Article 1469- 1471

Development Bank of the Philippines vs. Moll

BARREDO, J .:p
Appeal from the decision of the Court of First Instance of Manila in its Civil Case No. 56037
sentencing appellants to jointly and severally pay to the appellee Development Bank of the
Philippines the sum of P1,648,591.45, claimed by the said Bank to be the deficiency or unpaid
balance of appellants' overdue obligation under certain agricultural and industrial loans it had
granted to appellants after applying to the said loans the proceeds of the extrajudicial foreclosure
and public auction sale of the properties mortgaged to secure their payment, plus attorney's fees and
costs.
It appears that on April 12, 1947 and December 15, 1947, the appellee Development Bank of the
Philippines (then known as the Rehabilitation Finance Corporation) granted agricultural loans in the
amounts of P120,000.00 and P22,000.00, respectively, in favor of one Sebastian Moll, Sr. who, to
secure the payment of said loans, mortgaged in favor of the appellee Bank fourteen (14) parcels of
land comprising the property known as "Hacienda Moll" covered by certificates of title and tax
declarations issued by the land registry of the province of Camarines Sur. Said Sebastian Moll, Sr.
having subsequently died, his heirs (appellants) executed on May 14, 1949 an extrajudicial partition
of his estate, including the properties above-mentioned, adjudicating the same to themselves, albeit
binding themselves, jointly and severally, to assume payment of the indebtedness of the deceased
with the appellee Bank; and starting from the said date, appellants themselves applied for and were
granted by the appellee Bank new and additional loans, to wit: May 14, 1949 an industrial loan of
P150,000.00; May 28, 1951 an additional agricultural loan of P100,000.00; and May 31, 1951
another industrial loan of P580,000.00. The additional agricultural loan was granted by the appellee
Bank on the security of the same properties already mortgaged to the appellee Bank by appellants'
predecessor in interest, earlier stated; while the new industrial loans were secured by mortgages on
machineries, equipment and some other real estate.
Appellants thereafter failed to comply with the terms of the loan contracts as they fell due.
Consequently, the above-mentioned mortgages on their properties were extrajudicially foreclosed
under the provisions of Act 3135, as amended; and in the public auction sale thereof subsequently
conducted by the Provincial Sheriff of Camarines Sur on June 30, 1962, the 14 parcels of land
mortgaged to secure payment of the agricultural loans and the machineries, equipment and other
real estate mortgaged to secure payment of the industrial loans were awarded in favor of the
appellee Bank as the sole and highest bidder for the amounts of P176,174.50 and P19,750.00,
respectively, which were accordingly applied to the payment of the corresponding portions of the
said loans.
As the proceeds of the foreclosure sales aforesaid were not sufficient to cover the loan indebtedness
of appellants, the appellee Bank then instituted the present case in the Court of First Instance of
Manila on January 23, 1964, for the purpose of recovering so the complaint alleges, the sums of
P173,117.55, on account of the agricultural loans, and P1,475,473.90, on account of the industrial
loans, which it claims to be the outstanding balances or deficiencies under the two types of loans
obtained by appellants.
In their answer, appellants admit the existence of their indebtedness to the appellee Bank under the
loan contracts mentioned in the latter's complaint; but they deny and dispute, among others, the
deficiency claims of the appellee Bank, contending at the same time, by way of affirmative and
special defenses, that the extrajudicial foreclosure and public auction sales of the properties
mortgaged had been carried out by the sheriff irregularly and improperly in violation of the pertinent
provisions of Rule 39 of the Rules of Court and had thus resulted in the sale for unconscionable
prices of their mortgaged properties which, according to appellants' own estimate, have a total actual
value of not less than P5,000,000.00.
It appears, further, that the corresponding deeds and certificates of sale issued in favor of the
appellee Bank in consequence of the disputed foreclosure proceeding and public auction sales were
registered with the Register of Deeds concerned only on November 11, 1964 and December 7, 1964
some ten (10) months later than the commencement of the present action for collection of the
deficiency claim of the appellee Bank. .
After trial, the court below rendered the decision appealed from which, as stated earlier in the
opening paragraph hereof, sustains the above-mentioned deficiency claims of the appellee
Development Bank of the Philippines. .
In this appeal, appellants assail the said judgment thus: .
"I. THE HONORABLE COURT A QUO ERRED IN NOT SETTING ASIDE THE
ALLEGED AUCTION SALE ON JUNE 30,1962, OF THE MORTGAGED
PROPERTIES BY THE DEFENDANTS-APPELLANTS TO THE PLAINTIFF-
APPELLEE, ON THE GROUND THAT THE SELLING AUCTION PRICES OF SAID
PROPERTIES WERE UNJUST, DISPROPORTIONATE AND UNCONSCIONABLE
IN THE LIGHT OF THE FAIR AND CURRENT MARKET VALUE OF THE SAME
PROPERTIES AT THE TIME OF SAID AUCTION SALE. .
"II. THE HONORABLE COURT A QUO ERRED IN NOT DISMISSING THE
COMPLAINT AT BAR FOR RECOVERY OF A DEFICIENCY CLAIM, ON THE
GROUND THAT SAID COMPLAINT WAS OR IS, PREMATURE, FOR THE
REASON THAT IT HAD BEEN FILED DURING THE PERIOD OF LEGAL
REDEMPTION GRANTED BY LAW TO DEFENDANTS-APPELLANTS AS
MORTGAGE-DEBTORS." .
The thrust of appellants' argument in respect of the first assignment of error is to the effect that if in
1947 and 1951 when the agricultural and industrial loans herein involved were obtained by
appellants, the appellee Bank, after due inspection and appraisal of the securities they offered
therefor, had granted them a total agricultural loan of P242,000.00 upon the security of the 14
parcels of land they mortgaged and a total industrial loan of P770,000.00 upon the security of other
lands and machineries and equipment they also mortgaged, hence, it is inconceivable that after the
lapse of more than ten years and the fast and steadily increasing real estate values these past
years, the same properties would command, in the extrajudicial foreclosure sales conducted by the
provincial sheriff of Camarines Sur in 1962, only the measly sums of P176,174.50 and P19,750.00,
respectively, considering that pursuant to consistent banking practice, the aforesaid amounts of
loans granted would represent only 60% of the actual and current market value of the securities at
the time of the grant of said loans. In short, it is the position of appellants that the foreclosure sales
aforesaid should be set aside because "the total auction selling price of P195,924.50 for both the
collateral securities to the agro-industrial loans, is so inadequate, disproportionate and shocking to
conscience." .
It does appear that the purchase prices in question are considerably out of proportion to the possible
actual market value of appellants' securities. Considering, however, that the impugned sales were
made subject to appellants' right of redemption, the following ruling in Ponce de Leon vs.
Rehabilitation Finance Corporation,
1
sufficiently disposes of their contention: .
In support of their second assignment of error, the Sorianos maintain that the sum of
P10,000.00, for which the Paraaque property was sold to the RFC, is ridiculously
inadequate, considering that said property had been assessed at P59,647.05. This
presense is devoid of merit, for said property was subject to redemption and:
... where there is the right to redeem ... inadequacy of price should not be
material, because the judgment debtor may re-acquire the property or else sell his
right to redeem and thus recover any loss he claims to have suffered by reason of
the price obtained at the execution sale (Barrozo vs. Macaraig, 83 Phil. 378, 381,
Emphasis Ours.)
Then, again, as the trial court had correctly observed:
But, mere inadequacy of the price obtained at the sheriff's sale unless shocking to
the conscience will not be sufficient to set aside the sale if there is no showing that,
in the event of a regular sale, a better price can be obtained. The reason is that,
generally, and, in forced sales, low prices are usually offered (1 Moran's Rules of
Court, 834-835). Considering that in Gov't. of P.I. vs. Soriano, G.R. No. 32196,
wherein property worth P120,000.00 was sold for only P15,000.00, in Philippine
National Bank vs. Gonzales, 45 Phil. 693, wherein property valued at P45,000.00
was sold for P15,000.00 and in Cu Unjieng & Sons v. Mabalacat Sugar Co., 58 Phil.
439, property worth P300,000.00 to P400,000.00 was sold for P177,000.00, the
Court cannot consider the sale of the Bacolod properties, the Taft Avenue house and
lot and the Paraaque property of the Sorianos null and void for having been sold at
inadequate prices shocking to the conscience and there being no showing that in the
event of a resale, better prices can be obtained.'
This ruling was reiterated in the more recent case of De Leon vs. Salvador, et al.,
2

