SECOND DIVISION

[G.R. No. 124242. January 21, 2005]

SAN LORENZO DEVELOPMENT CORPORATION, petitioner, vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU
and PACITA ZAVALLA LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that
respondents Miguel Lu and Pacita Zavalla, (hereinafter, the
Spouses Lu) owned two (2) parcels of land situated in Sta.
Rosa, Laguna covered by TCT No. T-39022 and TCT No. T39023 both measuring 15,808 square meters or a total of
3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two
parcels of land to respondent Pablo Babasanta, (hereinafter,
Babasanta) for the price of fifteen pesos (P15.00) per square
meter. Babasanta made a downpayment of fifty thousand
pesos (P50,000.00) as evidenced by a memorandum receipt
issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were
made by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu
to demand the execution of a final deed of sale in his favor so
that he could effect full payment of the purchase price. In the
same letter, Babasanta notified the spouses about having
received information that the spouses sold the same property
to another without his knowledge and consent. He demanded
that the second sale be cancelled and that a final deed of sale
be issued in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she
acknowledged having agreed to sell the property to him at
fifteen pesos (P15.00) per square meter. She, however,
reminded Babasanta that when the balance of the purchase
price became due, he requested for a reduction of the price
and when she refused, Babasanta backed out of the sale.
Pacita added that she returned the sum of fifty thousand
pesos (P50,000.00) to Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed
before the Regional Trial Court (RTC), Branch 31, of San Pedro,
Laguna, a Complaint for Specific Performance and
Damages[1] against his co-respondents herein, the Spouses
Lu. Babasanta alleged that the lands covered by TCT No. T39022 and T-39023 had been sold to him by the spouses at
fifteen pesos (P15.00) per square meter. Despite his repeated
demands for the execution of a final deed of sale in his favor,
respondents allegedly refused.
In their Answer,[2] the Spouses Lu alleged that Pacita Lu
obtained loans from Babasanta and when the total advances
of Pacita reached fifty thousand pesos (P50,000.00), the latter
and Babasanta, without the knowledge and consent of Miguel
Lu, had verbally agreed to transform the transaction into a
contract to sell the two parcels of land to Babasanta with the
fifty thousand pesos (P50,000.00) to be considered as the
downpayment for the property and the balance to be paid on
or before 31 December 1987. Respondents Lu added that as
of November 1987, total payments made by Babasanta
amounted to only two hundred thousand pesos (P200,000.00)
and the latter allegedly failed to pay the balance of two
hundred sixty thousand pesos (P260,000.00) despite repeated
demands. Babasanta had purportedly asked Pacita for a
reduction of the price from fifteen pesos (P15.00) to twelve
pesos (P12.00) per square meter and when the Spouses Lu

refused to grant Babasantas request, the latter rescinded the

contract to sell and declared that the original loan transaction
just be carried out in that the spouses would be indebted to
him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased
Interbank Managers Check No. 05020269 in the amount of
two hundred thousand pesos (P200,000.00) in the name of
Babasanta to show that she was able and willing to pay the
balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January
1990[3] wherein he prayed for the issuance of a writ of
preliminary injunction with temporary restraining order and
the inclusion of the Register of Deeds of Calamba, Laguna as
party defendant. He contended that the issuance of a
preliminary injunction was necessary to restrain the transfer
or conveyance by the Spouses Lu of the subject property to
other persons.
The Spouses Lu filed their Opposition[4] to the amended
complaint contending that it raised new matters which
seriously affect their substantive rights under the original
complaint. However, the trial court in its Order dated 17
January 1990[5] admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo
Development Corporation (SLDC) filed a Motion for
Intervention[6] before the trial court. SLDC alleged that it had
legal interest in the subject matter under litigation because on
3 May 1989, the two parcels of land involved, namely Lot
1764-A and 1764-B, had been sold to it in a Deed of Absolute
Sale with Mortgage.[7] It alleged that it was a buyer in good
faith and for value and therefore it had a better right over the
property in litigation.
In his Opposition to SLDCs motion for intervention,[8]
respondent Babasanta demurred and argued that the latter
had no legal interest in the case because the two parcels of
land involved herein had already been conveyed to him by the
Spouses Lu and hence, the vendors were without legal
capacity to transfer or dispose of the two parcels of land to
the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990
allowed SLDC to intervene. SLDC filed its Complaint-inIntervention on 19 April 1990.[9] Respondent Babasantas
motion for the issuance of a preliminary injunction was
likewise granted by the trial court in its Order dated 11
January 1991[10] conditioned upon his filing of a bond in the
amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11
February 1989, the Spouses Lu executed in its favor an Option
to Buy the lots subject of the complaint. Accordingly, it paid
an option money in the amount of three hundred sixteen
thousand one hundred sixty pesos (P316,160.00) out of the
total consideration for the purchase of the two lots of one
million two hundred sixty-four thousand six hundred forty
pesos (P1,264,640.00). After the Spouses Lu received a total
amount of six hundred thirty-two thousand three hundred
twenty pesos (P632,320.00) they executed on 3 May 1989 a
Deed of Absolute Sale with Mortgage in its favor. SLDC added
that the certificates of title over the property were delivered
to it by the spouses clean and free from any adverse claims
and/or notice of lis pendens. SLDC further alleged that it only
learned of the filing of the complaint sometime in the early
part of January 1990 which prompted it to file the motion to
intervene without delay. Claiming that it was a buyer in good

faith, SLDC argued that it had no obligation to look beyond the

titles submitted to it by the Spouses Lu particularly because
Babasantas claims were not annotated on the certificates of
title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30
July 1993 upholding the sale of the property to SLDC. It
ordered the Spouses Lu to pay Babasanta the sum of two
hundred thousand pesos (P200,000.00) with legal interest
plus the further sum of fifty thousand pesos (P50,000.00) as
and for attorneys fees. On the complaint-in-intervention, the
trial court ordered the Register of Deeds of Laguna, Calamba
Branch to cancel the notice of lis pendens annotated on the
original of the TCT No. T-39022 (T-7218) and No. T-39023 (T7219).
Applying Article 1544 of the Civil Code, the trial court ruled
that since both Babasanta and SLDC did not register the
respective sales in their favor, ownership of the property
should pertain to the buyer who first acquired possession of
the property. The trial court equated the execution of a public
instrument in favor of SLDC as sufficient delivery of the
property to the latter. It concluded that symbolic possession
could be considered to have been first transferred to SLDC
and consequently ownership of the property pertained to
SLDC who purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to
the Court of Appeals alleging in the main that the trial court
erred in concluding that SLDC is a purchaser in good faith and
in upholding the validity of the sale made by the Spouses Lu
in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of
Appeals. They contended that the trial court erred in failing to
consider that the contract to sell between them and
Babasanta had been novated when the latter abandoned the
verbal contract of sale and declared that the original loan
transaction just be carried out. The Spouses Lu argued that
since the properties involved were conjugal, the trial court
should have declared the verbal contract to sell between
Pacita Lu and Pablo Babasanta null and void ab initio for lack
of knowledge and consent of Miguel Lu. They further averred
that the trial court erred in not dismissing the complaint filed
by Babasanta; in awarding damages in his favor and in
refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its
Decision[11] which set aside the judgment of the trial court.
It declared that the sale between Babasanta and the Spouses
Lu was valid and subsisting and ordered the spouses to
execute the necessary deed of conveyance in favor of
Babasanta, and the latter to pay the balance of the purchase
price in the amount of two hundred sixty thousand pesos
(P260,000.00). The appellate court ruled that the Absolute
Deed of Sale with Mortgage in favor of SLDC was null and void
on the ground that SLDC was a purchaser in bad faith. The
Spouses Lu were further ordered to return all payments made
by SLDC with legal interest and to pay attorneys fees to
Babasanta.
SLDC and the Spouses Lu filed separate motions for
reconsideration with the appellate court.[12] However, in a
Manifestation dated 20 December 1995,[13] the Spouses Lu
informed the appellate court that they are no longer
contesting the decision dated 4 October 1995.

In its Resolution dated 11 March 1996,[14] the appellate court

considered as withdrawn the motion for reconsideration filed
by the Spouses Lu in view of their manifestation of 20
December 1995. The appellate court denied SLDCs motion
for reconsideration on the ground that no new or substantial
arguments were raised therein which would warrant
modification or reversal of the courts decision dated 4
October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the
appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN
LORENZO WAS NOT A BUYER IN GOOD FAITH BECAUSE WHEN
THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH
ADVANCE OF P200,000.00, SAN LORENZO WAS PUT ON
INQUIRY OF A PRIOR TRANSACTION ON THE PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE
THE ESTABLISHED FACT THAT THE ALLEGED FIRST BUYER,
RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE
DISPUTED PROPERTY WHEN SAN LORENZO BOUGHT AND
TOOK POSSESSION OF THE PROPERTY AND NO ADVERSE
CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS
ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE
THE FACT THAT RESPONDENT BABASANTA HAS SUBMITTED
NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF
HIS RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT
NOTWITHSTANDING ITS FULL CONCURRENCE ON THE
FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND
SET ASIDE THE DECISION OF THE TRIAL COURT UPHOLDING
THE TITLE OF SAN LORENZO AS A BUYER AND FIRST
POSSESSOR IN GOOD FAITH. [15]
SLDC contended that the appellate court erred in concluding
that it had prior notice of Babasantas claim over the property
merely on the basis of its having advanced the amount of two
hundred thousand pesos (P200,000.00) to Pacita Lu upon the
latters representation that she needed the money to pay her
obligation to Babasanta. It argued that it had no reason to
suspect that Pacita was not telling the truth that the money
would be used to pay her indebtedness to Babasanta. At any
rate, SLDC averred that the amount of two hundred
thousand pesos (P200,000.00) which it advanced to Pacita Lu
would be deducted from the balance of the purchase price still
due from it and should not be construed as notice of the prior
sale of the land to Babasanta. It added that at no instance did
Pacita Lu inform it that the lands had been previously sold to
Babasanta.
Moreover, SLDC stressed that after the execution of the sale
in its favor it immediately took possession of the property and
asserted its rights as new owner as opposed to Babasanta
who has never exercised acts of ownership. Since the titles
bore no adverse claim, encumbrance, or lien at the time it
was sold to it, SLDC argued that it had every reason to rely on
the correctness of the certificate of title and it was not obliged
to go beyond the certificate to determine the condition of the
property. Invoking the presumption of good faith, it added that
the burden rests on Babasanta to prove that it was aware of
the prior sale to him but the latter failed to do so. SLDC
pointed out that the notice of lis pendens was annotated only

on 2 June 1989 long after the sale of the property to it was

consummated on 3 May 1989.
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27
August 1999, the Spouses Lu informed the Court that due to
financial constraints they have no more interest to pursue
their rights in the instant case and submit themselves to the
decision of the Court of Appeals.[16]
On the other hand, respondent Babasanta argued that SLDC
could not have acquired ownership of the property because it
failed to comply with the requirement of registration of the
sale in good faith. He emphasized that at the time SLDC
registered the sale in its favor on 30 June 1990, there was
already a notice of lis pendens annotated on the titles of the
property made as early as 2 June 1989. Hence, petitioners
registration of the sale did not confer upon it any right.
Babasanta further asserted that petitioners bad faith in the
acquisition of the property is evident from the fact that it
failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (P200,000.00)
managers check in his favor.
The core issue presented for resolution in the instant petition
is who between SLDC and Babasanta has a better right over
the two parcels of land subject of the instant case in view of
the successive transactions executed by the Spouses Lu.
To prove the perfection of the contract of sale in his favor,
Babasanta presented a document signed by Pacita Lu
acknowledging receipt of the sum of fifty thousand pesos
(P50,000.00) as partial payment for 3.6 hectares of farm lot
situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna.
[17] While the receipt signed by Pacita did not mention the
price for which the property was being sold, this deficiency
was supplied by Pacita Lus letter dated 29 May 1989[18]
wherein she admitted that she agreed to sell the 3.6 hectares
of land to Babasanta for fifteen pesos (P15.00) per square
meter.
An analysis of the facts obtaining in this case, as well as the
evidence presented by the parties, irresistibly leads to the
conclusion that the agreement between Babasanta and the
Spouses Lu is a contract to sell and not a contract of sale.
Contracts, in general, are perfected by mere consent,[19]
which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the
contract. The offer must be certain and the acceptance
absolute.[20] Moreover, contracts shall be obligatory in
whatever form they may have been entered into, provided all
the essential requisites for their validity are present.[21]
The receipt signed by Pacita Lu merely states that she
accepted the sum of fifty thousand pesos (P50,000.00) from
Babasanta as partial payment of 3.6 hectares of farm lot
situated in Sta. Rosa, Laguna. While there is no stipulation
that the seller reserves the ownership of the property until full
payment of the price which is a distinguishing feature of a
contract to sell, the subsequent acts of the parties convince
us that the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He
stated therein that despite his repeated requests for the
execution of the final deed of sale in his favor so that he could
effect full payment of the price, Pacita Lu allegedly refused to
do so. In effect, Babasanta himself recognized that ownership
of the property would not be transferred to him until such

time as he shall have effected full payment of the price.

Moreover, had the sellers intended to transfer title, they could
have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment,
but they did not. Doubtlessly, the receipt signed by Pacita Lu
should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of
sale is quite germane. In a contract of sale, title passes to the
vendee upon the delivery of the thing sold; whereas in a
contract to sell, by agreement the ownership is reserved in
the vendor and is not to pass until the full payment of the
price.[22] In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or
rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is
not a breach but an event that prevents the obligation of the
vendor to convey title from becoming effective.[23]
The perfected contract to sell imposed upon Babasanta the
obligation to pay the balance of the purchase price. There
being an obligation to pay the price, Babasanta should have
made the proper tender of payment and consignation of the
price in court as required by law. Mere sending of a letter by
the vendee expressing the intention to pay without the
accompanying payment is not considered a valid tender of
payment.[24] Consignation of the amounts due in court is
essential in order to extinguish Babasantas obligation to pay
the balance of the purchase price. Glaringly absent from the
records is any indication that Babasanta even attempted to
make the proper consignation of the amounts due, thus, the
obligation on the part of the sellers to convey title never
acquired obligatory force.
On the assumption that the transaction between the parties is
a contract of sale and not a contract to sell, Babasantas claim
of ownership should nevertheless fail.
Sale, being a consensual contract, is perfected by mere
consent[25] and from that moment, the parties may
reciprocally demand performance.[26] The essential elements
of a contract of sale, to wit: (1) consent or meeting of the
minds, that is, to transfer ownership in exchange for the price;
(2) object certain which is the subject matter of the contract;
(3) cause of the obligation which is established.[27]
The perfection of a contract of sale should not, however, be
confused with its consummation. In relation to the acquisition
and transfer of ownership, it should be noted that sale is not a
mode, but merely a title. A mode is the legal means by which
dominion or ownership is created, transferred or destroyed,
but title is only the legal basis by which to affect dominion or
ownership.[28] Under Article 712 of the Civil Code, ownership
and other real rights over property are acquired and
transmitted by law, by donation, by testate and intestate
succession, and in consequence of certain contracts, by
tradition. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition
is the mode of accomplishing the same.[29] Therefore, sale by
itself does not transfer or affect ownership; the most that sale
does is to create the obligation to transfer ownership. It is
tradition or delivery, as a consequence of sale, that actually
transfers ownership.
Explicitly, the law provides that the ownership of the thing
sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to

1501.[30] The word delivered should not be taken

restrictively to mean transfer of actual physical possession of
the property. The law recognizes two principal modes of
delivery, to wit: (1) actual delivery; and (2) legal or
constructive delivery.
Actual delivery consists in placing the thing sold in the control
and possession of the vendee.[31] Legal or constructive
delivery, on the other hand, may be had through any of the
following ways: the execution of a public instrument
evidencing the sale;[32] symbolical tradition such as the
delivery of the keys of the place where the movable sold is
being kept;[33] traditio longa manu or by mere consent or
agreement if the movable sold cannot yet be transferred to
the possession of the buyer at the time of the sale;[34]
traditio brevi manu if the buyer already had possession of the
object even before the sale;[35] and traditio constitutum
possessorium, where the seller remains in possession of the
property in a different capacity.[36]
Following the above disquisition, respondent Babasanta did
not acquire ownership by the mere execution of the receipt by
Pacita Lu acknowledging receipt of partial payment for the
property. For one, the agreement between Babasanta and the
Spouses Lu, though valid, was not embodied in a public
instrument. Hence, no constructive delivery of the lands could
have been effected. For another, Babasanta had not taken
possession of the property at any time after the perfection of
the sale in his favor or exercised acts of dominion over it
despite his assertions that he was the rightful owner of the
lands. Simply stated, there was no delivery to Babasanta,
whether actual or constructive, which is essential to transfer
ownership of the property. Thus, even on the assumption that
the perfected contract between the parties was a sale,
ownership could not have passed to Babasanta in the absence
of delivery, since in a contract of sale ownership is transferred
to the vendee only upon the delivery of the thing sold.[37]
However, it must be stressed that the juridical relationship
between the parties in a double sale is primarily governed by
Article 1544 which lays down the rules of preference between
the two purchasers of the same property. It provides:
Art. 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who
may have first taken possession thereof in good faith, if it
should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
The principle of primus tempore, potior jure (first in time,
stronger in right) gains greater significance in case of double
sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the
Registry of Property, both made in good faith, shall be
deemed the owner.[38] Verily, the act of registration must be
coupled with good faith that is, the registrant must have no
knowledge of the defect or lack of title of his vendor or must
not have been aware of facts which should have put him upon
such inquiry and investigation as might be necessary to
acquaint him with the defects in the title of his vendor.[39]

Admittedly, SLDC registered the sale with the Registry of

Deeds after it had acquired knowledge of Babasantas claim.
Babasanta, however, strongly argues that the registration of
the sale by SLDC was not sufficient to confer upon the latter
any title to the property since the registration was attended
by bad faith. Specifically, he points out that at the time SLDC
registered the sale on 30 June 1990, there was already a
notice of lis pendens on the file with the Register of Deeds,
the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the
notice of lis pendens obliterate the effects of delivery and
possession in good faith which admittedly had occurred prior
to SLDCs knowledge of the transaction in favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the
Spouses Lu executed the Option to Buy in favor of SLDC upon
receiving P316,160.00 as option money from SLDC. After
SLDC had paid more than one half of the agreed purchase
price of P1,264,640.00, the Spouses Lu subsequently
executed on 3 May 1989 a Deed of Absolute Sale in favor or
SLDC. At the time both deeds were executed, SLDC had no
knowledge of the prior transaction of the Spouses Lu with
Babasanta. Simply stated, from the time of execution of the
first deed up to the moment of transfer and delivery of
possession of the lands to SLDC, it had acted in good faith and
the subsequent annotation of lis pendens has no effect at all
on the consummated sale between SLDC and the Spouses Lu.
A purchaser in good faith is one who buys property of another
without notice that some other person has a right to, or
interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of
the claim or interest of some other person in the property.[40]
Following the foregoing definition, we rule that SLDC qualifies
as a buyer in good faith since there is no evidence extant in
the records that it had knowledge of the prior transaction in
favor of Babasanta. At the time of the sale of the property to
SLDC, the vendors were still the registered owners of the
property and were in fact in possession of the lands. Time
and again, this Court has ruled that a person dealing with the
owner of registered land is not bound to go beyond the
certificate of title as he is charged with notice of burdens on
the property which are noted on the face of the register or on
the certificate of title.[41] In assailing knowledge of the
transaction between him and the Spouses Lu, Babasanta
apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree
(P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every
conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land shall,
if registered, filed, or entered in the office of the Register of
Deeds for the province or city where the land to which it
relates lies, be constructive notice to all persons from the time
of such registering, filing, or entering.
However, the constructive notice operates as suchby the
express wording of Section 52from the time of the
registration of the notice of lis pendens which in this case was
effected only on 2 June 1989, at which time the sale in favor
of SLDC had long been consummated insofar as the obligation
of the Spouses Lu to transfer ownership over the property to
SLDC is concerned.

More fundamentally, given the superiority of the right of SLDC

to the claim of Babasanta the annotation of the notice of lis
pendens cannot help Babasantas position a bit and it is
irrelevant to the good or bad faith characterization of SLDC as
a purchaser. A notice of lis pendens, as the Court held in
Natao v. Esteban,[42] serves as a warning to a prospective
purchaser or incumbrancer that the particular property is in
litigation; and that he should keep his hands off the same,
unless he intends to gamble on the results of the litigation.
Precisely, in this case SLDC has intervened in the pending
litigation to protect its rights. Obviously, SLDCs faith in the
merit of its cause has been vindicated with the Courts
present decision which is the ultimate denouement on the
controversy.
The Court of Appeals has made capital[43] of SLDCs
averment in its Complaint-in-Intervention[44] that at the
instance of Pacita Lu it issued a check for P200,000.00
payable to Babasanta and the confirmatory testimony of
Pacita Lu herself on cross-examination.[45] However, there is
nothing in the said pleading and the testimony which
explicitly relates the amount to the transaction between the
Spouses Lu and Babasanta for what they attest to is that the
amount was supposed to pay off the advances made by
Babasanta to Pacita Lu. In any event, the incident took place
after the Spouses Lu had already executed the Deed of
Absolute Sale with Mortgage in favor of SLDC and therefore,
as previously explained, it has no effect on the legal position
of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the
sale had been tainted by the prior notice of lis pendens and
assuming further for the same nonce that this is a case of
double sale, still Babasantas claim could not prevail over that
of SLDCs. In Abarquez v. Court of Appeals,[46] this Court had
the occasion to rule that if a vendee in a double sale registers
the sale after he has acquired knowledge of a previous sale,
the registration constitutes a registration in bad faith and
does not confer upon him any right. If the registration is done
in bad faith, it is as if there is no registration at all, and the
buyer who has taken possession first of the property in good
faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized
and registered only after the second vendee, Abarquez,
registered their deed of sale with the Registry of Deeds, but
the Israels were first in possession. This Court awarded the
property to the Israels because registration of the property by
Abarquez lacked the element of good faith. While the facts in
the instant case substantially differ from that in Abarquez, we
would not hesitate to rule in favor of SLDC on the basis of its
prior possession of the property in good faith. Be it noted that
delivery of the property to SLDC was immediately effected
after the execution of the deed in its favor, at which time
SLDC had no knowledge at all of the prior transaction by the
Spouses Lu in favor of Babasanta.
The law speaks not only of one criterion. The first criterion is
priority of entry in the registry of property; there being no
priority of such entry, the second is priority of possession;
and, in the absence of the two priorities, the third priority is of
the date of title, with good faith as the common critical
element. Since SLDC acquired possession of the property in
good faith in contrast to Babasanta, who neither registered
nor possessed the property at any time, SLDCs right is
definitely superior to that of Babasantas.

