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Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-11658

February 15, 1918

LEUNG YEE, plaintiff-appellant,


vs.
FRANK L. STRONG MACHINERY COMPANY and J. G.
WILLIAMSON, defendants-appellees.
Booram and Mahoney for appellant.
Williams, Ferrier and SyCip for appellees.
CARSON, J.:
The "Compaia Agricola Filipina" bought a considerable quantity of ricecleaning machinery company from the defendant machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in
which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the sheriff,
in pursuance of the terms of the mortgage instrument, and was bought in
by the machinery company. The mortgage was registered in the chattel
mortgage registry, and the sale of the property to the machinery company
in satisfaction of the mortgage was annotated in the same registry on
December 29, 1913.
A few weeks thereafter, on or about the 14th of January, 1914, the
"Compaia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of sale,
although executed in a public document, was not registered. This deed
makes no reference to the building erected on the land and would appear
to have been executed for the purpose of curing any defects which might
be found to exist in the machinery company's title to the building under the
sheriff's certificate of sale. The machinery company went into possession of
the building at or about the time when this sale took place, that is to say,

the month of December, 1913, and it has continued in possession ever


since.
At or about the time when the chattel mortgage was executed in favor of
the machinery company, the mortgagor, the "Compaia Agricola Filipina"
executed another mortgage to the plaintiff upon the building, separate and
apart from the land on which it stood, to secure payment of the balance of
its indebtedness to the plaintiff under a contract for the construction of the
building. Upon the failure of the mortgagor to pay the amount of the
indebtedness secured by the mortgage, the plaintiff secured judgment for
that amount, levied execution upon the building, bought it in at the sheriff's
sale on or about the 18th of December, 1914, and had the sheriff's
certificate of the sale duly registered in the land registry of the Province of
Cavite.
At the time when the execution was levied upon the building, the defendant
machinery company, which was in possession, filed with the sheriff a sworn
statement setting up its claim of title and demanding the release of the
property from the levy. Thereafter, upon demand of the sheriff, the plaintiff
executed an indemnity bond in favor of the sheriff in the sum of P12,000, in
reliance upon which the sheriff sold the property at public auction to the
plaintiff, who was the highest bidder at the sheriff's sale.
This action was instituted by the plaintiff to recover possession of the
building from the machinery company.
The trial judge, relying upon the terms of article 1473 of the Civil Code,
gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of registry of
the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:
If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first
taken possession thereof in good faith, if it should be personal
property.
Should it be real property, it shall belong to the person acquiring it
who first recorded it in the registry.

Should there be no entry, the property shall belong to the person who
first took possession of it in good faith, and, in the absence thereof, to
the person who presents the oldest title, provided there is good faith.
The registry her referred to is of course the registry of real property, and it
must be apparent that the annotation or inscription of a deed of sale of real
property in a chattel mortgage registry cannot be given the legal effect of
an inscription in the registry of real property. By its express terms, the
Chattel Mortgage Law contemplates and makes provision for mortgages of
personal property; and the sole purpose and object of the chattel mortgage
registry is to provide for the registry of "Chattel mortgages," that is to say,
mortgages of personal property executed in the manner and form
prescribed in the statute. The building of strong materials in which the ricecleaning machinery was installed by the "Compaia Agricola Filipina" was
real property, and the mere fact that the parties seem to have dealt with it
separate and apart from the land on which it stood in no wise changed its
character as real property. It follows that neither the original registry in the
chattel mortgage of the building and the machinery installed therein, not the
annotation in that registry of the sale of the mortgaged property, had any
effect whatever so far as the building was concerned.
We conclude that the ruling in favor of the machinery company cannot be
sustained on the ground assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the ground that the
agreed statement of facts in the court below discloses that neither the
purchase of the building by the plaintiff nor his inscription of the sheriff's
certificate of sale in his favor was made in good faith, and that the
machinery company must be held to be the owner of the property under the
third paragraph of the above cited article of the code, it appearing that the
company first took possession of the property; and further, that the building
and the land were sold to the machinery company long prior to the date of
the sheriff's sale to the plaintiff.
It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
"title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base the

preferential right secured under this article of the code upon an inscription
of title in bad faith. Such an interpretation placed upon the language of this
section would open wide the door to fraud and collusion. The public records
cannot be converted into instruments of fraud and oppression by one who
secures an inscription therein in bad faith. The force and effect given by law
to an inscription in a public record presupposes the good faith of him who
enters such inscription; and rights created by statute, which are predicated
upon an inscription in a public registry, do not and cannot accrue under an
inscription "in bad faith," to the benefit of the person who thus makes the
inscription.
Construing the second paragraph of this article of the code, the supreme
court of Spain held in its sentencia of the 13th of May, 1908, that:
This rule is always to be understood on the basis of the good faith
mentioned in the first paragraph; therefore, it having been found that
the second purchasers who record their purchase had knowledge of
the previous sale, the question is to be decided in accordance with
the following paragraph. (Note 2, art. 1473, Civ. Code, Medina and
Maranon [1911] edition.)
Although article 1473, in its second paragraph, provides that the title
of conveyance of ownership of the real property that is first recorded
in the registry shall have preference, this provision must always be
understood on the basis of the good faith mentioned in the first
paragraph; the legislator could not have wished to strike it out and to
sanction bad faith, just to comply with a mere formality which, in given
cases, does not obtain even in real disputes between third persons.
(Note 2, art. 1473, Civ. Code, issued by the publishers of the La
Revista de los Tribunales, 13th edition.)
The agreed statement of facts clearly discloses that the plaintiff, when he
bought the building at the sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery company had bought the
building from plaintiff's judgment debtor; that it had gone into possession
long prior to the sheriff's sale; and that it was in possession at the time
when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed its
sworn claim of ownership, leaves no room for doubt in this regard. Having
bought in the building at the sheriff's sale with full knowledge that at the

time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to
have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.
Perhaps we should make it clear that in holding that the inscription of the
sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compaia Agricola
Filipina." The truth is that both the plaintiff and the defendant company
appear to have had just and righteous claims against their common debtor.
No criticism can properly be made of the exercise of the utmost diligence
by the plaintiff in asserting and exercising his right to recover the amount of
his claim from the estate of the common debtor. We are strongly inclined to
believe that in procuring the levy of execution upon the factory building and
in buying it at the sheriff's sale, he considered that he was doing no more
than he had a right to do under all the circumstances, and it is highly
possible and even probable that he thought at that time that he would be
able to maintain his position in a contest with the machinery company.
There was no collusion on his part with the common debtor, and no thought
of the perpetration of a fraud upon the rights of another, in the ordinary
sense of the word. He may have hoped, and doubtless he did hope, that
the title of the machinery company would not stand the test of an action in a
court of law; and if later developments had confirmed his unfounded hopes,
no one could question the legality of the propriety of the course he adopted.
But it appearing that he had full knowledge of the machinery company's
claim of ownership when he executed the indemnity bond and bought in the
property at the sheriff's sale, and it appearing further that the machinery
company's claim of ownership was well founded, he cannot be said to have
been an innocent purchaser for value. He took the risk and must stand by
the consequences; and it is in this sense that we find that he was not a
purchaser in good faith.
One who purchases real estate with knowledge of a defect or lack of title in
his vendor cannot claim that he has acquired title thereto in good faith as
against the true owner of the land or of 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 vendor's title, will not make him an innocent purchaser for
value, if 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 that measure of precaution which may
reasonably be acquired of a prudent man in a like situation. Good faith, or
lack of it, is in its 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 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 judged of by actual or fancied tokens
or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas Lumber
Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley,
119 Mich., 8, 10, 17.)
We conclude that upon the grounds herein set forth the disposing part of
the decision and judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.
EN BANC
G.R. No. L-11176

December 21, 1917

MARCIANO RIVERA, Plaintiff-Appellant, vs. ONG CHE, DefendantAppellee.


Ramon Salinas for appellant.
J. C. Hixson for appellee.
STREET, J.:

For some time prior to the events which gave origin to the lawsuit, the
house of Lichauco, or Lichauco Brothers, had offered for sale certain old
machinery and boilers which were deposited and exposed for sale in a yard
at Tanduay, in the city of Manila. The plaintiff, Marciano Rivera, alleges that
upon January 8, 1912, he purchased some of this old material for the price
of P5,500, and received a receipt from Crisanto Lichauco showing that he
had become such purchaser. These things consisted, according to said
receipt, of two complete steam-boilers, with chimneys; one steam motor
(15 by 30 inches) complete; one pair of twin rice hullers complete, and a
feeding pump (donkey) for boilers.chanroblesvirtualawlibrary chanrobles
virtual law library
The plaintiff, however, did not take possession of the property, which
remained in the same place. It further appears that upon February 9, 1912,
the defendant, Ong Che, bought from Lichauco Brothers a lot of old iron,
machinery, and junk for the sum of P1,100. This purchaser took immediate
possession of the materials purchased by him. Later, when Marciano
Rivera appeared to take possession of the things of which he supposed
himself to be the purchaser, under the receipt given by Crisanto Lichauco,
he found that many of the accessory and auxiliary parts of the boilers,
motor, and rice mill were wanting; and upon investigation it developed that
these articles were held by the defendant, Ong Che, and were claimed by
him as owner by virtue of the purchase effected by him upon February 9,
as stated above. The plaintiff thereupon instituted the present action to
recover the articles in question alleging that he was the true owner thereof.
At the hearing in the Court of First Instance of the city of Manila, judgment
was given in favor of the defendant and the plaintiff has
appealed.chanroblesvirtualawlibrary chanrobles virtual law library
We concur in the conclusion reached by the judge of the Court of First
Instance the defendant, Ong Che, was a purchaser of these articles in
good faith. It is furthermore uncontroverted that he acquired possession by
virtue of his purchase. He, therefore, undoubtedly has, under article 1473
of the Civil Code, a better title than the first purchaser, who has never had
possession at all. The only doubt as to the application of that article to the
present case arises from the fact that there is some conflict in the testimony
upon the question as to who was the original owner. It is to be inferred from
the testimony that the house of Lichauco consists of Faustino Lichauco and
Galo Lichauco, and it would seem that Crisanto Lichauco, who effected the
sale to Rivera, is not a member of that establishment. Crisanto testified that