... (w)hile in ordinary sales for reasons of equity a transaction may be invalidated on
the ground of inadequacy of price, or when such inadequacy shocks one's
conscience as to justify the courts to interfere, such does not follow when the law
gives to the owner the right to redeem, as when a sale is made at public auction,
upon the theory that the lesser the price the easier it is for the owner to effect the
redemption. And so it was aptly said: "When there is the right to redeem, inadequacy
of price should not be material, because the judgment debtor may reacquire the
property or also sell his right to redeem and thus recover the loss he claims to have
suffered by reason of the price obtained at the auction sale.
At this juncture, it may not be amiss to make it clear that appellants' period to redeem the properties
sold in the extrajudicial foreclosure sales in question is one year, "computed from the date of the
registration of the certificates of sales of the mortgaged properties," since registered lands are
involved in this case, and, as explained lately by this Court in Quimson, et al. vs. Philippine National
Bank, 3 "this Court has uniformly ruled that redemption from execution sales under ordinary
judgments pursuant to Section 30, Rule 39 of the Rules of Court should be made within twelve (12)
months from the registration of the same and We have uniformly applied the same rule to sales upon
extrajudicial foreclosure of registered lands.".
On the other hand, it may also be stressed that actions seeking to set aside auction sales do not toll
the running of the period of redemption; and this We have to emphasize now, if only to forestall the
possibility of the parties' coming up here in the future and praying for a definite ruling on the matter.
This question was resolved inSumerariz vs. Development Bank of the Philippines, L-23764,
December 26, 1967, 21 SCRA 1374, thus: .
Under the second assignment of error, plaintiffs maintain that the period of one (1)
year to redeem the property in question was suspended by the institution of Case
No. 29306 (commenced by Sumerariz and his wife against the DBP and the Sheriff
of Manila to set aside the foreclosure sale involved therein) on March 26, 1956, or
three (3) days before the expiration of said period. We have not found, however, any
statute or decision in support of this pretense. Moreover, up to now plaintiffs have not
exercised the right of redemption. Indeed, although they have intimated their wish to
redeem the property in question, they have not deposited the amount necessary
therefor. It may not be amiss to note that, unlike Section 30 of Rule 39 of the Rules of
Court, which permits the extension of the period of redemption of mortgaged
properties, (Enage vs. Vda. e Hijas de F. Escano, 38 Phil. 657) Section 3 of
Commonwealth Act No. 459, in relation to Section 9 of Republic Act No. 85, which
governs the redemption of property mortgaged to the Bank, does not contain a
similar provision (Nepomuceno vs. Rehabilitation Finance Corporation, L-14897,
November 23, 1960). Again this question has been definitely settled by the decision
in the previous case declaring that plaintiffs' right of redemption has already been
extinguished in view of their failure to exercise it within the statutory period.
Perforce then We must hold that the foreclosure sales here involved cannot be set aside on the
ground, vigorously alleged by appellants, that the prices obtained therein are grossly inadequate and
unconscionable. Corollarily, We do not deem it necessary to discuss further and rule upon
appellants' claim that the foreclosure sales referred to were improperly and irregularly conducted by
the provincial sheriff of Camarines Sur because the latter sold the mortgaged properties here
involved in mass and within a single day, although the record appears to be bereft of any concrete
showing, other than appellants' claim that better prices could had been obtained for the said
mortgaged securities had the above-mentioned provincial sheriff conducted the sales in question
otherwise.
4

