G.R. No.

85733 February 23, 1990

Sps. ENRIQUE and !NSUE"! "I#, petitioners,
vs.
$%E %!N!R&'"E !UR$ !F &((E&"S, Sps. $ERESI$& and !S&R GUE)&RR&, Sps. #&R!S
and &NI$& !R"IN!, Sps. R!#U"! and !NSUE"! !R"IN! and Sps. FE"I* and +!"!RES
!R"IN!, respondents.
Salonga, Andres, Hernandez & Allado for petitioners.
Ocampo, Dizon & Domingo for private respondent Pacific Banking Corporation.

RU,, J.:
The subject of this controversy is a parcel of land consisting of 1,101 square meters and located in Diliman,
Quezon ity. !t "as originally o"ned by #eli$, %anuel and %aria oncepcion &rlino, "ho mortgaged it to the
'rogressive ommercial (an) as security for a '100,000.00 loan on *uly 1, 1+,-. The loan not having been
paid, the mortgage "as foreclosed and the ban) acquired the property as the highest bidder at the auction sale
on %arch ./, 1+,+. The mortgagee thereafter transferred all its assets, including the said land, to the 'acific
(an)ing orporation 0'(1.
&n %ay .., 1+2-, the &rlinos, and their respective spouses 0hereinafter referred to as the private respondents1,
"ho had remained in possession of the land, made a "ritten offer to '( to repurchase the property. !n
response, the ban), through its 3ssistant 4ice5'resident, sent the follo"ing letter dated 6ovember +, 1+22, to
the private respondents7 counsel8
This "ill confirm our agreement concerning the repurchase by your clients, %r. and %rs. &scar
. 9uevarra of that certain property situated at ., *ose 3bad :antos, ;eroes ;ills, Quezon ity
"ith an area of 1,1 01 square meters, more or less, under the follo"ing terms and conditions8
a1 The cash consideration shall be '1,0,000.00 payable in full upon signing of the
Deed of 3bsolute :ale<
b1 The additional consideration shall consist of your client7s conveyance to us of
their share of .,+01.1- square meters on the property situated at amarin,
aloocan ity.
=e understand that your clients "ill be applying for a loan "ith a ban). !n this connection, "e
are enclosing a $ero$ copy of the Transfer ertificate of Title 6o. .1/,,1 Quezon ity, Ta$
Declaration 6o. >0+. and &fficial ?eceipt 6o. @5A0A2.> covering payment of real estate ta$es
for 1+22. Bindly request your clients to e$pedite the loan so that "e can consummate the
transaction as soon as possible.
'lease request your clients to sign their conformity belo" and return the duplicate thereof for our
files.
1
&scar . 9uevarra, one of the private respondents, indicated the required conformity.
&ne year later, on 6ovember ., 1+2/, '( advised the private respondents that if the transaction "as not
finalized "ithin >0 days, it "ould consider the offer of other buyers.
2
The record does not sho" any further
development until *une /, 1+2+, "hen the private respondents requested '( to allo" them to secure a certified
true copy of its Torrens certificate over the land for purposes of its survey and partition among them preparatory
to the actual transfer of title to them.
3
'( granted the request subject to the condition that title "ould remain
"ith it until the e$ecution of the necessary deed of conveyance.
-
&n 3pril /, 1+/0, or t"o years later, '( reminded the private respondents of its letter of 6ovember ., 1+2/,
but again no action "as ta)en to deliver to it the stipulated consideration for the sale. #inally, on %ay 1A, 1+/0,
'( e$ecuted a deed of sale over the land in favor of the herein petitioners, the spouses @nrique and onsuelo
Cim, for the sum of '>00,000.00.
5