At any rate, the above discussion on the rules on double sale

would be purely academic for as earlier stated in this decision,
the contract between Babasanta and the Spouses Lu is not a
contract of sale but merely a contract to sell. In Dichoso v.
Roxas,[47] we had the occasion to rule that Article 1544 does
not apply to a case where there was a sale to one party of the
land itself while the other contract was a mere promise to sell
the land or at most an actual assignment of the right to
repurchase the same land. Accordingly, there was no double
sale of the same land in that case.
WHEREFORE, the instant petition is hereby GRANTED. The
decision of the Court of Appeals appealed from is REVERSED
and SET ASIDE and the decision of the Regional Trial Court,
Branch 31, of San Pedro, Laguna is REINSTATED. No costs.
SO ORDERED.

Torrens system, of a piece or parcel of land, particularly

described in paragraph A of the petition. The said lot is
alleged to have an area of 371.6 square meters. The
petitioner alleged that he was the owner in fee simple of said
parcel of land for the reason that he had purchased the same
of Federico Caet on the 8th day of November, 1919.
Accompanying the petition, there was united a plan (marked
Exhibit A) containing a technical description of the metes and
bounds of said parcel of land.
To the registration of said parcel of land the oppositor,
Primitivo Kalaw, presented his opposition, alleging that he was
the owner of the same and that he had acquired it from the
said Federico Caet.
Upon the issue thus presented by the petitioner and
opposition, the Honorable James A. Ostrand, on the 23d day of
January, 1920, in a carefully prepared opinion, reached the
conclusion that the petitioner was the owner in fee simple of
said parcel of land, and ordered it registered in his name in
accordance with the provisions of the Land registration Act.
From that decree the oppositor appealed to this court.
From an examination of the record the following facts seem to
be proved by a large preponderance of the evidence:
(1) That on the 24th day of September, 1919, the said
Federico Caet sold, under a conditional sale, the parcel of
land in question to the appellant (Exhibit 1);
(2) That on the 8th day of November, 1919, the said Federico
Caet made an absolute sale of said parcel of land to the
petitioner Agripino Mendoza (Exhibit B);
(3) That on the 12th day of November, 1919, Agripino
Mendoza entered upon, and took actual possession of, said
parcel of land, enclosed it with a fence, and began to clean
the same;
(4) That after the petitioner had fenced and cleaned said lot,
as above indicated, a representative of the oppositor claimed
and attempted to obtain possession of said lot, but the
petitioner, who was then in possession, refused to deliver the
possession, upon the ground that the was the owner;

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
October 12, 1921
G.R. No. 16420
AGRIPINO MENDOZA, petitioner-appellee,
vs.
PRIMITIVO KALAW, objector-appellant.
Guillermo M. Katigbak for appellant.
Felipe A. Jose for appellee.
JOHNSON, J.:
From the record it appears that on the 26th day of November,
1919, the petitioner presented a petition in the Court of First
instance of the City of Manila for the registration, under the

(5) That on the 17th day of November (18th day of

November), 1919, the oppositor attempted to have his title
registered in the registry of deeds of the City of Manila, but
such registration was denied by the register of deeds for the
reason that there existed some defect in the description of the
property, and for the reason that the title of the vendor had
not therefore been registered. The register of deeds, however,
did make an "anotacion preventiva."
It will be noted from the foregoing that Federico Caet made
two sales of the same property one of the oppositor and the
other to the petitioner. The first was but a conditional sale
while the latter was an absolute sale. It will also be noted that
while the absolute sale to the petitioner was subsequent to
the conditional sale to the oppositor, the former obtained the
actual possession of the property first. It will further be noted
from a reading of Exhibits 1 and B that the petitioner actually
paid to his vendor the purchase price of the property in
question, while the payment by the oppositor depended upon
the performance of certain conditions mentioned in the
contract of sale.
While was have stated that there were two sales of the parcel
of land in question, that is hardly the fact, because a

conditional sale, before the performance of the condition, can

hardly be said to be a sale of property, especially where the
condition has not been performed or complied with. That
being true, article 1473 of the Civil Code can hardly be said to
be applicable.

respondents Faustino L. Yu and Antonio T. Lim against the

Kado siblings, namely, private respondents Elena K. Palanca,
Eduarda K. Vargas, Mercedes K. Caballero, Isabel K. Villamor,
Jose Kado, Maria K. Calonzo, Teofila Kado and Nestor Kado,
and their respective spouses.

Neither can the "anotacion preventiva" obtained by the

oppositor be said to have created any advance in his favor, for
the reason that a preventative precautionary notice on the
records of the registry of deeds only protects the rights of the
person securing it for a period of thirty days. (Par. 2, art. 17,
Mortgage Law.) A preventative precautionary notice only
protects the interests and rights of the person who secures it
against those who acquire an interest in the property
subsequent thereto, and then, only for a period of thirty days.
It cannot affect the rights or interests of persons who acquired
an interest in the property theretofore. (Veguillas vs. Jaucian,
25 Phil., 315; Samson vs. Garcia and Ycalina, 34 Phil., 805.) In
the present case the petitioner had acquired an absolute deed
to the land in question, and had actually entered into the
possession of the same, before the preventative
precautionary notice was noted in the office of the registry of
deeds. Therefore, under the provisions of the Mortgage Law
above cited, it could in no way affect the rights or interests of
persons, acquired theretofore.

In essence, the petition poses a challenge against the

respondent appellate courts legal conclusion that the
transaction entered into by private respondents Yu and Lim
with private respondents Kado siblings, is one of an absolute
sale and not merely a conditional sale as denominated in the
document signed by said parties. As such, there is no dispute
as to the following facts:

For all of the foregoing reasons, we are fully persuaded that

the judgment ordering the registration of the parcel of land in
question in the name of the petitioner should be and is hereby
affirmed, with costs. So ordered.

FIRST DIVISION
[G.R. No. 120191. October 10, 1997]
LORETO ADALIN, CARLOS CALINGASAN, DEMETRIO ADAYA and
MAGNO ADALIN, petitioners, vs. THE HON. COURT OF
APPEALS, FAUSTINO L. YU, ANTONIO T. LIM, ELENA K.
PALANCA, JOSE PALANCA, EDUARDA K. VARGAS, JOSE
VARGAS, MERCEDES K. CABALLERO, EBERHARDO CABALLERO,
ISABEL K. VILLAMOR, FEDERICO VILLAMOR, JOSE KADO,
URSULA KADO, MARIA K. CALONZO, BAYANI L. CALONZO,
TEOFILA KADO, NESTOR KADO and LILIA KADO, respondents.
DECISION
HERMOSISIMA, JR., J.:
Before us is a petition for review seeking the reversal of the
Decision[1] of the Court of Appeals[2] and in lieu thereof, the
reinstatement of the Decision[3] of the Regional Trial Court[4]
in an action for specific performance filed by private

xxx [F]rom the welter of evidence and the record, it has been
established that Elena Kado Palanca, and her brothers and
sisters, namely, Eduarda K. Vargas, Mercedes K. Caballero,
Isabel K. Villamor, Jose Kado, Maria K. Calonzo, Teofila Kado
and Nestor Kado, hereinafter referred to, for brevitys sake, as
the Appellees-Vendors, were the owners of a parcel of land,
with an area of 1,343 square meters, with a five-door, one
storey commercial building constructed thereon, fronting the
Imperial Hotel, located along Magallanes Street, Cotabato
City, described in and covered by Transfer Certificate of Title
No. T-12963 of the Registry of Deeds of Cotabato City x x x.
One of the five (5) doors was leased to Loreto Adalin,
hereinafter referred to as the Appellee Adalin, two (2) doors
were leased to Carlos Calingasan and Demetrio Adaya
respectively, and two (2) doors were leased to Magno Adalin,
all of whom are hereinafter referred to, for brevitys sake, as
the Appellees-Vendees. The Appellees-Vendees and Appellee
Adalin paid a monthly rental of P1,500.00 for each door. The
Appellees-Vendors commissioned Ester Bautista to look for
and negotiate with prospective buyers for the sale of their
property for the price of P3,000,000.00. Sometime in August,
1987, Ester Bautista offered the property, for sale, to the
Appellants and the latter agreed to buy the property. A
conference was held in the office of the Appellant Faustino Yu,
at the Imperial Hotel, where he was the President-Manager,
with both Appellants, the Appellee Adalin, the AppelleesVendors Elena Palanca and Teofilo Kado, in their behalf and in
behalf of the Appellees-Vendors, in attendance, to discuss the
terms and conditions of the sale. The Appellants and Appellee
Adalin, the Appellees-Vendors agreed that the Appellants will
each buy two (2) doors while Appellee Adalin will buy the fifth
door which he was leasing from the Appellees-Vendors, all for
the price of P2,600,000.00. During the conference, the
Appellants inquired from the Appellee-Vendor Elena Palanca
whether the Appellees-Vendees were interested to buy the
property but the Appellee-Vendor Elena Palanca replied that
the property had been offered to the Appellees-Vendees for
sale but that the latter were not interested to buy the same.
The conferees then agreed to meet, on September 2, 1987, in
the house of the Appellee-Vendor Palanca, with Atty. Bayani
Calonzo, her brother-in-law, in attendance, to finalize the sale.
However, unknown to the Appellants, the Appellee-Vendor
Elena Palanca, in her behalf and in behalf of the other
Appellees-Vendors, sent, on September 2, 1987, separate
letters to each of the Appellees-Vendees informing them that
someone was interested to buy the property and requested
them to vacate the property within thirty (30) days unless all
of you could buy the property at the same price x x x. During
the conference in the house of the Appellee-Vendor Elena
Palanca, on September 2, 1987, the Appellants, the Appellee
Adalin and the Appellees-Vendors Elena Palanca and Teofilo
Kado in their behalf and in behalf of the other AppelleesVendors, Atty. Bayani Calonzo, the husband of the Appellee

Maria Kado, Atty. Eugenio Soyao, the counsel of the appellants

and the Appellee-Vendee Magno Adalin who attended in his
behalf and in behalf of the Appellees-Vendees, were present.
When asked by the Appellants if the Appellees-Vendees were
interested to buy the property, the Appellee-vendee Magno
Adalin forthrightly replied that the Appellees-Vendees were
not interested to buy the property because they cannot afford
the purchase price thereof. However, he claimed that the
Appellees Vendees were entitled to P50,000.00 each as
disturbance money, in consideration for their vacating the
property, to be borne by the Appellees-Vendors. The
Appellants, the Appellee Adalin and the Appellees-Vendors
forthwith agreed that each Appellant will buy two (2) doors
while the fifth door leased by Appellee Adalin will be
purchased by him, all for the purchased price of
P2,600,000.00 and that the appellants and Appellee Adalin
will pay, P300,000.00 as downpayment for the property, the
balance to be payable upon the eviction of the AppelleesVendees from the property and the execution of a 'Deed of
Absolute Sale'. Atty. Bayani Calonzo forthwith assured the
Appellants that he could secure the eviction of the AppelleesVendees from the property within a month because the latter
were his close friends and compadres. Atty. Bayani Calonzo
then gave Atty. Eugenio Soyao, the counsel of the Appellants,
the go-signal to prepare the deed for the signatures of the
parties. On September 8, 1987, the Appellants and Appellee
Adalin, as buyers of the property, and the Appellees-Vendors,
met in the office of the Appellant Faustino Yu at the Imperial
Hotel and executed the Deed of Conditional Sale prepared by
Atty. Eugenio Soyao x x x. The Appellants and Appellee Adalin
each contributed P100,000.00 and gave the total amount of
P300,000.00 to the Appellee-Vendor Elena Palanca as the
downpayment for the property. The Appellees-Vendors Elena
Palanca and Eduarda Vargas signed an Acknowledgment
Receipt for the downpayment x x x in their behalf and in
behalf of the other Appellees-vendors. In the meantime, the
Appellants deferred registration of the deed until after the
eviction of the Appellees-Vendees from the property and the
payment of the balance of the purchase price of the property
to the Appellees-Vendors as agreed upon under the Deed of
Conditional Sale.
In the interim, on October 14, 1987, the Appellees-Vendors,
through the Appellee-Vendor Elena Palanca, wrote,
conformably with the terms of the Deed of Conditional Sale x
x x a letter complaint against the Appellees-Vendees with the
Barangay Captain for unlawful detainer x x x. The case was
docketed as Barangay Case No. 7,052-87 x x x. On October
16, 1987, the Appellee-Vendee Magno Adalin wrote a letter to
the Appellees-Vendors, through the Appellee-Vendor Elena
Palanca, informing them that he had decided to purchase the
two doors he was leasing for the purchase price of
P600,000.00 per door and was ready to tender the amount by
the end of the month x x x. The Appellee-Vendee Demetrio
Adaya and the Appellee-Vendee Carlos Calingasan likewise
wrote separate letters to the Appellees-vendors informing the
latter of their decision to purchase the premises occupied by
them respectively for the amount of P600,000.00 each x x x.
Inspite of the prior sale of the property to the Appellants and
Appellee Adalin, the Appellees-Vendors decided to back out
from said sale to the Appellants and to sell the property to
the Appellees-vendees and to return the downpayments of the
Appellants for the property in the total amount of P200,000.00
with interest thereon. The Appellees-Vendees procured TCBT
Check No. 195031 in the amount of P101,416.66 payable to
the Appellant Faustino Yu and TCBT Check No. 195032 in the
amount of P101,416.66 payable to the Appellant Antonio Lim

and transmitted the same to the Appellants with a covering

letter x x x. The Appellants were flabbergasted. Both the
Appellants refused to receive the said letter and checks and
insisted, instead, that the Appellees-Vendors comply with the
Deed of Conditional Sale x x x. On November 16, 1987, the
Appellants, through their counsel, wrote a letter to the
Appellees-Vendors, copies of which were furnished the
Appellees-vendees, inquiring if the appropriate action has
been undertaken towards the eviction of the AppelleesVendees x x x. The Appellees-Vendors ignored the said letter.
Instead, the Appellees-Vendors signed, in December, 1987, a
Deed of Sale of Registered Land under which they sold the
said property to the Appellees-Vendees, including the Appellee
Adalin for the price of only P1,000,000.00 x x x much lower
than the price of the Appellant under the Deed of Conditional
Sale x x x. Although it appears that the deed was notarized
by Atty. Bayani Calonzo, however, the deed does not bear any
number in the notarial register of the lawyer. In the same
month, the Appellees-Vendors signed another Deed of Sale of
Registered Land under which they sold to the AppelleesVendees including Appellee Adalin the aforesaid property for
the considerably increased price of P3,000,000.00 x x x. The
deed was notarized by Atty. Bayani Calonzo. Interestingly,
both deeds were not filed with the Register of Deeds of
Cotabato City. Not content with the two (2) Deeds of Sale of
registered Land x x x the Appellees-Vendors, signed a third
Deed of Sale of Registered land which appears dated
February 5, 1988 under which they purportedly sold to the
Appellees-Vendees, including Appellee Adalin, the aforesaid
property for the much reduced price of only P860,000.00 x x
x. However, the aforesaid deed was not immediately filed
with the Register of Deeds of Cotabato City. On February 26,
1988, the Appellees-Vendors, through Atty. Bayani Calonzo,
filed a Petition against the Appellants for the consignation of
their downpayment of P200,000.00, with the Regional Trial
Court of General Santos City entitled Maria K. Calonzo, et al.
versus Faustino Yu, Special Civil Case No. 259. x x x
Undaunted, the Appellants filed a complaint with the
Barangay captain for Breach of Contract against the
Appellees-vendors entitled Faustino Yu, et al. Versus Elena K.
Palanca, et al., Barangay Case No. 9,014-88. The Barangay
Captain issued, on April 7, 1988, summons to the AppelleesVendors for them to appear for a conference on April 22, 1988
at 9:00 oclock in the morning x x x. Invitations were also
sent to the Appellees-Vendees x x x. During the conference
attended by Appellee-Vendees, the Appellants, if only to
accommodate the Appellee-Vendee Magno Adalin and settle
the case amicably, agreed to buy only one door each so that
the Appellee-Vendee Magno Adalin could purchase the two
doors he was occupying. However, the Appellee-Vendee
Magno Adalin adamantly refused, claiming that he was
already the owner of the two (2) doors. When the Appellant
Antonio Lim asked the Appellee-Vendee Magno Adalin to show
the Deed of Sale for the two doors, the latter insouciantly
walked out. Atty. Bayani Calonzo likewise stated that there
was no need to show the deed of sale. No settlement was
forged and, on May 16, 1988, the Barangay Captain issued
the Certification to File Action x x x.
On May 5, 1988, the Appellants filed their complaint for
Specific Performance against the Appellees-Vendors and
appellee Adalin in the Court a quo.
On June 14, 1988, the Appellants caused the annotation of a
Notice of Lis Pendens at the dorsal portion of Transfer
Certificate of Title No. 12963 under the names of the

Appellees-Vendors x x x. On October 25, 1988, the AppelleesVendees filed a Motion for Intervention as PlaintiffsIntervenors appending thereto a copy of the Deed of Sale of
Registered land signed by the Appellees-Vendors x x x. On
October 27, 1988, the Appellees-Vendees filed the Deed of
Sale of Registered Land x x x with the Register of Deeds on
the basis of which Transfer certificate of Title No. 24791 over
the property was issued under their names x x x. On the
same day, the Appellees-Vendees filed in the Court a quo a
Motion To Admit Complaint-In-Intervention x x x. Attached to
the Complaint-In-Intervention was the 'Deed of Sale of
Registered land signed by the Appellees-Vendees x x x. The
Appellants were shocked to learn that the Appellees-Vendors
had signed the said deed. As a counter-move, the Appellants
filed a motion for leave to amend Complaint and, on
November 11, 1988, filed their Amended Complaint
impleading the Appellees-Vendees as additional defendants x
x x.
xxx
The Appellees-Vendors suffered a rebuff when, on January 10,
1989, the Regional Trial Court of General Santos City issued an
Order dismissing the Petition of the Appellees-Vendors for
consignation x x x. In the meantime, on November 30, 1989,
Appellee Adalin died and was substituted, per order of the
Court a quo, on January 5, 1990, by his heirs, namely, Anita,
Anelita, Loreto, Jr., Teresita, Wilfredo, Lilibeth, Nelson, Helen
and Jocel, all surnamed Adalin, as Appellees-Vendees x x x.
After trial, the Court a quo rendered judgment in favor of the
Appellees-Vendees x x x.[5]
In the opinion of the court a quo, petitioners became the
owners of the parcel of land in question with the five-door,
one storey commercial building standing thereon, when they
purchased the same following the offer and the 30-day option
extended to them by private respondent Elena Palanca, in
behalf of the other Kado siblings, in her letter to them dated
September 2, 1987. The trial court disregarded the fact that
the Kado siblings had already finished transacting with private
respondents Faustino Yu and Antonio Lim and had in fact
entered into a conditional sale with them respecting the same
property. The trial court brushed aside this fact as it reasoned
that:
x x x In conditional deed of sale, ownership is only
transferred after the purchase price is fully paid or the
fulfillment of the condition and the execution of a definite or
absolute deed of sale are made. x x x
In this case, it is clear from the provision of the Deed of
Conditional Sale x x x that the balance of the price of
P2,300,000.00 shall be paid only after all the defendantsvendees shall have vacated and surrendered the premises to
the defendants-vendors. However, the tenants did not leave
the premises. In fact they opted to buy the property.
Moreover, at that time, the property was legally leased to the
defendants-vendees. x x x
xxx
Clearly therefore, the condition set forth in the said Deed of
Conditional Sale between the plaintiffs and the defendantsvendors was not fulfilled. Since the condition was not fulfilled,
there was no transfer of ownership of the property from the
defendants-vendors to the plaintiffs. x x x

x x x [In] the letters of Elena Palanca to the defendantsvendees dated September 2, 1987 x x x [t]hey were given the
option or preferential right to purchase the property.
xxx
When the defendants-vendors accepted defendants-vendees
option to buy, the former returned the initial payment of
P200,000.00 to the plaintiffs x x x but they refused to accept
the same. This refusal however did not diminish the effect of
the acceptance of the option to buy, which in fact led to the
execution of the said Deed of Sale of Registered Land x x x
and the subsequent issuance of the Transfer Certificate of
Title No. T-24791 of the Registry of Deeds for the City of
Cotabato in the names of the defendants-vendees x x x. x x x
x x x [T]he defendants-vendors acted in bad faith when, while
during the effectivity of the period of the option to buy [that]
they gave to the defendants-vendees, they executed a Deed
of Conditional Sale x x x in favor of the plaintiffs. This was
only six (6) days from date of the option. x x x[6]
The trial court also ruled that the conditional sale of the
subject property to private respondents Faustino Yu and
Antonio Lim and the sale of the same property to petitioners,
did not involve a double sale as to warrant the application of
Article 1544 of the Civil Code. The court a quo ratiocinated in
this manner:
x x x [T]he plaintiffs assert that this case is one of double
sale and should be governed by Article 1544 of the Civil Code.
The first sale, plaintiffs claim, is that under the Deed of
Conditional Sale x x x in their favor and the second sale is that
ultimately covered by the Deed of sale of registered Land for
P860,000.00 x x x in favor of the defendants-vendees. As
already pointed out by the court, the execution of the Deed of
Conditional Sale did not transfer ownership of the property to
the plaintiffs, hence, there can be no double sale. As held in
the case of Mendoza vs. Kalaw, 42 Phil. 236, Article 1544 does
not apply to situations where one sale was subject to a
condition which was not complied with. This is because a
conditional sale, before the performance of the condition, can
hardly be said to be a sale of property, specially where the
condition has not been performed or complied with.[7]
Pursuant to the above ruminations of the court a quo, it
ordered the following in the dispositive portion of its decision:
WHEREFORE, the court hereby orders the dismissal of
plaintiffs complaint against the defendants-vendees for lack
of merit, and hereby further sustains the validity of Transfer
Certificate of Title No. T-24791 issued in their names
(defendants-vendees) by the Registry of Deeds for the City of
Cotabato.
The defendants-vendors are hereby jointly and severally
ordered to pay moral damages of P500,000.00 to each of the
plaintiffs, P100,000.00 exemplary damages to each of the
plaintiffs and P50,000.00 as and for attorneys fees.
Defendants-vendors are hereby further ordered to return the
P200,000.00 initial payment received by them with legal
interest from date of receipt thereof up to November 3, 1987.
Defendants-vendees counterclaim is hereby ordered
dismissed.
With cost against the defendants-vendors.
SO ORDERED.[8]