Anent appellants' second assignment of error to the effect that the present case was prematurely
instituted on the ground that an action for recovery of an alleged deficiency claim cannot be legally
entertained during the period of redemption, appellants argue in their brief (pp. 16-18), as follows: .
In the case at bar, the suit to recover deficiency claim was instituted on January 23,
1964, (page 1 Record on Appeal), but, the Certificate of Sale by the Provincial Sheriff
of Camarines Sur in connection with the auction sale of the collateral securities on
the industrial loans was registered in the Office of the Register of Deeds of said
province on November 11, 1964, and, the Certificate of Sale of said provincial sheriff
in connection with the auction sale of the collateral securities on the agricultural
loans, was registered in the same office on December 7, 1964. Therefore, the
present action for recovery of deficiency claim was filed even before the registration
of both Certificates of Sale, as shown by Exhibit '2' for appellants (pp. 33-34, Record
on Appeal). As the running of the period of one year of the right of redemption
commenced from the date and/or dates of registration of the Certificate of Sale, it is
too clear and unassailable that the filing of the case at bar on January 23, 1964, was
improper and premature. For indeed, the filing of a suit for recovery of a deficiency
claim before the commencement or, during the period of the right of redemption,
constitutes a clever anticipation that the auction sale arising from the effects of
extrajudicial foreclosure had been conducted with all the earmarks of validity, even if
it were not. Suppose an auction sale were declared illegal due to irregularities and
violation of the mandate of the law, what would be the effect of such pronouncement
in an action for deficiency claim when such action has no legal basis? If a suit for
recovery of a deficiency judgment or deficiency claim is a legal consequence of an
auction sale arising from judicial or extrajudicial foreclosure, then such suit should
await for the expiration period of the right of redemption within which period,
precisely, the redemptioner may ordinarily institute an action to assail the manner
with which the auction sale was conducted. ... .
In the case of Philippine Bank of Commerce vs. De Vera,
5
We held: .
"A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discloses
nothing, it is true, as to the mortgagee's right to recover such deficiency. But neither do we find any
provision thereunder which expressly or impliedly prohibits such recovery. .
Article 2131 of the new Civil Code, on the contrary, expressly provides that "The
form, extent and consequences of a mortgage, both as to its constitution,
modification and extinguishment, and as to other matters not included in this
Chapter, shall be governed by the provisions of the Mortgage Law and of the Land
Registration Law." Under the Mortgage Law, which is still in force, the mortgagee has
the right to claim for the deficiency resulting from the price obtained in the sale of the
real property at public auction and the outstanding obligation at the time of the
foreclosure proceedings. (See Soriano vs. Enriquez, 24 Phil. 584; Banco de Islas
Filipinas v. Concepcion e Hijos, 53 Phil. 86; Banco Nacional v. Barreto, 53 Phil. 101).
Under the Rules of Court (Sec. 6, Rule 70), "Upon the sale of any real property,
under an order for a sale to satisfy a mortgage or other incumbrance thereon, if there
be a balance due to the plaintiff after applying the proceeds of the sale, the court,
upon motion, should render a judgment against the defendant for any such balance
for which, by the record of the case, he may be personally liable to the plaintiff,... ." It
is true that this refers to a judicial foreclosure, but the underlying principle is the
same, that the mortgage is but a security and not a satisfaction of indebtedness. ... .
Under the provisions of section 6 of Rule 70 now section 6 of Rule 68 of the revised Rules of
Court above-cited, it is expressly provided that "if there be a balance due to the plaintiff after
applying the proceeds of the sale, the court, upon motion, shall render judgment against the
defendant for any such balance for which, by the record of the case, he may be personally liable to
the plaintiff, upon which execution may issue immediately if the balance is all due at the time of the
rendition of the judgment." Said provisions are equivalent to those of section 260 of the old Code of
Civil Procedure, under which it was held in a case,
6
"that in order that a decree for any balance for
which the mortgagor may be personally liable to the mortgagee may be issued, it is necessary that the
sale of the mortgaged real property has been made according to the decree for said sale to satisfy the
judgment; that there has remained a balance due the mortgagee after applying the proceeds of the sale
to the debt; (and) that the mortgagee presents a motion for the issuance of a decree for said balance",
while in another case, 7 it was said that "Section 260 requires the rendition and entry of a judgment for
the deficiency against the defendant, who shall be personally liable to the plaintiff, and execution may
issue on said judgment at once." We believe it is apparent from the provisions and decisions above-
quoted that once the auction sale of the mortgaged property is effected and the resulting deficiency in the
mortgage debt is ascertained, the mortgagee-creditor is then and there entitled to secure a deficiency
judgment which may immediately be executed, whether or not the mortgagor is still entitled to redeem the
property sold. We hold then that appellants' right to redeem their auctioned properties could not be a bar
to the present action of appellee to recover the deficiencies which it claims to have resulted after applying
the proceeds of the foreclosure sales here involved in payment of appellants' mortgage debt. .
WHEREFORE, the decision appealed from is affirmed, with costs against appellants.
Topacio v CA
PARAS, J .:
This is an appeal by way of certiorari from the decision
1
in CA G.R. CV 23258 which reversed the decision
2
of
the Regional Trial Court, Branch 98, Quezon City in Civil Case No. 51954.
On March 9, 1988, the parties submitted the following stipulation of facts:
1. The parties admit the personal and corporate circumstances of each other as found in the
complaint.
2. The spouses Juan P. de Villa, Jr. and Rosalia de Villa, parents-in-law of the plaintiff, were the
former owners of Lot No. 13, Block 21-A, covered by TCT No. 280808 of the Registry of Deeds of
Quezon City. This property was previously mortgaged to the Ayala Investment and Development
Corporation to secure an obligation of P500,000.00. For failure of the said mortgagors to pay upon
maturity, the mortgage was foreclosed and consequently, defendant acquired the property as
highest bidder in the auction sale, following the foreclosure. No redemption having been exercised
by the mortgagors, the defendant was able to consolidate its title over the property.
3. Plaintiff, who lives with his in-laws, negotiated to purchase the property from defendant. He first
made an offer on August 9, 1985 (Annex A, complaint) for P900,000.00 but defendant asked
plaintiff to improve his offer. Subsequently, the plaintiff and Mr. Manuel Ablan, then Manager of the
Loans Adjustment and Special Asset Department of the defendant arrived at P1,250,000.00 as the
purchase price, with 30% downpayment, and the balance, payable in cash, upon execution of the
Deed of Sale. Plaintiff confirmed his offer in his letter to the defendant dated November 27, 1985
(Annex B, complaint; Annex, 1, Answer), with his check payment of P375,000.00.
4. Defendant received plaintiff's initial payment of P375,000.00 on November 28, 1985, for which a
receipt was issued under defendant's Official Receipt No. 112375 (Annex C, Complaint).
5. On December 4, 1985, defendant wrote to the plaintiff, informing him of the terms and conditions
of the sale, as approved by the management of defendant, which, among other things, gives
plaintiff up to January 4, 1986 within which to pay the balance of P875,000.00 (Annex D,