the property sold by him to the plaintiff Rivera, including the articles which
are now in dispute, was the property of Galo Lichauco. There is grave
doubt as to the correctness of this statement, however, as the same
witness admits that the machinery sold by him to Rivera had been taken
out of an old mill owned by Lichauco Brothers in Dagupan; and it is not
made clear that Galo Lichauco had ever become its exclusive owner.
Furthermore, the evidence submitted by the defendant tends to show that
the things acquired by him, including the articles in dispute, were bought
from Faustino Lichauco as property of the house. At any rate we find that,
under the circumstances disclosed in this case, and even conceding that
the property belong to Galo Lichauco, the house of Lichauco had authority
to sell it. In this view the case presented is that where two different agents
of the same owner successively negotiated sales to two different
purchasers, and it is obvious that, under the article of the Civil Code cited
above, the second purchaser having acquired possession first must be
declared the true owner. In our view of the facts it was merely a case where
a mistake was made by the house of Lichauco in selling something that
had already been sold.chanroblesvirtualawlibrary chanrobles virtual law
library
Other aspects of the case are equally fatal to the contention of the plaintiff.
It was incumbent upon the plaintiff to prove title in himself, as against the
defendant, by a preponderance of the evidence; and he could not recover
merely upon the weakness of the defendant's title. (Belen vs. Belen, 13
Phil. Rep., 202.) The court below held that the plaintiff had failed to prove
title in himself and we see no reason for disturbing the judgment on this
point. The defendant had, in his favor, the fact that he was a purchaser in
good faith and had acquired lawful possession. There is a presumption
arising from such possession that he was the owner (sec. 334 [10], Code of
Civil Procedure); and the mere fact, if such it be, that the property originally
belonged to Galo Lichauco was not sufficient, without more, to defeat a title
acquired by the defendant through the house of
Lichauco.chanroblesvirtualawlibrary chanrobles virtual law library
It should be stated that at the hearing the plaintiff himself did not appear as
a witness. Furthermore, no steps were taken, prior to the trial to secure the
attendance of either Galo Lichauco or Faustino Lichauco, both of whom
would have been most material witnesses for the plaintiff if his contention is
correct.chanroblesvirtualawlibrary chanrobles virtual law library

At the close of the trial in the court below, plaintiff's counsel asked for a
continuance in order to call these witnesses. The court refused to grant a
continuance for such purpose. In this we think the court did not abuse its
discretion, and its action in this respect does not constitute reversible error.
The plaintiff was appraised from the nature of the issue raised that the
question to be tried was that of ownership and he should have been ready
with the witnesses to prove it. He was not entitled to a continuance on the
ground of the absence of those important witnesses unless he showed that
he had used reasonable diligence to secure their attendance. An
application for a continuance of a cause is addressed to the sound legal
discretion of the trial court, and its ruling thereon will not be disturbed,
unless it clearly appears that such discretion has been abused, and that by
the refusal of the continuance a party has been without his fault deprived of
an opportunity of making his case or
defense.chanroblesvirtualawlibrary chanrobles virtual law library
It results that the judgment of the lower court should be affirmed, with costs
of this instance against the appellant. So
ordered.chanroblesvirtualawlibrary
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29972 January 26, 1976
ROSARIO CARBONELL, petitioner,
vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE
and RAMON INFANTE, respondents.

MAKASIAR, J.
Petitioner seeks a review of the resolution of the Court of Appeals (Special
Division of Five) dated October 30, 1968, reversing its decision of
November 2, 1967 (Fifth Division), and its resolution of December 6, 1968
denying petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:


Wherefore, the motion for reconsideration filed on behalf of
appellee Emma Infante, is hereby granted and the decision of
November 2, 1967, is hereby annulled and set aside. Another
judgement shall be entered affirming in toto that of the court a
quo, dated January 20, 1965, which dismisses the plaintiff's
complaint and defendant's counterclaim.
Without costs.
The facts of the case as follows:
Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes
Islands, was the owner of the parcel of land herein involve with
improvements situated at 179 V. Agan St., San Juan, Rizal, having an area
of some one hundred ninety-five (195) square meters, more or less,
covered by TCT No. 5040 and subject to mortgage in favor of the Republic
Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a
cousin and adjacent neighbor of respondent Poncio, and also from the
Batanes Islands, lived in the adjoining lot at 177 V. Agan Street.
Both petitioners Rosario Carbonell and respondent Emma Infante offered
to buy the said lot from Poncio (Poncio's Answer, p. 38, rec. on appeal).
Respondent Poncio, unable to keep up with the installments due on the
mortgage, approached petitioner one day and offered to sell to the latter
the said lot, excluding the house wherein respondent lived. Petitioner
accepted the offer and proposed the price of P9.50 per square meter.
Respondent Poncio, after having secured the consent of his wife and
parents, accepted the price proposed by petitioner, on the condition that
from the purchase price would come the money to be paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings
Bank and secured the consent of the President thereof for her to pay the
arrears on the mortgage and to continue the payment of the installments as
they fall due. The amount in arrears reached a total sum of P247.26. But
because respondent Poncio had previously told her that the money,
needed was only P200.00, only the latter amount was brought by petitioner
constraining respondent Jose Poncio to withdraw the sum of P47.00 from

his bank deposit with Republic Savings Bank. But the next day, petitioner
refunded to Poncio the sum of P47.00.
On January 27, 1955, petitioner and respondent Poncio, in the presence of
a witness, made and executed a document in the Batanes dialect, which,
translated into English, reads:
CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
JOSE PONCIO
Beginning today January 27, 1955, Jose Poncio can start living
on the lot sold by him to me, Rosario Carbonell, until after one
year during which time he will not pa anything. Then if after said
one can he could not find an place where to move his house,
he could still continue occupying the site but he should pay a
rent that man, be agreed.
(Sgd)
JOS
E
PON
CIO
(Sgd.
)
ROS
ARIO
CAR
BON
ELL
(Sgd)
CON
STA
NCIO
MEO
NAD
A
Witne
ss
(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes
Islands, to prepare the formal deed of sale, which she brought to
respondent Poncio together with the amount of some P400.00, the balance
she still had to pay in addition to her assuming the mortgaged obligation to
Republic Savings Bank.
Upon arriving at respondent Jose Poncio's house, however, the latter told
petitioner that he could not proceed any more with the sale, because he
had already given the lot to respondent Emma Infants; and that he could
not withdraw from his deal with respondent Mrs. Infante, even if he were to
go to jail. Petitioner then sought to contact respondent Mrs. Infante but the
latter refused to see her.
On February 5, 1955, petitioner saw Emma Infante erecting a all around
the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an
adverse claim over the land in question with the Office of the Register of
Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the Register
of Deeds and demand letters to private respondents Jose Poncio and
Emma Infante.
In his answer to the complaint Poncio admitted "that on January 30, 1955,
Mrs. Infante improved her offer and he agreed to sell the land and its
improvements to her for P3,535.00" (pp. 38-40, ROA).
In a private memorandum agreement dated January 31, 1955, respondent
Poncio indeed bound himself to sell to his corespondent Emma Infante, the
property for the sum of P2,357.52, with respondent Emma Infante still
assuming the existing mortgage debt in favor of Republic Savings Bank in
the amount of P1,177.48. Emma Infante lives just behind the houses of
Poncio and Rosario Carbonell.
On February 2, 1955, respondent Jose Poncio executed the formal deed of
sale in favor of respondent Mrs. Infante in the total sum of P3,554.00 and
on the same date, the latter paid Republic Savings Bank the mortgage
indebtedness of P1,500.00. The mortgage on the lot was eventually
discharged.

Informed that the sale in favor of respondent Emma Infante had not yet
been registered, Atty. Garcia prepared an adverse claim for petitioner, who
signed and swore to an registered the same on February 8, 1955.
The deed of sale in favor of respondent Mrs. Infante was registered only
on February 12, 1955. As a consequence thereof, a Transfer Certificate of
Title was issued to her but with the annotation of the adverse claim of
petitioner Rosario Carbonell.
Respondent Emma Infante took immediate possession of the lot involved,
covered the same with 500 cubic meters of garden soil and built therein a
wall and gate, spending the sum of P1,500.00. She further contracted the
services of an architect to build a house; but the construction of the same
started only in 1959 years after the litigation actually began and during
its pendency. Respondent Mrs. Infante spent for the house the total amount
of P11,929.00.
On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second
amended complaint against private respondents, praying that she be
declared the lawful owner of the questioned parcel of land; that the
subsequent sale to respondents Ramon R. Infante and Emma L. Infante be
declared null and void, and that respondent Jose Poncio be ordered to
execute the corresponding deed of conveyance of said land in her favor
and for damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).
Respondents first moved to dismiss the complaint on the ground, among
others, that petitioner's claim is unenforceable under the Statute of Frauds,
the alleged sale in her favor not being evidenced by a written document
(pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied
without prejudice to passing on the question raised therein when the case
would be tried on the merits (p. 17, ROA in the C.A.), respondents filed
separate answers, reiterating the grounds of their motion to dismiss (pp.
18-23, ROA in the C.A.).
During the trial, when petitioner started presenting evidence of the sale of
the land in question to her by respondent Poncio, part of which evidence
was the agreement written in the Batanes dialect aforementioned,
respondent Infantes objected to the presentation by petitioner of parole
evidence to prove the alleged sale between her and respondent Poncio. In
its order of April 26, 1966, the trial court sustained the objection and

dismissed the complaint on the ground that the memorandum presented by


petitioner to prove said sale does not satisfy the requirements of the law
(pp. 31-35, ROA in the C.A.).
From the above order of dismissal, petitioner appealed to the Supreme
Court (G.R. No. L-11231) which ruled in a decision dated May 12, 1958,
that the Statute of Frauds, being applicable only to executory contracts,
does not apply to the alleged sale between petitioner and respondent
Poncio, which petitioner claimed to have been partially performed, so that
petitioner is entitled to establish by parole evidence "the truth of this
allegation, as well as the contract itself." The order appealed from was thus
reversed, and the case remanded to the court a quo for further proceedings
(pp. 26-49, ROA in the C.A.).
After trial in the court a quo; a decision was, rendered on December 5,
1962, declaring the second sale by respondent Jose Poncio to his corespondents Ramon Infante and Emma Infante of the land in question null
and void and ordering respondent Poncio to execute the proper deed of
conveyance of said land in favor of petitioner after compliance by the latter
of her covenants under her agreement with respondent Poncio (pp. 5056,
ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a
motion for re-trial to adduce evidence for the proper implementation of the
court's decision in case it would be affirmed on appeal (pp. 56-60, ROA in
the C.A.), which motion was opposed by petitioner for being premature (pp.
61-64, ROA in the C.A.). Before their motion for re-trial could be resolved,
respondent Infantes, this time through their former counsel, filed another
motion for new trial, claiming that the decision of the trial court is contrary to
the evidence and the law (pp. 64-78, ROA in the C.A.), which motion was
also opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which rehearing only the respondents introduced additional evidence consisting
principally of the cost of improvements they introduced on the land in
question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its
decision of December 5, 1962 on the ground that the claim of the
respondents was superior to the claim of petitioner, and dismissing the

complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner
Rosario Carbonell appealed to the respondent Court of Appeals (p. 96,
ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed of
Justices Magno Gatmaitan, Salvador V. Esguerra and Angle H. Mojica,
speaking through Justice Magno Gatmaitan), rendered judgment reversing
the decision of the trial court, declaring petitioner therein, to have a superior
right to the land in question, and condemning the defendant Infantes to
reconvey to petitioner after her reimbursement to them of the sum of
P3,000.00 plus legal interest, the land in question and all its improvements
(Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on
the motion for reconsideration, the Appellate Court, three Justices
(Villamor, Esguerra and Nolasco) of Special Division of Five, granted said
motion, annulled and set aside its decision of November 2, 1967, and
entered another judgment affirming in toto the decision of the court a quo,
with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of
Petition).
Petitioner Rosario Carbonell moved to reconsider the Resolution of the
Special Division of Five, which motion was denied by Minute Resolution of
December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for
reconsideration) [Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case, recites:
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 movable
property.
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and, in

the absence thereof, to the person who presents the oldest title,
provided there is good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his
deed of sale to merit the protection of the second paragraph of said Article
1544.
Unlike the first and third paragraphs of said Article 1544, which accord
preference to the one who first takes possession in good faith of personal
or real property, the second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good faith first
recorded" his right. Under the first and third paragraph, good faith must
characterize the act of anterior registration (DBP vs. Mangawang, et al., 11
SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If
there is inscription, as in the case at bar, prior registration in good faith is a
pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was
the only buyer thereof and the title of Poncio was still in his name solely
encumbered by bank mortgage duly annotated thereon. Carbonell was not
aware and she could not have been aware of any sale of Infante as
there was no such sale to Infante then. Hence, Carbonell's prior purchase
of the land was made in good faith. Her good faith subsisted and continued
to exist when she recorded her adverse claim four (4) days prior to the
registration of Infantes's deed of sale. Carbonell's good faith did not cease
after Poncio told her on January 31, 1955 of his second sale of the same
lot to Infante. Because of that information, Carbonell wanted an audience
with Infante, which desire underscores Carbonell's good faith. With an
aristocratic disdain unworthy of the good breeding of a good Christian and
good neighbor, Infante snubbed Carbonell like a leper and refused to see
her. So Carbonell did the next best thing to protect her right she
registered her adversed claim on February 8, 1955. Under the
circumstances, this recording of her adverse claim should be deemed to
have been done in good faith and should emphasize Infante's bad faith
when she registered her deed of sale four (4) days later on February 12,
1955.

Bad faith arising from previous knowledge by Infante of the prior sale to
Carbonell is shown by the following facts, the vital significance and
evidenciary effect of which the respondent Court of Appeals either
overlooked of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after
she was informed by Poncio that he sold the lot to Infante but several days
before Infante registered her deed of sale. This indicates that Infante knew
from Poncio and from the bank of the prior sale of the lot by Poncio to
Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante lives just
behind the house of Carbonell. Her refusal to talk to Carbonell could only
mean that she did not want to listen to Carbonell's story that she
(Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not
Poncio's saving deposit passbook Exhibit "1" Infantes] and Poncio's
copy of the mortgage contract, when Poncio sold the lot Carbonell who,
after paying the arrearages of Poncio, assumed the balance of his
mortgaged indebtedness to the bank, which in the normal course of
business must have necessarily informed Infante about the said
assumption by Carbonell of the mortgage indebtedness of Poncio. Before
or upon paying in full the mortgage indebtedness of Poncio to the Bank.
Infante naturally must have demanded from Poncio the delivery to her of
his mortgage passbook as well as Poncio's mortgage contract so that the
fact of full payment of his bank mortgage will be entered therein; and
Poncio, as well as the bank, must have inevitably informed her that said
mortgage passbook could not be given to her because it was already
delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of
the mortgage contract at the time he executed a deed of sale in favor of the
Infantes and when the Infantes redeemed his mortgage indebtedness from
the bank, Poncio would have surrendered his mortgage passbook and his
copy of the mortgage contract to the Infantes, who could have presented
the same as exhibits during the trial, in much the same way that the
Infantes were able to present as evidence Exhibit "1" Infantes, Poncio's
savings deposit passbook, of which Poncio necessarily remained in
possession as the said deposit passbook was never involved in the
contract of sale with assumption of mortgage. Said savings deposit
passbook merely proves that Poncio had to withdraw P47.26, which

amount was tided to the sum of P200.00 paid by Carbonell for Poncio's
amortization arrearages in favor of the bank on January 27, 1955; because
Carbonell on that day brought with her only P200.00, as Poncio told her
that was the amount of his arrearages to the bank. But the next day
Carbonell refunded to Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage
passbook and that the said mortgage passbook was already in possession
of Carbonell, should have compelled Infante to inquire from Poncio why he
was no longer in possession of the mortgage passbook and from Carbonell
why she was in possession of the same (Paglago, et. al vs. Jara et al 22
SCRA 1247, 1252-1253). The only plausible and logical reason why Infante
did not bother anymore to make such injury , w because in the ordinary
course of business the bank must have told her that Poncio already sold
the lot to Carbonell who thereby assumed the mortgage indebtedness of
Poncio and to whom Poncio delivered his mortgage passbook. Hoping to
give a semblance of truth to her pretended good faith, Infante snubbed
Carbonell's request to talk to her about the prior sale to her b Poncio of the
lot. As aforestated, this is not the attitude expected of a good neighbor
imbued with Christian charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was
accordingly annotated on Poncio's title, four [4] days before Infante
registered on February 12, 1955 her deed of sale executed on February 2,
1955. Here she was again on notice of the prior sale to Carbonell. Such
registration of adverse claim is valid and effective (Jovellanos vs.
Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court
of First Instance, he alleged that both Mrs. Infante and Mrs. Carbonell
offered to buy the lot at P15.00 per square meter, which offers he rejected
as he believed that his lot is worth at least P20.00 per square meter. It is
therefore logical to presume that Infante was told by Poncio and
consequently knew of the offer of Carbonell which fact likewise should have
put her on her guard and should have compelled her to inquire from Poncio
whether or not he had already sold the property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice,
in the preceding case of Rosario Carbonell vs. Jose Poncio, Ramon Infante
and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his answer:

... that he had consistently turned down several offers, made by


plaintiff, to buy the land in question, at P15 a square meter, for
he believes that it is worth not less than P20 a square meter;
that Mrs. Infante, likewise, tried to buy the land at P15 a square
meter; that, on or about January 27, 1955, Poncio was advised
by plaintiff that should she decide to buy the property at P20 a
square meter, she would allow him to remain in the property for
one year; that plaintiff then induced Poncio to sign a document,
copy of which if probably the one appended to the second
amended complaint; that Poncio signed it 'relying upon the
statement of the plaintiff that the document was a permit for him
to remain in the premises in the event defendant decided to sell
the property to the plaintiff at P20.00 a square meter'; that on
January 30, 1955, Mrs. Infante improved her offer and agreed
to sell the land and its improvement to her for P3,535.00; that
Poncio has not lost 'his mind,' to sell his property, worth at least
P4,000, for the paltry sum P1,177.48, the amount of his
obligation to the Republic Saving s Bank; and that plaintiff's
action is barred by the Statute of Frauds. ... (pp. 38-40, ROA,
emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground
that the private document Exhibit "A" executed by Poncio and Carbonell
and witnessed by Constancio Meonada captioned "Contract for One-half
Lot which I Bought from Jose Poncio," was not such a memorandum in
writing within the purview of the Statute of Frauds, the trial judge himself
recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in
the property which he had sold to the plaintiff. There is no mention of the
reconsideration, a description of the property and such other essential
elements of the contract of sale. There is nothing in the memorandum
which would tend to show even in the slightest manner that it was intended
to be an evidence of contract sale. On the contrary, from the terms of the
memorandum, it tends to show that the sale of the property in favor of the
plaintiff is already an accomplished act. By the very contents of the

memorandum itself, it cannot therefore, be considered to be the


memorandum which would show that a sale has been made by Poncio in
favor of the plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial
court, to repeat the said memorandum states "that Poncio is allowed to
stay in the property which he had sold to the plaintiff ..., it tends to show
that the sale of the property in favor of the plaintiff is already an
accomplished act..."
(2) When the said order was appealed to the Supreme Court by Carbonell
in the previous case of Rosario Carbonell vs. Jose Poncio, Ramon Infante
and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate
Justice, speaking for a unanimous Court, reversed the aforesaid order of
the trial court dismissing the complaint, holding that because the complaint
alleges and the plaintiff claims that the contract of sale was partly
performed, the same is removed from the application of the Statute of
Frauds and Carbonell should be allowed to establish by parol evidence the
truth of her allegation of partial performance of the contract of sale, and
further stated:
Apart from the foregoing, there are in the case at bar several
circumstances indicating that plaintiff's claim might not be
entirely devoid of factual basis. Thus, for instance, Poncio
admitted in his answer that plaintiff had offered several times to
purchase his land.
Again, there is Exhibit A, a document signed by the defendant.
It is in the Batanes dialect, which, according to plaintiff's
uncontradicted evidence, is the one spoken by Poncio, he
being a native of said region. Exhibit A states that Poncio would
stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a
place where to transfer his house thereon, he may remain
upon. Incidentally, the allegation in Poncio's answer to the
effect that he signed Exhibit A under the belief that it "was a
permit for him to remain in the premises in the" that "he decided
to sell the property" to the plaintiff at P20 a sq. m." is, on its
face, somewhat difficult to believe. Indeed, if he had not
decided as yet to sell the land to plaintiff, who had never
increased her offer of P15 a square meter, there was no reason

for Poncio to get said permit from her. Upon the other hand, if
plaintiff intended to mislead Poncio, she would have caused
Exhibit A to be drafted, probably, in English , instead of taking
the trouble of seeing to it that it was written precisely in his
native dialect, the Batanes. Moreover, Poncio's signature on
Exhibit A suggests that he is neither illiterate nor so ignorant as
to sign document without reading its contents, apart from the
fact that Meonada had read Exhibit A to him and given him a
copy thereof, before he signed thereon, according to
Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears
any relation to her claim that there has been partial
performance of the supposed contract of sale, is the
notation of the sum of P247.26 in the bank book of
defendant Jose Poncio. The noting or jotting down
of the sum of P247.26 in the bank book of Jose
Poncio does not prove the fact that the said amount
was the purchase price of the property in question.
For all we knew, the sum of P247.26 which plaintiff
claims to have paid to the Republic Savings Bank
for the account of the defendant, assuming that the
money paid to the Republic Savings Bank came
from the plaintiff, was the result of some usurious
loan or accomodation, rather than earnest money or
part payment of the land. Neither is it competent or
satisfactory evidence to prove the conveyance of
the land in question the fact that the bank book
account of Jose Poncio happens to be in the
possession of the plaintiff. (Defendants-Appellees'
brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in
plaintiffs possession, or whether there is any relation between
the P247.26 entry therein and the partial payment of P247.26
allegedly made by plaintiff to Poncio on account of the price of
his land, if we do not allow the plaintiff to explain it on the
witness stand? Without expressing any opinion on the merits of