Private respondents Faustino Yu and Antonio Lim wasted no

time in appealing from the above decision of the court a quo.
They were vindicated when the respondent Court of Appeals
rendered its decision in their favor. The respondent appellate
court reversed the trial court as it ruled, thus:
x x x We find, and so declare, that the Deed of Conditional
Sale x x x executed by the Appellees-Vendors in favor of the
Appellants was an absolute deed of sale and not a conditional
sale.
xxx
In ascertaining the nature of a contract and the intention of
the parties thereto, it behooves the trier of facts to look into
the context of the contract in its entirety and not merely
specific words or phrases therein, standing alone, as well as
the contemporaneous and subsequent acts of the parties. It
bears stressing that the title of the contract is not conclusive
of its nature. x x x
Although a contract may be denominated a Deed of
Conditional Sale, or Agreement to Sell, the same may be, in
reality a deed of absolute sale or a contract of sale x x x.
Under Article 1458 of the New Civil Code, a sale may be
absolute or conditional. A contract may be conditional when
the ownership of the thing sold is retained until the fulfillment
of a positive suspensive condition, generally the payment of
the purchase price, the breach of which condition will prevent
the onset of the obligation to deliver title x x x. A sale of
immovables is absolute where the contract does not contain
any provision that title to the property sold is reversed to the
Vendors or that the Vendor is entitled to unilaterally rescind
the same.
xxx
The Court a quo x x x resolutely subscribed to the view that
the x x x deed is conditional, its efficacy dependent upon a
suspensive condition--that of the payment by the Appellants
of the balance of the purchase price of the property, after the
Appellees-Vendees shall have been evicted from the property
or shall have voluntarily vacated the same and the Deed of
Absolute Sale shall have been executed in favor of the
Appellants; and, since the condition was not fulfilled, the sale
never became effective x x x. x x x Even a cursory reading of
the deed will readily show absence of any stipulation in said
deed that the title to the property was reserved to the
Appellees-Vendors until the balance of the purchase price was
paid nor giving them the right to unilaterally rescind the
contract if the Appellants failed to pay the said amount upon
the eviction of the Appellees-Vendees. Inscrutably then, the
deed is a perfected deed of absolute sale, not a conditional
one. x x x
xxx
There may not have been delivery of the property to the
Appellants either symbolically or physically and more, the
Appellees-Vendors may have deferred their obligation of
delivering physical possession of the property to the Appellees
only after the Appellees-Vendees shall have vacated the
property, however, the right of retention of the AppelleesVendors of title to or ownership over the property cannot
thereby be inferred therefrom. x x x

In fine, the non-payment of the balance of the purchase price

of the property and the consequent eviction of the AppelleesVendees therefrom were not conditions which suspended the
efficacy of the Deed of Conditional Sale. Rather, the same, if
due to the fault of the Appellants, merely accorded the
Appellees-Vendors the option to rescind the already existing
and effective sale.
The Appellants and the Appellees-Vendors, having entered
into, under the Deed of Conditional Sale x x x an absolute
sale, the Appellants thus had every right to demand that the
Appellees-Vendors performed their prestation under the deed,
to wit--the eviction of the Appellees-Vendees from the
property--so that the Appellants may then pay the balance of
the purchase price of the property.
xxx
The Court a quo and the Appellees, however, posit that the
Deed of Conditional sale x x x had not been consummated
and title to and ownership over the property had not been
transferred to the Appellants because there had been neither
constructive nor actual delivery of the property to the
Appellants x x x.
We do not agree. The evidence in the record shows that the
Appellants and the Appellees-Vendors met in the house of
Appellee Elena Palanca on September 2, 1987. The AppelleesVendees were represented by the Appellee-Vendee, Retired
Col. Magno Adalin. The latter did not object to the sale of the
property to the Appellants but merely insisted that each of the
Appellees-Vendees be given P50,000.00 as disturbance fee by
the Appellees-Vendors to which the latter acquiesced because
Atty. Bayani Calonzo forthwith gave Atty. Eugenio Soyao, the
go-signal to prepare the Deed of Conditional Sale for the
signatures thereof by the parties on September 8, 1987. The
Appellees-Vendors, on September 2, 1987, wrote letters to the
Appellees-Vendees giving them the option to match the price
offered by the Appellants. The Appellees-Vendees maintained
a resounding silence to the letter-offer of the AppelleesVendors. It was only, on October 16, 1987, that the AppelleesVendees, after the execution by the Appellants and the
Appellees-Vendors of the Deed of Conditional Sale, that the
Appellees-Vendees finally decided to, themselves, purchase
the property. The Appellees are estopped from claiming that
the property had not been delivered to the appellants. The
Appellants cannot use their gross bad faith as a shield to
frustrate the enforcement, by the Appellants, of the Deed of
Conditional Sale. x x x
xxx
The Appellees-Vendors cannot invoke the refusal of the
Appellees-Vendees to vacate the property and the latters
decision to themselves purchase the property as a valid
justification to renege on and turn their backs against their
obligation to deliver or cause the eviction of the Appelleesvendees from and deliver physical possession of the property
to the Appellants. For, if We gave our approbation to the
stance of the Appellees, then We would thereby be
sanctioning the performance by the Appellees-Vendors of their
obligations under the deed subject to the will and caprices of
the Appellees-Vendees, which we cannot do x x x.
It would be the zenith of inequity for the Appellees-Vendors to
invoke the occupation by the Appellees-Vendees, as of the
property, as a justification to ignore their obligation to have
the Appellees-Vendees evicted from the property and for them

to give P50,000.00 disturbance fee for each of the AppelleesVendees and a justification for the latter to hold on to the
possession of the property.
xxx
Assuming, gratia arguendi, for the nonce, that there had been
no consummation of the Deed of Conditional sale x x x by
reason of the non-delivery to the appellants of the property, it
does not thereby mean that the Deed of Sale of Registered
Land x x x executed by the Appellees should be given
preference. Apropos to this, We give our approbation to the
plaint of the Appellants that the Court a quo erred in not
applying the second and third paragraphs of Article 1544 x x
x.
For, the evidence in the record shows that, although the
Appellees-Vendees managed to cause the registration of the
Deed of Sale of Registered Land x x x on October 27, 1988
and procure Transfer Certificate of Title No. 24791 under their
names, on said date, and that they were, as of said date, in
physical possession of the property, however, the evidence in
the record shows that the Appellees-Vendees were in gross
evident bad faith. At the time the Appellees executed the
Deed of Sale of Registered Land in December 1987 x x x
they were aware that the Appellees-Vendors and the
Appellants had executed their Deed of Conditional Sale as
early as September 8, 1987. x x x In the light of the
foregoing, We arrive at the ineluctable conclusion that
preference must be accorded the Deed of Conditional Sale
executed by the appellants and the Appellees-Vendors.[9]
Accordingly, the respondent Court of Appeals rendered
another judgment in the case and ordered the following:
1.The Deed of Conditional Sale, Exhibit A is hereby
declared valid;
2.The Deeds of Sale of Registered Land, Exhibits E, F and
G and Transfer Certificate of Title No. 24791 are hereby
declared null and void;
3.The Appellees-Vendees except the heirs of Loreto Adalin are
hereby ordered to vacate the property within thirty (30) days
from the finality of this Decision;
4.The Appellees-Vendors are hereby ordered to execute, in
favor of the Appellants, a Deed of Absolute Sale covering
four (4) doors of the property (which includes the area of the
property on which said four doors are constructed) except the
door purchased by the Appellee-Vendee Loreto Adalin, free of
any liens or encumbrances;
5.The Appellants are hereby ordered to remit to the AppelleesVendors the balance of the purchase price of the four (4)
doors in the amount of P1,880,000.00;
6.The Appellees-Vendors are hereby ordered to refund to the
Appellees-Vendees the amount of P840,000.00 which they
paid for the property under the Deed of Conditional Sale of
Registered Land, Exhibit G, without interest considering that
they also acted in bad faith;
7.The Appellee-Vendee Magno Adalin is hereby ordered to pay
the amount of P3,000.00 a month, and each of the AppelleesVendees, except the Appellee Adalin, the amount of P1,500.00
to the Appellants, from November, 1987, up to the time the
property is vacated and delivered to the Appellants, as

reasonable compensation for the occupancy of the property,

with interest thereon at the rate of 6% per annum;
8.The Appellees-Vendors are hereby ordered to pay, jointly
and severally, to each of the Appellants the amount of
P100,000.00 by way of moral damages, P20,000.00 by way of
exemplary damages and P20,000.00 by way of attorneys
fees;
9.The counterclaims of the Appellees are dismissed.
With costs against the Appellees.
SO ORDERED.[10]
Unable to agree with the above decision of the respondent
appellate court, petitioners seek reversal thereof on the basis
on the following grounds:
1.The Unconsummated conditional Contract of Sale in favor
of the herein respondent VENDEES is Inferior to and Cannot
Prevail Over the Consummated Absolute Contracts of Sale in
favor of the herein petitioners.
2.The Deeds of sale in favor of the herein Petitioners as well
as Transfer Certificate of Title No. 24791 in their names are
Perfectly Valid Documents.
3.The herein Petitioners may not be legally and rightfully
Ordered to Vacate the Litigated Property or Pay Reasonable
Compensation for the Occupancy Thereof.
4.The herein Petitioners may not be Held Liable to Pay the
Costs.[11]
5.The Court of Appeals erred in holding that the Deed of
Conditional Sale is in reality an absolute deed of sale.
6.The Court of Appeals erred in relying totally and exclusively
on the evidence presented by respondents and in disregarding
the evidence for petitioners.
7.The Court of Appeals erred in holding that herein petitioners
are guilty of bad faith and that Article 1544 of the Civil Code is
applicable.[12]
The petition lacks merit.
The grounds relied upon by petitioners are essentially a
splitting of the various aspects of the one pivotal issue that
holds the key to the resolution of this controversy: the true
nature of the sale transaction entered into by the Kado
siblings with private respondents Faustino Yu and Antonio Lim.
Our task put simply, amounts to a declaration of what kind of
contract had been entered into by said parties and of what
their respective rights and obligations are thereunder.
It is not disputed that in August, 1987, Elena K. Palanca, in
behalf of the Kado siblings, commissioned Ester Bautista to
look for buyers for their property fronting the Imperial Hotel
in Cotabato City. Bautista logically offered said property to the
owners of the Imperial Hotel which may be expected to grab
the offer and take advantage of the proximity of the property
to the hotel site. True enough, private respondent Faustino
Yu, the President-General manager of the Imperial Hotel,
agreed to buy said property.
Thus during that same month of August, 1987, a conference
was held in the office of private respondent Yu at the Imperial
Hotel. Present there were private respondent Yu, Loreto
Adalin who was one of the tenants of the five-door, one-storey

building standing on the subject property, and Elena Palanca

and Teofilo Kado in their own behalf as sellers and in behalf of
the other tenants of said building. During the conference,
private respondents Yu and Lim categorically asked Palanca
whether the other tenants were interested to buy the
property, but Palanca also categorically answered that the
other tenants were not interested to buy the same.
Consequently, they agreed to meet at the house of Palanca on
September 2, 1987 to finalize the sale.
On September 2, 1987, Loreto Adalin; Yu and Lim and their
legal counsel; Palanca and Kado and their legal counsel; and
one other tenant, Magno Adalin, met at Palancas house.
Magno Adalin was there in his own behalf as tenant of two of
the five doors of the one-storey building standing on the
subject property and in behalf of the tenants of the two other
doors, namely Carlos Calingasan and Demetrio Adaya. Again,
private respondents Yu and Lim asked Palanca and Magno
Adalin whether the other tenants were interested to buy the
subject property, and Magno Adalin unequivocally answered
that he and the other tenants were not so interested mainly
because they could not afford it. However, Magno Adalin
asserted that he and the other tenants were each entitled to a
disturbance fee of P50,000.00 as consideration for their
vacating the subject property.
During said meeting, Palanca and Kado, as sellers, and Loreto
Adalin and private respondents Yu and Lim, as buyers, agreed
that the latter will pay P300,000.00 as downpayment for the
property and that as soon as the former secures the eviction
of the tenants, they will be paid the balance of P2,300,000.00.
Pursuant to the above terms and conditions, a Deed of
Conditional Sale was drafted by the counsel of private
respondents Yu and Lim. On September 8, 1987, at the
Imperial Hotel office of private respondent Yu, Palanca and
Eduarda Vargas, representing the sellers, and Loreto Adalin
and private respondents Yu and Lim signed the Deed of
Conditional Sale. They also agreed to defer the registration of
the deed until after the sellers have secured the eviction of
the tenants from the subject property.
The tenants, however, refused to vacate the subject property.
Being under obligation to secure the eviction of the tenants, in
accordance with the terms and conditions of the Deed of
Conditional Sale, Elena Palanca filed with the Barangay
Captain a letter complaint for unlawful detainer against the
said tenants.
Undisputedly, Palanca, in behalf of the Kado siblings who had
already committed to sell the property to private respondents
Yu and Lim and Loreto Adalin, understood her obligation to
eject the tenants on the subject property. Having gone to the
extent of filing an ejectment case before the Barangay
Captain, Palanca clearly showed an intelligent appreciation of
the nature of the transaction that she had entered into: that
she, in behalf of the Kado siblings, had already sold the
subject property to private respondents Yu and Lim and Loreto
Adalin, and that only the payment of the balance of the
purchase price was subject to the condition that she would
successfully secure the eviction of their tenants. In the sense
that the payment of the balance of the purchase price was
subject to a condition, the sale transaction was not yet
completed, and both sellers and buyers have their respective
obligations yet to be fulfilled: the former, the ejectment of
their tenants; and the latter, the payment of the balance of
the purchase price. In this sense, the Deed of Conditional
Sale may be an accurate denomination of the transaction.

But the sale was conditional only inasmuch as there remained

yet to be fulfilled, the obligation of the sellers to eject their
tenants and the obligation of the buyers to pay the balance of
the purchase price. The choice of who to sell the property to,
however, had already been made by the sellers and is thus no
longer subject to any condition nor open to any change. In
that sense, therefore, the sale made by Palanca to private
respondents was definitive and absolute.
Nothing in the acts of the sellers and buyers before, during or
after the said transaction justifies the radical change of
posture of Palanca who, in order to provide a legal basis for
her later acceptance of the tenants offer to buy the same
property, in effect claimed that the sale, being conditional,
was dependent on the sellers not changing their minds about
selling the property to private respondents Yu and Lim. The
tenants, for their part, defended Palancas subsequent dealing
with them by asserting their option rights under Palancas
letter of September 2, 1987 and harking on the non-fulfillment
of the condition that their ejectment be secured first.
Two days after Palanca filed an ejectment case before the
Barangay Captain against the tenants of the subject property,
Magno Adalin, Demetrio Adaya and Carlos Calingasan wrote
letters to Palanca informing the Kado siblings that they have
decided to purchase the doors that they were leasing for the
purchase price of P600,000.00 per door. Almost instantly,
Palanca, in behalf of the Kado siblings, accepted the offer of
the said tenants and returned the downpayments of private
respondents Yu and Lim. Of course, the latter refused to
accept the reimbursements.
Certainly, we cannot countenance the double dealing
perpetrated by Palanca in behalf of the Kado siblings. No
amount of legal rationalizing can sanction the arbitrary breach
of contract that Palanca committed in accepting the offer of
Magno Adalin, Adaya and Calingasan to purchase a property
already earlier sold to private respondents Yu and Lim.
Petitioners claim that they were given a 30-day option to
purchase the subject property as contained in the September
2, 1987 letter of Palanca. In the first place, such option is not
valid for utter lack of consideration.[13] Secondly, private
respondents twice asked Palanca and the tenants concerned
as to whether or not the latter were interested to buy the
subject property, and twice, too, the answer given to private
respondents was that the said tenants were not interested to
buy the subject property because they could not afford it.
Clearly, said tenants and Palanca, who represented the former
in the initial negotiations with private respondents, are
estopped from denying their earlier statement to the effect
that the said tenants Magno Adalin, Adaya and Calingasan
had no intention of buying the four doors that they were
leasing from the Kado siblings. More significantly, the
subsequent sale of the subject property by Palanca to the said
tenants, smacks of gross bad faith, considering that Palanca
and the said tenants were in full awareness of the August and
September negotiations between Bautista and Palanca, on the
one hand, and Loreto Adalin, Faustino Yu and Antonio Lim, on
the other, for the sale of the one-storey building. It cannot be
denied, thus, that Palanca and the said tenants entered into
the subsequent or second sale notwithstanding their full
knowledge of the subsistence of the earlier sale over the
same property to private respondents Yu and Lim. It goes
without saying, thus, that though the second sale to the said
tenants was registered, such prior registration cannot erase
the gross bad faith that characterized such second sale, and
consequently, there is no legal basis to rule that such second

sale prevails over the first sale of the said property to private
respondents Yu and Lim.
We agree, thus, with the ruminations of the respondent Court
of Appeals that:
The Appellees-Vendors cannot invoke the refusal of the
Appellees-Vendees to vacate the property and the latters
decision to themselves purchase the property as a valid
justification to renege on and turn their backs against their
obligation to deliver or cause the eviction of the AppelleesVendees from and deliver physical possession of the property
to the Appellants. For, if We gave our approbation to the
stance of the Appellees, then We would thereby be
sanctioning the performance by the Appellees-Vendors of their
obligations under the deed subject to the will and caprices of
the Appellees-Vendees, which we cannot do x x x.
It would be the zenith of inequity for the Appellees-Vendors to
invoke the occupation by the Appellees-Vendees, as of the
property, as a justification to ignore their obligation to have
the Appellees-Vendees evicted from the property and for them
to give P50,000.00 disturbance fee for each of the AppelleesVendees and a justification for the latter to hold on to the
possession of the property.
xxx
Assuming, gratia arguendi for the nonce, that there had been
no consummation of the Deed of Conditional Sale x x x by
reason of the non-delivery to the Appellants of the property, it
does not thereby mean that the Deed of Sale of Registered
Land x x x executed by the Appellees should be given
preference. Apropos to this, We give our approbation to the
plaint of the Appellants that the Court a quo erred in not
applying the second and third paragraphs of Article 1544 x x
x.
For, the evidence in the record shows that, although the
Appellees-Vendees managed to cause the registration of the
Deed of Sale of Registered Land x x x on October 27, 1988
and procure Transfer Certificate of Title No. 24791 under their
names, on said date, and that they were, as of said date, in
physical possession of the property, however, the evidence in
the record shows that the Appellees-Vendees were in gross
evident bad faith. At the time the Appellees executed the
Deed of Sale of Registered Land in December 1987 x x x
they were aware that the Appellees-Vendors and the
Appellants had executed their Deed of Conditional Sale as
early as September 8, 1987. x x x In the light of the
foregoing, We arrive at the ineluctable conclusion that
preference must be accorded the deed of Conditional Sale
executed by the Appellants and the Appellees-Vendors.[14]
WHEREFORE, the instant petition is HEREBY DISMISSED.
Costs against petitioners.
SO ORDERED.

SECOND DIVISION
[G.R. No. 129760. December 29, 1998]
RICARDO CHENG, petitioner, vs. RAMON B. GENATO and
ERNESTO R. DA JOSE & SOCORRO B. DA JOSE, respondents.
DECISION
MARTINEZ, J.:
This petition for review on certiorari seeks to annul and set
aside the Decision of the Court of Appeals (CA)[1] dated July
7, 1997 in CA-G.R. No. CV No. 44706 entitled Ricardo Cheng,
plaintiff-appellee vs. Ramon B. Genato, defendant-appellant,
Ernesto R. Da Jose & Socorro B. Da Jose, IntervenorsAppellants which reversed the ruling of the Regional Trial
Court, Branch 96 of Quezon City dated January 18, 1994. The
dispositive portion of the CA Decision reads:
WHEREFORE, based on the foregoing, appealed decision is
hereby REVERSED and SET ASIDE and judgment is rendered
ordering;

1.

The dismissal of the complaint;

2.
The cancellation of the annotations of the defendantappellants Affidavit to Annul Contract to Sell and plaintiffappellees Notice of Adverse Claim in the subject TCTs,
namely, TCT No. T-76.196 (M) and TCT No. T-76.197 (M);
3.
Payment by the intervenors-appellants of the
remaining balance of the purchase price pursuant to their
agreement with the defendant-appellant to suspend
encashment of the three post-dated checks issued since 1989.
4.
Ordering the execution by the defendant-appellant
Genato of the Deed of Absolute Sale over the subject two lots
covered by TCT No. T-76.196 (M) and TCT No. T-76.197 (M) in
favor of intervenors-appellants Spouses Da Jose;
5.
The return by defendant-appellant Genato of
P50,000.00 paid to him by the plaintiff-appellee Cheng, and
6.
Payment by plaintiff-appellee Cheng of moral damages
to herein intervenors-appellants Da Jose of P100,000.00,
exemplary damages of P50,000.00, attorneys fees of
P50,000.00, and costs of suit; and to defendant-appellant, of
P100,000.00 in exemplary damages, P50,000.00 in attorneys
fees. The amounts payable to the defendant-appellant may
be compensated by plaintiff-appellee with the amount ordered
under the immediately foregoing paragraph which defendantappellant has to pay the plaintiff-appellee.
SO ORDERED.[2]
The antecedents of the case are as follows:
Respondent Ramon B. Genato(Genato) is the owner of two
parcels of land located at Paradise Farms, San Jose Del Monte,
Bulacan covered by TCT No. T-76.196 (M)[3] and TCT No. T76.197 (M)[4] with an aggregate area of 35,821 square
meters, more or less.
On September 6, 1989, respondent Genato entered into an
agreement with respondent-spouses Ernesto R. Da Jose and
Socorro B. Da Jose (Da Jose spouses) over the abovementioned two parcels of land. The agreement culminated in
the execution of a contract to sell for which the purchase price
was P80.00 per square meter. The contract was in a public
instrument and was duly annotated at the back of the two
certificates of title on the same day. Clauses 1 and 3 thereof
provide:
'1. That the purchase price shall be EIGHTY (P80.00) PESOS,
Philippine Currency per square meter, of which the amount of
FIFTY THOUSAND (P50,000.00) Pesos shall be paid by the
VENDEE to the VENDOR as partial down payment at the time
of execution of this Contract to Sell.
xxx

xxx

xxx
'3. That the VENDEE, thirty (30) DAYS after the execution of
this contract, and only after having satisfactorily verified and
confirmed the truth and authenticity of documents, and that
no restrictions, limitations, and developments imposed on
and/or affecting the property subject of this contract shall be
detrimental to his interest, the VENDEE shall pay to the
VENDOR, NINE HUNDRED FIFTY THOUSAND (P950,000.00)
PESOS, Philippine Currency, representing the full payment of
the agreed Down Payment, after which complete possession
of the property shall be given to the VENDEE to enable him to
prepare the premises and any development therein.[5]

On October 4, 1989, the Da Jose spouses, not having finished

verifying the titles mentioned in clause 3 as aforequoted,
asked for and was granted by respondent Genato an
extension of another 30 days or until November 5, 1989.
However, according to Genato, the extension was granted on
condition that a new set of documents is made seven (7) days
from October 4, 1989.[6] This was denied by the Da Jose
spouses.
Pending the effectivity of the aforesaid extension period, and
without due notice to the Da Jose spouses, Genato executed
an Affidavit to Annul the Contract to Sell,[7] on October 13,
1989. Moreover, no annotation of the said affidavit at the
back of his titles was made right away. The affidavit
contained, inter alia, the following paragraphs;

xxx
xxx

xxx

That it was agreed between the parties that the agreed

downpayment of P950,000.00 shall be paid thirty (30) days
after the execution of the Contract, that is on or before
October 6, 1989;
The supposed VENDEES failed to pay the said full
downpayment even up to this writing, a breach of contract.
That this affidavit is being executed to Annul the aforesaid
Contract to Sell for the vendee having committed a breach of
contract for not having complied with the obligation as
provided in the Contract to Sell;[8]
On October 24, 1989, herein petitioner Ricardo Cheng (Cheng)
went to Genatos residence and expressed interest in buying
the subject properties. On that occasion, Genato showed to
Ricardo Cheng copies of his transfer certificates of title and
the annotations at the back thereof of his contract to sell with
the Da Jose spouses. Genato also showed him the
aforementioned Affidavit to Annul the Contract to Sell which
has not been annotated at the back of the titles.
Despite these, Cheng went ahead and issued a check for
P50,000.00 upon the assurance by Genato that the previous
contract with the Da Jose spouses will be annulled for which
Genato issued a handwritten receipt (Exh. D), written in this
wise.