Complaint, Annex 2, Answer).
6. Plaintiff asked for extensions within which to pay the balance. The first was made on January 8,
1986 (Annex 3, Answer), another on April 22, 1986 (Annex 4, Answer). Defendant agreed to extend
the payment up to June 30, 1986, in accordance with defendant's letter dated May 5, 1986,
requiring plaintiff, in addition, to pay interest at 24% per annum on the unpaid balance (Annex 5,
Answer).
7. Plaintiff, not having been able to meet defendant's deadline (June 30, 1986), defendant wrote a
letter to plaintiff dated September 6, 1986 (Annex 6, Answer) declaring itself (defendant) free to sell
the property to other buyers and informing plaintiff that he could already claim his initial payment of
P375,000.00
8. In response, plaintiff, in its letter dated October 22, 1986 (Annex 7, Answer), asked for an
extension of another six (6) months, within which to pay the balance of P875,000.00. Defendant
denied plaintiff's request and asked plaintiff to get back his P375,000.00, in defendant's letter to
plaintiff dated November 7, 1986 (Annex 8, Answer).
9. On January 5, 1987, defendant wrote plaintiff, reiterating its request that plaintiff get back his
P375,000.00 (Annex 9, Answer) and on February 12, 1987 (Annex E, Complaint, Annex 10,
Answer), defendant mailed to plaintiff a cashier's check for P375,000.00, payable to him. Plaintiff
replied in March 6, 1987 (Annex F, Complaint, Annex 11, Answer), declining acceptance of the
P375,000.00 and insisting therein the defendant allow plaintiff to pay the balance of P875,000.00.
10. Subsequently, defendant informed plaintiff that the property is being sold for P1,600.00, in its
Answer. Plaintiff then wrote on April 1, 1987 to Mr. Xavier Loinaz of defendant (Annex 13, Answer)
asking that original price of P1,250,000.00 be maintained. Defendant again wrote to plaintiff on May
29, 1987 (Annex 14, Answer) reiterating its position that defendant was willing to sell at
P1,600,000.00.
11. Plaintiff, in its letter to defendant dated July 21, 1987, (Annex G, Complaint, Annex 15,
Answer), returned the cashier's check earlier issued by defendant in favor of plaintiff. Defendant
acknowledged receipt of said letter but declined to take back the said check as expressed in
defendant's letter of the same date (Annex 16, Answer).
12. The cashier's check of P375,000.00 payable to plaintiff remains uncashed to date and is still in
the hands of the plaintiff, after defendant refused to accept its return.
13. Plaintiff admits that Annexes 1 to 16 attached to the Answer are true and faithful copies of the
originals. Defendant likewise admits that Annexes A to G attached to the complaint are true and
faithful copies of the originals. Said Annexes are hereby adopted by the parties as part of this
Stipulation of Facts and may be received in evidence without further authentication or identification.
(Rollo, pp. 21-24)
On the basis of the foregoing stipulation, the trial court rendered judgment in favor of the petitioner, finding that there
is a perfected contract of sale which is still enforceable because the respondent failed to rescind either by judicial or
notarial rescission.
The dispositive portion of the trial court's decision is quoted hereunder:
Samakatwid, iginagawad ng hukumang ito ang pasiya para sa nagsasakdal at ipinag-uutos sa
ipinagsakdal na BPI Investment Corporation na tanggapin mula sa nagsasakdal.
Una Ang tsekeng P375,000.00 bilang paunang bayad na tatlumpung porsiento ng buong
halaga.
Pangalawa Ang hulihang P875,000.00 na may kalakip na interes na labindalawang (12%)
porsiento simula sa ika-lima ng Oktubre, 1987 hanggang mabayaran ito;
Pangatlo At isagawa ng nasasakdal na BPI Investment Corporation ang pagsasalin ng ari-arian
na nabanggit sa dakong itaas sa pamamagitan ng isang bilihan tuluyan sa kapakanan ng
nasasakdal na si Lino Topacio at kanyang may-bahay.
Ang gastos ay dapat bayaran ng ipinagsasakdal.
IPINAG-UUTOS. (Rollo, p. 24)
The Court of Appeals, on appeal, reversed the trial court's decision stating that the letter dated December 4, 1985,
sent by BPI to the petitioner reveals that the contract entered into by them is a contract to sell, not a contract of sale.
The letter of December 4, 1985 is hereby quoted as follows:
We are pleased to inform you that the managament has approved for the sale for the above
property to you under the following terms and conditions:
1. Selling price of P1,250,000.00 is on CASH basis;
2. Execution of a Deed of Absolute Sale;
3. All expenses relative to the sale/transfer of title shall be for the account of the buyer;
4. Eviction of tenants, if any, shall be for the account of the buyer;
5. Sale of the property is on as-is where-is basis.
If you are agreeable to the foregoing, kindly indicate your conformity by signing on the space
provided below and return the copies to us together with your balance of P875,000.00. The validity
of the above approval is good up to January 4, 1986. (Rollo, pp. 7-8)
The petition is impressed with merit.
The payment by petitioner of P375,000.00 on November 28, 1991 which respondent accepted, and for which an
official receipt was issued, the body of which hereby quoted:
Partial payment for the purchase of real property, formerly owned by Juan de Villa.
P
3
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,
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.
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was the operative act that gave rise to a perfected contract of sale between the parties. Article 1482 of the
Civil Code provides:
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract.
Earnest money is something of value to show that the buyer was really in earnest, and given to the seller to
bind the bargain. Under the Civil Code, earnest money is considered part of the purchase price and as proof
of the perfection of the contract. The P375,000.00 given by the petitioner representing 30% of the purchase
price is earnest money.
Furthermore, Article 1475 of the Civil Code states:
Art. 1475. The contract of sale is perfected at the moment there is a meeting of the minds upon the
thing which is the object of the contract and upon the price.
From the moment, the parties may reciprocally demand performance, subject to the provisions of
the law governing the form of contracts.
Based on the aforecited article, the parties have agreed on the object of the contract which is the house and
lot located at No. 32 Whitefield St., White Plains, Quezon City and even before November 27, 1985, (the
date petitioner sent his letter together with the 30% downpayment), the parties have agreed on the price
which is P1,250,000.00.
Nowhere in the transaction indicates that BPI reserved its title property nor did it provide for any automatic rescission
in case of default. So when petitioner failed to pay the balance of P875,000.00 despite several extensions given by
private respondent, the latter could not validly rescind the contract without complying with the provision of Article
1592 or Article 1191 on notarial or judicial rescission respectively. The ruling in Taguba v. Vda. de Leon, 132 SCRA
722 applies in the case at bar, to wit:
Considering, therefore the nature of the transaction between petitioner Taguba and private
respondent, which We affirm and sustain to be a contract of sale, absolute in nature the applicable
provisions of Article 1592 of the New Civil Code which states:
Art. 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the
rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by notarial act. After the
demand the court may not grant him a new term.
In the case at bar, it is undisputed that the petitioner Taguba never notified private respondent by
notarial act that he was rescinding the contract, and neither had he filed suit in suit court to rescind
the sale.
Respondent cannot just consider the sale cancelled by simply returning the downpayment which petitioner
refused to accept.
WHEREFORE, the appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the
decision of the Regional Trial Court of Quezon City, Branch 89, dated April 10, 1989 is AFFIRMED with costs against
respondent.
SO ORDERED.
Facts:

The spouses De Villa (parents-in-law of Topacio) were the former owners of a lot in QC. It was previously
mortgaged to Ayala Investment and Development Corp to secure an obligation of P500k. For failure to
pay, the mortgage was foreclosed and consequently, BPI acquired the property as highest bidder.


Topacio wanted to buy the property. He made an offer for P900k, but was asked to improve it. Together,
they arrived at P1.25M as the purchase price, with 30% downpayment and the balance payable in cash
upon execution of the Deed of Sale.


Topacio paid the initial payment of P375k.


BPI wrote to Topacio and informed him that he had until January 4, 1986 to pay the balance of P875k.
He asked for extensions. BPI agreed to extend up to June 30.


Topacio was unable to meet the deadline, so BPI wrote a letter to Topacio, where BPI declared himself
free to sell the property to other buyers and that Topacio could claim his initial payment of P375k.


Topacio merely asked for more extensions. While BPI kept telling Topacio that he could
claim the P375k back (in the form of a cashiers check), Topacio declined. But BPI mailed
the check to him. The check remained with Topacio, uncashed.


BPI then told Topacio that the property would be sold for P1.6M instead, so Topacio reminded him of
the original agreement (P1.25M), but BPI refused.


RTC: In favor of Topacio, finding that there is a perfected contract of sale which is still enforceable
because BPI did not rescind either by judicial or notarial rescission.


CA: Reversed. The contract is a contract to sell, not a contract of sale.
Issue: Contract to sell or contract of sale? Held: Contract of sale.


The payment by Topacio of P375k was the operative act that gave rise to a perfect contract of sale. It is
considered earnest money (something of value to show that the buyer was really in earnest, and given
to the seller to bind the bargain). It is considered part of the purchase price and proof of the perfection
of the contract.


The parties agreed on the object (house and lot in White Plains), and the price and the manner of
payment.


Nowhere in the transaction indicates that BPI reserved its title on the property, nor did it provide for any
automatic rescission in case of default. So whenTopacio failed to pay the balance of P875k despite
several extensions, BPI could not validly rescind the contract w/o complying with the provision of Art
1592 or Art 1191 on notarial or judicial rescission respectively.


Labagala v. CA (see prior Digest)

Buenaventura v. CA

FACTS:

Defendant spouses Leonardo Joaquin and Feliciana Landrito are parents of co-defendants Fidel,
Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino.

They are also the parents of plaintiffs Consolacion, Nora, Emma, and Natividad.

A deed of sale was executed by the defendant spouses in favor of their co-
defendant children.

However, such deed of sale is sought to be declared null and void by the plaintiffs.

Plaintiffs argue that: 1) Ther e was no act ual c ons i der at i on 2) Even as s umi ng t her e
was cons i der at i on, t he pr oper t i es ar e mor e t han 3 - f ol dtimes more valuable than the
measly sums appearing therein. 3) The sale was the result of a deliberate conspiracy to unjustly deprive
the rest of the compulsory heirs of their legitime.

ISSUE : I. W/N the Deeds of Sale are void for lack of consideration

HELD: DEED OF SALE VALID.
A contract of sale is not a real contract, but a consensual contract. As a consensual
contract, a contract of sale becomes a binding and valid contract upon the meeting of the
minds as to price. If there is a meeting of the minds of the parties as to the price, the
contract of sale is valid, despite the manner of payment, or even the breach of that manner of
payment. It is not the act of payment of price that determines the validity of a contract of
sale. Payment of the price has nothing to do with the perfection of the contract. Failure to
pay the consideration is different from lack of consideration.
Petitioners do not have any legal interest over the properties. Their rights over
theproperties are merely inchoate and vests only upon their parents death.

Philippine Free Press, Inc. v.CA

FACTS:
Petitioner, thru Teodoro Locsin, Sr., filed a case of Annulment of Sale of its building, lot and printing machineries
during the regime of Martial Law to private respondent then represented by late B/Gen. Menzi on February 26, 1987.
Petitioner contends that there was vitiated consent and gross inadequacy of purchase price during its sale on
October 23, 1973. The trial court dismissed petitioners complaint and granted private respondents counterclaim. It
was elevated to the Court of Appeals but was also dismissed for lack of merit.
ISSUE:
Whether or not the action for annulment has already prescribed.
RULING:
YES. Article 391 of the Civil Code pertinently reads The action for annulment shall be brought within four years. This
period shall begin: In cases of intimidation, violence or undue influence, from the time the defect of consent ceases x
x x.
[The Supreme Court] can not accept the petitioners contention that the period during which authoritarian rule was in
force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino
government took power. It is true that under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of
tolling the period of prescription. However, [the Supreme Court] can not say, as a universal rule, that the period from
September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, [the Supreme Court] can not box
in the dictatorial period within the term without distinction, and without, by necessity, suspending all liabilities,
however demandable, incurred during that period, including perhaps those ordered by this Court to be paid.


Spouses Serrano and Herrera v. CA

Facts:
Petitioners are registered owners of a lot located in Las Pias. On March 23, 1900, respondent
offered to buy the lot and petitioners agreed to sell it at 1,500 per square meter. Respondent then gave
100,000 as partial payment.
A few days after, respondent, through his counsel, wrote petitioners informing them of his
readiness to pay the balance of the contract price and requesting them to prepare the Deed of Sale.
Petitioners, through counsel, informed respondent in a letter that Amparo Herrera would be
leaving for abroad on or before April 15, 1990 and they are canceling the transaction and that respondent
may recover the earnest money (100,000) anytime. Petitioners also wrote him stating that they already
delivered a managers check to his counsel in said amount.
Respondent thus filed a complaint for specific performance and damages with the RTC of Makati.
Issue: Whether or not there was a contract of sale.
Ruling:
The transaction was a contract to sell.

When petitioners declared in the Receipt for Partial Payment that they

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED
THOUSAND PESOS AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE
ON THIS DATE. there can be no other interpretation than that they agreed to a conditional contract of
sale, consummation of which is subject only to the full payment of the purchase price.
A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the
vendors obligation to transfer title is subordinated to the happening of a future and uncertain event, so
that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. The suspensive condition is commonly full payment of the purchase price.
In this case, the Receipt for Partial Payment shows that the true agreement between the
parties is a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to respondent
until full payment of the purchase price. Second, the agreement between the parties was not embodied in
a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not
intend immediate transfer of ownership, but only a transfer after full payment of the purchase price. Third,
petitioners retained possession of the certificate of title of the lot.
It is true that Article 1482 provides that whenever earnest money is given in a contract of sale, it
shall be considered as part of the price and proof of the perfection of the contract. However, this article
speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a
contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon
full payment of the purchase price.
Clearly, respondent cannot compel petitioners to transfer ownership of the property to
him.
Ting Ho v. Teng Gui


PUNO, C.J .:

This is a Petition for Review on Certiorari
[1]
assailing the Decision
[2]
of the
Court of Appeals (CA) in CA-G.R. CV No. 42993 which reversed and set aside the
Decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil
Case No. 558-0-88.

The instant case traces its origin to an action for partition filed by petitioners
Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho
Belenzo against their brother, respondent Vicente Teng Gui, before the RTC,
Branch 74 of Olongapo City. The controversy revolves around a parcel of land,
and the improvements established thereon, which, according to petitioners, should
form part of the estate of their deceased father, Felix Ting Ho, and should be
partitioned equally among each of the siblings.