&n :eptember >0, 1+/0, the private respondents filed a complaint in the ?egional Trial ourt of Quezon ity
against the petitioners and '( for the annulment of the deed of sale on the ground that the subject land had
been earlier sold to them. !n its judgment for the plaintiffs, the court held that both '( and the spouses Cim
had acted in bad faith "hen they concluded the sale )no"ing that Dthere "as a cloud in the status of the property
in question.D
.
The decision "as affirmed in toto by the respondent court,
7
and the petitioners are no" before
us, urging reversal.
The petitioners claim they are purchasers in good faith, having relied on the assurances of '( as verified from
the records in the ?egistry of Deeds of Quezon ity that the land belonged to '( and "as unencumbered.
They therefore should have preferential right to the disputed land, "hich they had registered in their name under
TT 6o. .,/,.>. #or their part, the private respondents insist that as they had a valid and binding earlier deed
of sale in their favor, the land could no longer be sold by '( to the petitioners, "ho "ere a"are of their prior
right.
!n support of their position that it "as not incumbent upon them to go beyond the land records to chec) the real
status of the land, the petitioners cite Seo v. ang!"at
8
"here the ourt said8
!n order that a purchaser of land "ith a Torrens title may be considered as a purchaser in good
faith, it is enough that he e$amines the latest certificate of title "hich in this case is that issued in
the name of the immediate transferor. The purchaser is not bound by the original certificate of
title but only by the certificate of title of the person from "hom he has purchased the property.
$$$ $$$ $$$
Thus, "here innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that "ould impair public confidence in the certificate of title<
other"ise everyone dealing "ith property registered under the torrens system "ould have to
inquire in every instance as to "hether the title had been regularly or irregularly issued by the
court. !ndeed, this is contrary to the evident purpose of the la". @very person dealing "ith
registered land may safely rely on the correctness of the certificate of title issued therefore and
the la" "ill in no "ay oblige him to go behind the certificate to determine the condition of the
property. :tated differently, an innocent purchaser for value relying on a torrens title issued is
protected.
3nd even assuming that there "as an earlier valid sale of the property to the private respondents, the petitioners
add, they "ould still prevail under 3rticle 1-AA of the ivil ode, providing as follo"s8
!f the same thing should have been sold to different vendees, the o"nership shall be transferred
to the person "ho may have first ta)en possession thereof in good faith, if it should be movable
property.
:hould it be immovable property, the o"nership shall belong to the person acquiring it "ho in
good faith first recorded it in the ?egistry of 'roperty.
:hould there be no inscription, the o"nership shall pertain to the person "ho in good faith "as
first in the possession< and, in the absence thereof, to the person "ho presents the oldest title,
provided there is good faith.
The private respondents, ho"ever, deny that the petitioners had acted in good faith, pointing to the evidence that
onsuelo Cim had, before the e$ecution of the disputed deed of sale, visited the property and been informed of
their e$isting adverse claim thereto.
9
(esides, the said deed contained the follo"ing stipulation8
That the 4@6D@@ is a"are of the fact that the aforementioned property is presently occupied by
the former o"ners and that clearing of the property of its occupants shall be for the e$clusive
responsibility and account of the vendee.
3nd, indeed, the ourt also said in :eno that8
The "ell5)no"n rule in this jurisdiction is that a person dealing "ith a registered land has a right
to rely upon the face of the Torrens ertificate of Title and to dispense "ith the need of inquiring
further, e#cept $%en t%e part& concerned %as act!al kno$ledge of facts and circ!mstances t%at
$o!ld impel a reasona"l& ca!tio!s man to make s!c% in'!ir&. 0@mphasis supplied.1
3s the ourt sees it, the real issue is not "hether the petitioner acted in good faith but "hether there "as in fact
a prior sale of the same property to the private respondents. &nly if it is established that there "as indeed a
double sale of the property "ill it be necessary to ascertain if 3rticle 1-AA is applicable.
:tated differently, the question is8 =as the transaction bet"een private respondents and '(, as embodied in the
letter of 6ovember +, 1+22, a contract to sell or a contract of saleE
!t is not enough to say that the contract of sale being consensual, it became effective bet"een the ban) and the
private respondents as of 6ovember +, 1+22. There is no question about that< but such agreement is li)e putting
the cart before the horse. 'recisely, our purpose is to ascertain to "hat particular underta)ings the parties have
given their mutual consent so "e can determine the nature of their agreement.
3ccording to Sing (ee v. Santos8
10

