Goodyear Philippines, Inc. vs.

Sy 474 SCRA 427 November 9, 2005 Ponente: Justice Panganiban FACTS: The subject of this case involves a motor vehicle. The vehicle was originally owned by Goodyear Philippines, Inc. (Goodyear) which it purchased from Industrial and Transport Equipment, Inc. in 1983. It had since been in the service of Goodyear until April 30, 1986 when it was hijacked. This hijacking was reported to the Philippine National Police (PNP) which issued out an alert alarm on the said vehicle as a stolen one. It was later on recovered also in 1986. The vehicle was used by Goodyear until 1996, when it sold it to Anthony Sy on September 12, 1996. Sy, in turn, sold it to Jose L. Lee on January 29, 1997. But the latter on December 4, 1997, filed an action for rescission of contract with damages against Sy, because he could not register the vehicle in his name due to the certification from the PNP Regional Traffic Management Office in Legazpi City that it was a stolen vehicle and the alarm covering the same was not lifted. Instead, the PNP in Legazpi City impounded the vehicle and charged Lee criminally. Upon being informed by Sy of the denial of the registration of the vehicle in Lees name, Goodyear requested on the PNP to lift the stolen vehicle alarm status. This notwithstanding, Goodyear was impleaded as third-party defendant in the thirdparty complaint filed by Sy. A motion to dismiss was then filed by Goodyear on the twin grounds that the third-party complaint failed to state a cause of action and even if it did, such cause of action was already extinguished. The Regional Trial Court resolved to dismiss the third-party complaint on the basis of the first proffered ground. On the other hand, the Court of Appeals ruled that the Third-Party Complaint had stated a cause of action. Hence, this petition. ISSUE: Whether or not petitioner breached any warranty in the absence of proof that at the time it sold the subject vehicle to Sy, petitioner was not the owner thereof. HELD: No. In the present case, petitioner did not breach the implied warranty against hidden encumbrances. The subject vehicle that had earlier been stolen by a third party was subsequently recovered by the authorities and restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and subsequent recovery, the fact remained that the vehicle continued to be owned by petitioner, free from any charge or encumbrance whatsoever. The Third-Party Complaint did not allege that petitioner had a creditor with a legal right to or interest in the subject vehicle. There was no indication either of any debt that was secured by the vehicle. In fact, there was not even any claim, liability or some other right attached to the vehicle that would lessen its value. Its impoundment, as well as the refusal of its registration, was not the hindrance or obstruction in the contemplation of law that the vendor warranted against. *Gratia argumenti that there was a breach of the implied warranty against hidden encumbrances, notice of the breach was not given to petitioner within a reasonable time. Article 1586 of the Civil Code requires that notice be given after the breach, of which Sy ought to have known. In his Third-Party Complaint against petitioner, there was no allegation at all that respondent had given petitioner the requisite notice. Finally, the argument that there was a breach of the implied warranty against eviction does not hold water, for there was never any final judgment based on either a right prior to the sale; or an act that could be imputed to petitioner and deprive Sy of ownership or possession of the vehicle purchased. * Guys, its up to you kung gusto niyong isama yung certain paragraph na yun. Hindi naman siya indispensable sa ruling. Sinama ko lang siya para humaba. Hahaha! ILUMINADO HANOPOL vs. PERFECTO PILAPIL G.R. No. L-19248 February 28, 1963 FACTS: Appellant Hanopol claims ownership of a parcel of unregistered land in Leyte by virtue of a series of purchases effected in 1938 by means of private instruments, executed by the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all surnamed Siapo. Additionally, he invokes in his favor a decision rendered by the Court of First Instance of Leyte (in Civil Case No. 412) on

a complaint he filed on June 16, 1948, against the same vendors, who, according to his own averments, took possession of the said property in December, 1945 through fraud, threat and intimidation, pretending falsely to be the owners thereof and ejecting the tenants of Hanopol thereon, and since then had continued to possess the land. Decision declaring him the exclusive owner of the land in question and ordering therein defendants to deliver possession thereof was rendered on September 21, 1958. On the other hand, appellee Pilapil asserts title to the property on the strength of a duly notarized deed of sale executed in his favor by the same owners on December 3, 1945, which deed of sale was registered in the Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act No. 3344. ISSUE: Whether or not the registration of the second sale in favor of Pilapil affects Hanopol's rights as the first vendee HELD: Appellant argues that the registration