10/24/89
Received from Ricardo Cheng
the Sum of Fifty Thousand Only (P50,000 -)
as partial for T-76196 (M)
T-76197 (M) area 35,821 Sq.m.
Paradise Farm, Gaya-Gaya, San Jose Del Monte
P70/m2
Bulacan
Plus C.G.T. etc
(SGD) Ramon B. Genato
Check # 470393
10/24/89[9]
On October 25, 1989, Genato deposited Chengs check. On
the same day, Cheng called up Genato reminding him to
register the affidavit to annul the contract to sell.[10]
The following day, or on October 26, 1989, acting on Chengs
request, Genato caused the registration of the Affidavit to

Annul the Contract to Sell in the Registry of Deeds,

Meycauayan, Bulacan as primary entry No. 262702.[11]

cited Chengs bad faith as a buyer being duly informed by

Genato of the existing annotated Contract to Sell on the titles.

While the Da Jose spouses were at the Office of the Registry of

Deeds of Meycauaya, Bulacan on October 27, 1989, they met
Genato by coincidence. It was only then that the Da Jose
spouses discovered about the affidavit to annul their contract.
The latter were shocked at the disclosure and protested
against the rescission of their contract. After being reminded
that he (Genato) had given them (Da Jose spouses) an
additional 30-day period to finish their verification of his titles,
that the period was still in effect, and that they were willing
and able to pay the balance of the agreed down payment,
later on in the day, Genato decided to continue the Contract
he had with them. The agreement to continue with their
contract was formalized in a conforme letter dated October
27, 1989.

After trial on the merits, the lower court ruled that the receipt
issued by Genato to Cheng unerringly meant a sale and not
just a priority or an option to buy. It cannot be true that the
transaction was subjected to some condition or reservation,
like the priority in favor of the Da Jose spouses as first buyer
because, if it were otherwise, the receipt would have provided
such material condition or reservation, especially as it was
Genato himself who had made the receipt in his own hand. It
also opined that there was a valid rescission of the Contract to
Sell by virtue of the Affidavit to Annul the Contract to Sell.
Time was of the essence in the execution of the agreement
between Genato and Cheng, under this circumstance demand,
extrajudicial or judicial, is not necessary. It falls under the
exception to the rule provided in Article 1169[19] of the Civil
Code. The right of Genato to unilaterally rescind the contract
is said to be under Article 1191[20] of the Civil Code.
Additionally, after reference was made to the substance of the
agreement between Genato and the Da Jose spouses, the
lower court also concluded that Cheng should be preferred
over the intervenors-Da Jose spouses in the purchase of the
subject properties. Thus, on January 18, 1994 the trial court
rendered its decision the decretal portion of which reads:

Thereafter, Ramon Genato advised Ricardo Cheng of his

decision to continue his contract with the Da Jose spouses and
the return of Chengs P50,000.00 check. Consequently, on
October 30, 1989, Chengs lawyer sent a letter[12] to Genato
demanding compliance with their agreement to sell the
property to him stating that the contract to sell between him
and Genato was already perfected and threatening legal
action.
On November 2, 1989, Genato sent a letter[13] to Cheng
(Exh. 6) enclosing a BPI Cashiers Check for P50,000.00 and
expressed regret for his inability to consummate his
transaction with him. After having received the letter of
Genato on November 4, 1989, Cheng, however, returned the
said check to the former via RCPI telegram[14] dated
November 6, 1989, reiterating that our contract to sell your
property had already been perfected.
Meanwhile, also on November 2, 1989, Cheng executed an
affidavit of adverse claim[15] and had it annotated on the
subject TCTs.
On the same day, consistent with the decision of Genato and
the Da Jose spouses to continue with their Contract to Sell of
September 6, 1989, the Da Jose spouses paid Genato the
complete down payment of P950,000.00 and delivered to him
three (3) postdated checks (all dated May 6, 1990, the
stipulated due date) in the total amount of P1,865,680.00 to
cover full payment of the balance of the agreed purchase
price. However, due to the filing of the pendency of this case,
the three (3) postdated checks have not been encashed.
On December 8, 1989, Cheng instituted a complaint[16] for
specific performance to compel Genato to execute a deed of
sale to him of the subject properties plus damages and prayer
for preliminary attachment. In his complaint, Cheng averred
that the P50,000.00 check he gave was a partial payment to
the total agreed purchase price of the subject properties and
considered as an earnest money for which Genato acceded.
Thus, their contract was already perfected.
In Answer[17] thereto, Genato alleged that the agreement
was only a simple receipt of an option-bid deposit, and never
stated that it was a partial payment, nor is it an earnest
money and that it was subject to the condition that the prior
contract with the Da Jose spouses be first cancelled.
The Da Jose spouses, in their Answer in Intervention,[18]
asserted that they have a superior right to the property as
first buyers. They alleged that the unilateral cancellation of
the Contract to Sell was without effect and void. They also

WHEREFORE, judgment is hereby rendered:

1. Declaring the contract to sell dated September 6, 1989
executed between defendant Ramon Genato, as vendor, and
intervenors Spouses Ernesto and Socorro Da Jose, as vendees,
resolved and rescinded in accordance with Art. 1191, Civil
Code, by virtue of defendants affidavit to annul contract to
sell dated October 13, 1989 and as the consequence of
intervenors failure to execute within seven (7) days from
October 4, 1989 another contract to sell pursuant to their
mutual agreement with the defendant;
2. Ordering defendant to return to the intervenors the sum of
P1,000,000.00, plus interest at the legal rate from November
2, 1989 until full payment;
3. Directing defendant to return to the intervenors the three
(3) postdated checks immediately upon finality of this
judgment;
4. Commanding defendant to execute with and in favor of the
plaintiff Ricardo Cheng, as vendee, a deed of conveyance and
sale of the real properties described and covered in Transfer
Certificates of Title No. T-76-196 (M) and T-76.197 (M) of the
Registry of Deeds of Bulacan, Meycauyan Branch, at the rate
of P70.00/sqaure meter, less the amount of P50,000.00
already paid to defendant, which is considered as part of the
purchase price, with the plaintiff being liable for payment of
the capital gains taxes and other expenses of the transfer
pursuant to the agreement to sell dated October 24, 1989;
and
5. Ordering defendant to pay the plaintiff and the intervenors
as follows:
a/ P50,000.00, as nominal damages, to plaintiff;
b/ P50,000.00, as nominal damages, to intervenors;
c/ P20,000.00, as and for attorneys fees, to plaintiff;
d/ P20,000.00, as and for attorneys fees, to intervenors; and
e/ Cost of the suit.

xxx

xxx

xxx
Not satisfied with the aforesaid decision, herein respondents
Ramon Genato and Da Jose spouses appealed to the court a
quo which reversed such judgment and ruled that the prior
contract to sell in favor of the Da Jose spouses was not validly
rescinded, that the subsequent contract to sell between
Genato and Cheng, embodied in the handwritten receipt, was
without force and effect due to the failure to rescind the prior
contract; and that Cheng should pay damages to the
respondents herein being found to be in bad faith.
Hence this petition.[21]
This petition for review, assails the Court of Appeals Decision
on the following grounds: (1) that the Da Jose spouses
Contract to Sell has been validly rescinded or resolved; (2)
that Ricardo Chengs own contract with Genato was not just a
contract to sell but one of conditional contract of sale which
gave him better rights, thus precluding the application of the
rule on double sales under Article 1544, Civil Code; and (3)
that, in any case, it was error to hold him liable for damages.
The petition must be denied for failure to show that the Court
of Appeals committed a reversible error which would warrant
a contrary ruling.
No reversible error can be ascribed to the ruling of the Court
of Appeals that there was no valid and effective rescission of
resolution of the Da Jose spouses Contract to Sell, contrary to
petitioners contentions and the trial courts erroneous ruling.
In a Contract to Sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a
breach, casual or serious, but a situation that prevents the
obligation of the vendor to convey title from acquiring an
obligatory force.[22] It is one where the happening of the
event gives rise to an obligation. Thus, for its non-fulfillment
there will be no contract to speak of, the obligor having failed
to perform the suspensive condition which enforces a juridical
relation. In fact with this circumstance, there can be no
rescission of an obligation that is still non-existent, the
suspensive condition not having occurred as yet.[23]
Emphasis should be made that the breach contemplated in
Article 1191 of the New Civil Code is the obligors failure to
comply with an obligation already extant, not a failure of a
condition to render binding that obligation.[24]
Obviously, the foregoing jurisprudence cannot be made to
apply to the situation in the instant case because no default
can be ascribed to the Da Jose spouses since the 30-day
extension period has not yet expired. The Da Jose spouses
contention that no further condition was agreed when they
were granted the 30-days extension period from October 7,
1989 in connection with clause 3 of their contract to sell dated
September 6, 1989 should be upheld for the following reason,
to wit; firstly, If this were not true, Genato could not have
been persuaded to continue his contract with them and later
on agree to accept the full settlement of the purchase price
knowing fully well that he himself imposed such sine qua non
condition in order for the extension to be valid; secondly,
Genato could have immediately annotated his affidavit to
annul the contract to sell on his title when it was executed on
October 13, 1989 and not only on October 26, 1989 after
Cheng reminded him of the annotation; thirdly, Genato could
have sent at least a notice of such fact, there being no

stipulation authorizing him for automatic rescission, so as to

finally clear the encumbrance of his titles and make it
available to other would be buyers. It likewise settles the
holding of the trial court that Genato needed money
urgently.
Even assuming in gratia argumenti that the Da Jose spouses
defaulted, as claimed by Genato, in their Contract to Sell, the
execution by Genato of the affidavit to annul the contract is
not even called for. For with or without the aforesaid affidavit
their non-payment to complete the full downpayment of the
purchase price ipso facto avoids their contract to sell, it being
subjected to a suspensive condition. When a contract is
subject to a suspensive condition, its birth or effectivity can
take place only if and when the event which constitutes the
condition happens or is fulfilled.[25] If the suspensive
condition does not take place, the parties would stand as if
the conditional obligation had never existed.[26]
Nevertheless, this being so Genato is not relieved from the
giving of a notice, verbal or written, to the Da Jose spouses for
decision to rescind their contract. In many cases,[27] even
though we upheld the validity of a stipulation in a contract to
sell authorizing automatic rescission for a violation of its terms
and conditions, at least a written notice must be sent to the
defaulter informing him of the same. The act of a party in
treating a contract as cancelled should be made known to the
other.[28] For such act is always provisional. It is always
subject to scrutiny and review by the courts in case the
alleged defaulter brings the matter to the proper courts. In
University of the Philippines vs. De Los Angeles,[29] this Court
stressed and we quote:
In other words, the party who deems the contract violated
may consider it resolved or rescinded, and act accordingly,
without previous court action, but it proceeds at its own risk.
For it is only the final judgment of the corresponding court
that will conclusively and finally settle whether the action
taken was or was not correct in law. But the law definitely
does not require that the contracting party who believes itself
injured must first file suit and wait for a judgment before
taking extajudicial steps to protect its interest. Otherwise, the
party injured by the others breach will have to passively sit
and watch its damages accumulate during the pendency of
the suit until the final judgment of rescission is rendered when
the law itself requires that he should exercise due diligence to
minimize its own damages (Civil Code, Article 2203).
This rule validates, both in equity and justice, contracts such
as the one at bat, in order to avoid and prevent the defaulting
party from assuming the offer as still in effect due to the
obligees tolerance for such non-fulfillment. Resultantly,
litigations of this sort shall be prevented and the relations
among would-be parties may be preserved. Thus, Ricardo
Chengs contention that the Contract to Sell between Genato
and the Da Jose spouses was rescinded or resolved due to
Genatos unilateral rescission finds no support in this case.
Anent the issue on the nature of the agreement between
Cheng and Genato, the records of this case are replete with
admissions[30] that Cheng believed it to be one of a Contract
to Sell and not one of Conditionl Contract of Sale which he, in
a transparent turn-around, now pleads in this Petition. This
ambivalent stance of Cheng is even noted by the appellate
court, thus:
At the outset, this Court notes that plaintiff-appellee was
inconsistent in characterizing the contract he allegedly

entered into. In his complaint,[31] Cheng alleged that the

P50,000.00 down payment was earnest money. And next, his
testimony[32] was offered to prove that the transaction
between him and Genato on October 24, 1989 was actually a
perfected contract to sell.[33]
Settled is the rule that an issue which was not raised during
the trial in the court below cannot be raised for the first time
on appeal.[34] Issues of fact and arguments not adequately
brought to the attention of the trial court need not be and
ordinarily will not be considered by a reviewing court as they
cannot be raised for the first time on appeal.[35] In fact, both
courts below correctly held that the receipt which was the
result of their agreement, is a contract to sell. This was, in
fact Chengs contention in his pleadings before said courts.
This patent twist only operates against Chengs posture which
is indicative of the weakness of his claim.
But even if we are to assume that the receipt, Exh. D, is to
be treated as a conditional contract of sale, it did not acquire
any obligatory force since it was subject to suspensive
condition that the earlier contract to sell between Genato and
the Da Jose spouses should first be cancelled or rescinded a
condition never met, as Genato, to his credit, upon realizing
his error, redeemed himself by respecting and maintaining his
earlier contract with the Da Jose spouses. In fact a careful
reading of the receipt, Exh. D, alone would not even show
that a conditional contract of sale has been entered by Genato
and Cheng. When the requisites of a valid contract of sale are
lacking in said receipt, therefore the sale is neither valid or
enforceable.[36]
To support his now new theory that the transaction was a
conditional contract of sale, petitioner invokes the case of
Coronel vs. Court of Appeals[37] as the law that should govern
their Petition. We do not agree. Apparently, the factual milieu
in Coronel is not on all fours with those in the case at bar.
In Coronel, this Court found that the petitioners therein clearly
intended to transfer title to the buyer which petitioner
themselves admitted in their pleading. The agreement of the
parties therein was definitively outline in the Receipt of Down
Payment both as to property, the purchase price, the delivery
of the seller of the property and the manner of the transfer of
title subject to the specific condition that upon the transfer in
their names of the subject property the Coronels will execute
the deed of absolute sale.

Should there be no inscription, the ownership shall pertain to

the person who in good faith was first in possession; and in
the absence thereof, to the person who presents the oldest
title, provided there is good faith
However, a meticulous reading of the aforequoted provision
shows that said law is not apropos to the instant case. This
provision connotes that the following circumstances must
concur:
(a) The two (or more) sales transactions in the issue must
pertain to exactly the same subject matter, and must be valid
sales transactions.
(b) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests; and
(c) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought from
the very same seller.
These situations obviously are lacking in a contract to sell for
neither a transfer of ownership nor a sales transaction has
been consummated. The contract to be binding upon the
obligee or the vendor depends upon the fulfillment or nonfulfillment of an event.
Notwithstanding this contrary finding with the appellate court,
we are of the view that the governing principle of Article 1544,
Civil Code, should apply in this situation. Jurisprudence[38]
teaches us that the governing principle is PRIMUS TEMPORE,
PORTIOR JURE (first in time, stronger in right). For not only
was the contract between herein respondents first in time; it
was also registered long before petitioners intrusion as a
second buyer. This principle only applies when the special
rules provided in the aforcited article of Civil Code do not
apply or fit the specific circumstances mandated under said
law or by jurisprudence interpreting the article.
The rule exacted by Article 1544 of the Civil Code for the
second buyer to be able to displace the first buyer are:
(1) that the second buyer must show that he acted in good
faith (i.e. in ignorance of the first sale and of the first buyers
rights) from the time of acquisition until title is transferred to
him by registration or failing registration, by delivery of
possession;[39]

Whereas, in the instant case, even by a careful perusal of the

receipt, Exh. D, alone such kind of circumstances cannot be
ascertained without however resorting to the exceptions of
the Rule on Parol Evidence.

(2) the second buyer must show continuing good faith and
innocence or lack of knowledge of the first sale until his
contract ripens into full ownership through prior registration
as provided by law.[40]

To our mind, the trial court and the appellate court correctly
held that the agreement between Genato and Cheng is a
contract to sell, which was, in fact, petitioner connection in
his pleadings before the said courts. Consequently, both to
mind, which read:
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.

Thus, in the case at bar, the knowledge gained by the Da Jose

spouses, as first buyers, of the new agreement between
Cheng and Genato will not defeat their rights as first buyers
except where Cheng, as second buyer, registers or annotates
his transaction or agreement on the title of the subject
properties in good faith ahead of the Da Jose spouses.
Moreover, although the Da Jose spouses, as first buyers, knew
of the second transaction it will not bar them from availing of
their rights granted by law, among them, to register first their
agreement as against the second buyer.

Should it be immovable property, the ownership shall belong

to the person acquiring it who in good faith first recorded it in
the Registry of Property.

In contrast, knowledge gained by Cheng of the first

transaction between the Da Jose spouses and Genato defeats
his rights even if he is first to register the second transaction,

since such knowledge taints his prior registration with bad

faith.
Registration, as defined by Soler and Castillo, means any
entry made in the books of the registry, including both
registration in its ordinary and strict sense and cancellation,
annotation, and even marginal notes.[41] In its strict
acceptation, it is the entry made in the registry which records
solemnly and permanently the right of ownership and other
real rights.[42] We have ruled[43] before that when a Deed of
Sale is inscribed in the registry of property on the original
document itself, what was done with respect to said entries or
annotations and marginal notes amounted to a registration of
the sale. In this light, we see no reason why we should not
give priority in right the annotation made by the Da Jose
spouses with respect to their Contract to Sell dated
September 6, 1989.
Moreover, registration alone in such cases without good faith
is not sufficient. Good faith must concur with registration for
such prior right to be enforceable. In the instant case, the
annotation made by the Da Jose spouses on the titles of
Genato of their Contract to Sell more than satisfies this
requirement. Whereas in the case of Genatos agreement
with Cheng such is unavailing. For even before the receipt,
Exh. D, was issued to Cheng information of such pre-existing
agreement has been brought to his knowledge which did not
deter him from pursuing his agreement with Genato. We give
credence to the factual finding of the appellate court that
Cheng himself admitted that it was he who sought Genato in
order to inquire about the property and offered to buy the
same.[44] And since Cheng was fully aware, or could have
been if he had chosen to inquire, of the rights of the Da Jose
spouses under the Contract to Sell duly annotated on the
transfer certificates of titles of Genato, it now becomes
unnecessary to further elaborate in detail the fact that he is
indeed in bad faith in entering into such agreement. As we
have held in Leung Yee vs. F.L. Strong Machinery Co.:[45]
One who purchases real estate with knowledge of a defect x
x x of title in his vendor cannot claim that he has acquired
title thereto in good faith as against x x x x an interest
therein; and the same rule must be applied to one who has
knowledge of facts which should have put him upon such
inquiry and investigation as might be necessary to acquaint
him with the defects in the title of his vendor. A purchaser
cannot close his eyes to facts which should put a reasonable
man upon his guard, and then claim that he acted in good
faith under the belief that there was no defect in the title of
the vendor. His mere refusal to believe that such defect
exists, or his willful closing of his eyes to the possibility of the
existence of a defect in his vendors title, will not make him an
innocent purchaser for value, if it afterwards develops that the
title was in fact defective, and it appears that he had such
notice of the defect as would have led to its discovery had he
acted with that measure of precaution which may reasonably
be required of a prudent man in a like situation. Good faith, or
lack of it, is in its last analysis a question of intention; but in
ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to
the conduct and outward acts by which alone the inward
motive may, with safety, be determined. So it is that the
honesty of intention, the honest lawful intent, which
constitutes good faith implies a freedom from knowledge and
circumstances which ought to put a person on inquiry, and so
it is that proof of such knowledge overcomes the presumption
of good faith in which the courts always indulge in the

absence of the proof to the contrary. Good faith, or the want

of it, is not a visible, tangible fact that can be seen or touched,
but rather a state or condition of mind which can only be
judge of by actual or fancied tokens or signs. (Wilder vs.
Gilman, 55 Vt. 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250;
Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann.,
2094-2098; Pinkerton Bros. Co. vs. Bromely, 119 Mich., 8, 10,
17.) Emphasis ours
Damages were awarded by the appellate court on the basis of
its finding that petitioner was in bad faith when he filed the
suit for specific performance knowing fully well that his
agreement with Genato did not push through.[46] Such bad
faith, coupled with his wrongful interference with the
contractual relations between Genato and the Da Jose
spouses, which culminated in his filing of the present suit and
thereby creating what the counsel for the respondents
describes as a prolonged and economically unhealthy
gridlock[47] on both the land itself and the respondents
rights provides ample basis for the damages awarded. Based
on these overwhelming evidence of bad faith on the part of
herein petitioner Ricardo Cheng, we find that the award of
damages made by the appellate court is in order.
WHEREFORE, premises considered, the instant petition for
review is DENIED and the assailed decision is hereby
AFFIRMED EN TOTO.
SO ORDERED.