plaintiff's claim, it is clear, therefore, that she is entitled , legally


as well as from the viewpoint of equity, to an opportunity to
introduce parol evidence in support of the allegations of her
second amended complaint. (pp. 46-49, ROA, emphasis
supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale
in favor of the Infantes and ordering Poncio to execute a deed of
conveyance in favor of Carbonell, the trial judge found:
... A careful consideration of the contents of Exh. 'A' show to the
satisfaction of the court that the sale of the parcel of land in
question by the defendant Poncio in favor of the plaintiff was
covered therein and that the said Exh. "a' was also executed to
allow the defendant to continue staying in the premises for the
stated period. It will be noted that Exh. 'A' refers to a lot 'sold by
him to me' and having been written originally in a dialect well
understood by the defendant Poncio, he signed the said Exh.
'A' with a full knowledge and consciousness of the terms and
consequences thereof. This therefore, corroborates the
testimony of the plaintiff Carbonell that the sale of the land was
made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of
the plaintiff, when the latter paid P247.26 to the Republic
Savings Bank on account of Poncio's mortgage indebtedness.
Finally, the possession by the plaintiff of the defendant Poncio's
passbook of the Republic Savings Bank also adds credibility to
her testimony. The defendant contends on the other hand that
the testimony of the plaintiff, as well as her witnesses, regarding
the sale of the land made by Poncio in favor of the plaintiff is
inadmissible under the provision of the Statute of Fraud based
on the argument that the note Exh. "A" is not the note or
memorandum referred to in the to in the Statute of Fraud. The
defendants argue that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to qualify it as the note or
memorandum referred to therein and open the way for the
presentation of parole evidence to prove the fact contained in
the note or memorandum. The defendant argues that there is
even no description of the lot referred to in the note, especially
when the note refers to only one half lot. With respect to the

latter argument of the Exhibit 'A', the court has arrived at the
conclusion that there is a sufficient description of the lot
referred to in Exh. 'A' as none other than the parcel of land
occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land
involved herein is sufficiently established by the contents of the
note Exh. "A". For a while, this court had that similar impression
but after a more and thorough consideration of the context in
Exh. 'A' and for the reasons stated above, the Court has arrived
at the conclusion stated earlier (pp. 52-54, ROA, emphasis
supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on
January 20, 1965 another decision dismissing the complaint, although he
found
1. That on January 27, 1955, the plaintiff purchased from the
defendant Poncio a parcel of land with an area of 195 square
meters, more or less, covered by TCT No. 5040 of the Province
of Rizal, located at San Juan del Monte, Rizal, for the price of
P6.50 per square meter;
2. That the purchase made by the plaintiff was not reduced to
writing except for a short note or memorandum Exh. A, which
also recited that the defendant Poncio would be allowed to
continue his stay in the premises, among other things, ... (pp.
91-92, ROA, emphasis supplied).
From such factual findings, the trial Judge confirms the due execution of
Exhibit "A", only that his legal conclusion is that it is not sufficient to transfer
ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the
Court of Appeals composed of Justices Esguerra (now Associate Justice of
the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan,
the Court of Appeals found that:
... the testimony of Rosario Carbonell not having at all been
attempted to be disproved by defendants, particularly Jose
Poncio, and corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to the effect that

between herself and Jose there had been celebrated a sale of


the property excluding the house for the price of P9.50 per
square meter, so much so that on faith of that, Rosario had
advanced the sum of P247.26 and binding herself to pay unto
Jose the balance of the purchase price after deducting the
indebtedness to the Bank and since the wording of Exhibit
A, the private document goes so far as to describe their
transaction as one of sale, already consummated between
them, note the part tense used in the phrase, "the lot sold by
him to me" and going so far even as to state that from that day
onwards, vendor would continue to live therein, for one year,
'during which time he will not pay anything' this can only mean
that between Rosario and Jose, there had been a true contract
of sale, consummated by delivery constitutum possession, Art.
1500, New Civil Code;vendor's possession having become
converted from then on, as a mere tenant of vendee, with the
special privilege of not paying rental for one year, it is true
that the sale by Jose Poncio to Rosario Carbonell corroborated
documentarily only by Exhibit A could not have been registered
at all, but it was a valid contract nonetheless, since under our
law, a contract sale is consensual, perfected by mere
consent, Couto v. Cortes, 8 Phil 459, so much so that under the
New Civil Code, while a sale of an immovable is ordered to be
reduced to a public document, Art. 1358, that mandate does not
render an oral sale of realty invalid, but merely incapable of
proof, where still executory and action is brought and resisted
for its performance, 1403, par. 2, 3; but where already wholly or
partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further
demonstrate is presented and admitted as the case was here,
then the oral sale becomes perfectly good, and becomes a
good cause of action not only to reduce it to the form of a public
document, but even to enforce the contract in its entirety, Art.
1357; and thus it is that what we now have is a case
wherein on the one hand Rosario Carbonell has proved that
she had an anterior sale, celebrated in her favor on 27 January,
1955, Exhibit A, annotated as an adverse claim on 8 February,
1955, and on other, a sale is due form in favor of Emma L.
Infante on 2 February, 1955, Exhibit 3-Infante, and registered in
due form with title unto her issued on 12 February, 1955; the

vital question must now come on which of these two sales


should prevail; ... (pp. 74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of
Appeals Justice Esguerra (now a member of this Court), concurred in by
Justices Villamor and Nolasco, constituting the majority of a Special
Division of Five, the Court of Appeals, upon motion of the Infantes, while
reversing the decision of November 2, 1967 and affirming the decision of
the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted
the existence and genuineness of Exhibit "A", the private memorandum
dated January 27, 1955, although it did not consider the same as satisfying
"the essential elements of a contract of sale," because it "neither
specifically describes the property and its boundaries, nor mention its
certificate of title number, nor states the price certain to be paid, or contrary
to the express mandate of Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan
maintains his decision of November 2, 1967 as well as his findings of facts
therein, and reiterated that the private memorandum Exhibit "A", is a
perfected sale, as a sale is consensual and consummated by mere
consent, and is binding on and effective between the parties. This
statement of the principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be
foreclosed by the bank for failure on the part of Poncio to pay the
amortizations thereon. To forestall the foreclosure and at the same time to
realize some money from his mortgaged lot, Poncio agreed to sell the
same to Carbonell at P9.50 per square meter, on condition that Carbonell
[1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in
the amount of P247.26 to the bank; and [2] should assume his mortgage
indebtedness. The bank president agreed to the said sale with assumption
of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears
of P247.26. On January 27, 1955, she paid the amount of P200.00 to the
bank because that was the amount that Poncio told her as his arrearages
and Poncio advanced the sum of P47.26, which amount was refunded to

him by Carbonell the following day. This conveyance was confirmed that
same day, January 27, 1955, by the private document, Exhibit "A", which
was prepared in the Batanes dialect by the witness Constancio Meonada,
who is also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given
the right to continue staying on the land without paying any rental for one
year, after which he should pay rent if he could not still find a place to
transfer his house. All these terms are part of the consideration of the sale
to Carbonell.
It is evident therefore that there was ample consideration, and not merely
the sum of P200.00, for the sale of Poncio to Carbonell of the lot in
question.
But Poncio, induced by the higher price offered to him by Infante, reneged
on his commitment to Carbonell and told Carbonell, who confronted him
about it, that he would not withdraw from his deal with Infante even if he is
sent to jail The victim, therefore, "of injustice and outrage is the widow
Carbonell and not the Infantes, who without moral compunction exploited
the greed and treacherous nature of Poncio, who, for love of money and
without remorse of conscience, dishonored his own plighted word to
Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith
of Emma Infante from the time she enticed Poncio to dishonor his contract
with Carbonell, and instead to sell the lot to her (Infante) by offering Poncio
a much higher price than the price for which he sold the same to Carbonell.
Being guilty of bad faith, both in taking physical possession of the lot and in
recording their deed of sale, the Infantes cannot recover the value of the
improvements they introduced in the lot. And after the filing by Carbonell of
the complaint in June, 1955, the Infantes had less justification to erect a
building thereon since their title to said lot is seriously disputed by
Carbonell on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A"
under the belief that it was a permit for him to remain in the premises in
ease he decides to sell the property to Carbonell at P20.00 per square
meter, the observation of the Supreme Court through Mr. Chief Justice
Concepcion in G.R. No. L-11231, supra, bears repeating:

... Incidentally, the allegation in Poncio's answer to the effect


that he signed Exhibit A under the belief that it 'was a permit for
him to remain in the premises in the event that 'he decided to
sell the property' to the plaintiff at P20.00 a sq. m is, on its face,
somewhat difficult to believe. Indeed, if he had not decided as
yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to
get said permit from her. Upon the they if plaintiff intended to
mislead Poncio, she would have Exhibit A to be drafted,
probably, in English, instead of taking the trouble of seeing to it
that it was written precisely in his native dialect, the Batanes.
Moreover, Poncio's signature on Exhibit A suggests that he is
neither illiterate nor so ignorant as to sign a document without
reading its contents, apart from the fact that Meonada had read
Exhibit A to him-and given him a copy thereof, before he signed
thereon, according to Meonada's uncontradicted testimony. (pp.
46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965,
which he reiterated in his dissent from the resolution of the majority of the
Special Division. of Five on October 30, 1968, Exhibit A, the private
document in the Batanes dialect, is a valid contract of sale between the
parties, since sale is a consensual contract and is perfected by mere
consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all
between the parties and accords to the vendee the right to compel the
vendor to execute the proper public document As a matter of fact, Exhibit A,
while merely a private document, can be fully or partially performed, to it
from the operation of the statute of frauds. Being a all consensual contract,
Exhibit A effectively transferred the possession of the lot to the vendee
Carbonell by constitutum possessorium (Article 1500, New Civil Code);
because thereunder the vendor Poncio continued to retain physical
possession of the lot as tenant of the vendee and no longer as knew
thereof. More than just the signing of Exhibit A by Poncio and Carbonell
with Constancio Meonada as witness to fact the contract of sale, the
transition was further confirmed when Poncio agreed to the actual payment
by at Carbonell of his mortgage arrearages to the bank on January 27,
1955 and by his consequent delivery of his own mortgage passbook to
Carbonell. If he remained owner and mortgagor, Poncio would not have
surrendered his mortgage passbook to' Carbonell.

IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE
MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe
the disputed lot as the subject matter of the sale, was correctly disposed of
in the first decision of the trial court of December 5, 1962, thus: "The
defendant argues that there is even no description of the lot referred to in
the note (or memorandum), especially when the note refers to only one-half
lot. With respect to the latter argument of the defendant, plaintiff points out
that one- half lot was mentioned in Exhibit 'A' because the original
description carried in the title states that it was formerly part of a bigger lot
and only segregated later. The explanation is tenable, in (sic) considering
the time value of the contents of Exh. 'A', the court has arrived at the
conclusion that there is sufficient description of the lot referred to in Exh. As
none other than the parcel of lot occupied by the defendant Poncio and
where he has his improvements erected. The Identity of the parcel of land
involved herein is sufficiently established by the contents of the note Exh.
'A'. For a while, this court had that similar impression but after a more and
through consideration of the context in Exh. 'A' and for the reasons stated
above, the court has arrived to (sic) the conclusion stated earlier" (pp. 5354, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same
area, adjacent to the lot of his cousin Carbonell and likewise mortgaged by
him to the Republic Savings Bank. The transaction therefore between
Poncio and Carbonell can only refer and does refer to the lot involved
herein. If Poncio had another lot to remove his house, Exhibit A would not
have stipulated to allow him to stay in the sold lot without paying any rent
for one year and thereafter to pay rental in case he cannot find another
place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must
however refund to respondents Infantes the amount of P1,500.00, which
the Infantes paid to the Republic Savings Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the
improvements they introduced op the disputed lot are governed by Articles
546 and 547 of the New Civil Code. Their expenses consisting of

P1,500.00 for draining the property, filling it with 500 cubic meters of
garden soil, building a wall around it and installing a gate and P11,929.00
for erecting a b ' bungalow thereon, are useful expenditures, for they add to
the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs.
Villanueva, 7 Phil. 277; Valencia vs. Ayala de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in good faith can
retain the useful improvements unless the person who defeated him in his
possession refunds him the amount of such useful expenses or pay him the
increased value the land may have acquired by reason thereof. Under
Article 547, the possessor in good faith has also the right to remove the
useful improvements if such removal can be done without damage to the
land, unless the person with the superior right elects to pay for the useful
improvements or reimburse the expenses therefor under paragraph 2 of
Article 546. These provisions seem to imply that the possessor in bad faith
has neither the right of retention of useful improvements nor the right to a
refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by the
possessor in bad faith for pure luxury or mere pleasure only by paying the
value thereof at the time he enters into possession (Article 549 NCC), as a
matter of equity, the Infantes, although possessors in bad faith, should be
allowed to remove the aforesaid improvements, unless petitioner Carbonell
chooses to pay for their value at the time the Infantes introduced said
useful improvements in 1955 and 1959. The Infantes cannot claim
reimbursement for the current value of the said useful improvements;
because they have been enjoying such improvements for about two
decades without paying any rent on the land and during which period
herein petitioner Carbonell was deprived of its possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF
THE COURT OF APPEALS OF OCTOBER 30, 1968 IS HEREBY
REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY
DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN
QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE
HUNDRED PESOS (P1,500.00) WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION; AND THE REGISTER OF DEEDS OF
RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE
OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS

INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED


TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE
PONCIO, AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN
FAVOR OF PETITIONER ROSARIO CARBONELL UPON
PRESENTATION OF PROOF OF PAYMENT BY HER TO THE INFANTES
OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED
PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR
AFOREMENTIONED USEFUL IMPROVEMENTS FROM THE LOT
WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION,
UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO
ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF
THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS
(P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF
THIS DECISION. SHOULD PETITIONER CARBONELL FAIL TO PAY THE
SAID AMOUNT WITHIN THE AFORESTATED PERIOD OF THREE (3)
MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF
THREE (3) MONTHS WITHIN WHICH THE RESPONDENTS INFANTES
MAY REMOVE THEIR AFOREMENTIONED USEFUL IMPROVEMENTS
SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3)
MONTHS GIVEN PETITIONER CARBONELL TO PAY FOR THE SAID
USEFUL IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
Castro, C.J, Aquino and Martin, JJ., concur.

Separate Opinions

TEEHANKEE, J., concurring:


I concur. My concurrence proceeds from the same premise as the
dissenting opinion of Justice Munoz Palma that both the conflicting buyers
of the real property in question, namely, petitioner Rosario Carbonell as the

first buyer may be deemed purchasers in good faith at the respective dates
of their purchase.
The answer to the question of who between the two buyers in good faith
should prevail is provided in the second paragraph of Article 1544 of the
Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that
"the ownership of the immovable property shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private
memorandum of sale of the property in favor of the first buyer Carbonell,
However, six days later on February 2, 1955, the seller sold the property for
a second time for an improved price, this time executing a formal
registrable deed of sale in favor of the second buyer Infante.
So it was that when the first buyer Carbonell saw the seller a few days
afterwards bringing the formal deed of sale for the seller's signature and the
balance of the agreed cash payment, the seller told her that he could not
proceed anymore with formalizing the first sale because he had already
formalized the second sale in favor of the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of
sale, she did the next best thing to protect her legal rights and registered on
February 8, 1955 with the Rizal Register of Deeds her adverse claim as
first buyer entitled to the property. The second buyer Infante registered the
deed of sale in her favor with the Rizal Register of Deeds only on February
12, 1955 (notwithstanding its having been executed ten days earlier on
February 2, 1955), and therefore the transfer certificate of title issued in her
favor carried the duly annotated adverse claim of Carbonell as the first
buyer.
Both these registrations were in good faith and hence, as provided by the
cited code article, the first buyer Carbonell as also the first registrant is
legally entitled to the property.
The fact that Carbonell registered only an adverse claim as she had no
registrable deed of sale is of no moment. The facts of record amply show
that she had a written memorandum of sale, which was partially executed
with the advance payment made by her for the seller's mortgage account
with the bank, and which was perfected and binding in law by their accord
on the subject matter and price. Carbonell could in law enforce in court her

rights as first buyer under the memorandum agreement and compel the
seller to execute in her favor a formal registrable deed of sale which would
relate back to the date of the original memorandum agreement.
And under the cited code provision, Carbonell had to duly register such
adverse claim as first buyer, as otherwise the subsequent registration of the
second buyer's deed of sale would have obliterated her legal rights and
enable the seller to achieve his fraudulent act of selling the property a
second time for a better price in derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in
Carbonell's favor and (as was only to be expected) informed her that he
could not proceed anymore with the sale because he had sold it for a
second time for a better price did not convert her prior registration of her
adverse claim into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully
sold his property for a second time cannot work out to his own advantage
and to the detriment of the innocent first buyer (by being considered as an
"automatic registration" of the second sale) and defeat the first buyer's right
of priority, in time in right and in registration.
The governing principle here is prius tempore, portior jure 2 (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the
second sale ahead of the first. 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 other so 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 buyer's rights)
from the time of acquisition until the title is transferred to him by registration
or failing registration, by delivery of possession. The second buyer must
showcontinuing 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.
The above principles were aptly restated in a 1948 Court of Appeals
decision in the case of Gallardo, vs. Gallardopenned by Justice J.B.L.
Reyes, then a member of the appellate court. 3 The facts of that case and
the case at bar are virtually Identical, except that the earlier case was
decided under the old Civil Code (Article 1473 thereof now reproduced as
Article 1544 of the present Civil Code), and the ratio
decidendi thereof, mutatis mutandis, is fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows
that before a second vendee can obtain priority over the first, it
is indispensable that he should have acted in good faith, (that is
to say, in ignorance of the rights of the first vendee's rights) until
the title is transferred to him by actual or constructive delivery of
the thing sold. This is the price exacted by law for his being able
to displace the first vendee; and the mere fact that the second
contract of sale was perfected in good faith is not sufficient if,
before the title passes, the second vendee acquires knowledge
of the first transaction. That the second buyer innocently agreed
to purchase the land may protect him against responsibility of
conspiring with his vendor to defraud the established rights of
the first purchaser; but to defeat the latter's priority in time
(based on the old principle "prius tempore, potior jure," first in
time, better in right) the good faith or innocence of the posterior
vendee must needs continue until his contract ripens into
ownership by tradition or recording (Palanca vs. Director of
lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was
executed after that of Caoagas is of no moment, the contract of
sale being perfected and binding by mere accord on the subject
matter and the price, even if neither is delivered (Article 1450,
Civil Code), the deed of conveyance will relate back to the date
of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955)
concededly preceded the second buyer's registration (February 12, 1955)

by four days, and therefore, as provided by the Civil Code, the first buyer
thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under
review should be affirmed, this dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his
195-square meter lot located at V. Again St., San Juan, Rizal, covered by
Transfer Certificate of Title No. 5040, the solution to which is found in Art.
1544 of the Civil Code, more particularly the second paragraph thereof
which provides that should the thing sold be immovable property, the
ownership shall belong to the person acquiring it who in good with first
recorded it in the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and
respondent Emma Infante, are both purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at
the time negotiations for the purchase of the lot were being made between
her and the vendor, Jose Poncio, as of January 27, 1955, there was no
indication at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an
express finding of the trial court in its decision of January 20, 1965, to the
effect that when the vendor and purchaser. Infante consummated the sale
on or about January 29, 1955, an examination of the original of T.C.T. 5040
on file with the Register of Deeds of Rizal as well as the owner's duplicate
revealed no annotation of any encumbrance or lien other than the
mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal);
(b) the findings of fact of the Court of Appeals given in the decision penned
by then Justice Salvador V. Esguerra as well as in the first decision written
by Justice Magno Gatmaitan which subsequently became the basis of the
dissenting opinion to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it
must have to be remembered that the first vendee, Rosario
Carbonell, certainly was an innocent purchaser ... but also must
it be remembered that Emma L. Infante, when she bought the
property on 2 February, 1955, under Exhibit 3-Infante, neither