of Pilapil's notarized deed of sale in 1948 under Act No. 3344 "shall be understood to be without prejudice to a third party with a better right". He contends that since at the time the Siapos sold the land in question in 1945 to Pilapil, the former were no longer the owners as they had already sold the same to appellant since 1938, the first sale to him is a better right which cannot be prejudiced by the registration of the second sale. We do not think the proviso in Act No. 3344 justifies appellant's contention. If his theory is correct, then the second paragraph of Article 1544 of the New Civil Code (formerly Article 1473 of the old Code) would have no application at all except to lands or real estate registered under the Spanish Mortgage Law or the Land Registration Act. Such a theory would thus limit the scope of that codal provision. But even if we adopt this latter view, that is, that Article 1544 (formerly Article 1473) only applies to registered land, still we cannot agree with the appellant that by the mere fact of his having a previous title or deed of sale, he has acquired thereby what is referred to in Act No. 3344 as the "better right" that would be unaffected by the registration of a second deed of sale under the same law. Under such theory, there would never be a case of double sale of the same unregistered property. It thus appears that the "better right" referred to in Act No. 3344 is much more than the mere prior deed of sale in favor of the first vendee. In the Lichauco case mentioned, it was the prescriptive right that had supervened. Or, as also suggested in that case, other facts and circumstances exist which, in addition to his deed of sale, the first vendee can be said to have better right than the second purchaser. In the case at bar, there appears to be no clear evidence of Hanopol's possession of the land in controversy. In fact, in his complaint against the vendors, Hanopol alleged that the Siapos took possession of the same land under claim of ownership in 1945 and continued and were in such possession at the time of the filing of the complaint against them in 1948. Consequently, since the Siapos were in actual occupancy of the property under claim of ownership, when they sold the said land to appellee Pilapil on December 3, 1945, such possession was transmitted to the latter, at least constructively, with the execution of the notarial deed of sale, if not actually and physically as claimed by Pilapil in his answer filed in the present case. Thus, even on this score, Hanopol cannot have a better right than appellee Pilapil who, according to the trial court, "was not shown to be a purchaser in bad faith".

EXPRESSCREDIT FINANCING CORPORATION, Petitioner, SPS. MORTON AND JUANITA VELASCO, Respondents. QUISUMBING, J.:

G.R. No. 156033 Present: Promulgated: October 20, 2005

On May 25, 1988, respondents purchased on installment, from spouses Jesus and Lorelei Garcia (Garcia spouses), a house and lot in Quezon City, covered by Transfer Certificate of Title No. 3250 in the name of Jesus Garcia. In July 1988, a Deed of Absolute Sale was executed whereby the Garcia spouses bound themselves to deliver the title of the property purchased, free from all liens and encumbrances within 15 days from full payment. Respondents were thereafter informed by the Garcia spouses that since the house on the property was still under construction, the lot was still covered by the mother title and had no separate title as yet. They promised to give the title after the construction was completed. In August 1988, the keys to the property were delivered to the respondents. They moved in, applied for a telephone connection, and insured the house. When respondents followed up on the title, the Garcia spouses told them that since the Quezon City Hall was razed by a fire in June, the title had to be reconstituted, so their separate title could not yet be delivered to them. Because the Garcia spouses would not deliver the title despite repeated demands, respondents went to the Register of

Deeds in Quezon City and discovered that the Garcia spouses had mortgaged the property to petitioner, Expresscredit Financing Corporation, for P250,000 on June 15, 1989, or more than a year after the property was sold to them. On October 23, 1990, the respondents filed a case for Quieting of Title and Specific Performance against the Garcia spouses before the court a quo, whereby they caused registration of a notice of lispendenson the title, attaching thereto a copy of their complaint stating that they have been the owners of the said property since May 25, 1988. The Garcia spouses were subsequently declared in default for failing several times to appear in court despite notice. On October 7, 1992, petitioner foreclosed on the property in defiance of the notice of lispendensand the Writ of Preliminary Injunction issued by the lower court, enjoining petitioner from selling or in any manner disposing of the property without permission from the court. Petitioner sold the property in a public auction where petitioner was the highest bidder. Due to the failure of the Garcia spouses to redeem the property, petitioner thereafter executed an