for taxation purposes in their names on March 1964 under Tax

Declaration No. 7981.[9]
On 28 May 1964, Gamiao and Dayag sold the southern half of
Lot No. 7036-A-7, denominated as Lot No. 7036-A-7-B, to
Teodoro dela Cruz,[10] and the northern half, identified as Lot
No. 7036-A-7-A,[11] to Restituto Hernandez.[12] Thereupon,
Teodoro dela Cruz and Restituto Hernandez took possession of
and cultivated the portions of the property respectively sold to
them.[13]
Later, on 28 December 1986, Restituto Hernandez donated
the northern half to his daughter, Evangeline Hernandez-del
Rosario.[14] The children of Teodoro dela Cruz continued
possession of the southern half after their fathers death on 7
June 1970.
In a Deed of Sale[15] dated 15 June 1976, the Madrid brothers
conveyed all their rights and interests over Lot No. 7036-A-7
to Pacifico Marquez (hereafter, Marquez), which the former
confirmed[16] on 28 February 1983.[17] The deed of sale was
registered with the Office of the Register of Deeds of Isabela
on 2 March 1982.[18]

SECOND DIVISION
[G.R. No. 132161. January 17, 2005]
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC.,
petitioner, vs. THE HONORABLE COURT OF APPEALS and
HEIRS OF TEODORO DELA CRUZ, respondents.
DECISION
TINGA, J.:
Petitioner Consolidated Rural Bank, Inc. of Cagayan Valley
filed the instant Petition for Certiorari[1] under Rule 45 of the
Revised Rules of Court, seeking the review of the Decision[2]
of the Court of Appeals Twelfth Division in CA-G.R. CV No.
33662, promulgated on 27 May 1997, which reversed the
judgment[3] of the lower court in favor of petitioner; and the
Resolution[4] of the Court of Appeals, promulgated on 5
January 1998, which reiterated its Decision insofar as
respondents Heirs of Teodoro dela Cruz (the Heirs) are
concerned.
From the record, the following are the established facts:
Rizal, Anselmo, Gregorio, Filomeno and Domingo, all
surnamed Madrid (hereafter the Madrid brothers), were the
registered owners of Lot No. 7036-A of plan Psd-10188,
Cadastral Survey 211, situated in San Mateo, Isabela per
Transfer Certificate of Title (TCT) No. T-8121 issued by the
Register of Deeds of Isabela in September 1956.[5]
On 23 and 24 October 1956, Lot No. 7036-A was subdivided
into several lots under subdivision plan Psd- 50390. One of
the resulting subdivision lots was Lot No. 7036-A-7 with an
area of Five Thousand Nine Hundred Fifty-Eight (5,958) square
meters.[6]
On 15 August 1957, Rizal Madrid sold part of his share
identified as Lot No. 7036-A-7, to Aleja Gamiao (hereafter
Gamiao) and Felisa Dayag (hereafter, Dayag) by virtue of a
Deed of Sale,[7] to which his brothers Anselmo, Gregorio,
Filomeno and Domingo offered no objection as evidenced by
their Joint Affidavit dated 14 August 1957.[8] The deed of sale
was not registered with the Office of the Register of Deeds of
Isabela. However, Gamiao and Dayag declared the property

Subsequently, Marquez subdivided Lot No. 7036-A-7 into eight

(8) lots, namely: Lot Nos. 7036-A-7-A to 7036-A-7-H, for which
TCT Nos. T-149375 to T-149382 were issued to him on 29
March 1984.[19] On the same date, Marquez and his spouse,
Mercedita Mariana, mortgaged Lots Nos. 7036-A-7-A to 7036A-7-D to the Consolidated Rural Bank, Inc. of Cagayan Valley
(hereafter, CRB) to secure a loan of One Hundred Thousand
Pesos (P100,000.00).[20] These deeds of real estate mortgage
were registered with the Office of the Register of Deeds on 2
April 1984.
On 6 February 1985, Marquez mortgaged Lot No. 7036-A-7-E
likewise to the Rural Bank of Cauayan (RBC) to secure a loan
of Ten Thousand Pesos (P10,000.00).[21]
As Marquez defaulted in the payment of his loan, CRB caused
the foreclosure of the mortgages in its favor and the lots were
sold to it as the highest bidder on 25 April 1986.[22]
On 31 October 1985, Marquez sold Lot No. 7036-A-7-G to
Romeo Calixto (Calixto).[23]
Claiming to be null and void the issuance of TCT Nos. T149375 to T-149382; the foreclosure sale of Lot Nos. 7036-A7-A to 7036-A-7-D; the mortgage to RBC; and the sale to
Calixto, the Heirs-now respondents herein-represented by
Edronel dela Cruz, filed a case[24] for reconveyance and
damages the southern portion of Lot No. 7036-A (hereafter,
the subject property) against Marquez, Calixto, RBC and CRB
in December 1986.
Evangeline del Rosario, the successor-in-interest of Restituto
Hernandez, filed with leave of court a Complaint in
Intervention[25] wherein she claimed the northern portion of
Lot No. 7036-A-7.
In the Answer to the Amended Complaint,[26] Marquez, as
defendant, alleged that apart from being the first registrant,
he was a buyer in good faith and for value. He also argued
that the sale executed by Rizal Madrid to Gamiao and Dayag
was not binding upon him, it being unregistered. For his part,
Calixto manifested that he had no interest in the subject
property as he ceased to be the owner thereof, the same
having been reacquired by defendant Marquez.[27]

CRB, as defendant, and co-defendant RBC insisted that they

were mortgagees in good faith and that they had the right to
rely on the titles of Marquez which were free from any lien or
encumbrance.[28]
After trial, the Regional Trial Court, Branch 19 of Cauayan,
Isabela (hereafter, RTC) handed down a decision in favor of
the defendants, disposing as follows:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered:
1.
Dismissing the amended complaint and the complaint
in intervention;
2.
Declaring Pacifico V. Marquez the lawful owner of Lots
7036-A-7 now Lots 7036-A-7-A to 7036-A-7-H, inclusive,
covered by TCT Nos. T-149375 to T-149382, inclusive;
3.
Declaring the mortgage of Lots 7036-A-7-A, 7036-A-7-B,
7036-A-7-C and 7036-A-7-D in favor of the defendant
Consolidated Rural Bank (Cagayan Valley) and of Lot 7036-A7-E in favor of defendant Rural Bank of Cauayan by Pacifico V.
Marquez valid;
4.

Dismissing the counterclaim of Pacifico V. Marquez; and

5.
Declaring the Heirs of Teodoro dela Cruz the lawful
owners of the lots covered by TCT Nos. T-33119, T-33220 and
T-7583.
No pronouncement as to costs.
SO ORDERED.[29]
In support of its decision, the RTC made the following findings:
With respect to issues numbers 1-3, the Court therefore holds
that the sale of Lot 7036-A-7 made by Rizal Madrid to Aleja
Gamiao and Felisa Dayag and the subsequent conveyances to
the plaintiffs and intervenors are all valid and the Madrid
brothers are bound by said contracts by virtue of the
confirmation made by them on August 14, 1957 (Exh. B).
Are the defendants Pacifico V. Marquez and Romeo B. Calixto
buyers in good faith and for value of Lot 7036-A-7?
It must be borne in mind that good faith is always presumed
and he who imputes bad faith has the burden of proving the
same (Art. 527, Civil Code). The Court has carefully
scrutinized the evidence presented but finds nothing to show
that Marquez was aware of the plaintiffs and intervenors
claim of ownership over this lot. TCT No. T-8121 covering said
property, before the issuance of Marquez title, reveals
nothing about the plaintiffs and intervenors right thereto for
it is an admitted fact that the conveyances in their favor are
not registered.
The Court is therefore confronted with two sales over the
same property. Article 1544 of the Civil Code provides:
ART. 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property. x x x (Underscoring supplied).
From the foregoing provisions and in the absence of proof that
Marquez has actual or constructive knowledge of plaintiffs

and intervenors claim, the Court has to rule that as the

vendee who first registered his sale, Marquez ownership over
Lot 7036-A-7 must be upheld.[30]
The Heirs interposed an appeal with the Court of Appeals. In
their Appellants Brief,[31] they ascribed the following errors
to the RTC: (1) it erred in finding that Marquez was a buyer in
good faith; (2) it erred in validating the mortgage of the
properties to RBC and CRB; and (3) it erred in not reconveying
Lot No. 7036-A-7-B to them.[32]
Intervenor Evangeline del Rosario filed a separate appeal with
the Court of Appeals. It was, however, dismissed in a
Resolution dated 20 September 1993 for her failure to pay
docket fees. Thus, she lost her standing as an appellant.[33]
On 27 May 1997, the Court of Appeals rendered its assailed
Decision[34] reversing the RTCs judgment. The dispositive
portion reads:
WHEREFORE, the decision appealed from is hereby REVERSED
and SET ASIDE. Accordingly, judgment is hereby rendered as
follows:
1.
Declaring the heirs of Teodoro dela Cruz the lawful
owners of the southern half portion and Evangeline
Hernandez-del Rosario the northern half portion of Lot No.
7036-A-7, now covered by TCT Nos. T-149375 to T-149382,
inclusive;
2.
Declaring null and void the deed of sale dated June 15,
1976 between Pacifico V. Marquez and the Madrid brothers
covering said Lot 7036-A-7;
3.
Declaring null and void the mortgage made by
defendant Pacifico V. Marquez of Lot Nos. 7036-A-7-A, 7036-A7-B, 7036-A-7-C and 7036-A-7-D in favor of the defendant
Consolidated Rural Bank and of Lot 7036-A-7-E in favor of
defendant Rural Bank of Cauayan; and
4.
Ordering Pacifico V. Marquez to reconvey Lot 7036-A-7
to the heirs of Teodoro dela Cruz and Evangeline Hernandezdel Rosario.
No pronouncement as to costs.
SO ORDERED.[35]
In upholding the claim of the Heirs, the Court of Appeals held
that Marquez failed to prove that he was a purchaser in good
faith and for value. It noted that while Marquez was the first
registrant, there was no showing that the registration of the
deed of sale in his favor was coupled with good faith. Marquez
admitted having knowledge that the subject property was
being taken by the Heirs at the time of the sale.[36] The
Heirs were also in possession of the land at the time.
According to the Decision, these circumstances along with the
subject propertys attractive locationit was situated along
the National Highway and was across a gasoline station
should have put Marquez on inquiry as to its status. Instead,
Marquez closed his eyes to these matters and failed to
exercise the ordinary care expected of a buyer of real estate.
[37]
Anent the mortgagees RBC and CRB, the Court of Appeals
found that they merely relied on the certificates of title of the
mortgaged properties. They did not ascertain the status and
condition thereof according to standard banking practice. For
failure to observe the ordinary banking procedure, the Court
of Appeals considered them to have acted in bad faith and on

that basis declared null and void the mortgages made by

Marquez in their favor.[38]

defendants win, while the Court of Appeals decided the case

in favor of the Heirs.

Dissatisfied, CRB filed a Motion for Reconsideration[39]

pointing out, among others, that the Decision promulgated on
27 May 1997 failed to establish good faith on the part of the
Heirs. Absent proof of possession in good faith, CRB avers, the
Heirs cannot claim ownership over the subject property.

Article 1544 of the Civil Code reads, thus:

In a Resolution[40] dated 5 January 1998, the Court of

Appeals stressed its disbelief in CRBs allegation that it did not
merely rely on the certificates of title of the properties and
that it conducted credit investigation and standard ocular
inspection. But recalling that intervenor Evangeline del
Rosario had lost her standing as an appellant, the Court of
Appeals accordingly modified its previous Decision, as follows:
WHEREFORE, the decision dated May 27, 1997, is hereby
MODIFIED to read as follows:
WHEREFORE, the decision appealed from is hereby REVERSED
and SET ASIDE insofar as plaintiffs-appellants are concerned.
Accordingly, judgment is hereby rendered as follows:
1.
Declaring the Heirs of Teodoro dela Cruz the lawful
owners of the southern half portion of Lot No. 7036-A-7;
2.
Declaring null and void the deed of sale dated June 15,
1976 between Pacifico V. Marquez and the Madrid brothers
insofar as the southern half portion of Lot NO. (sic) 7036-A-7 is
concerned;
3.
Declaring the mortgage made by defendant Pacifico V.
Marquez in favor of defendant Consolidated Rural Bank
(Cagayan Valley) and defendant Rural Bank of Cauayan as null
and void insofar as the southern half portion of Lot No. 7036A-7 is concerned;
4.
Ordering defendant Pacifico V. Marquez to reconvey the
southern portion of Lot No. 7036-A-7 to the Heirs of Teodoro
dela Cruz.
No pronouncement as to costs.
SO ORDERED.[41]
Hence, the instant CRB petition. However, both Marquez and
RBC elected not to challenge the Decision of the appellate
court.
Petitioner CRB, in essence, alleges that the Court of Appeals
committed serious error of law in upholding the Heirs
ownership claim over the subject property considering that
there was no finding that they acted in good faith in taking
possession thereof nor was there proof that the first buyers,
Gamiao and Dayag, ever took possession of the subject
property. CRB also makes issue of the fact that the sale to
Gamiao and Dayag was confirmed a day ahead of the actual
sale, clearly evincing bad faith, it adds. Further, CRB asserts
Marquezs right over the property being its registered owner.
The petition is devoid of merit. However, the dismissal of the
petition is justified by reasons different from those employed
by the Court of Appeals.
Like the lower court, the appellate court resolved the present
controversy by applying the rule on double sale provided in
Article 1544 of the Civil Code. They, however, arrived at
different conclusions. The RTC made CRB and the other

ART. 1544. If the same thing should have been sold to

different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in possession; and, in
the absence thereof, to the person who presents the oldest
title, provided there is good faith.
The provision is not applicable in the present case. It
contemplates a case of double or multiple sales by a single
vendor. More specifically, it covers a situation where a single
vendor sold one and the same immovable property to two or
more buyers.[42] According to a noted civil law author, it is
necessary that the conveyance must have been made by a
party who has an existing right in the thing and the power to
dispose of it.[43] It cannot be invoked where the two different
contracts of sale are made by two different persons, one of
them not being the owner of the property sold.[44] And even
if the sale was made by the same person, if the second sale
was made when such person was no longer the owner of the
property, because it had been acquired by the first purchaser
in full dominion, the second purchaser cannot acquire any
right.[45]
In the case at bar, the subject property was not transferred to
several purchasers by a single vendor. In the first deed of
sale, the vendors were Gamiao and Dayag whose right to the
subject property originated from their acquisition thereof from
Rizal Madrid with the conformity of all the other Madrid
brothers in 1957, followed by their declaration of the property
in its entirety for taxation purposes in their names. On the
other hand, the vendors in the other or later deed were the
Madrid brothers but at that time they were no longer the
owners since they had long before disposed of the property in
favor of Gamiao and Dayag.
Citing Manresa, the Court of Appeals in 1936 had occasion to
explain the proper application of Article 1473 of the Old Civil
Code (now Article 1544 of the New Civil Code) in the case of
Carpio v. Exevea,[46] thus:
In order that tradition may be considered performed, it is
necessary that the requisites which it implies must have been
fulfilled, and one of the indispensable requisites, according to
the most exact Roman concept, is that the conveyor had the
right and the will to convey the thing. The intention to transfer
is not sufficient; it only constitutes the will. It is, furthermore,
necessary that the conveyor could juridically perform that act;
that he had the right to do so, since a right which he did not
possess could not be vested by him in the transferee.
This is what Article 1473 has failed to express: the necessity
for the preexistence of the right on the part of the conveyor.
But even if the article does not express it, it would be
understood, in our opinion, that that circumstance constitutes
one of the assumptions upon which the article is based.

This construction is not repugnant to the text of Article 1473,

and not only is it not contrary to it, but it explains and justifies
the same. (Vol. 10, 4th ed., p. 159)[47]
In that case, the property was transferred to the first
purchaser in 1908 by its original owner, Juan Millante.
Thereafter, it was sold to plaintiff Carpio in June 1929. Both
conveyances were unregistered. On the same date that the
property was sold to the plaintiff, Juan Millante sold the same
to defendant Exevea. This time, the sale was registered in the
Registry of Deeds. But despite the fact of registration in
defendants favor, the Court of Appeals found for the plaintiff
and refused to apply the provisions of Art. 1473 of the Old
Civil Code, reasoning that on the date of the execution of the
document, Exhibit 1, Juan Millante did not and could not have
any right whatsoever to the parcel of land in question.[48]
Citing a portion of a judgment dated 24 November 1894 of the
Supreme Court of Spain, the Court of Appeals elucidated
further:
Article 1473 of the Civil Code presupposes the right of the
vendor to dispose of the thing sold, and does not limit or alter
in this respect the provisions of the Mortgage Law in force,
which upholds the principle that registration does not validate
acts or contracts which are void, and that although acts and
contracts executed by persons who, in the Registry, appear to
be entitled to do so are not invalidated once recorded, even if
afterwards the right of such vendor is annulled or resolved by
virtue of a previous unrecorded title, nevertheless this refers
only to third parties.[49]
In a situation where not all the requisites are present which
would warrant the application of Art. 1544, the principle of
prior tempore, potior jure or simply he who is first in time is
preferred in right,[50] should apply.[51] The only essential
requisite of this rule is priority in time; in other words, the only
one who can invoke this is the first vendee. Undisputedly, he
is a purchaser in good faith because at the time he bought the
real property, there was still no sale to a second vendee.[52]
In the instant case, the sale to the Heirs by Gamiao and
Dayag, who first bought it from Rizal Madrid, was anterior to
the sale by the Madrid brothers to Marquez. The Heirs also
had possessed the subject property first in time. Thus,
applying the principle, the Heirs, without a scintilla of doubt,
have a superior right to the subject property.
Moreover, it is an established principle that no one can give
what one does not havenemo dat quod non habet.
Accordingly, one can sell only what one owns or is authorized
to sell, and the buyer can acquire no more than what the
seller can transfer legally.[53] In this case, since the Madrid
brothers were no longer the owners of the subject property at
the time of the sale to Marquez, the latter did not acquire any
right to it.
In any event, assuming arguendo that Article 1544 applies to
the present case, the claim of Marquez still cannot prevail
over the right of the Heirs since according to the evidence he
was not a purchaser and registrant in good faith.
Following Article 1544, in the double sale of an immovable,
the rules of preference are:
(a) the first registrant in good faith;
(b) should there be no entry, the first in possession in good
faith; and

(c) in the absence thereof, the buyer who presents the oldest
title in good faith. [54]
Prior registration of the subject property does not by itself
confer ownership or a better right over the property. Article
1544 requires that before the second buyer can obtain priority
over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first
buyers rights)from the time of acquisition until the title is
transferred to him by registration or failing registration, by
delivery of possession.[55]
In the instant case, the actions of Marquez have not satisfied
the requirement of good faith from the time of the purchase of
the subject property to the time of registration. Found by the
Court of Appeals, Marquez knew at the time of the sale that
the subject property was being claimed or taken by the
Heirs. This was a detail which could indicate a defect in the
vendors title which he failed to inquire into. Marquez also
admitted that he did not take possession of the property and
at the time he testified he did not even know who was in
possession. Thus, he testified on direct examination in the RTC
as follows:
ATTY. CALIXTO
Q
Can you tell us the circumstances to your buying the
land in question?
A
In 1976 the Madrid brothers confessed to me their
problems about their lots in San Mateo that they were being
taken by Teodoro dela Cruz and Atty. Teofilo A. Leonin; that
they have to pay the lawyers fee of P10,000.00 otherwise
Atty. Leonin will confiscate the land. So they begged me to
buy their properties, some of it. So that on June 3, 1976, they
came to Cabagan where I was and gave them P14,000.00, I
think. We have talked that they will execute the deed of sale.
Q
Why is it, doctor, that you have already this deed of
sale, Exh. 14, why did you find it necessary to have this Deed
of Confirmation of a Prior Sale, Exh. 15?
A
Because as I said a while ago that the first deed of sale
was submitted to the Register of Deeds by Romeo Badua so
that I said that because when I became a Municipal Health
Officer in San Mateo, Isabela, I heard so many rumors, so
many things about the land and so I requested them to
execute a deed of confirmation.[56]
...
ATTY. CALIXTOQ
At present, who is in possession on the Riceland portion
of the lot in question?
A
I can not say because the people working on that are
changing from time to time.
Q
Why, have you not taken over the cultivation of the land
in question?
A
Well, the Dela Cruzes are prohibiting that we will occupy
the place.
Q

So, you do not have any possession?