had she before then been, preliminary informed of the first sate
to Rosario ...; indeed as Emma has testified on this detail, it is
easy to accept her declaration:
Q. When Mr. Jose Poncio offered you
this land in question, did he tell you that
the land was sold or otherwise promised
to Mrs. Carbonell?
A. Of course not, otherwise will never
buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees,
Rosario and Emma, were innocent and had acted in the best of good
faith ... (pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo;
see also p. 7 of his dissenting opinion found on p. 95, rollo).
Departing from a well-entrenched rule set down in a long array of decisions
of this Court that factual findings of the trial court and of the Court -of
Appeals are generally binding and conclusive, 1 and that on appeal by
certiorari, questions of fact are not to be determined nor reviewed by
Us 2 the Majority Opinion of my colleagues however undertakes a factfinding process of its own, and draws the conclusion that Emma Infante
was a buyer in bad faith because, among other things: (a) Emma allegedly
refused to talk to Rosario Carbonell when the latter went to see her about
the sale of the lot, which "is not the attitude expected of a good neighbor
imbued with Christian charity and goodwill as well as a clean conscience"
(p. 10, Majority Opinion); (b) "(B)efore or upon paying in full the mortgage
indebtedness of Poncio to the bank. Infante naturally must have demanded
from Poncio the delivery to her of his mortgage passbook as well as
Poncio's mortgage contract. . and Poncio as well as the bank, must have
inevitably informed here that said mortgage passbook could not be given to
her because it was already delivered to Carbonell" (p. 9, Ibid); and (c) "...
(T)he victim, therefore, 'of injustice and outrage is the widow Carbonell and
not the Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without
remorse of conscience, dishonored his own plighted word to Carbonell, his
own cousin. ... Inevitably evident therefore from the foregoing discussion,

is the bad faith of Emma Infantefrom the time she enticed Poncio to
dishonor his contract with Carbonell, and instead to sell the lot to
her (Infante) by offering Poncio a much higher price than the price for which
he sold the same to Carbonell ..." (p. 20, Majority Opinion; all italicized
portions supplied) all of which are unsupported by the evidence and
diametrically contrary to the findings of the court a quo and the appellate
court sustaining the good faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next
question to be resolved is who of the twofirst registered her purchase or
title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer
bought the property in good faith, but that the registration of her title must
also be accomplished in good faith. This requirement of good faith is not
only applicable to the second or subsequent purchaser but to the first as
well. 3
Construing and applying the second paragraph of Art. 1473 of the Spanish
Civil Code which has been adoptedverbatim in Art. 1544 of the Civil Code
of the Philippines, this Court in Leung Lee vs. FL Strong Machinery Co., et
al 37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473
of the Civil Code require "good faith," in express terms, in
relation to "possession" and title but contain no express
requirement as to 'good faith' in relation to the "inscription" of
the property in the registry, it must he presumed that good faith
is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree
with this contention. It could not have been the intention of the
legislator to base the preferential right secured under this article
of the code upon an inscription of title in bad faith. Such an
interpretation placed upon the language of this section would
open wide the door to fraud and collusion. The public records
cannot be converted into instruments of fraud and oppression
by one who secures an inscription therein in bad faith. The
force and effect given by law to an inscription in a public record
presupposes the good faith of him who enters such inscription;
and rights created by statute, which are predicated upon an

inscription in a public registry, do not and cannot accrue under


an inscription "in bad faith," to the benefit of the person who
thus makes the inscription. (pp. 648-649, supra)
Good faith means "freedom from knowledge and circumstances which
ought to put a person on inquiry"; 3* it consists of an honest intention to
abstain from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a
title superior to that of Emma Infante for even if We were to concede that
the notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same
was not accomplished in good faith. This is obvious from occurrences
narrated in the Majority Opinion, thus: that on January 27, 1955, Carbonell
and Jose Poncio made and executed the memorandum of sale, Exhibit A;
that thereafter Carbonell asked Atty. Salvador Reyes to prepare the formal
deed of sale which she brought to Poncio together with the amount of some
P400.00, the balance she had to pay in addition to her assuming the
mortgage obligation to Republic Savings Bank; that upon arriving at
Poncio's house the latter told Carbonell that he could not proceed anymore
with the sale because he had already given the lot to Emma Infants; that
onFebruary 5, 1955, Carbonell saw Emma Infante erecting a wall around
the lot with a gate; that Carbonell consulted Atty. Jose Garcia who advised
her to present an adverse claim with the office of the Register of Deeds,
and that being informed that the sale in favor of Emma Infante had not yet
been registered, Atty. Garcia prepared the notice of adverse claim which
was signed and sworn to by Rosario Carbonell and registered on February
8, 1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim
she was, therefore, cognizant of facts which impaired her title to the
property in question, and taking advantage of the situation that the second
purchaser had not as yet registered her deed of sale, she went ahead of
the second buyer and annotated what was only in the nature of an adverse
claim inasmuch as she had no registrable document of sale at the time.
That annotation of Carbonell's adverse claim did not produce any legal
effects as to place her in a preferential situation to that of Infante, the
second purchaser, for the simple reason that a registration made in bad
faith is equivalent to no registration at all. It is a settled rule that the

inscription in the registry, to be effective, must be made in good faith.


(Pena, supra, p. 164)
3. One last point to be considered is the theory advanced by the dissenting
opinion of Justice Gatmaitan that while Carbonell's registration of her
adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of
the latter's deed of sale there was already inscribed on the original of the
title on file with the Register of Deeds the adverse claim of Rosario
Carbonell.
With due respect to the foregoing conclusion of highly respected
Colleague, I hold the view that the act of the registration of Infante's deed
of sale on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is,
the registration of Infantes purchase as against Carbonell when the latter
inquired knowledge of the second sale on or about January 27, 1955, when
she brought the memorandum of sale, Exh. A, to Jose Poncio and was
informed by the latter that he could not go through with the sale because he
had already sold it to Emma Infante, which information was bolstered by
the fact that Carbonell saw Infante erecting a wall around the lot
on February 5.
We have long accepted the rule that knowledge is equivalent to
registration. What would be the purpose of registration other than to give
notice to interested parties and to the whole world of the existence of rights
or liens against the property under question?
What has been clearly and succinctly postulated in T. de Winkleman and
Winkleman vs. Veluz 1922, 43 Phil. 604, 609, is applicable to the case
before Us, and We quote therefrom:
. . . The purpose of registering an instrument relating to land,
annuities, mortgages, liens or any other class of real rights is to
give notice to persons interested of the existence of these
various liens against the property. If the parties interested have
actual notice of the existence of such liens then the necessity
for registration does not exist. Neither can one who has actual
notice of existing liens acquire any rights in such property free
from such liens by the mere fact that such liens have not been

proven recorded. (citing Obras Pias vs. Devera Ignacio, 17 Phil.


45, 47).
We cannot overlook the fact that while it may be true that the vendor
Poncio had signed the memorandum, Exh. A, from which it may be implied
that he sold a lot to Carbonell, there were other things to be accomplished
for purposes of binding third parties, the lot in question being registered
land, such as the execution of a formal deed of sale. Such a document of
sale was never signed by Poncio for according to petitioner Carbonell,
when she presented to Poncio the corresponding document together with
the sum of P400.00 which according to her was the balance of the
purchase price after she had assumed the mortgage with the Republic
Bank, she was informed by the vendor that the property had been sold to
another. That sale was confirmed when Carbonell saw Infante erecting a
wall around the lot on February 5, 1955. As of that moment when Carbonell
had notice or actual knowledge of the second sale in favor of Emma Infante
a valid registration of the latter's deed of sale was constituted as against
Carbonell. Accordingly, Infante has a preferential right to the property, the
registration of her sale having been effected in the foregoing manner, prior
to the annotation of Carbonell's adverse claim on February 8, 1955.
The circumstances of the present case are strikingly similar to the
hypothetical problem posed in Commentator Edgardo Paras' Book on the
Civil Code of the Philippines and I wholeheartedly concur with his solution
of the problem which is based on law. From him I quote: 6
A sold a parcel of land with a torrens title to B on January 5. A
week later, A sold the same land to C. Neither sale was
registered. As soon as B learned of the sale in favor of C, he
(B) registered an adverse claim stating that he was making the
claim because the second sale was in fraud of his rights as first
buyer. Later, C registered the deed of sale that had been made
in his favor. Who is now the owner B or C?
Ans. C is clearly the owner, although he was the second buyer.
This is so, not because of the registration of the sale itself but
because of the AUTOMATIC registration in his favor caused by
Bs knowledge of the first sale (actual knowledge being
equivalent to registration). The purpose of registration is to
notify. This notification was done because of Bs knowledge. It is

wrong to assert that B was only trying to protect his right-for


there was no more right to be protected. He should have
registered the sale BEFORE knowledge came to him. It is now
too late. It is clear from this that with respect to the principle
"actual knowledge is equivalent to registration of the sale about
which knowledge has been obtained' the knowledge may be
that-of either the FIRST or the SECOND buyer. (pp. 142-143,
Vol. V, 1972 Ed.)
Aside from the fact that the sale to Infante was considered registered prior
to the registration of Carbonell's notice of adverse claim, Infante also took
immediate physical possession of the property by erecting a fence with a
gate around the lot on February 5, at least tree days prior to Carbonell Is
registration on February 8, 1955.
On top of all these, equity is on the side of Emma Infante. Under the
Majority Opinion, Emma Infante stands to lose the lot she bought in good
faith which was fully paid for plus the building she erected thereon for which
she spent the total sun of a little less than P14,000.00, or equivalent to
about P40,000.00 at the time the case was decided by the Appellate Court,
considering that Rosario Carbonell is being given the option either to order
the removal of the house or to acquire it at P13,429.00. On this point I
agree with the following statement of Justice Esguerra who penned the
decision of the Appellate Court, thus:
It is indeed inequitable and re revolting to one's sense of justice
and fairness that Rosario Carbonell who paid out of her own
money the sum of only P200.00 to the Republic Savings Bank
for the account of Jose Poncio, which was the motivation for the
execution of the private instrument, Exhibit A, should have a
superior right to the land involved. The property has been
improved at a great expense and a building of strong materials
has been constructed thereon Emma Infants ho spent for her
lot and building the total sum of P13,429.00 made, up of
P11,929.00 for cost of land and improvements and the building
and P1,500.00 to discharge the mortgage in favor of the
Republic Savings Bank. with the present purchasing power of
the peso this aft i more than 13 years, would be not equivalent
to about P40,000.00. Courts should not lend a hand to the

perpetration of such kind of injustice and outrage (see page 88,


rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs.
Theime, et al., 217 p. 376; 377, that "equity is a right wiseneth that
considerate all of the particular circumstances of the case and is also
tempered with the sweetness of mercy." (quoting from St. Germain) In this
case now before Us there is no need to invoke mercy, for all that is required
is a wise consideration of the particular circumstances narrated above
which warrant a judgment in favor of respondents Infants.
With all the foregoing, I vote for the affirmance of the decision under review.

