
or less, for the lump sum of P47,000 payable, partly in cash and partly in installments.
Said two parcels are defined by means of the boundaries given in the contract. The
defendant refused to pay the full stipulated price, alleging that the second parcel with an
area of 98 hectares according to the deed of sale, had only 70 hectares, and therefore
asked for a reduction of the price. The plaintiff refused to grant the request, and brought
suit against the vendee to recover the whole price agreed upon. The court rendered
judgment in favor of the plaintiff. On appeal, the Supreme Court, applying article 1471 of
the Civil Code, affirmed the judgment appealed from, on the ground that the rule given
in the second paragraph of article 1471 was not applicable to the case, because all the
land contained within the given boundaries of the two parcels sold had been delivered
to the vendee; the land contained within the boundaries of the property sold had not
been broken up and the cuerpo cierto which is the object of the contract had all been
delivered by the vendor, as he had undertaken to do. Wherefore, the vendor cannot
claim anything should the area turn out to be greater than that stated in the deed;
neither can the vendee, should the area of the second parcel prove to be much smaller.

In the case of Asiain vs. Jalandoni (45 Phil., 296), when the parties agreed upon the
sale of the land there in question, they had in mind chiefly the area and quality of the
land, the subject of the contract, as will be seen from the letter of Asiain dated May 6,
1920, in which, among other things, he said:

"DEAR BENJAMIN: I am in receipt of your letter and with regard to your

statement that that parcel does not contain 21 hectares I do not believe. I
bet anything that that part only which is planted with cane contains more
than 20 hectares, I bet 2 against 1.

"If you agree, I would bet that you pay only one half, I am not a surveyor,
but these days I had the pleasure to survey the land and I know more or
less its area.

"Here we are not to deceive each other. If you like that parcel and if you
want to buy it I will give you good propositions. I don't know where and
how they learned that I was selling the hacienda and they made me a
good offer, but as we do not want to part but with that parcel, hence my
propositions are the following, in view of the time that has elapsed and the
progress of the cane.

"I assure (aseguro) that there are 2,000 piculs and sell on that basis,
provided that the case is milled in due time. In case the sugar does not
amount to 2,000 piculs, I will pay in sugar all such amount as will be
necessary to complete the 2,000 but if after milling the cane, as I say,
there is an excess over 2,000 piculs, all the excess shall be mine. So that
if you like, I make the sale for the same price that we talked about and the
same conditions, not a dime more or less."

And also from the written memorandum signed by both contracting parties, containing
among other things the following:

"Purchase of land of Mr. Luis Asiain and his wife Maria Cadenas, by B.
Jalandoni, containing 25 hectares more or less of land bounded by property of
the purchaser, with its corresponding crop, estimated at 2,000 piculs, the total
value of which is 55 thousand. The price is to be paid by paying 30 thousand at
the signing of the document, and 25 thousand within one year with interest at the
rate of 10 per cent."
In accordance with the foregoing memorandum the deed of sale was executed in the
City of Iloilo, the parties stipulating among other things, the following:

"(1) That Luis Asiain does hereby promise and bind himself to sell to Benjamin
Jalandoni a parcel of land of the hacienda "Maria" of the aforesaid Luis Asiain,
situated in the municipality of La Carlota, Province of Occidental Negros, P.I.

"(2) That Benjamin Jalandoni does hereby promise and bind himself to purchase
the aforesaid parcel of land in the sum of P55,000 upon certain conditions
specified in a memorandum signed by the parties which is in the hands of
Attorneys Padilla & Treñas."

Jalandoni then took possession of the land, milled the cane at La Carlota Central, from
which he realized 800 piculs and 23 cates of the centrifugal sugar. And after he had
secured from Asiain the certificate of title, he had a surveyor measure the land, which
was found to contain only 18 hectares, 54 ares, and 22 centares. Jalandoni had paid
P30,000 leaving an unpaid balance of P25,000 of the purchase price of P55,000
stipulated in the contract. Asiain sued to recover the balance from Jalandoni. The
competent court declared the deed of sale void, absolved the defendant from paying
P25,000 and ordered the parties to return what they had received under the contract.

Upon appeal to the Supreme Court, the judgment was affirmed on the ground that both
parties had acted by a mutual mistake.

Comparing the facts in that case of Asiain with those before us now, we note a
fundamental difference: In that case the vendor undertook to deliver to the vendee a
parcel of land some 25 hectares in area and of such a quality as to be able to produce
2,000 piculs of centrifugal sugar. The vendee, in turn, agreed to buy said parcel of land
with the understanding that it contained that area and was of the quality guaranteed by
the vendor. Inasmuch as the land had neither the area nor the quality the vendor had
assured the vendee it had, it is clear the latter was entitled to rescind the contract, upon
the strength of the authorities cited in the opinion of the court. We believe that Jalandoni
was entitled to rescind that contract, inasmuch as the vendor did not deliver a parcel of
land of the area and quality stipulated in the contract.

In the present case the parties did not consider the area as an essential element of the
contract. There is no evidence of the negotiation leading up to the sale of the land,
except that the parties executed the deed Exhibit A. There is no evidence of record that
the parties fixed the price at so much per hectare. If the plaintiff wanted to but the land
at so much per unit of measure, he should have so stated in the contract. The plaintiff
testified that one of the defendants, Francisca Villanueva, signified her willingness to set
aside the contract in case there was a considerable difference in area. But in her letter
Exhibit E-1, this defendant stated that she had to wait for the decision of her sister or
the latter's husband before acting upon the plaintiff's claim. We believe that he most that
can be inferred from such a statement is that she was disposed to settle the case with a
view to avoiding litigation; but this does not mean that the parties agreed to fix the price
of the land at so much per unit of measure.

For the foregoing considerations, the judgment appealed from is reversed, and it is held
that the contract Exhibit A between the parties is valid and binding upon them.
Wherefore, the defendants are absolved from the complaint without special
pronouncement of costs. So ordered.