None, sir.[57]

One who purchases real property which is in actual possession

of others should, at least, make some inquiry concerning the

rights of those in possession. The actual possession by

people other than the vendor should, at least, put the
purchaser upon inquiry. He can scarcely, in the absence of
such inquiry, be regarded as a bona fide purchaser as against
such possessions.[58] The rule of caveat emptor requires the
purchaser to be aware of the supposed title of the vendor and
one who buys without checking the vendors title takes all the
risks and losses consequent to such failure.[59]
It is further perplexing that Marquez did not fight for the
possession of the property if it were true that he had a better
right to it. In our opinion, there were circumstances at the
time of the sale, and even at the time of registration, which
would reasonably require a purchaser of real property to
investigate to determine whether defects existed in his
vendors title. Instead, Marquez willfully closed his eyes to the
possibility of the existence of these flaws. For failure to
exercise the measure of precaution which may be required of
a prudent man in a like situation, he cannot be called a
purchaser in good faith.[60]
As this Court explained in the case of Spouses Mathay v. Court
of Appeals:[61]
Although it is a recognized principle that a person dealing on
a registered land need not go beyond its certificate of title, it
is also a firmly settled rule that where there are circumstances
which would put a party on guard and prompt him to
investigate or inspect the property being sold to him, such as
the presence of occupants/tenants thereon, it is, of course,
expected from the purchaser of a valued piece of land to
inquire first into the status or nature of possession of the
occupants, i.e., whether or not the occupants possess the land
en concepto de dueo, in concept of owner. As is the common
practice in the real estate industry, an ocular inspection of the
premises involved is a safeguard a cautious and prudent
purchaser usually takes. Should he find out that the land he
intends to buy is occupied by anybody else other than the
seller who, as in this case, is not in actual possession, it would
then be incumbent upon the purchaser to verify the extent of
the occupants possessory rights. The failure of a prospective
buyer to take such precautionary steps would mean
negligence on his part and would thereby preclude him from
claiming or invoking the rights of a purchaser in good
faith.[62]
This rule equally applies to mortgagees of real property. In
the case of Crisostomo v. Court of Appeals,[63] the Court held:
It is a well-settled rule that a purchaser or mortgagee cannot
close his eyes to facts which should put a reasonable man
upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the
vendor or mortgagor. His mere refusal to believe that such
defect exists, or his willful closing of his eyes to the possibility
of the existence of a defect in the vendors or mortgagors
title, will not make him an innocent purchaser or mortgagee
for value, if it afterwards develops that the title was in fact
defective, and it appears that he had such notice of the
defects as would have led to its discovery had he acted with
the measure of a prudent man in a like situation.[64]
Banks, their business being impressed with public interest, are
expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered
lands. Hence, for merely relying on the certificates of title and
for its failure to ascertain the status of the mortgaged
properties as is the standard procedure in its operations, we

agree with the Court of Appeals that CRB is a mortgagee in

bad faith.
In this connection, Marquezs obstention of title to the
property and the subsequent transfer thereof to CRB cannot
help the latters cause. In a situation where a party has actual
knowledge of the claimants actual, open and notorious
possession of the disputed property at the time of
registration, as in this case, the actual notice and knowledge
are equivalent to registration, because to hold otherwise
would be to tolerate fraud and the Torrens system cannot be
used to shield fraud. [65]
While certificates of title are indefeasible, unassailable and
binding against the whole world, they merely confirm or
record title already existing and vested. They cannot be used
to protect a usurper from the true owner, nor can they be
used for the perpetration of fraud; neither do they permit one
to enrich himself at the expense of others.[66]
We also find that the Court of Appeals did not err in awarding
the subject property to the Heirs absent proof of good faith in
their possession of the subject property and without any
showing of possession thereof by Gamiao and Dayag.
As correctly argued by the Heirs in their Comment,[67] the
requirement of good faith in the possession of the property
finds no application in cases where there is no second sale.
[68] In the case at bar, Teodoro dela Cruz took possession of
the property in 1964 long before the sale to Marquez
transpired in 1976 and a considerable length of time
eighteen (18) years in factbefore the Heirs had knowledge
of the registration of said sale in 1982. As Article 526 of the
Civil Code aptly provides, (H)e is deemed a possessor in good
faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it. Thus, there was no
need for the appellate court to consider the issue of good faith
or bad faith with regard to Teodoro dela Cruzs possession of
the subject property.
Likewise, we are of the opinion that it is not necessary that
there should be any finding of possession by Gamiao and
Dayag of the subject property. It should be recalled that the
regularity of the sale to Gamiao and Dayag was never
contested by Marquez.[69] In fact the RTC upheld the validity
of this sale, holding that the Madrid brothers are bound by the
sale by virtue of their confirmation thereof in the Joint Affidavit
dated 14 August 1957. That this was executed a day ahead of
the actual sale on 15 August 1957 does not diminish its
integrity as it was made before there was even any shadow of
controversy regarding the ownership of the subject property.
Moreover, as this Court declared in the case of Heirs of
Simplicio Santiago v. Heirs of Mariano E. Santiago,[70] tax
declarations are good indicia of possession in the concept of
an owner, for no one in his right mind would be paying taxes
for a property that is not in his actual or constructive
possession.[71]
WHEREFORE, the Petition is DENIED. The dispositive portion of
the Court of Appeals Decision, as modified by its Resolution
dated 5 January 1998, is AFFIRMED. Costs against petitioner.
SO ORDERED.

Between two buyers of the same immovable property

registered under the Torrens system, the law gives ownership
priority to (1) the first registrant in good faith; (2) then, the
first possessor in good faith; and (3) finally, the buyer who in
good faith presents the oldest title. This provision, however,
does not apply if the property is not registered under the
Torrens system.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules
of Court, seeking to set aside the March 21, 2002 Amended
Decision[2] and the July 22, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 62391. The Amended Decision
disposed as follows:
WHEREFORE, the dispositive part of the original DECISION of
this case, promulgated on November 19, 2001, is SET ASIDE
and another one is entered AFFIRMING in part and REVERSING
in part the judgment appealed from, as follows:
1.
Declaring [Respondent] Romana de Vera the rightful
owner and with better right to possess the property in
question, being an innocent purchaser for value therefor;
2.
Declaring Gloria Villafania [liable] to pay the following to
[Respondent] Romana de Vera and to [Petitioner-]Spouses
[Noel and Julie] Abrigo, to wit:
As to [Respondent] Romana de Vera:
1.
2.
3.
4.
5.

P300,000.00 plus 6% per annum as actual damages;

P50,000.00 as moral damages;
P50,000.00 as exemplary damages;
P30,000.00 as attorneys fees; and
Cost of suit.

As to [Petitioner-]Spouses [Noel and Julie] Abrigo:

1.
2.
3.
4.

P50,000.00 as moral damages;

P50,000.00 as exemplary damages;
P30,000.00 as attorneys fees;
Cost of suit.[4]

The assailed Resolution denied reconsideration.

The Facts
Quoting the trial court, the CA narrated the facts as follows:
As culled from the records, the following are the pertinent
antecedents amply summarized by the trial court:
On May 27, 1993, Gloria Villafania sold a house and lot
located at Banaoang, Mangaldan, Pangasinan and covered by
Tax Declaration No. 1406 to Rosenda Tigno-Salazar and Rosita
Cave-Go. The said sale became a subject of a suit for
annulment of documents between the vendor and the
vendees.

FIRST DIVISION
[G.R. No. 154409. June 21, 2004]
Spouses NOEL and JULIE ABRIGO, petitioners, vs. ROMANA DE
VERA, respondent.
DECISION
PANGANIBAN, J.:

On December 7, 1993, the Regional Trial Court, Branch 40 of

Dagupan City rendered judgment approving the Compromise
Agreement submitted by the parties. In the said Decision,
Gloria Villafania was given one year from the date of the
Compromise Agreement to buy back the house and lot, and
failure to do so would mean that the previous sale in favor of
Rosenda Tigno-Salazar and Rosita Cave-Go shall remain valid
and binding and the plaintiff shall voluntarily vacate the
premises without need of any demand. Gloria Villafania failed
to buy back the house and lot, so the [vendees] declared the
lot in their name.

Unknown, however to Rosenda Tigno-Salazar and Rosita

Cave-Go, Gloria Villafania obtained a free patent over the
parcel of land involved [on March 15, 1988 as evidenced by
OCT No. P-30522]. The said free patent was later on
cancelled by TCT No. 212598 on April 11, 1996.
On October 16, 1997, Rosenda Tigno-Salazar and Rosita
Cave-Go, sold the house and lot to the herein [PetitionerSpouses Noel and Julie Abrigo].
On October 23, 1997, Gloria Villafania sold the same house
and lot to Romana de Vera x x x. Romana de Vera registered
the sale and as a consequence, TCT No. 22515 was issued in
her name.
On November 12, 1997, Romana de Vera filed an action for
Forcible Entry and Damages against [Spouses Noel and Julie
Abrigo] before the Municipal Trial Court of Mangaldan,
Pangasinan docketed as Civil Case No. 1452. On February 25,
1998, the parties therein submitted a Motion for Dismissal in
view of their agreement in the instant case that neither of
them can physically take possession of the property in
question until the instant case is terminated. Hence the
ejectment case was dismissed.[5]
Thus, on November 21, 1997, [petitioners] filed the instant
case [with the Regional Trial Court of Dagupan City] for the
annulment of documents, injunction, preliminary injunction,
restraining order and damages [against respondent and Gloria
Villafania].
After the trial on the merits, the lower court rendered the
assailed Decision dated January 4, 1999, awarding the
properties to [petitioners] as well as damages. Moreover, x x x
Gloria Villafania was ordered to pay [petitioners and private
respondent] damages and attorneys fees.
Not contented with the assailed Decision, both parties
[appealed to the CA].[6]
Ruling of the Court of Appeals
In its original Decision promulgated on November 19, 2001,
the CA held that a void title could not give rise to a valid one
and hence dismissed the appeal of Private Respondent
Romana de Vera.[7] Since Gloria Villafania had already
transferred ownership to Rosenda Tigno-Salazar and Rosita
Cave-Go, the subsequent sale to De Vera was deemed void.
The CA also dismissed the appeal of Petitioner-Spouses Abrigo
and found no sufficient basis to award them moral and
exemplary damages and attorneys fees.
On reconsideration, the CA issued its March 21, 2002
Amended Decision, finding Respondent De Vera to be a
purchaser in good faith and for value. The appellate court
ruled that she had relied in good faith on the Torrens title of
her vendor and must thus be protected.[8]
Hence, this Petition.[9]
Issues
Petitioners raise for our consideration the issues below:
1.
Whether or not the deed of sale executed by Gloria
Villafania in favor of [R]espondent Romana de Vera is valid.
2.
Whether or not the [R]espondent Romana de Vera is
a purchaser for value in good faith.

3.
Who between the petitioners and respondent has a
better title over the property in question.[10]
In the main, the issues boil down to who between petitionerspouses and respondent has a better right to the property.
The Courts Ruling
The Petition is bereft of merit.
Main Issue:
Better Right over the Property
Petitioners contend that Gloria Villafania could not have
transferred the property to Respondent De Vera because it no
longer belonged to her.[11] They further claim that the sale
could not be validated, since respondent was not a purchaser
in good faith and for value.[12]
Law on Double Sale
The present case involves what in legal contemplation was a
double sale. On May 27, 1993, Gloria Villafania first sold the
disputed property to Rosenda Tigno-Salazar and Rosita CaveGo, from whom petitioners, in turn, derived their right.
Subsequently, on October 23, 1997, a second sale was
executed by Villafania with Respondent Romana de Vera.
Article 1544 of the Civil Code states the law on double sale
thus:
Art. 1544.
If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest
title, provided there is good faith.
Otherwise stated, the law provides that a double sale of
immovables transfers ownership to (1) the first registrant in
good faith; (2) then, the first possessor in good faith; and (3)
finally, the buyer who in good faith presents the oldest title.
[13] There is no ambiguity in the application of this law with
respect to lands registered under the Torrens system.
This principle is in full accord with Section 51 of PD 1529[14]
which provides that no deed, mortgage, lease or other
voluntary instrument -- except a will -- purporting to convey or
affect registered land shall take effect as a conveyance or
bind the land until its registration.[15] Thus, if the sale is not
registered, it is binding only between the seller and the buyer
but it does not affect innocent third persons.[16]
In the instant case, both Petitioners Abrigo and respondent
registered the sale of the property. Since neither petitioners
nor their predecessors (Tigno-Salazar and Cave-Go) knew that
the property was covered by the Torrens system, they
registered their respective sales under Act 3344.[17] For her
part, respondent registered the transaction under the Torrens
system[18] because, during the sale, Villafania had presented
the transfer certificate of title (TCT) covering the property.[19]

Respondent De Vera contends that her registration under the

Torrens system should prevail over that of petitioners who
recorded theirs under Act 3344. De Vera relies on the
following insight of Justice Edgardo L. Paras:
x x x If the land is registered under the Land Registration Act
(and has therefore a Torrens Title), and it is sold but the
subsequent sale is registered not under the Land Registration
Act but under Act 3344, as amended, such sale is not
considered REGISTERED, as the term is used under Art. 1544
x x x.[20]
We agree with respondent. It is undisputed that Villafania had
been issued a free patent registered as Original Certificate of
Title (OCT) No. P-30522.[21] The OCT was later cancelled by
Transfer Certificate of Title (TCT) No. 212598, also in
Villafanias name.[22] As a consequence of the sale, TCT No.
212598 was subsequently cancelled and TCT No. 22515
thereafter issued to respondent.
Soriano v. Heirs of Magali[23] held that registration must be
done in the proper registry in order to bind the land. Since
the property in dispute in the present case was already
registered under the Torrens system, petitioners registration
of the sale under Act 3344 was not effective for purposes of
Article 1544 of the Civil Code.
More recently, in Naawan Community Rural Bank v. Court of
Appeals,[24] the Court upheld the right of a party who had
registered the sale of land under the Property Registration
Decree, as opposed to another who had registered a deed of
final conveyance under Act 3344. In that case, the priority in
time principle was not applied, because the land was already
covered by the Torrens system at the time the conveyance
was registered under Act 3344. For the same reason,
inasmuch as the registration of the sale to Respondent De
Vera under the Torrens system was done in good faith, this
sale must be upheld over the sale registered under Act 3344
to Petitioner-Spouses Abrigo.
Radiowealth Finance Co. v. Palileo[25] explained the difference
in the rules of registration under Act 3344 and those under
the Torrens system in this wise:
Under Act No. 3344, registration of instruments affecting
unregistered lands is without prejudice to a third party with a
better right. The aforequoted phrase has been held by this
Court to mean that the mere registration of a sale in ones
favor does not give him any right over the land if the vendor
was not anymore the owner of the land having previously sold
the same to somebody else even if the earlier sale was
unrecorded.
The case of Carumba vs. Court of Appeals[26] is a case in
point. It was held therein that Article 1544 of the Civil Code
has no application to land not registered under Act No. 496.
Like in the case at bar, Carumba dealt with a double sale of
the same unregistered land. The first sale was made by the
original owners and was unrecorded while the second was an
execution sale that resulted from a complaint for a sum of
money filed against the said original owners. Applying
[Section 33], Rule 39 of the Revised Rules of Court,[27] this
Court held that Article 1544 of the Civil Code cannot be
invoked to benefit the purchaser at the execution sale though
the latter was a buyer in good faith and even if this second
sale was registered. It was explained that this is because the
purchaser of unregistered land at a sheriffs execution sale
only steps into the shoes of the judgment debtor, and merely

acquires the latters interest in the property sold as of the

time the property was levied upon.
Applying this principle, x x x the execution sale of
unregistered land in favor of petitioner is of no effect because
the land no longer belonged to the judgment debtor as of the
time of the said execution sale.[28]
Petitioners cannot validly argue that they were fraudulently
misled into believing that the property was unregistered. A
Torrens title, once registered, serves as a notice to the whole
world.[29] All persons must take notice, and no one can plead
ignorance of the registration.[30]
Good-Faith Requirement
We have consistently held that Article 1544 requires the
second buyer to acquire the immovable in good faith and to
register it in good faith.[31] Mere registration of title is not
enough; good faith must concur with the registration.[32] We
explained the rationale in Uraca v. Court of Appeals,[33] which
we quote:
Under the foregoing, the prior registration of the disputed
property by the second buyer does not by itself confer
ownership or a better right over the property. Article 1544
requires that such registration must be coupled with good
faith. Jurisprudence teaches us that (t)he governing principle
is primus tempore, potior jure (first in time, stronger in right).
Knowledge gained by the first buyer of the second sale cannot
defeat the first buyers rights except where the second buyer
registers in good faith the second sale ahead of the first, as
provided by the Civil Code. Such knowledge of the first buyer
does not bar her from availing of her rights under the law,
among them, to register first her purchase as against the
second buyer. But in converso, knowledge gained by the
second buyer of the first sale defeats his rights even if he is
first to register the second sale, since such knowledge taints
his prior registration with bad faith. This is the price exacted
by Article 1544 of the Civil Code for the second buyer being
able to displace the first buyer; that before the second buyer
can obtain priority over the first, he must show that he acted
in good faith throughout (i.e. in ignorance of the first sale and
of the first buyers rights) ---- from the time of acquisition until
the title is transferred to him by registration, or failing
registration, by delivery of possession.[34] (Italics supplied)
Equally important, under Section 44 of PD 1529, every
registered owner receiving a certificate of title pursuant to a
decree of registration, and every subsequent purchaser of
registered land taking such certificate for value and in good
faith shall hold the same free from all encumbrances, except
those noted and enumerated in the certificate.[35] Thus, a
person dealing with registered land is not required to go
behind the registry to determine the condition of the property,
since such condition is noted on the face of the register or
certificate of title.[36] Following this principle, this Court has
consistently held as regards registered land that a purchaser
in good faith acquires a good title as against all the
transferees thereof whose rights are not recorded in the
Registry of Deeds at the time of the sale.[37]
Citing Santiago v. Court of Appeals,[38] petitioners contend
that their prior registration under Act 3344 is constructive
notice to respondent and negates her good faith at the time
she registered the sale. Santiago affirmed the following
commentary of Justice Jose C. Vitug:

The governing principle is prius tempore, potior jure (first in

time, stronger in right). Knowledge by the first buyer of the
second sale cannot defeat the first buyer's rights except when
the second buyer first registers in good faith the second sale
(Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge
gained by the second buyer of the first sale defeats his rights
even if he is first to register, since such knowledge taints his
registration with bad faith (see also Astorga vs. Court of
Appeals, G.R. No 58530, 26 December 1984) In Cruz vs.
Cabana (G.R. No. 56232, 22 June 1984; 129 SCRA 656), it was
held that it is essential, to merit the protection of Art. 1544,
second paragraph, that the second realty buyer must act in
good faith in registering his deed of sale (citing Carbonell vs.
Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R. 95843,
02 September 1992).
xxx

xxx

xxx

Registration of the second buyer under Act 3344, providing

for the registration of all instruments on land neither covered
by the Spanish Mortgage Law nor the Torrens System (Act
496), cannot improve his standing since Act 3344 itself
expresses that registration thereunder would not prejudice
prior rights in good faith (see Carumba vs. Court of Appeals,
31 SCRA 558). Registration, however, by the first buyer under
Act 3344 can have the effect of constructive notice to the
second buyer that can defeat his right as such buyer in good
faith (see Arts. 708-709, Civil Code; see also Revilla vs.
Galindez, 107 Phil. 480; Taguba vs. Peralta, 132 SCRA 700).
Art. 1544 has been held to be inapplicable to execution sales
of unregistered land, since the purchaser merely steps into
the shoes of the debtor and acquires the latter's interest as of
the time the property is sold (Carumba vs. Court of Appeals,
31 SCRA 558; see also Fabian vs. Smith, Bell & Co., 8 Phil.
496) or when there is only one sale (Remalante vs. Tibe, 158
SCRA 138).[39] (Emphasis supplied)
Santiago was subsequently applied in Bayoca v. Nogales,[40]
which held:
Verily, there is absence of prior registration in good faith by
petitioners of the second sale in their favor. As stated in the
Santiago case, registration by the first buyer under Act No.
3344 can have the effect of constructive notice to the second
buyer that can defeat his right as such buyer. On account of
the undisputed fact of registration under Act No. 3344 by [the
first buyers], necessarily, there is absent good faith in the
registration of the sale by the [second buyers] for which they
had been issued certificates of title in their names. x x
x.[41]
Santiago and Bayoca are not in point. In Santiago, the first
buyers registered the sale under the Torrens system, as can
be inferred from the issuance of the TCT in their names.[42]
There was no registration under Act 3344. In Bayoca, when
the first buyer registered the sale under Act 3344, the
property was still unregistered land.[43] Such registration was
therefore considered effectual.
Furthermore, Revilla and Taguba, which are cited in Santiago,
are not on all fours with the present case. In Revilla, the first
buyer did not register the sale.[44] In Taguba, registration was
not an issue.[45]
As can be gathered from the foregoing, constructive notice to
the second buyer through registration under Act 3344 does
not apply if the property is registered under the Torrens
system, as in this case.

We quote below the additional commentary of Justice Vitug,

which was omitted in Santiago. This omission was evidently
the reason why petitioner misunderstood the context of the
citation therein:
"The registration contemplated under Art. 1544 has been held
to refer to registration under Act 496 Land Registration Act
(now PD 1529) which considers the act of registration as the
operative act that binds the land (see Mediante vs. Rosabal, 1
O.G. [12] 900, Garcia vs. Rosabal, 73 Phil 694). On lands
covered by the Torrens System, the purchaser acquires such
rights and interest as they appear in the certificate of title,
unaffected by any prior lien or encumbrance not noted
therein. The purchaser is not required to explore farther than
what the Torrens title, upon its face, indicates. The only
exception is where the purchaser has actual knowledge of a
flaw or defect in the title of the seller or of such liens or
encumbrances which, as to him, is equivalent to registration
(see Sec. 39, Act 496; Bernales vs. IAC, G.R. 75336, 18
October 1988; Hernandez vs. Sales, 69 Phil 744; Tajonera vs.
Court of Appeals, L-26677, 27 March 1981),"[46]
Respondent
in Good Faith
The Court of Appeals examined the facts to determine
whether respondent was an innocent purchaser for value.[47]
After its factual findings revealed that Respondent De Vera
was in good faith, it explained thus:
x x x. Gloria Villafania, [Respondent] De Veras vendor,
appears to be the registered owner. The subject land was,
and still is, registered in the name of Gloria Villafania. There
is nothing in her certificate of title and in the circumstances of
the transaction or sale which warrant [Respondent] De Vera in
supposing that she need[ed] to look beyond the title. She had
no notice of the earlier sale of the land to [petitioners]. She
ascertained and verified that her vendor was the sole owner
and in possession of the subject property by examining her
vendors title in the Registry of Deeds and actually going to
the premises. There is no evidence in the record showing that
when she bought the land on October 23, 1997, she knew or
had the slightest notice that the same was under litigation in
Civil Case No. D-10638 of the Regional Trial Court of Dagupan
City, Branch 40, between Gloria Villafania and [Petitioners]
Abrigo. She was not even a party to said case. In sum, she
testified clearly and positively, without any contrary evidence
presented by the [petitioners], that she did not know anything
about the earlier sale and claim of the spouses Abrigo, until
after she had bought the same, and only then when she
bought the same, and only then when she brought an
ejectment case with the x x x Municipal Court of Mangaldan,
known as Civil Case No. 1452. To the [Respondent] De Vera,
the only legal truth upon which she had to rely was that the
land is registered in the name of Gloria Villafania, her vendor,
and that her title under the law, is absolute and indefeasible.
x x x.[48]
We find no reason to disturb these findings, which petitioners
have not rebutted. Spouses Abrigo base their position only on
the general averment that respondent should have been more
vigilant prior to consummating the sale. They argue that had
she inspected the property, she would have found petitioners
to be in possession.[49]
This argument is contradicted, however, by the spouses own
admission that the parents and the sister of Villafania were
still the actual occupants in October 1997, when Respondent

De Vera purchased the property.[50] The family members may

reasonably be assumed to be Villafanias agents, who had not
been shown to have notified respondent of the first sale when
she conducted an ocular inspection. Thus, good faith on
respondents part stands.
WHEREFORE, the Petition is DENIED and the assailed Decision
AFFIRMED. Costs against petitioners.
SO ORDERED.