Affidavit of Consolidation and secured Certificate of Title No. 69049 in its name. On March 1, 1996, the Regional Trial Court rendered its Decision and held that defendant [Expresscredit] Financing Corporation is an innocent purchaser and is, therefore, in good faith. The case filed against defendant [Expresscredit] Financing Corporation was ordered DISMISSED for lack of merit. The Court of Appeals reversed the Decision of the trial court. Issue: Who has preferential right over the property, the respondents who acquired it through prior purchase or the petitioner who acquired the same in a foreclosure sale as the highest bidder? Held: The respondents who acquired through prior purchase in good faith. An innocent purchaser for value or any equivalent phrase shall be deemed to include, under the Torrens System, the innocent lessee, mortgagee, and other encumbrancer for value. As shown by the evidence, the property had already been sold by the Garcia spouses to the respondents on May 25, 1988. The respondents immediately took possession, applied for a telephone line, and insured the property with Pioneer Insurance in September 1988. When the same land was mortgaged by the Garcia spouses, respondents have been, since May 25, 1988 in actual, physical, continuous and uninterrupted possession. Petitioner justifies its acquisition of the property by saying that when it was mortgaged, the previous sale of the land was not annotated on the title and so its purchase was in good faith. To fulfill the requirement of good faith, it is imperative for a mortgagee of the land, in the possession of persons not the mortgagor, to inquire and investigate into the rights or title of those in possession. It is true that a person dealing with the owner of registered land is not bound to go beyond the certificate of title. He may rely on the notices of the encumbrances on the property annotated on the certificate of title or absence of any annotation. However, we note that the Garcia spouses are unlike other mortgagors. They are in the business of constructing and selling townhouses and are past masters in real estate transactions. Further, petitioner is in the business of extending credit to the public, including real estate loans. In both these businesses, it devolves upon both, greater charge than ordinary buyers or encumbrancers for value, who are not in such venture. It is standard in their business, as a matter of due diligencerequired of banks and financing companies, to ascertain whether the property being offered as security for the debt has already been sold to another to prevent injury to prior innocent buyers. They also have the resources to ascertain any encumbrances over the properties they are dealing with. According to respondents witness, ConchitaCotoner, on the second week of June 1989, two credit investigators of petitioner visited the subject property to investigate concerning the occupants on the property. They were promptly informed by the witness, who was the caretaker of the property, that the same had been sold to respondents by the Garcia spouses in May of 1988. Clearly, petitioner, through its agents, had been informed of the earlier sale of the subject property to the respondents. Since the Garcia spouses no longer had the right to alienate the property, no valid mortgage was ever constituted on it. Since the mortgage contract was void, the foreclosure of the property was ineffectual as well. Sadly, petitioner, despite having knowledge of the unregistered sale still accepted the mortgage and to our mind, in bad faith, purchased the same at the foreclosure sale. Indeed, where the land sold in auction sale was registered under the Torrens System, the purchaser at the execution sale acquired such rights, title and interest of the judgment debtor as appearing on the certificate of title issued on the property, subject to no liens, encumbrances or burdens that were not noted thereon. Petitioners claim that it purchased the property at an auction sale is of no moment. In this case, particular circumstances constrain us to rule that petitioner was neither a mortgagee nor a purchaser in good faith and as such, could not acquire good title to the property as against the former transferee. URSAL vs CA FACTS: spouses Jesus and Cristita Moneset (Monesets) are the registered owners of a 333-square meter land together with a house thereon situated at Sitio Laguna, Basak, Cebu City covered by Transfer Certificate of Title No. 78374.On January 9, 1985, they executed a Contract to Sell Lot & House in favor of petitioner Winifreda Ursal (Ursal). Petitioner paid the down payment and took possession of the property. She immediately built a concrete perimeter fence and an artesian well, and planted fruit bearing trees and flowering plants thereon which all amounted to P50,000.00. After