Separate Opinions
TEEHANKEE, J., concurring:
I concur. My concurrence proceeds from the same premise as the
dissenting opinion of Justice Munoz Palma that both the conflicting buyers
of the real property in question, namely, petitioner Rosario Carbonell as the
first buyer may be deemed purchasers in good faith at the respective dates
of their purchase.
The answer to the question of who between the two buyers in good faith
should prevail is provided in the second paragraph of Article 1544 of the
Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that
"the ownership of the immovable property shall belong to the person
acquiring it who in good faith first recorded it in the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private
memorandum of sale of the property in favor of the first buyer Carbonell,
However, six days later on February 2, 1955, the seller sold the property for
a second time for an improved price, this time executing a formal
registrable deed of sale in favor of the second buyer Infante.
So it was that when the first buyer Carbonell saw the seller a few days
afterwards bringing the formal deed of sale for the seller's signature and the
balance of the agreed cash payment, the seller told her that he could not

proceed anymore with formalizing the first sale because he had already
formalized the second sale in favor of the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of
sale, she did the next best thing to protect her legal rights and registered on
February 8, 1955 with the Rizal Register of Deeds her adverse claim as
first buyer entitled to the property. The second buyer Infante registered the
deed of sale in her favor with the Rizal Register of Deeds only on February
12, 1955 (notwithstanding its having been executed ten days earlier on
February 2, 1955), and therefore the transfer certificate of title issued in her
favor carried the duly annotated adverse claim of Carbonell as the first
buyer.
Both these registrations were in good faith and hence, as provided by the
cited code article, the first buyer Carbonell as also the first registrant is
legally entitled to the property.
The fact that Carbonell registered only an adverse claim as she had no
registrable deed of sale is of no moment. The facts of record amply show
that she had a written memorandum of sale, which was partially executed
with the advance payment made by her for the seller's mortgage account
with the bank, and which was perfected and binding in law by their accord
on the subject matter and price. Carbonell could in law enforce in court her
rights as first buyer under the memorandum agreement and compel the
seller to execute in her favor a formal registrable deed of sale which would
relate back to the date of the original memorandum agreement.
And under the cited code provision, Carbonell had to duly register such
adverse claim as first buyer, as otherwise the subsequent registration of the
second buyer's deed of sale would have obliterated her legal rights and
enable the seller to achieve his fraudulent act of selling the property a
second time for a better price in derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in
Carbonell's favor and (as was only to be expected) informed her that he
could not proceed anymore with the sale because he had sold it for a
second time for a better price did not convert her prior registration of her
adverse claim into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully
sold his property for a second time cannot work out to his own advantage

and to the detriment of the innocent first buyer (by being considered as an
"automatic registration" of the second sale) and defeat the first buyer's right
of priority, in time in right and in registration.
The governing principle here is prius tempore, portior jure 2 (first in time,
stronger in right). Knowledge gained by the first buyer of the second sale
cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the
second sale ahead of the first. 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 other so 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 buyer's rights)
from the time of acquisition until the title is transferred to him by registration
or failing registration, by delivery of possession. The second buyer must
showcontinuing 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.
The above principles were aptly restated in a 1948 Court of Appeals
decision in the case of Gallardo, vs. Gallardopenned by Justice J.B.L.
Reyes, then a member of the appellate court. 3 The facts of that case and
the case at bar are virtually Identical, except that the earlier case was
decided under the old Civil Code (Article 1473 thereof now reproduced as
Article 1544 of the present Civil Code), and the ratio
decidendi thereof, mutatis mutandis, is fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows
that before a second vendee can obtain priority over the first, it
is indispensable that he should have acted in good faith, (that is
to say, in ignorance of the rights of the first vendee's rights) until
the title is transferred to him by actual or constructive delivery of
the thing sold. This is the price exacted by law for his being able
to displace the first vendee; and the mere fact that the second

contract of sale was perfected in good faith is not sufficient if,


before the title passes, the second vendee acquires knowledge
of the first transaction. That the second buyer innocently agreed
to purchase the land may protect him against responsibility of
conspiring with his vendor to defraud the established rights of
the first purchaser; but to defeat the latter's priority in time
(based on the old principle "prius tempore, potior jure," first in
time, better in right) the good faith or innocence of the posterior
vendee must needs continue until his contract ripens into
ownership by tradition or recording (Palanca vs. Director of
lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was
executed after that of Caoagas is of no moment, the contract of
sale being perfected and binding by mere accord on the subject
matter and the price, even if neither is delivered (Article 1450,
Civil Code), the deed of conveyance will relate back to the date
of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955)
concededly preceded the second buyer's registration (February 12, 1955)
by four days, and therefore, as provided by the Civil Code, the first buyer
thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under
review should be affirmed, this dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his
195-square meter lot located at V. Again St., San Juan, Rizal, covered by
Transfer Certificate of Title No. 5040, the solution to which is found in Art.
1544 of the Civil Code, more particularly the second paragraph thereof
which provides that should the thing sold be immovable property, the
ownership shall belong to the person acquiring it who in good with first
recorded it in the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and
respondent Emma Infante, are both purchasers in good faith.

That Rosario Carbonell is a buyer in good faith cannot be disputed for at


the time negotiations for the purchase of the lot were being made between
her and the vendor, Jose Poncio, as of January 27, 1955, there was no
indication at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an
express finding of the trial court in its decision of January 20, 1965, to the
effect that when the vendor and purchaser. Infante consummated the sale
on or about January 29, 1955, an examination of the original of T.C.T. 5040
on file with the Register of Deeds of Rizal as well as the owner's duplicate
revealed no annotation of any encumbrance or lien other than the
mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal);
(b) the findings of fact of the Court of Appeals given in the decision penned
by then Justice Salvador V. Esguerra as well as in the first decision written
by Justice Magno Gatmaitan which subsequently became the basis of the
dissenting opinion to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it
must have to be remembered that the first vendee, Rosario
Carbonell, certainly was an innocent purchaser ... but also must
it be remembered that Emma L. Infante, when she bought the
property on 2 February, 1955, under Exhibit 3-Infante, neither
had she before then been, preliminary informed of the first sate
to Rosario ...; indeed as Emma has testified on this detail, it is
easy to accept her declaration:
Q. When Mr. Jose Poncio offered you
this land in question, did he tell you that
the land was sold or otherwise promised
to Mrs. Carbonell?
A. Of course not, otherwise will never
buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees,
Rosario and Emma, were innocent and had acted in the best of good
faith ... (pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo;
see also p. 7 of his dissenting opinion found on p. 95, rollo).

Departing from a well-entrenched rule set down in a long array of decisions


of this Court that factual findings of the trial court and of the Court of
Appeals are generally binding and conclusive, 1 and that on appeal by
certiorari, questions of fact are not to be determined nor reviewed by
Us 2 the Majority Opinion of my colleagues however undertakes a factfinding process of its own, and draws the conclusion that Emma Infante
was a buyer in bad faith because, among other things: (a) Emma allegedly
refused to talk to Rosario Carbonell when the latter went to see her about
the sale of the lot, which "is not the attitude expected of a good neighbor
imbued with Christian charity and goodwill as well as a clean conscience"
(p. 10, Majority Opinion); (b) "(B)efore or upon paying in full the mortgage
indebtedness of Poncio to the bank. Infante naturally must have demanded
from Poncio the delivery to her of his mortgage passbook as well as
Poncio's mortgage contract. . and Poncio as well as the bank, must have
inevitably informed here that said mortgage passbook could not be given to
her because it was already delivered to Carbonell" (p. 9, Ibid); and (c) "...
(T)he victim, therefore, 'of injustice and outrage is the widow Carbonell and
not the Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without
remorse of conscience, dishonored his own plighted word to Carbonell, his
own cousin. ... Inevitably evident therefore from the foregoing discussion,
is the bad faith of Emma Infantefrom the time she enticed Poncio to
dishonor his contract with Carbonell, and instead to sell the lot to
her (Infante) by offering Poncio a much higher price than the price for which
he sold the same to Carbonell ..." (p. 20, Majority Opinion; all italicized
portions supplied) all of which are unsupported by the evidence and
diametrically contrary to the findings of the court a quo and the appellate
court sustaining the good faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next
question to be resolved is who of the twofirst registered her purchase or
title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer
bought the property in good faith, but that the registration of her title must
also be accomplished in good faith. This requirement of good faith is not
only applicable to the second or subsequent purchaser but to the first as
well. 3

Construing and applying the second paragraph of Art. 1473 of the Spanish
Civil Code which has been adoptedverbatim in Art. 1544 of the Civil Code
of the Philippines, this Court in Leung Lee vs. FL Strong Machinery Co., et
al37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473
of the Civil Code require "good faith," in express terms, in
relation to "possession" and title but contain no express
requirement as to 'good faith' in relation to the "inscription" of
the property in the registry, it must he presumed that good faith
is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree
with this contention. It could not have been the intention of the
legislator to base the preferential right secured under this article
of the code upon an inscription of title in bad faith. Such an
interpretation placed upon the language of this section would
open wide the door to fraud and collusion. The public records
cannot be converted into instruments of fraud and oppression
by one who secures an inscription therein in bad faith. The
force and effect given by law to an inscription in a public record
presupposes the good faith of him who enters such inscription;
and rights created by statute, which are predicated upon an
inscription in a public registry, do not and cannot accrue under
an inscription "in bad faith," to the benefit of the person who
thus makes the inscription. (pp. 648-649,supra)
Good faith means "freedom from knowledge and circumstances which
ought to put a person on inquiry"; 3* it consists of an honest intention to
abstain from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a
title superior to that of Emma Infante for even if We were to concede that
the notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same
was not accomplished in good faith. This is obvious from occurrences
narrated in the Majority Opinion, thus: that on January 27, 1955, Carbonell
and Jose Poncio made and executed the memorandum of sale, Exhibit A;
that thereafter Carbonell asked Atty. Salvador Reyes to prepare the formal
deed of sale which she brought to Poncio together with the amount of some
P400.00, the balance she had to pay in addition to her assuming the