... 3 distinction must be made bet"een a contract of sale in "hich title passes to the buyer upon
delivery of the thing sold and a contract to sell 0or of e$clusive right and privilege to purchase as
in this case1 "here by agreement the o"nership is reserved in the seller and is not to pass until
the full payment of the purchase price is made. !n the first case, non5payment of the price is a
negative resolutory condition< in the second case, full payment is a positive suspensive condition.
(eing contraries, their effect in la" cannot be !dentical. !n the first case, the vendor has lost and
cannot recover the o"nership of the land sold until and unless the contract of sale is itself
resolved and set aside. !n the second case, ho"ever, the title remains in the vendor if the vendee
does not comply "ith the condition precedent of ma)ing payment at the time specified in the
contract.
3pplying these distinctions, the ourt finds that the agreement bet"een '( and the private respondents "as
only a contract to sell, not a contact of sale. 3nd the reasons are obvious.
There "as no immediate transfer of title to the private respondents as "ould have happened if there had been a
sale at the outset. The supposed sale "as never registered and TT 6o. .1/,,1 in favor of '( "as not
replaced "ith another certificate of title in favor of the private respondents. !n their letter to '( on *une /,
1+2+, they ac)no"ledged that title to the property "ould remain "ith the ban) until their transaction shall have
been finalized. !n response, '( reiterated the same condition. 6o less important, the consideration agreed
upon by the parties "as never paid by the private respondents, to convert the agreement into a contract of sale.
!n fact, '( reminded them t"ice F on 6ovember ., 1+2/, and on 3pril /, 1+/0 F to comply "ith their
obligations. They did not. Their default "as not, as the respondent court described it, Da slight delayD but lasted
for all of three years and in fact continued up to the rendition of the decision in the trial court. 3s payment of the
consideration "as a positive suspensive condition, title to the subject property never passed to the private
respondents. ;ence, the property "as legally unencumbered and still belonged to '( on %ay 1A, 1+/0, "hen
it "as sold by the ban) to the petitioners.
!t is true that the contract to sell imposes reciprocal obligations and so cannot be terminated unilaterally by
either party. *udicial rescission is required under 3rticle 11+1 of the ivil ode. ;o"ever, this rule is not
absolute. =e have held that in proper cases, a party may ta)e it upon itself to consider the contract rescinded
and act accordingly albeit subject to judicial confirmation, "hich may or may not be given. !t is true that the
rescinding party ta)es a ris) that its action may not be approved by the court. (ut as "e said in )niversit& of t%e
P%ilippines v. De los Angeles8
11
&f course, it must be understood that the act of a party in treating a contract as cancelled or
resolved on account of infractions by the other contracting party must be made )no"n to the
other and is al"ays provisional, being ever subject to scrutiny and revie" by the proper court. !f
the other party denies that rescission is justified, it is free to resort to judicial action in its o"n
behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the
resolution of the contract "as not "arranted, the responsible party "ill be sentenced to damages<
in the contrary case, the resolution "ill be affirmed, and the consequent indemnity a"arded to
the party prejudiced.
!n other "ords, the party "ho deems the contract violated may consider it resolved or rescinded,
and act accordingly, "ithout previous court action, but it proceeds at its o"n ris). #or it is only
the final judgment of the corresponding court that "ill conclusively and finally settle "hether the
action ta)en "as or "as not correct in la". (ut the la" definitely does not require that the
contracting party "ho believes itself injured must first file suit and "ait for a judgment before
ta)ing e$trajudicial steps to protect its interest. &ther"ise, the party injured by the other7s breach
"ill have to passively sit and "atch its damages accumulate during the pendency of the suit until
final judgment of rescission is rendered "hen the la" itself requires that he should e$ercise due
diligence to minimize its o"n damages.
!n the case at bar, the private respondents obligated themselves to deliver to the ban) the sum of '1,0,000.00
and their share of .,+01.1- square meters on a property situated in aloocan ity. !n the letter of '( dated
6ovember +, 1+22, they "ere requested to De$pedite the loan 0they "ere negotiating for this purpose1 so "e can
consummate the transaction as soon as possibleD. That "as in 1+22. !n 1+2/, they "ere reminded of their
obligation and as)ed to comply "ithin thirty days. They did not. &n 3pril /, 1+/0, they "ere reminded of that
letter of 6ovember ., 1+2/, and again as)ed to comply< but again they did not. :urely, the ban) could not be
required to "ait for them forever, especially so since they remained in possession of the property and there is no
record that they "ere paying rentals. Gnder the circumstances, '( had the right to consider the contract to sell
bet"een them terminated for non5payment of the stipulated consideration. =e hereby confirm that rescission.
;aving arrived at these conclusions, the ourt no longer finds it necessary to determine if the petitioners acted
in bad faith "hen they purchased the subject property. The private respondents lost all legal interest in the land
"hen their contract to sell "as rescinded by '( for their non5compliance "ith its provisions. 3s that contract
"as rito longer effective "hen the land "as sold by '( to the petitioners, the private respondents had no legal
standing to assail that subsequent transaction. The deed of sale bet"een '( and the petitioners must therefore
be sustained.
=;@?@#&?@, the petition is 9?36T@D and the challenged decision of the ourt of 3ppeals is ?@4@?:@D.
TT 6o. .,/,.> in favor of the petitioners is recognized as valid and the complaint for the annulment of the
deed of sale dated %ay 1A, 1+/0, is hereby dismissed. osts against the private respondents.
:& &?D@?@D.