paying six monthly installments, petitioner stopped paying due to the Monesets failure to deliver to her the transfer certificate of title of the property as per their agreement; and because of the failure of the Monesets to turn over said title, petitioner failed to have the contract of sale annotated thereon. nown to petitioner, the Monesets executed on November 5, 1985 an absolute deed of sale in favor of Dr. Rafael Canora, Jr. over the said property for P14,000.00.On September 15, 1986, the Monesets executed another sale, this time with pacto de retro with Restituto Bundalo.On the same day, Bundalo, as attorney-in-fact of the Monesets, executed a real estate mortgage over said property with Rural Bank of Larena (hereafter Bank) located in Siquijor for the amount of P100,000.00.The special power of attorney made by the Monesets in favor of Bundalo as well as the real estate mortgage was then annotated on the title on September 16, 1986. For the failure of the Monesets to pay the loan, the Bank served a notice of extrajudicial foreclosure dated January 27, 1988 on Bundalo. On September 30, 1989, Ursal filed an action for declaration of non-effectivity of mortgage and damages against the Monesets, Bundalo and the Bank. She claimed that the defendants committed fraud and/or bad faith in mortgaging the property she earlier bought from the Monesets with a bank located in another island, Siquijor; and the Bank acted in bad faith since it granted the real estate mortgage in spite of its knowledge that the property was in the possession of petitioner. The Monesets answered that it was Ursal who stopped paying the agreed monthly installments in breach of their agreement. The Bank, on the other hand, averred that the title of the property was in the name of Cristita Radaza Moneset married to Jesus Moneset and did not show any legal infirmity. ISSUE: Whether or not the document captioned: Contract to Sell Lot and House (Exh. A) is valid and binding so much so that the herein Petitioner who is the Vendee is the lawful and true owner of the lot and house in question] HELD: No. Petitioner did not become the lawful and true owner of the property in question. The reason is that, the contract between petitioner and the Monesets being one of Contract to Sell Lot and House, petitioner, under the circumstances, never acquired ownership over the property and her rights were limited to demand for specific performance from the Monesets, which at this juncture however is no longer feasible as the property had already been sold to other persons. A contract to sell is a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price. In such contract, the prospective seller expressly reserves the transfer of title to the prospective buyer, until the happening of an event, which in this case is the full payment of the purchase price. What the seller agrees or obligates himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. Stated differently, the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. It is different from contracts of sale, since ownership in contracts to sell is reserved by the vendor and is not to pass to the vendee until full payment of the purchase price, while in contracts of sale, title to the property passess to the vendee upon the delivery of the thing sold. In contracts of sale the vendor loses ownership over the property and cannot recover it unless and until the contract is resolved or rescinded, while in contracts to sell, title is retained by the vendor until full payment of the price. In contracts to sell, full payment is a positive suspensive condition while in contracts of sale, non-payment is a negative resolutory condition. A contract to sell may further be distinguished from a conditional contract of sale, in that, the fulfillment of the suspensive condition, which is the full payment of the purchase price, will not automatically transfer ownership to the buyer although the property may have been previously delivered to him. The prospective vendor still has to convey title to the prospective buyer by entering into a contract of absolute sale. While in a conditional contract of sale, the fulfillment of the suspensive condition renders the sale absolute and affects the sellers title thereto such that if there was previous delivery of the property, the sellers ownership or title to the property is automatically transferred to the buyer. Indeed, in contracts to sell the obligation of the seller to sell becomes demandable only upon the happening of the suspensive condition, that is, the full payment of the purchase price by the buyer. It is only upon the existence of the contract of sale that the seller becomes obligated to transfer the ownership of the thing sold to the buyer. Prior to the existence of the contract of sale, the seller is not obligated to transfer the ownership to the buyer, even if there is a contract to sell between them. Since the contract in this case is a contract to sell, the ownership of the property remained with the Monesets even after petitioner has paid the down payment and took possession of the property. In Flancia vs. Court of Appeals, wherethe vendee in the contract to sell also took possession of the property, this Court held that the subsequent mortgage constituted by the owner over said property in favor of another person was valid since the vendee retained absolute ownership over the property. At most, the vendee in the contract to sell was entitled only to damages. 1 ILAO-QUIANAY vs. MAPILE G.R. No. 154087 October 25, 2005 Tinga, J.