EN BANC
[G.R. No. L-18497. May 31, 1965.]
DAGUPAN TRADING COMPANY, Petitioner, v. RUSTICO MACAM,
Respondent.
Angel Sanchez for Petitioner.
Manuel L. Fernandez for Respondent.
SYLLABUS
1. SALES; CONFLICTING SALES; ONE SALE BEFORE
REGISTRATION OF LAND AND THE OTHER AN EXECUTION SALE
AFTER REGISTRATION OF LAND; LAW GOVERNING. Where
one of two conflicting sales of a piece of land was executed
before the land was registered, while the other was an
execution sale in favor of the judgment creditor of the owner
made after the same property had been registered, what
should determine the issue are the provisions of the last
paragraph of Section 35, Rule 39 of the Rules of Court to the
effect that, upon the execution and delivery of the final
certificate of sale in favor of the purchaser of land sold in an
execution sale, such purchaser "shall be substituted to and
acquire all the rights, title, interest and claim of the judgment
debtor to the property as of the time of the levy."
2. ID.; ID.; ID.; UNREGISTERED SALE CANNOT BE DEFEATED BY
SUBSEQUENT EXECUTION SALE AND REGISTRATION OF
LATTER. Where for a considerable time prior to the levy on
execution the interest of the owner of the land levied upon
had already been conveyed to another who took possession
thereof and introduced improvements therein, the aforesaid
levy is void. The prior sale, albeit unregistered, cannot be
deemed automatically cancelled upon the subsequent
issuance of the Torrens title over the land.
3. ID.; ID.; ID.; RIGHT OF OWNERSHIP ALREADY FIXED UNDER
CIVIL LAW AND/OR MORTGAGE LAW CANNOT BE
OVERTHROWN BY NEW LAW. As between a right of
ownership already fixed and established under the Civil Law
and/or the Spanish Mortgage Law, and a new law or system
which would make possible the overthrowing of such
ownership on admittedly artificial and technical grounds, the
former must be upheld.
DECISION
DIZON, J.:

Appeal taken by the Dagupan Trading Company from the

decision of the Court of Appeals affirming the one rendered by
the Court of First Instance of Pangasinan in Civil Case No.
13772, dismissing its complaint.
On September 4, 1958, appellant commenced the action
mentioned above against appellee Rustico Macam, praying
that it be declared owner of one-eighth portion of the land
described in paragraph 2 of the complaint; that a partition of
the whole property be made; that appellee be ordered to pay
it the amount of P500.00 a year as damages from 1958 until
said portion is delivered, plus attorneys fees and costs.
Answering the complaint, appellee alleged, in the main, that
Sammy Marons share in the property described in the
complaint, as well as that of all his co-heirs, had been
acquired by purchase by appellee since June 19 and
September 21, 1955, before the issuance of the original
certificate of title in their name; that at the time levy in
execution was made on Sammy Marons share therein, the
latter had no longer any right or interest in said property; that
appellant and its predecessor in interest were cognizant of the
facts already mentioned; that since the sales made in his
favor, he had enjoyed uninterrupted possession of the
property and introduced considerable improvements therein.
Appellee likewise sought to recover damages by way of
counterclaim.
After trial upon the issue thus joined, the court rendered
judgment dismissing the complaint, which, on appear, was
affirmed by the Court of Appeals.
The facts of the case are not disputed.
In the year 1955, Sammy Maron and his seven brothers and
sisters were pro-indiviso owners of a parcel of unregistered
land located in barrio Parayao, Municipality of Binmaley,
Pangasinan. While their application for registration of said
land under Act No. 496 was pending, they executed, on June
19 and September 21, 1955, two deeds of sale conveying the
property to appellee, who thereafter took possession thereof
and proceeded to introduce substantial improvements therein.
One month later, that is on October 14, 1955, Original
Certificate of Title No. 6942 covering the land was issued in
the name of the Marons, free from all liens and
encumbrances.
On August 4, 1956, by virtue of a final judgment rendered in
Civil Case No. 42215 of the Municipal Court of Manila against
Sammy Maron in favor of the Manila Trading and Supply
Company, levy was made upon whatever interest he had in
the aforementioned property, and thereafter said interest was
sold at public auction to the judgment creditor. The
corresponding notice of levy, certificate of sale and the
sheriffs certificate of final sale in favor of the Manila Trading
and Supply Co. because nobody exercised the right of
redemption were duly registered. On March 1, 1958, the
latter sold all its rights and title in the property to Appellant.
The question before Us now is: Who has the better right as
between appellant Dagupan Trading Company, on the one
hand, and appellee Rustico Macam, on the other, to the oneeighth share of Sammy Maron in the property mentioned
heretofore?
If the property covered by the conflicting sales were
unregistered land, Macam would undoubtedly have the better
right in view of the fact that his claim is based on a prior sale
coupled with public, exclusive and continuous possession

thereof as owner. On the other hand, were the land involved in

the conflicting transactions duly registered land, We would be
inclined to hold that appellant has the better right because, as
We have consistently held, in case of conveyance of
registered real estate, the registration of the deed of sale is
the operative act that gives validity to the transfer. This would
be fatal to appellees claim, the deeds of sale executed in his
favor by the Marons not having been registered, while the
levy in execution and the provisional certificate of sale as well
as the final deed of sale in favor of appellant were registered.
Consequently, this registered conveyance must prevail
although posterior to the one executed in favor of appellee,
and appellant must be deemed to have acquired such right,
title and interest as appeared on the certificate of title issued
in favor of Sammy Maron, subject to no lien, encumbrance or
burden not noted thereon. (Anderson & Co., v. Garcia 64 Phil.
506; Reynes Et. Al., v. Barrera, Et Al., 68 Phil. 656; Banco
National, etc. v. Camus, 70 Phil. 289)
The present case, however, does not fall within either
situation. Here the sale in favor of appellee was executed
before the land subject matter thereof was registered, while
the conflicting sale in favor of appellant was executed after
the same property had been registered. We can not,
therefore, decide the case in the light of whatever adjudicated
cases there are covering the two situations mentioned in the
preceding paragraph. It is our considered view that what
should determine the issue are the provisions of the last
paragraph of Section 35, Rule 39 of the Rules of Court, to the
effect that upon the execution and delivery of the final
certificate of sale in favor of the purchaser of land sold in an
execution sale, such purchaser "shall be substituted to and
acquire all the right, title, interest and claim of the judgment
debtor to the property as of the time of the levy." Now We ask:
What was the interest and claim of Sammy Maron on the oneeight portion of the property inherited by him and his co-heirs,
at the time of the levy? The answer must necessarily be that
he had none, because for a considerable time prior to the
levy, his interest had already been conveyed to appellee,
"fully and irretrievably" as the Court of Appeals held.
Consequently, subsequent levy made on the property for the
purpose of satisfying the judgment rendered against Sammy
Maron in favor of the Manila Trading Company was void and of
no effect. (Buson v. Licauco 13 Phil. 357-358; Landig v. U. S.
Commercial Company, 89 Phil. 638). Needless to say, the
unregistered sale and the consequent conveyance of title and
ownership in favor of appellee could not have been cancelled
and rendered of no effect upon the subsequent issuance of
the Torrens title over the entire parcel of land. We can not,
therefore, but agree with the following statement contained in
the appealed decision:jgc:chanrobles.com.ph
". . . Separate and apart from this, however, we believe that in
the inevitable conflict between a right of ownership already
fixed and established under the Civil Law and/or the Spanish
Mortgage Law which cannot be affected by any subsequent
levy or attachment or executions and a new law or system
which would make possible the overthrowing of such
ownership on admittedly artificial and technical grounds, the
former must be upheld and applied."cralaw virtua1aw library
But to the above considerations must be added the important
circumstance that, as already stated before, upon the
execution of the deed of sale in his favor by Sammy Maron,
appellee took possession of the land conveyed as owner
thereof, and introduced considerable improvements therein.

To deprive him now of the same by sheer force of technicality

would be against both justice and equity.
IN VIEW OF ALL THE FOREGOING, the decision appealed from
is affirmed, with costs.

EN BANC
[G.R. No. L-27587. February 18, 1970.]
AMADO CARUMBA, Petitioner, v. THE COURT OF APPEALS,
SANTIAGO BALBUENA and ANGELES BOAQUIA, as Deputy
Provincial Sheriff, Respondents.
Luis N. de Leon for Petitioner.
Reno R. Gonzales for Respondents.
SYLLABUS
1. CIVIL LAW; PURCHASE AND SALE; RULE ON DOUBLE SALE
OF UNREGISTERED LAND. While under Article 1544,
registration in good faith prevails over possession in the event
of a doubt sale by the vendor of the same piece of land to
different vendees, said article is of no application to the case
at bar. The reason is that the purchaser of unregistered land
at a sheriffs execution sale only steps into the shoes of the
judgment debtor. He merely acquires the latters interest in
the property sold as of the time the property was levied upon.
2. ID.; ID.; SALE OF UNREGISTERED LAND, RIGHT OF
PURCHASER WHO TAKES POSSESSION THEREOF. The deed
of sale in favor of Canuto was executed two years before the
levy was made by the Sheriff. While it is true that the said
deed of sale was only embodied in a private document, the
same, coupled with the fact that the buyer (petitioner
Carumba) had taken possession of the unregistered land sold,
sufficed to vest ownership on the said buyer. So that when
levy was made by the Sheriff, the judgment debtor no longer
had dominical interest nor any real right over the land that
could pass to the purchaser at the execution sale. Hence, the
latter must yield the land to petitioner Carumba.
DECISION
REYES, J.B.L., J.:
Amado Carumba petitions this Supreme Court for a certiorari
to review a decision of the Court of Appeals, rendered in its
Case No. 36094-R, that reversed the judgment in his favor
rendered by the Court of First Instance of Camarines Sur (Civil
Case 4646).

The factual background and history of these proceeding is

thus stated by the Court of Appeals (pages 12):jgc:chanrobles.com.ph
"On April 12, 1956, the spouses Amado Canuto and Nemesia
Ibasco, by virtue of a `Deed of Sale of Unregistered Land with
Covenants of "Warranty (Exh. A), sold a parcel of land, partly
residential and partly coconut land with a periphery (area) of
359.09 square meters, more or less, located in the barrio of
Santo Domingo, Iriga, Camarines Sur, to the spouses Amado
Carumba and Benita Canuto, for the sum of P350.00. The
referred deed of sale was never registered in the Office of the
Register of Deeds of Camarines Sur, and the Notary, Mr.
Vicente Malaya, was not then an authorized notary public in
the place, as shown by Exh. 5. Besides, it has been expressly
admitted by appellee that he is the brother-in-law of Amado
Canuto, the alleged vendor of the property sold to him.
Amado Canuto is the older brother of the wife of the herein
appellee, Amado Carumba.
On January 21, 1957, a complaint (Exh. B) for a sum of money
was filed by Santiago Balbuena against Amado Canuto and
Nemesia Ibasco before the Justice of the peace Court of Iriga,
Camarines Sur, known as Civil Case No. 139 and on April 15,
1967, a decision (Exh. C) was rendered in favor of the plaintiff
and against the defendants. On October 1, 1958, the ex-officio
Sheriff, Justo V. Imperial, of Camarines Sur, issued a "Definite
Deed of Sale (Exh. D) of the property now in question in favor
of Santiago Balbuena, which instrument of sale was registered
before the Office of the Register of Deeds of Camarines Sur,
on October 3, 1958. The aforesaid property was declared for
taxation purposes (Exh. 1) in the name of Santiago Balbuena
in 1958."cralaw virtua1aw library
The Court of First Instance, finding that after execution of the
document Carumba had taken possession of the land, planting
bananas, coffee and other vegetables thereon, declared him
to be the owner of the property under a consummated sale;
held void the execution levy made by the sheriff, pursuant to
a judgment against Carumbas vendor, Amado Canuto; and
nullified the sale in favor of the judgment creditor, Santiago
Balbuena. The Court, therefore, declared Carumba the owner
of the litigated property and ordered Balbuena to pay P30.00,
as damages, plus the costs.
The Court of Appeals, without altering the findings of fact
made by the court of origin, declared that there having been a
double sale of the land subject of the suit Balbuenas title was
superior to that of his adversary under Article 1644 of the Civil
Code of the Philippines, since the execution sale had been
properly registered in good faith and the sale to Carumba was
not recorded.
We disagree. While under the invoked Article 1544 registration
in good faith prevails over possession in the event of a doubt
sale by the vendor of the same piece of land to different
vendees, said article is of no application to the case at bar,
even if Balbuena, the later vendee, was ignorant of the prior
sale made by his judgment debtor in favor of petitioner
Carumba. The reason is that the purchaser of Unregistered
land at a sheriffs execution sale only steps into the shoes of
the judgment debtor, and merely acquires the latters interest
in the property sold as of the time the property was levied
upon. This is specifically provided by section 35 of Rule 39 of
the Revised Rules of Court, the second paragraph of said
section specifically providing that:jgc:chanrobles.com.ph

"Upon the execution and delivery of said (final) deed the

purchaser, redemptioner, or his assignee shall be substituted
to and acquire all the right, title, interest, and claim of the
judgment debtor to the property as of the time of the levy,
except as against the judgment debtor in possession, in which
case the substitution shall be effective as of the time of the
deed . . ." (Italics supplied)
While the time of the levy does not clearly appear, it could not
have been made prior to 15 April 1957, when the decision
against the former owners of the land was rendered in favor of
Balbuena. But the deed of sale in favor of Canuto had been
executed two years before, on 12 April 1955, and while only
embodied in a private document, the same, coupled with the
fact that the buyer (petitioner Carumba) had taken possession
of the unregistered land sold, sufficed to vest ownership on
the said buyer. When the levy was made by the Sheriff,
therefore, the judgment debtor no longer had dominical
interest nor any real right over the land that could pass to the
purchaser at the execution sale. 1 Hence, the latter must yield
the land to petitioner Carumba. The rule is different in case of
lands covered by Torrens titles, where the prior sale is neither
recorded nor known to the execution purchaser prior to the
levy; 2 but the land here in question is admittedly not
registered under Act No. 496.
WHEREFORE, the decision of the Court of Appeals is reversed
and that of the Court of First Instance affirmed. Costs against
respondent Santiago Balbuena.
THIRD DIVISION
[G.R. No. 148376. March 31, 2005]
LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs.
VILLANER ACABAL, EDUARDO ACABAL, SOLOMON ACABAL,
GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL, ARMIN
ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court is a Petition for Review on Certiorari of the
February 15, 2001 Decision[1] of the Court of Appeals
reversing that of the Regional Trial Court (RTC) of Dumaguete
City, Branch 35.[2]
In dispute is the exact nature of the document[3] which
respondent Villaner Acabal (Villaner) executed in favor of his
godson-nephew-petitioner Leonardo Acabal (Leonardo) on
April 19, 1990.
Villaners parents, Alejandro Acabal and Felicidad Balasabas,
owned a parcel of land situated in Barrio Tanglad, Manjuyod,
Negros Oriental, containing an area of 18.15 hectares more or
less, described in Tax Declaration No. 15856.[4] By a Deed of
Absolute Sale dated July 6, 1971,[5] his parents transferred for
P2,000.00 ownership of the said land to him, who was then
married to Justiniana Lipajan.[6]
Sometime after the foregoing transfer, it appears that Villaner
became a widower.
Subsequently, he executed on April 19, 1990 a deed[7]
conveying the same property[8] in favor of Leonardo.
Villaner was later to claim that while the April 19, 1990
document he executed now appears to be a Deed of Absolute
Sale purportedly witnessed by a Bais City trial court clerk
Carmelo Cadalin and his wife Lacorte, what he signed was a
document captioned Lease Contract[9] (modeled after a July
1976 lease agreement[10] he had previously executed with

previous lessee, Maria Luisa Montenegro[11]) wherein he

leased for 3 years the property to Leonardo at P1,000.00 per
hectare[12] and which was witnessed by two women
employees of one Judge Villegas of Bais City.
Villaner thus filed on October 11, 1993 a complaint[13] before
the Dumaguete RTC against Leonardo and Ramon Nicolas to
whom Leonardo in turn conveyed the property, for annulment
of the deeds of sale.

Q:
Now you said that on May 25, 1990, Leonardo Acabal
did not pay the amount that he promised to you, what did you
do of (sic) his refusal to pay that amount?
A:
I went to Mr. [Carmelo] Mellie Cadalin because he was
the one who prepared the papers and to ask Leonardo Acabal
why he will not comply with our agreement.
Q:

By the way, who is this Mellie Cadalin?

At the witness stand, Villaner declared:

A:
Mellie Cadalin is also working in the sala of Judge
Villegas.

Q:
It appears, Mr. Acabal, that you have signed a document
of sale with the defendant Leonardo Acabal on April 19, 1990,
please tell the court whether you have really agreed to sell
this property to the defendant on or before April 19, 1990?

Q:
Who requested Mellie Cadalin to prepare this
document?

A:
We had some agreement but not about the selling of
this property.
Q:
What was your agreement with the defendant Leonardo
Acabal?
A:

Our agreement [was] that he will just rent.[14]

A:

Maybe it was Leonardo Acabal.

Q:
By the way, when for the first time did you talk to
Leonardo Acabal regarding your agreement to lease this
property to him?
A:

March 14, 1990, in San Carlos.

Q:
And what document did you give to him in order that
that document will be prepared?

Q:
Now, please tell the court how were you able to sign this
document on April 19, 1990?

A:
I have given (sic) some papers and contract of lease
that I have signed to (sic) Mrs. Montenegro.[17] (Emphasis
and underscoring supplied)

A:
I do not know why I signed that, that is why I am
puzzled.

Q:

Why, did you not read the contents of this document?

A:
I have not read that. I only happened to read the title of
the Lease Contract.
Q:
And do you recall who were the witnesses of the
document which you signed in favor of Leonardo Acabal?

Q:
Now, Carmelo Cadalin [Mellie] also testified before
this court that in fact he identified the document marked as
Exhibit C for the plaintiff that what you executed on April
19, 1990 was a deed of sale and not a contract of lease, what
can you say to that statement?
A:

That is a lie.
And whats the truth then?

A:

Employees of Judge Villegas of Bais City.

Q:

Q:

Did you see them sign that document?

A:

Yes, sir.

A:
What really (sic) I have signed was the document of
lease contract.

Q:
These signatures appearing in this document marked as
Exhibit C for the plaintiff and Exhibit 1 for the defendant,
please examine over (sic) these signatures if these were the
signatures of these witnesses who signed this document?
A:

These are not the signatures of the two women.

Q:
And after signing this document on April 19, 1990, did
you appear before a notary public to have this notarized?
A:

No, I went home to San Carlos.[15]

Q:
According to this document, you sell (sic) this property
at P10,000.00, did you sell this property to Leonardo Acabal?
A:

No, sir.

Q:
How about after April 19, 1990, did you receive this
amount from Leonardo Acabal?
A:

No, sir.[16]

Q:
Now, can you explain to the Honorable Court why it so
happened that on April 19, you were able to sign a deed of
sale?
A:
What I can see now is that perhaps those copies of the
deed of sale were placed by Mr. Cadalin under the documents
which I signed the lease contract. But why is it that it has
already a deed of sale when what I have signed was only the
lease of contract or the contract of lease.
Q:
Now, Mr. Cadalin also stated before this court that he
handed over to you this Deed of Sale marked as Exhibit C
and according to him you read this document, what can you
say to this statement?
A:
Yes, there was a document that he gave me to read it
(sic)but it was a contract of lease.
Q:
How sure are you that what you signed on April 19,
1990 was really a contract of lease and not a contract of sale?
A:
Because when I signed the contract of lease the
witnesses that witnessed my signing the document were the
employees of Judge Villegas and then I am now surprised why
in the deed of sale which I purportedly signed are witnessed

by Carmelo Cadalin and his wife Lacorte.[18] (Emphasis and

underscoring supplied)

A:
Yes, number one is my signature and number 2 is the
signature of my wife as witness.[24]

On the other hand, Leonardo asserts that what Villaner

executed was a Deed of Absolute Sale for a consideration of
P10,000.00 which he had already paid,[19] and as he had
become the absolute owner of the property, he validly
transferred it to Ramon Nicolas on May 19, 1990.[20]

Carmelo Cadalin who admittedly prepared the deed of

absolute sale and who appears as a witness, along with his
wife, to the execution of the document corroborated
Leonardos claim:
Q:

Mr. Cadalin, do you know the plaintiff Villaner Acabal?

A:

Yes, I know.[21]

Q:
And I would like to ask you Mr. witness why do you know
Villaner Acabal?
A:
At the time that he went to our house together with
Leonardo Acabal he requested me to prepare a deed of sale
as regards to a sale of the property.[22]
x

Q:
And after they requested you to prepare a document of
sale, what did you do?
A:
At first I refused to [do] it because I have so many works
to do, but then they insisted so I prepared the deed.
Q:

After you prepared the document, what did you do?

A:
After I prepared it I gave it to him so that he could read
the same.
Q:

When you say him, whom do you refer to?

A:

Villaner Acabal.

Q:
And did Villaner Acabal read the document you
prepared?
A:

Yes, he read it.

Q:

And after reading it what did Villaner Acabal do?

A:

He signed the document.

Q:
Showing to you a document which is marked Exhibit C
for the plaintiff and Exhibit 1 for the defendants, please tell
the Honorable Court what relation this document has to the
document which you described earlier?
COURT INTERPRETER:
Witness is confronted with the said document earlier marked
as Exhibit C for the prosecution and Exhibit 1 for the defense.
A:

Yes, this is the one.[23]

Q:
Also stated in the document is the phrase Signed in the
presence of and there is a number and then two signatures,
could you please examine the document and say whether
these signatures are familiar to you?