In their complaint before the RTC, petitioners alleged that their father Felix
Ting Ho died intestate on June 26, 1970, and left upon his death an estate
consisting of the following:
a) A commercial land consisting of 774 square meters, more or less,
located at Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City, covered by
Original Certificate of Title No. P-1064 and Tax Declaration No. 002-2451;
b) A two-storey residential house on the aforesaid lot;
c) A two-storey commercial building, the first floor rented to different
persons and the second floor, Bonanza Hotel, operated by the defendant also
located on the above described lot; and
d) A sari-sari store (formerly a bakery) also located on the above described
lot.
[3]


According to petitioners, the said lot and properties were titled and tax declared
under trust in the name of respondent Vicente Teng Gui for the benefit of the
deceased Felix Ting Ho who, being a Chinese citizen, was then disqualified to own
public lands in the Philippines; and that upon the death of Felix Ting Ho, the
respondent took possession of the same for his own exclusive use and benefit to
their exclusion and prejudice.
[4]


In his answer, the respondent countered that on October 11, 1958, Felix Ting
Ho sold the commercial and residential buildings to his sister-in-law, Victoria
Cabasal, and the bakery to his brother-in-law, Gregorio Fontela.
[5]
He alleged that
he acquired said properties from the respective buyers on October 28, 1961 and has
since then been in possession of subject properties in the concept of an owner; and
that on January 24, 1978, Original Certificate of Title No. P-1064 covering the
subject lot was issued to him pursuant to a miscellaneous sales patent granted to
him on January 3, 1978.
[6]


The undisputed facts as found by the trial court (RTC), and affirmed by the
appellate court (CA), are as follows:

[T]he plaintiffs and the defendant are all brothers and sisters, the
defendant being the oldest. They are the only legitimate children of the
deceased Spouses Felix Ting Ho and Leonila Cabasal. Felix Ting Ho
died on June 26, 1970 while the wife Leonila Cabasal died on December
7, 1978. The defendant Vicente Teng Gui is the oldest among the
children as he was born onApril 5, 1943. The father of the plaintiffs and
the defendant was a Chinese citizen although their mother was
Filipino. That sometime in 1947, the father of the plaintiffs and
defendant, Felix Ting Ho, who was already then married to their mother
Leonila Cabasal, occupied a parcel of land identified to (sic) as Lot No.
18 Brill which was thereafter identified as Lot No. 16 situated at Afable
Street, East Bajac-Bajac, Olongapo City, by virtue of the permission
granted him by the then U.S. Naval Reservation Office, Olongapo,
Zambales. The couple thereafter introduced improvements on the
land. They built a house of strong material at 16 Afable Street which is a
commercial and residential house and another building of strong material
at 18 Afable Streetwhich was a residential house and a bakery. The
couple, as well as their children, lived and resided in the said properties
until their death. The father, Felix Ting Ho had managed the bakery
while the mother managed the sari-sari store. Long before the death of
Felix Ting Ho, who died on June 26, 1970, he executed on October
11, 1958 a Deed of Absolute Sale of a house of strong material
located at 16 Afable Street, Olongapo, Zambales, specifically
described in Tax Dec. No. 5432, in favor of Victoria Cabasal his
sister-in-law (Exh. C).This Deed of Sale cancelled the Tax Dec. of
Felix Ting Ho over the said building (Exh. C-1) and the building was
registered in the name of the buyer Victoria Cabasal, as per Tax Dec.
No. 7579 (Exh. C-2). On the same date, October 11, 1958 the said
Felix Ting Ho also sold a building of strong material located at 18
Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio
Fontela, of legal age, an American citizen, married (Exh. D). This
Deed of Sale, in effect, cancelled Tax Dec. No. 5982 and the same was
registered in the name of the buyer Gregorio Fontela, as per Tax Dec.
No. 7580 (Exh. D-2). In turn Victoria Cabasal and her husband
Gregorio Fontela sold to Vicente Teng Gui on October 28, 1961 the
buildings which were bought by them from Felix Ting Ho and their
tax declarations for the building they bought (Exhs. C-2 and D-2)
were accordingly cancelled and the said buildings were registered in
the name of the defendant Vicente Teng Gui (Exhs. C-3 and D-
3). On October 25, 1966 the father of the parties Felix Ting Ho executed
an Affidavit of Transfer, Relinquishment and Renouncement of Rights
and Interest including Improvements on Land in favor of his eldest son
the defendant Vicente Teng Gui. On the basis of the said document the
defendant who then chose Filipino citizenship filed a miscellaneous sales
application with the Bureau of Lands. Miscellaneous Sales Patent No.
7457 of the land which was then identified to be Lot No. 418, Ts-308
consisting of 774 square meters was issued to the applicant Vicente
Teng Gui and accordingly on the 24
th
of January, 1978 Original
Certificate of Title No. P-1064 covering the lot in question was issued
to the defendant Vicente Teng Gui. Although the buildings and
improvements on the land in question were sold by Felix Ting Ho to
Victoria Cabasal and Gregorio Fontela in 1958 and who in turn sold the
buildings to the defendant in 1961 the said Felix Ting Ho and his wife
remained in possession of the properties as Felix Ting Ho continued to
manage the bakery while the wife Leonila Cabasal continued to manage
the sari-sari store. During all the time that the alleged buildings were
sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and
the subsequent sale of the same to the defendant Vicente Teng Gui in
October of 1961 the plaintiffs and the defendant continued to live and
were under the custody of their parents until their father Felix Ting Ho
died in 1970 and their mother Leonila Cabasal died in
1978.
[7]
(Emphasis supplied)

In light of these factual findings, the RTC found that Felix Ting Ho, being a
Chinese citizen and the father of the petitioners and respondent, resorted to a series
of simulated transactions in order to preserve the right to the lot and the properties
thereon in the hands of the family. As stated by the trial court:

After a serious consideration of the testimonies given by both one
of the plaintiffs and the defendant as well as the documentary exhibits
presented in the case, the Court is inclined to believe that Felix Ting Ho,
the father of the plaintiffs and the defendant, and the husband of Leonila
Cabasal thought of preserving the properties in question by transferring
the said properties to his eldest son as he thought that he cannot acquire
the properties as he was a Chinese citizen. To transfer the improvements
on the land to his eldest son the defendant Vicente Teng Gui, he first
executed simulated Deeds of Sales in favor of the sister and brother-in-
law of his wife in 1958 and after three (3) years it was made to appear
that these vendees had sold the improvements to the defendant Vicente
Teng Gui who was then 18 years old. The Court finds that these
transaction (sic) were simulated and that no consideration was ever paid
by the vendees.

x x x x x x x x x

With regards (sic) to the transfer and relinquishment of Felix Ting
Hos right to the land in question in favor of the defendant, the Court
believes, that although from the face of the document it is stated in
absolute terms that without any consideration Felix Ting Ho was
transferring and renouncing his right in favor of his son, the defendant
Vicente Teng Gui, still the Court believes that the transaction was one of
implied trust executed by Felix Ting Ho for the benefit of his family
[8]