FACTS: Subject of this case is a parcel of land situated in Sta. Cruz, Manila and covered by Transfer Certificate of Title in the name of the deceased Simplicio Ilao. In the course of the judicial settlement of Ilaos estate, his heirs found out that the title of the subject property had an annotation of adverse claim filed by a certain Juanito Ibarra. Respondent herein, Atty. Rodolfo Mapile, filed a motion to exclude the property from the inventory on the ground that the same no longer formed part of Ilaos estate having been disposed of during the latters lifetime in favor of Ibarra. Acting upon respondents allegation, the heirs of Ilao promptly filed a civil case for Quieting of Title and Damages. The Court of First Instance of Manila denied respondents motion and authorized the sale of the subject property to Virgilio Sevilla subject to the outcome of aforementioned civil case. Relevantly, it appears that in 1974, Ibarra filed a petition for the issuance of a new owners duplicate copy of the title of the subject property, claiming that he was in possession of said owners duplicate but that he lost the same in a fire that took place in Sta. Ignacia, Camiling, Tarlac on April 26, 1974. This allegation was, however, uncovered by the trial court to be false when, upon the courts subpoena, Ilaos heirs appeared and presented the certificate of title Ibarra claimed to have been lost. Subsequently, respondent filed a civil case for Specific Performance and Declaration of Nullity of Contract, claiming that the subject property had been sold by Ilao to Ibarra pursuant to a Deed of Absolute Sale dated February 7, 1972, and that Ibarra, in turn, sold the property to him. The two civil cases were consolidated. After trial, the court rendered judgment in favor of respondent, finding that the deed of sale was genuine and ordering that petitioners surrender the owners duplicate copy of the transfer certificate of title and all documents appurtenant thereto. The decision was primarily anchored on the trial courts finding that the conflicting testimonies of the handwriting experts presented by both parties left it no choice but to favor the notarized deed of sale and to rule that the same is genuine. Petitioners argue that the appellate court erred in disregarding the testimonies of the expert witnesses allegedly to the effect that Ilaos signature on the deed of sale was forged. It also alleged that it erred in certain matters crucial to the case, such as the fact, among others, that Ibarra neither took possession of the subject property nor of the certificate of title covering it. ISSUE: WON the property subject of this case rightfully belongs to respondent herein. HELD: YES. The petitioners contention is not entirely accurate. The trial court and the Court of Appeals did take into account the entirety of the testimonies of the handwriting experts and reckoned that neither should be accorded probative value because the expert witnesses have conflicting opinions on the genuineness of the signatures used as standards against which the alleged forged signature on the deed of sale would be measured. Experts are presented to enlighted not confuse the courts and for this reason, the Court do not fault the lower court for disregarding, in its exasperation, their testimony on record, no doubt, relying on the leeway extended to all courts that they "are not bound to submit their findings necessarily to such testimony. The validity of the deed of sale should, therefore, be recognized, the only opposition thereto being the alleged forgery of Ilaos signature which was not satisfactorily demonstrated. There is no doubt that the deed of sale was duly acknowledged before a notary public. As a notarized document, it has in its favor the presumption of regularity and it carries the evidentiary weight conferred upon it with respect to its due execution. As regards petitioners contention that at no time did Ibarra exercise ownership over the subject property as neither the property nor the certificate of title covering it were delivered to Ibarra, these circumstances do not necessarily warrant a conclusion that the property was not validly transferred to Ibarra. It has been held that ownership of the thing sold is acquired only from the delivery thereof, either actual or constructive. Article 1498 of the Civil Code provides that 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 clearly be inferred. The execution of the public instrument, even without actual delivery of the thing, transfers the ownership from the vendor to the vendee, who may thereafter exercise the rights of an owner over the same. In this case, a public instrument was executed through which constructive delivery of the subject property was made transferring ownership thereof to Ibarra. As the new owner, Ibarra acted perfectly within his rights when he soldthe property to respondent.