Q:
After Villaner Acabal signed the document, what did
Villaner Acabal do?
A:

He was given the payment by Leonardo Acabal.[25]

Q:
Aside from the document, deed of absolute sale, that
you mentioned earlier that you prepared for Villaner Acabal
and Leonardo Acabal, what other documents, if any, did you
prepare for them?
A:
Affidavit of non-tenancy and aggregate area.[26]
(Emphasis and underscoring supplied)
The complaint was later amended[27] to implead Villaners
eight children as party plaintiffs, they being heirs of his
deceased wife.
By Decision of August 8, 1996, the trial court found for the
therein defendants-herein petitioners Leonardo and Ramon
Nicolas and accordingly dismissed the complaint.
Villaner et al. thereupon brought the case on appeal to the
Court of Appeals which reversed the trial court, it holding that
the Deed of Absolute Sale executed by Villaner in favor of
Leonardo was simulated and fictitious.[28]
Hence, Leonardo and Ramon Nicolas present petition for
review on certiorari,[29] anchored on the following
assignments of error:
I.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
WHEN IT RULED THAT RESPONDENT VILLANER ACABAL WAS
DECEIVED INTO SIGNING THE DEED OF ABSOLUTE SALE WHEN
THE LATTER KNOWINGLY, FREELY AND VOLUNTARILY
EXECUTED THE SAME IN FAVOR OF PETITIONER LEONARDO
ACABAL.
II.
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE
CONSIDERATION OF THE DEED OF ABSOLUTE SALE IN THE
AMOUNT OF TEN THOUSAND PESOS (P10,0000.00) WAS
UNUSUALLY LOW AND INADEQUATE, ESPECIALLY TAKING
INTO ACCOUNT THE LOCATION OF THE SUBJECT PROPERTY.
III.
THE COURT OF APPEALS ERRED WHEN IT FAILED TO
CONSIDER WHY RESPONDENT VILLANER ACABAL ONLY
QUESTIONED THE POSSESSION AND OWNERSHIP OF
PETITIONER RAMON NICOLAS IN COURT AFTER THE LATTER
WAS IN OPEN, CONTINUOUS AND PEACEFUL POSSESSION OF
THE SUBJECT PROPERTY FOR ALMOST THREE (3) YEARS.
IV.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
LAW WHEN IT FAILED TO DECLARE PETITIONER RAMON
NICOLAS AS A BUYER IN GOOD FAITH AS THE LATTER TOOK
THE NECESSARY STEPS AN ORDINARY AND PRUDENT MAN

WOULD HAVE TAKEN BEFORE BUYING THE QUESTIONED

PROPERTY.
V.
THE COURT OF APPEALS ERRED IN RULING IN FAVOR OF
RESPONDENT VILLANER ACABAL WHEN THE LATTER DID NOT
PRESENT A SINGLE WITNESS TO TESTIFY ON THE ALLEGED
CONTRACT OF LEASE WHICH HE ALLEGEDLY SIGNED AND
WITNESSED BY THE EMPLOYEES OF JUDGE VILLEGAS.
VI.
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
LAW WHEN IT RULED THAT RULE 8, SECTION 8 OF THE 1987
(sic) RULE (sic) OF CIVIL PROCEDURE IS NOT APPLICABLE IN
THE CASE AT BAR, CONTRARY TO THE RULING OF THE LOWER
COURT.
VII.
THE COURT OF APPEALS ERRED WHEN IT ORDERED
PETITIONERS TO PAY RESPONDENTS JOINTLY AND SEVERALLY
BY WAY OF RENTAL THE SUM OF P10,000.00 PER YEAR FROM
1990 UP TO THE TIME THEY VACATE THE PREMISES.[30]
Procedurally, petitioners contend that the Court of Appeals
erred when it failed to apply Section 8, Rule 8 of the Rules of
Court, respondent Villaner having failed to deny under oath
the genuineness and due execution of the April 19, 1990 Deed
of Absolute Sale.
Petitioners contention does not persuade. The failure to deny
the genuineness and due execution of an actionable
document does not preclude a party from arguing against it
by evidence of fraud, mistake, compromise, payment, statute
of limitations, estoppel, and want of consideration.[31]
On the merits, this Court rules in petitioners favor.
It is a basic rule in evidence that the burden of proof lies on
the party who makes the allegations[32] ei incumbit
probatio, qui dicit, non qui negat; cum per rerum naturam
factum negantis probatio nulla sit.[33] If he claims a right
granted by law, he must prove it by competent evidence,
relying on the strength of his own evidence and not upon the
weakness of that of his opponent.
More specifically, allegations of a defect in or lack of valid
consent to a contract by reason of fraud or undue influence
are never presumed but must be established not by mere
preponderance of evidence but by clear and convincing
evidence.[34] For the circumstances evidencing fraud and
misrepresentation are as varied as the people who perpetrate
it in each case, assuming different shapes and forms and may
be committed in as many different ways.[35]
In the case at bar, it was incumbent on the plaintiff-herein
respondent Villaner to prove that he was deceived into
executing the Deed of Absolute Sale. Except for his bare
allegation that the transaction was one of lease, he failed to
adduce evidence in support thereof. His conjecture that
perhaps those copies of the deed of sale were placed by Mr.
Cadalin under the documents which I signed the contract of
lease,[36] must fail, for facts not conjectures decide cases.
Attempting to seek corroboration of his account, Villaner
presented Atty. Vicente Real who notarized the document.
While on direct examination, Atty. Real virtually corroborated

Villaners claim that he did not bring the document to him for
notarization,[37] on cross-examination, Atty. Real conceded
that it was impossible to remember every person who would
ask him to notarize documents:
Q:
And in the course of your notarization, can you
remember each and every face that come (sic) to you for
notarization?
A:

No, it is impossible.

Q:
In the case of Villaner Acabal which you have his
document notarized (sic) in 1990, can you remember his face
when he came to you?
A:

No.

Q:
And can you also say, if a person who came to you
having a document to be notarized and if he will appear again
after a month, can you remember whether he was the one
who came to you?
A:
Not so much because everyday there are many people
who appear with documents to be notarized,
Q:
So, it is safe to say that if Villaner Acabal came to you
on April 25 or rather April 16, 1990 andhave (sic) his
document notarized if he comes back in, say May 25, can you
still remember if he was the one who came to you?
A:
I cannot be sure but at least, there are times I can
remember persons because he seems to be close to me
already.
Q:

Is this Villaner close to you?

A:
Because he has been frequenting the house/asking for a
copy of the document.
Q:
So, he became close to you after you notarized the
document?
A:

Yes.[38] (Emphasis and underscoring supplied)

On Villaners claim that two women employees of Judge

Villegas signed as witnesses to the deed[39] but that the
signatures appearing thereon are not those of said witnesses,
[40] the same must be discredited in light of his unexplained
failure to present such alleged women employee-witnesses.
In another vein, Villaner zeroes in on the purchase price of the
property P10,000.00 which to him was unusually low if
the transaction were one of sale. To substantiate his claim,
Villaner presented Tax Declarations covering the property for
the years 1971,[41] 1974,[42] 1977,[43] 1980,[44] 1983,[45]
1985,[46] as well as a Declaration of Real Property executed
in 1994.[47]
It bears noting, however, that Villaner failed to present
evidence on the fair market value of the property as of April
19, 1990, the date of execution of the disputed deed. Absent
any evidence of the fair market value of a land as of the time
of its sale, it cannot be concluded that the price at which it
was sold was inadequate.[48] Inadequacy of price must be
proven because mere speculation or conjecture has no place
in our judicial system.[49]
Victor Ragay, who was appointed by the trial court to conduct
an ocular inspection[50] of the property and to investigate
matters relative to the case,[51] gave an instructive report

dated December 3, 1994,[52] the pertinent portions of which

are hereby reproduced verbatim:
a) Only three (3) to four (4) hectares of the eighteen (18) were
planted to sugar cane, the rest was never cultivated;
b) the soil is reddish and somewhat sandy in composition;
c) the soil contains so much limestones (rocks consisting
mainly of calcium carbonate);
d) no part of the land in question is plain or flat, contrary to
claim of the plaintiff that almost 10 hectares of the land in
question is plain or flat;
e) some areas, eastward of and adjacent of the land in
question (mistakenly to be owned by the defendant Nicolas)
were planted to sugar cane by the owners Kadusales;
f) the road going to the land in question (as claimed to be the
road) is no longer passable because it has been abandoned
and not maintained by anyone, thus it makes everything
impossible for anybody to get and haul the sugar cane from
the area;
g) the Commissioner has discovered some stockpiles of
abandoned harvested sugar canes left to rot, along the side of
the road, undelivered to the milling site because of the
difficulty in bringing up trucks to the scene of the harvest;
h) the sugarcanes presently planted on the land in question at
the time of the ocular inspection were three (3) feet in height
and their structural built was thin or lean;
i) Most of the part of the 18 hectares is not planted or
cultivated because the same is too rocky and not suitable for
planting to sugarcane.[53]
Additionally, Ragay reported that one Anatolio Cabusog
recently purchased a 6-hectare property adjoining that of the
subject property for only P1,600.00[54] or P266.67 per
hectare. Given that, had the 18-hectare subject property
been sold at about the same time, it would have fetched the
amount of P4,800.00,[55] hence, the P10,000.00 purchase
price appearing in the questioned April 19, 1990 document is
more than reasonable.
Even, however, on the assumption that the price of
P10,000.00 was below the fair market value of the property in
1990, mere inadequacy of the price per se will not rule out the
transaction as one of sale. For the price must be grossly
inadequate or shocking to the conscience such that the mind
revolts at it and such that a reasonable man would neither
directly nor indirectly be likely to consent to it.[56]
Still in another vein, Villaner submits that Leonardos transfer
of the property to Nicolas in a span of one month for a profit
of P30,000.00 conclusively reflects Leonardos fraudulent
intent. This submission is a non sequitur.
As for Villaners argument that the sale of the property to
Leonardo and the subsequent sale thereof to Nicolas are void
for being violative of the retention limits imposed by Republic
Act No. 6657, otherwise known as the Comprehensive
Agrarian Reform Law, the same fails. The pertinent
provisions of said law read:
SECTION 6. Retention Limits. Except as otherwise provided
in this Act, no person may retain, directly or indirectly, any
public or agricultural land, the size of which may vary

according to factors governing a viable family-sized farm,

such as commodity produced, terrain, infrastructure, and soil
fertility as determined by the Presidential Agrarian Reform
Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three
(3) hectares may be awarded to each child of the landowner,
subject to the following qualifications: (1) that he is at least
fifteen (15) years of age; and (2) that he is tilling the land or
directly managing the farm: Provided, That landowners whose
lands have been covered by Presidential Decree No. 27 shall
be allowed to keep the areas originally retained by them
thereunder:[57] Provided further, That original homestead
grantees or direct compulsory heirs who still own the original
homestead at the time of the approval of this Act shall retain
the same areas as long as they continue to cultivate said
homestead.
x

Upon the effectivity of this Act, any sale, disposition, lease,

management, contract or transfer of possession of private
lands executed by the original landowner in violation of this
Act shall be null and void: Provided, however, that those
executed prior to this Act shall be valid only when registered
with the Register of Deeds within a period of three (3) months
after the effectivity of this Act. Thereafter, all Registers of
Deeds shall inform the DAR within thirty (30) days of any
transaction involving agricultural lands in excess of five (5)
hectares.
x

SECTION 70. Disposition of Private Agricultural Lands. The

sale or disposition of agricultural lands retained by a land
owner as a consequence of Section 6 hereof shall be valid as
long as the total landholdings that shall be owned by the
transferee thereof inclusive of the land to be acquired shall
not exceed the landholding ceilings provided for in this Act.
Any sale or disposition of agricultural lands after the
effectivity of this Act found to be contrary to the provisions
hereof shall be null and void.
Transferees of agricultural lands shall furnish the appropriate
Register of Deeds and the BARC an affidavit attesting that his
total landholdings as a result of the said acquisition do not
exceed the landholding ceiling. The Register of Deeds shall
not register the transfer of any agricultural land without the
submission of his sworn statement together with proof of
service of a copy thereof to the BARC. (Emphasis and
underscoring supplied)
As the above-quoted provisions of the Comprehensive
Agrarian Reform Law show, only those private lands devoted
to or suitable for agriculture are covered by it.[58] As priorly
related, Victor Ragay, who was appointed by the trial court to
conduct an ocular inspection of the property, observed in his
report that only three (3) to four (4) hectares were planted
with sugarcane while the rest of the property was not suitable
for planting as the soil was full of limestone.[59] He also
remarked that the sugarcanes were only 3 feet in height and
very lean,[60] whereas sugarcanes usually grow to a height of
3 to 6 meters (about 8 to 20 feet) and have stems 2 to 5
centimeters (1-2 inches) thick.[61]
It is thus gathered that the property was not suitable for
agricultural purposes. In any event, since the area devoted to
the planting of sugarcane, hence, suitable for agricultural
purposes, comprises only 4 hectares at the most, it is less

than the maximum retention limit prescribed by law. There

was then no violation of the Comprehensive Agrarian Reform
Law.
Even assuming that the disposition of the property by Villaner
was contrary to law, he would still have no remedy under the
law as he and Leonardo were in pari delicto, hence, he is not
entitled to afirmative relief one who seeks equity and justice
must come to court with clean hands. In pari delicto potior
est conditio defendentis.[62]
The proposition is universal that no action arises, in equity or
at law, from an illegal contract; no suit can be maintained for
its specific performance, or to recover the property agreed to
be sold or delivered, or the money agreed to be paid, or
damages for its violation. The rule has sometimes been laid
down as though it were equally universal, that where the
parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other.[63] (Emphasis and
underscoring supplied)
The principle of pari delicto is grounded on two premises: first,
that courts should not lend their good offices to mediating
disputes among wrongdoers;[64] and second, that denying
judicial relief to an admitted wrongdoer is an effective means
of deterring illegality.[65] This doctrine of ancient vintage is
not a principle of justice but one of policy as articulated in
1775 by Lord Mansfield in Holman v. Johnson:[66]
The objection, that a contract is immoral or illegal as between
the plaintiff and defendant, sounds at all times very ill in the
mouth of the defendant. It is not for his sake, however, that
the objection is ever allowed; but it is founded in general
principles of policy, which the defendant has the advantage
of, contrary to the real justice, as between him and the
plaintiff, by accident, if I may so say. The principle of public
policy is this; ex dolo malo non oritur actio.[67] No court will
lend its aid to a man who founds his cause of action upon an
immoral or an illegal act. If, from the plaintiffs own stating or
otherwise, the cause of action appears to arise ex turpi causa,
[68] or the transgression of a positive law of this country,
there the court says he has no right to be assisted. It is upon
that ground the court goes; not for the sake of the defendant,
but because they will not lend their aid to such a plaintiff. So
if the plaintiff and the defendant were to change sides, and
the defendant was to bring his action against the plaintiff, the
latter would then have the advantage of it; for where both are
equally in fault potior est conditio defendentis.[69]
Thus, to serve as both a sanction and as a deterrent, the law
will not aid either party to an illegal agreement and will leave
them where it finds them.
The principle of pari delicto, however, is not absolute,
admitting an exception under Article 1416 of the Civil Code.
ART. 1416. When the agreement is not illegal per se but is
merely prohibited, and the prohibition by the law is designed
for the protection of the plaintiff, he may, if public policy is
thereby enhanced, recover what he has paid or delivered.
Under this article, recovery for what has been paid or
delivered pursuant to an inexistent contract is allowed only
when the following requisites are met: (1) the contract is not
illegal per se but merely prohibited; (2) the prohibition is for
the protection of the plaintiffs; and (3) if public policy is
enhanced thereby.[70] The exception is unavailing in the
instant case, however, since the prohibition is clearly not for

the protection of the plaintiff-landowner but for the

beneficiary farmers.[71]
In fine, Villaner is estopped from assailing and annulling his
own deliberate acts.[72]
More. Villaner cannot feign ignorance of the law, nor claim
that he acted in good faith, let alone assert that he is less
guilty than Leonardo. Under Article 3 of the Civil Code,
ignorance of the law excuses no one from compliance
therewith.
And now, Villaners co-heirs claim that as co-owners of the
property, the Deed of Absolute Sale executed by Villaner in
favor of Leonardo does not bind them as they did not consent
to such an undertaking. There is no question that the
property is conjugal. Article 160 of the Civil Code[73]
provides:
ART. 160. All property of the marriage is presumed to belong
to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife.[74]
The presumption, this Court has held, applies to all properties
acquired during marriage. For the presumption to be invoked,
therefore, the property must be shown to have been acquired
during the marriage.[75]
In the case at bar, the property was acquired on July 6, 1971
during Villaners marriage with Justiniana Lipajan. It cannot be
seriously contended that simply because the tax declarations
covering the property was solely in the name of Villaner it is
his personal and exclusive property.
In Bucoy v. Paulino[76] and Mendoza v. Reyes[77] which both
apply by analogy, this Court held that registration alone of the
properties in the name of the husband does not destroy the
conjugal nature of the properties.[78] What is material is the
time when the land was acquired by Villaner, and that was
during the lawful existence of his marriage to Justiniana.
Since the property was acquired during the existence of the
marriage of Villaner and Justiniana, the presumption under
Article 160 of the Civil Code is that it is the couples conjugal
property. The burden is on petitioners then to prove that it is
not. This they failed to do.
The property being conjugal, upon the death of Justiniana
Lipajan, the conjugal partnership was terminated.[79] With
the dissolution of the conjugal partnership, Villaners interest
in the conjugal partnership became actual and vested with
respect to an undivided one-half portion.[80] Justiniana's
rights to the other half, in turn, vested upon her death to her
heirs[81] including Villaner who is entitled to the same share
as that of each of their eight legitimate children.[82] As a
result then of the death of Justiniana, a regime of coownership arose between Villaner and his co-heirs in relation
to the property.[83]
With respect to Justinianas one-half share in the conjugal
partnership which her heirs inherited, applying the provisions
on the law of succession, her eight children and Villaner each
receives one-ninth (1/9) thereof. Having inherited one-ninth
(1/9) of his wifes share in the conjugal partnership or one
eighteenth (1/18)[84] of the entire conjugal partnership and is
himself already the owner of one half (1/2) or nineeighteenths (9/18), Villaners total interest amounts to teneighteenths (10/18) or five-ninths (5/9).

While Villaner owns five-ninths (5/9) of the disputed property,

he could not claim title to any definite portion of the
community property until its actual partition by agreement or
judicial decree. Prior to partition, all that he has is an ideal or
abstract quota or proportionate share in the property.[85]
Villaner, however, as a co-owner of the property has the right
to sell his undivided share thereof. The Civil Code provides so:
ART. 493. Each co-owner shall have the full ownership of his
part and of the fruits and benefits pertaining thereto, and he
may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation
or the mortgage, with respect to the co-owners, shall be
limited to the portion which may be allotted to him in the
division upon the termination of the co-ownership.
Thus, every co-owner has absolute ownership of his undivided
interest in the co-owned property and is free to alienate,
assign or mortgage his interest except as to purely personal
rights. While a co-owner has the right to freely sell and
dispose of his undivided interest, nevertheless, as a co-owner,
he cannot alienate the shares of his other co-owners nemo
dat qui non habet.[86]
Villaner, however, sold the entire property without obtaining
the consent of the other co-owners. Following the wellestablished principle that the binding force of a contract must
be recognized as far as it is legally possible to do so quando
res non valet ut ago, valeat quantum valere potest[87] the
disposition affects only Villaners share pro indiviso, and the
transferee gets only what corresponds to his grantors share
in the partition of the property owned in common.[88]
As early as 1923, this Court has ruled that even if a co-owner
sells the whole property as his, the sale will affect only his
own share but not those of the other co-owners who did not
consent to the sale. This is because under the
aforementioned codal provision, the sale or other disposition
affects only his undivided share and the transferee gets only
what would correspond to this grantor in the partition of the
thing owned in common. Consequently, by virtue of the sales
made by Rosalia and Gaudencio Bailon which are valid with
respect to their proportionate shares, and the subsequent
transfers which culminated in the sale to private respondent
Celestino Afable, the said Afable thereby became a co-owner
of the disputed parcel of land as correctly held by the lower
court since the sales produced the effect of substituting the
buyers in the enjoyment thereof.
From the foregoing, it may be deduced that since a co-owner
is entitled to sell his undivided share, a sale of the entire
property by one co-owner without the consent of the other coowners is not null and void. However, only the rights of the
co-owner-seller are transferred., thereby making the buyer a
co-owner of the property.
The proper action in cases like this is not for the nullification
of the sale or the recovery of possession of the thing owned in
common from the third person who substituted the co-owner
or co-owners who alienated their shares, but the DIVISION of

the common property as if it continued to remain in the

possession of the co-owners who possessed and administered
it.[89]
Thus, it is now settled that the appropriate recourse of coowners in cases where their consent were not secured in a
sale of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for
PARTITION under Rule 69 of the Revised Rules of Court.
Neither recovery of possession nor restitution can be granted
since the defendant buyers are legitimate proprietors and
possessors in joint ownership of the common property
claimed.[90] (Italics in the original; citations omitted;
underscoring supplied)
This Court is not unmindful of its ruling in Cruz v. Leis[91]
where it held:
It is conceded that, as a rule, a co-owner such as Gertrudes
could only dispose of her share in the property owned in
common. Article 493 of the Civil Code provides:
x

Unfortunately for private respondents, however, the property

was registered in TCT No. 43100 solely in the name of
Gertrudes Isidro, widow. Where a parcel of land, forming
part of the undistributed properties of the dissolved conjugal
partnership of gains, is sold by a widow to a purchaser who
merely relied on the face of the certificate of title thereto,
issued solely in the name of the widow, the purchaser
acquires a valid title to the land even as against the heirs of
the deceased spouse. The rationale for this rule is that a
person dealing with registered land is not required to go
behind the register to determine the condition of the property.
He is only charged with notice of the burdens on the property
which are noted on the face of the register or the certificate of
title. To require him to do more is to defeat one of the primary
objects of the Torrens system.[92] (Citation omitted)
Cruz, however, is not applicable for the simple reason that in
the case at bar the property in dispute is unregistered. The
issue of good faith or bad faith of a buyer is relevant only
where the subject of the sale is a registered land but not
where the property is an unregistered land.[93] One who
purchases an unregistered land does so at his peril.[94]
Nicolas claim of having bought the land in good faith is thus
irrelevant.[95]
WHEREFORE, the petition is GRANTED. The Court of Appeals
February 15, 2001 Decision in CA-G.R. CV No. 56148 is
REVERSED and SET ASIDE and another is rendered declaring
the sale in favor of petitioner Leonardo Acabal and the
subsequent sale in favor of petitioner Ramon Nicolas valid but
only insofar as five-ninths (5/9) of the subject property is
concerned.
No pronouncement as to costs.
SO ORDERED.