Notwithstanding such findings, the RTC considered the Affidavit of
Transfer, Relinquishment and Renouncement of Rights and Interests over the land
as a donation which was accepted by the donee, the herein respondent. With
respect to the properties in the lot, the trial court held that although the sales were
simulated, pursuant to Article 1471 of the New Civil Code
[9]
it can be assumed that
the intention of Felix Ting Ho in such transaction was to give and donate such
properties to the respondent. As a result, it awarded the entire conjugal share of
Felix Ting Ho in the subject lot and properties to the respondent and divided only
the conjugal share of his wife among the siblings. The dispositive portion of
the RTC decision decreed:

WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against the defendant as the Court orders the partition and
the adjudication of the subject properties, Lot 418, Ts-308, specifically
described in original Certificate of Title No. P-1064 and the residential
and commercial houses standing on the lot specifically described in Tax
Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the
following manner, to wit: To the defendant Vicente Teng Gui is
adjudicated an undivided six-tenth (6/10) of the aforementioned
properties and to each of the plaintiffs Felix Ting Ho, Jr., Merla Ting-Ho
Braden, Juana Ting and Lydia Ting Ho-Belenzo each an undivided one-
tenth (1/10) of the properties
[10]


From this decision, both parties interposed their respective appeals. The
petitioners claimed that the RTC erred in awarding respondent the entire conjugal
share of their deceased father in the lot and properties in question contrary to its
own finding that an implied trust existed between the parties. The respondent, on
the other hand, asserted that the RTC erred in not ruling that the lot and properties
do not form part of the estate of Felix Ting Ho and are owned entirely by him.

On appeal, the CA reversed and set aside the decision of the RTC. The
appellate court held that the deceased Felix Ting Ho was never the owner and
never claimed ownership of the subject lot since he is disqualified under Philippine
laws from owning public lands, and that respondent Vicente Teng Gui was the
rightful owner over said lot by virtue of Miscellaneous Sales Patent No. 7457
issued in his favor, viz:

The deceased Felix Ting Ho, plaintiffs and defendants late
father, was never the owner of the subject lot, now identified as Lot
No. 418, Ts-308 covered by OCT No. P-1064 (Exh. A; Record, p.
104). As stated by Felix Ting Ho no less in the Affidavit of
Transfer, Relinquishment and Renouncement of Rights and
Interest etc. (Exh. B: Record, p. 107), executed on October 25, 1966
he, the late Felix Ting Ho, was merely a possessor or occupant of the
subject lot by virtue of a permission granted by the
then U.S. Naval Reservation Office, Olongapo, Zambales. The late
Felix Ting Ho was never the owner and never claimed ownership of the
land. (Emphasis supplied)

The affidavit, Exhibit B, was subscribed and sworn to before a
Land Investigator of the Bureau of Lands and in the said affidavit, the
late Felix Ting Ho expressly acknowledged that because he is a Chinese
citizen he is not qualified to purchase public lands under Philippine laws
for which reason he thereby transfers, relinquishes and renounces all his
rights and interests in the subject land, including all the improvements
thereon to his son, the defendant Vicente Teng Gui, who is of legal age,
single, Filipino citizen and qualified under the public land law to acquire
lands.

x x x x x x x x x

Defendant Vicente Teng Gui acquired the subject land by
sales patent or purchase from the government and not from his
father, the late Felix Ting Ho. It cannot be said that he acquired or
bought the land in trust for his father because on December 5, 1977
when the subject land was sold to him by the government and on January
3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late
Felix Ting Ho was already dead, having died on June 6, 1970 (TSN,
January 10, 1990, p. 4).
[11]


Regarding the properties erected over the said lot, the CA held that the
finding that the sales of the two-storey commercial and residential buildings and
sari-sari store to Victoria Cabasal and Gregorio Fontela and subsequently to
respondent were without consideration and simulated is supported by evidence,
which clearly establishes that these properties should form part of the estate of the
late spouses Felix Ting Ho and Leonila Cabasal.

Thus, while the appellate court dismissed the complaint for partition with
respect to the lot in question, it awarded the petitioners a four-fifths (4/5) share of
the subject properties erected on the said lot. The dispositive portion of the CA
ruling reads as follows:

WHEREFORE, premises considered, the decision appealed from
is REVERSED and SET ASIDE and NEW JUDGMENT rendered:

1. DISMISSING plaintiff-appellants complaint with respect to
the subject parcel of land, identified as Lot No. 418, Ts-308, covered by
OCT No. P-1064, in the name of plaintiff-appellants [should be
defendant-appellant];

2. DECLARING that the two-storey commercial building, the
two-storey residential building and sari-sari store (formerly a bakery), all
erected on the subject lot No. 418, Ts-308, form part of the estate of the
deceased spouses Felix Ting Ho and Leonila Cabasal, and that plaintiff-
appellants are entitled to four-fifths (4/5) thereof, the remaining one-fifth
(1/5) being the share of the defendant-appellant;

3. DIRECTING the court a quo to partition the said two-storey
commercial building, two-storey residential building and sari-sari store
(formerly a bakery) in accordance with Rule 69 of the Revised Rules of
Court and pertinent provisions of the Civil Code;

4. Let the records of this case be remanded to the court of origin
for further proceedings;

5. Let a copy of this decision be furnished the Office of the
Solicitor General; and

6. There is no pronouncement as to costs.

SO ORDERED.
[12]


Both petitioners and respondent filed their respective motions for
reconsideration from this ruling, which were summarily denied by the CA in its
Resolution
[13]
dated August 5, 1997. Hence, this petition.

According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-
308 does not form part of the estate of the deceased Felix Ting Ho and is owned
alone by respondent. Respondent, on the other hand, contends that he should be
declared the sole owner not only of Lot No. 418, Ts-308 but also of the properties
erected thereon and that the CA erred in not dismissing the complaint for partition
with respect to the said properties.

The primary issue for consideration is whether both Lot No. 418, Ts-308 and
the properties erected thereon should be included in the estate of the deceased Felix
Ting Ho.

We affirm the CA ruling.

With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935
Constitution states:

Section 1. All agricultural timber, and mineral lands of the
public domain, waters, minerals, coal, petroleum, and other mineral
oils, all forces of potential energy and other natural resources of the
Philippines belong to the State, and their disposition, exploitation,
development, or utilization shall be limited to citizens of the
Philippines or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to
any existing right, grant, lease, or concession at the time of the
inauguration of the Government established under this Constitution
(Emphasis supplied)

Our fundamental law cannot be any clearer. The right to acquire lands of the
public domain is reserved for Filipino citizens or corporations at least sixty percent
of the capital of which is owned by Filipinos. Thus, in Krivenko v. Register of
Deeds,
[14]
the Court enunciated that:

Perhaps the effect of our construction is to preclude aliens,
admitted freely into the Philippines from owning sites where they
may build their homes. But if this is the solemn mandate of the
Constitution, we will not attempt to compromise it even in the name
of amity or equity. We are satisfied, however, that aliens are not
completely excluded by the Constitution from the use of lands for
residential purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such as a lease contract
which is not forbidden by the Constitution. Should they desire to remain
here forever and share our fortunes and misfortunes, Filipino citizenship
is not impossible to acquire.
[15]


In the present case, the father of petitioners and respondent was a Chinese
citizen; therefore, he was disqualified from acquiring and owning real property in
thePhilippines. In fact, he was only occupying the subject lot by virtue of the
permission granted him by the then U.S. Naval Reservation Office of Olongapo,
Zambales. As correctly found by the CA, the deceased Felix Ting Ho was never
the owner of the subject lot in light of the constitutional proscription and the
respondent did not at any instance act as the dummy of his father.

On the other hand, the respondent became the owner of Lot No. 418, Ts-308
when he was granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by
the Secretary of Natural Resources By Authority of the President of the
Philippines, and when Original Certificate of Title No. P-1064 was
correspondingly issued in his name. The grant of the miscellaneous sales patent by
the Secretary of Natural Resources, and the corresponding issuance of the original
certificate of title in his name, show that the respondent possesses all the
qualifications and none of the disqualifications to acquire alienable and disposable
lands of the public domain. These issuances bear the presumption of regularity in
their performance in the absence of evidence to the contrary.

Registration of grants and patents involving public lands is governed by
Section 122 of Act No. 496, which was subsequently amended by Section 103 of
Presidential Decree No. 1529, viz:

Sec. 103. Certificate of title pursuant to patents.Whenever
public land is by the Government alienated, granted or conveyed to any
person, the same shall be brought forthwith under the operation of this
Decree. It shall be the duty of the official issuing the instrument of
alienation, grant, patent or conveyance in behalf of the Government to
cause such instrument to be filed with the Register of Deeds of the
province or city where the land lies, and to be there registered like other
deeds and conveyance, whereupon a certificate of title shall be entered as
in other cases of registered land, and an owners duplicate issued to the
grantee. The deeds, grant, patent or instrument of conveyance from the
Government to the grantee shall not take effect as a conveyance or bind
the land, but shall operate only as a contract between the Government
and the grantee and as evidence of authority to the Register of Deeds to
make registration. It is the act of registration that shall be the operative
act to affect and convey the land, and in all cases under this Decree
registration shall be made in the office of the Register of Deeds of the
province or city where the land lies. The fees for registration shall be
paid by the grantee. After due registration and issuance of the
certificate of title, such land shall be deemed to be registered land to
all intents and purposes under this Decree.
[16]
(Emphasis supplied)


Under the law, a certificate of title issued pursuant to any grant or patent
involving public land is as conclusive and indefeasible as any other certificate of
title issued to private lands in the ordinary or cadastral registration
proceeding. The effect of the registration of a patent and the issuance of a
certificate of title to the patentee is to vest in him an incontestable title to the land,
in the same manner as if ownership had been determined by final decree of the
court, and the title so issued is absolutely conclusive and indisputable, and is not
subject to collateral attack.
[17]


Nonetheless, petitioners invoke equity considerations and claim that the
ruling of the RTC that an implied trust was created between respondent and their
father with respect to the subject lot should be upheld.

This contention must fail because the prohibition against an alien from
owning lands of the public domain is absolute and not even an implied trust can be
permitted to arise on equity considerations.

In the case of Muller v. Muller,
[18]
wherein the respondent, a German
national, was seeking reimbursement of funds claimed by him to be given in trust
to his petitioner wife, a Philippine citizen, for the purchase of a property in
Antipolo, the Court, in rejecting the claim, ruled that:

Respondent was aware of the constitutional prohibition and
expressly admitted his knowledge thereof to this Court. He declared that
he had the Antipolo property titled in the name of the petitioner because
of the said prohibition. His attempt at subsequently asserting or claiming
a right on the said property cannot be sustained.

The Court of Appeals erred in holding that an implied trust
was created and resulted by operation of law in view of petitioner's
marriage to respondent. Save for the exception provided in cases of
hereditary succession, respondent's disqualification from owning
lands in the Philippines is absolute. Not even an ownership in trust is
allowed.Besides, where the purchase is made in violation of an existing
statute and in evasion of its express provision, no trust can result in favor
of the party who is guilty of the fraud. To hold otherwise would allow
circumvention of the constitutional prohibition.

Invoking the principle that a court is not only a court of law but
also a court of equity, is likewise misplaced. It has been held that equity
as a rule will follow the law and will not permit that to be done indirectly
which, because of public policy, cannot be done directly...
[19]


Coming now to the issue of ownership of the properties erected on the
subject lot, the Court agrees with the finding of the trial court, as affirmed by the
appellate court, that the series of transactions resorted to by the deceased were
simulated in order to preserve the properties in the hands of the family. The
records show that during all the time that the properties were allegedly sold to the
spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of
the same to respondent in 1961, the petitioners and respondent, along with their
parents, remained in possession and continued to live in said properties.

However, the trial court concluded that:

In fairness to the defendant, although the Deeds of Sale executed
by Felix Ting Ho regarding the improvements in favor of Victoria
Cabasal and Gregorio Fontela and the subsequent transfer of the same by
Gregorio Fontela and Victoria Cabasal to the defendant are all simulated,
yet, pursuant to Article 1471 of the New Civil Code it can be
assumed that the intention of Felix Ting Ho in such transaction was
to give and donate the improvements to his eldest son the defendant
Vicente Teng Gui
[20]


Its finding was based on Article 1471 of the Civil Code, which provides that:

Art. 1471. If the price is simulated, the sale is void, but the act
may be shown to have been in reality a donation, or some other act or
contract.
[21]


The Court holds that the reliance of the trial court on the provisions of
Article 1471 of the Civil Code to conclude that the simulated sales were a valid
donation to the respondent is misplaced because its finding was based on a mere
assumption when the law requires positive proof.

The respondent was unable to show, and the records are bereft of any
evidence, that the simulated sales of the properties were intended by the deceased
to be a donation to him. Thus, the Court holds that the two-storey residential
house, two-storey residential building and sari-sari store form part of the estate of
the late spouses Felix Ting Ho and Leonila Cabasal, entitling the petitioners to a
four-fifths (4/5) share thereof.

IN VIEW WHEREOF, the petition is DENIED. The assailed Decision
dated December 27, 1996 of the Court of Appeals in CA-G.R. CV No. 42993 is
hereby AFFIRMED.

SO ORDERED.