mortgage obligation to Republic Savings Bank; that upon arriving at


Poncio's house the latter told Carbonell that he could not proceed anymore
with the sale because he had already given the lot to Emma Infants; that
onFebruary 5, 1955, Carbonell saw Emma Infante erecting a wall around
the lot with a gate; that Carbonell consulted Atty. Jose Garcia who advised
her to present an adverse claim with the office of the Register of Deeds,
and that being informed that the sale in favor of Emma Infante had not yet
been registered, Atty. Garcia prepared the notice of adverse claim which
was signed and sworn to by Rosario Carbonell and registered on February
8, 1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim
she was, therefore, cognizant of facts which impaired her title to the
property in question, and taking advantage of the situation that the second
purchaser had not as yet registered her deed of sale, she went ahead of
the second buyer and annotated what was only in the nature of an adverse
claim inasmuch as she had no registrable document of sale at the time.
That annotation of Carbonell's adverse claim did not produce any legal
effects as to place her in a preferential situation to that of Infante, the
second purchaser, for the simple reason that a registration made in bad
faith is equivalent to no registration at all. It is a settled rule that the
inscription in the registry, to be effective, must be made in good faith.
(Pena, supra, p. 164)
3. One last point to be considered is the theory advanced by the dissenting
opinion of Justice Gatmaitan that while Carbonell's registration of her
adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of
the latter's deed of sale there was already inscribed on the original of the
title on file with the Register of Deeds the adverse claim of Rosario
Carbonell.
With due respect to the foregoing conclusion of highly respected
Colleague, I hold the view that the act of the registration of Infante's deed
of sale on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is,
the registration of Infantes purchase as against Carbonell when the latter
inquired knowledge of the second sale on or about January 27, 1955, when
she brought the memorandum of sale, Exh. A, to Jose Poncio and was
informed by the latter that he could not go through with the sale because he

had already sold it to Emma Infante, which information was bolstered by


the fact that Carbonell saw Infante erecting a wall around the lot
on February 5.
We have long accepted the rule that knowledge is equivalent to
registration. What would be the purpose of registration other than to give
notice to interested parties and to the whole world of the existence of rights
or liens against the property under question?
What has been clearly and succinctly postulated in T. de Winkleman and
Winkleman vs. Veluz 1922, 43 Phil. 604, 609, is applicable to the case
before Us, and We quote therefrom:
... The purpose of registering an instrument relating to land,
annuities, mortgages, liens or any other class of real rights is to
give notice to persons interested of the existence of these
various liens against the property. If the parties interested have
actual notice of the existence of such liens then the necessity
for registration does not exist. Neither can one who has actual
notice of existing liens acquire any rights in such property free
from such liens by the mere fact that such liens have not been
proven recorded. (citing Obras Pias vs. Devera Ignacio, 17 Phil.
45, 47).
We cannot overlook the fact that while it may be true that the vendor
Poncio had signed the memorandum, Exh. A, from which it may be implied
that he sold a lot to Carbonell, there were other things to be accomplished
for purposes of binding third parties, the lot in question being registered
land, such as the execution of a formal deed of sale. Such a document of
sale was never signed by Poncio for according to petitioner Carbonell,
when she presented to Poncio the corresponding document together with
the sum of P400.00 which according to her was the balance of the
purchase price after she had assumed the mortgage with the Republic
Bank, she was informed by the vendor that the property had been sold to
another. That sale was confirmed when Carbonell saw Infante erecting a
wall around the lot on February 5, 1955. As of that moment when Carbonell
had notice or actual knowledge of the second sale in favor of Emma Infante
a valid registration of the latter's deed of sale was constituted as against
Carbonell. Accordingly, Infante has a preferential right to the property, the

registration of her sale having been effected in the foregoing manner, prior
to the annotation of Carbonell's adverse claim on February 8, 1955.
The circumstances of the present case are strikingly similar to the
hypothetical problem posed in Commentator Edgardo Paras' Book on the
Civil Code of the Philippines and I wholeheartedly concur with his solution
of the problem which is based on law. From him I quote: 6
A sold a parcel of land with a torrens title to B on January 5. A
week later, A sold the same land to C. Neither sale was
registered. As soon as B learned of the sale in favor of C, he
(B) registered an adverse claim stating that he was making the
claim because the second sale was in fraud of his rights as first
buyer. Later, C registered the deed of sale that had been made
in his favor. Who is now the owner B or C?
Ans. C is clearly the owner, although he was the second buyer.
This is so, not because of the registration of the sale itself but
because of the AUTOMATIC registration in his favor caused by
Bs knowledge of the first sale (actual knowledge being
equivalent to registration). The purpose of registration is to
notify. This notification was done because of Bs knowledge. It is
wrong to assert that B was only trying to protect his right-for
there was no more right to be protected. He should have
registered the sale BEFORE knowledge came to him. It is now
too late. It is clear from this that with respect to the principle
"actual knowledge is equivalent to registration of the sale about
which knowledge has been obtained' the knowledge may be
that-of either the FIRST or the SECOND buyer. (pp. 142-143,
Vol. V, 1972 Ed.)
Aside from the fact that the sale to Infante was considered registered prior
to the registration of Carbonell's notice of adverse claim, Infante also took
immediate physical possession of the property by erecting a fence with a
gate around the lot on February 5, at least tree days prior to Carbonell Is
registration on February 8, 1955.
On top of all these, equity is on the side of Emma Infante. Under the
Majority Opinion, Emma Infante stands to lose the lot she bought in good
faith which was fully paid for plus the building she erected thereon for which

she spent the total sun of a little less than P14,000.00, or equivalent to
about P40,000.00 at the time the case was decided by the Appellate Court,
considering that Rosario Carbonell is being given the option either to order
the removal of the house or to acquire it at P13,429.00. On this point I
agree with the following statement of Justice Esguerra who penned the
decision of the Appellate Court, thus:
It is indeed inequitable and re revolting to one's sense of justice
and fairness that Rosario Carbonell who paid out of her own
money the sum of only P200.00 to the Republic Savings Bank
for the account of Jose Poncio, which was the motivation for the
execution of the private instrument, Exhibit A, should have a
superior right to the land involved. The property has been
improved at a great expense and a building of strong materials
has been constructed thereon Emma Infants ho spent for her
lot and building the total sum of P13,429.00 made, up of
P11,929.00 for cost of land and improvements and the building
and P1,500.00 to discharge the mortgage in favor of the
Republic Savings Bank. with the present purchasing power of
the peso this aft i more than 13 years, would be not equivalent
to about P40,000.00. Courts should not lend a hand to the
perpetration of such kind of injustice and outrage (see page 88,
rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs.
Theime, et al., 217 p. 376; 377, that "equity is a right wiseneth that
considerate all of the particular circumstances of the case and is also
tempered with the sweetness of mercy." (quoting from St. Germain) In this
case now before Us there is no need to invoke mercy, for all that is required
is a wise consideration of the particular circumstances narrated above
which warrant a judgment in favor of respondents Infants.
With all the foregoing, I vote for the affirmance of the decision under review.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 129760 December 29, 1998


RICARDO CHENG, petitioner,
vs.
RAMON B. GENATO and ERNESTO R. DA JOSE & SOCORRO DA
JOSE, respondents.

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,
Intervenors-Appellants" 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 defendantappellant's Affidavit to Annul Contract to Sell and plaintiffappellee's Notice of Adverse Claim in the subject TCT's,
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 the 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, attorney's fees of
P50,000.00, and costs of suit; and to defendant-appellant, of
P100,000.00 in exemplary damages, P50,000.00 in attorney's
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. T-76.197 (M) 4 with an aggregate area of
35,821square 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 above-mentioned 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 1and 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 (P950,00.00)
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.
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
Genato's 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.
Check # 470393 (SGD.) Ramon B. Genato
10/24/89 9
On October 25, 1989, Genato deposited Cheng's 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 Cheng's 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
While the Da Jose spouses were at the Office of the Registry of Deeds of
Meycauayan, 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.
Thereafter, Ramon Genato advised Ricardo Cheng of his decision to
continue his contract with the Da Jose spouses and the return of Cheng's
P50,000.00 check. Consequently, on October 30, 1989, Cheng's 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 Cashier's 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 TCT's.
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 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 cited Cheng's bad faith as a buyer being duly informed by
Genato of the existing annotated Contract to Sell on the titles.
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:
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 defendant's 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 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, Meycauayan Branch, at the rate
of P70.000/square meter, less the amount of P50,000.00
alreaddy 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 attorney's
fees, to plaintiff;
d/ P20,000.00, as and for attorney's
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 Cheng's 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 or resolution of the Da Jose
spouses Contract to Sell, contrary to petitioner's contentions and the trial
court's 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 obligor's 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 on 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 his 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 extrajudicial steps
to protect its interest. Otherwise, the party injured by the other's
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 obligee's 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 Cheng's
contention that the Contract to Sell between Genato and the Da Jose
spouses was rescinded or resolved due to Genato's 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 Conditional
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 Cheng's contention in his
pleadings before said courts. This patent twist only operates against
Cheng's 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
enfoceable. 36
To support his now new theory that the transaction was a conditional
contract of sale, petitioner invokes the case ofCoronel 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 outlined 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.

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.
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:
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 he 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 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 non-fulfillment 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 petitioner's intrusion as a second buyer. This
principle only applies when the special rules provided in the aforcited article
of the 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 buyer's rights) from the time of
acquisition until title is transferred to him by registration or failing
registration, by delivery of possession; 39
(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
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.
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 Genato's 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 . . .
of title in his vendor cannot claim that he has acquired title
thereto in good faith as against . . . . 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 vendor's 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. 46Such 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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-27587 February 18, 1970


AMADO CARUMBA, petitioner,
vs.
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.

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 proceedings is thus stated by
the Court of Appeals (pages 1-2):
On April 12, 1955, 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 or 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, 1968, the exofficio 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.
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 Carumba's 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 Balbuena's title was superior to that of his adversary under
Article 1544 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 double 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 sheriff's execution
sale only steps into the shoes of the judgment debtor, and merely acquires
the latter's 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:
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 ... (Emphasis 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.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC
G.R. No. L-19248

February 28, 1963

ILUMINADO HANOPOL, plaintiff-appellant,


vs.
PERFECTO PILAPIL, defendant-appellee.
Jesus P. Narvios for plaintiff-appellant.
Estacion & Paltriquerra for defendant-appellee.
BARRERA, J.:
This is a case of double sale of the same parcel of unregistered land
decided by the Court of First Instance of Leyte (Civil Case No. 21) in favor
of defendant-appellee Perfecto Pilapil, originally appealed by plaintiffappellant Iluminado Hanopol to the Court of Appeals, but later certified to
this Court for proper adjudication, the issues involved being exclusively of
law.
Appellant Hanopol claims ownership of the land by virtue of a series of
purchases effected in 1938 by means of private instruments, executed by
the former owners Teodora, Lucia, Generosa, Sinforosa and Isabelo, all
surnamed Siapo. Additionally, he invokes in his favor a decision rendered
by the Court of First Instance of Leyte (in Civil Case No. 412) on a
complaint he filed on June 16, 1948, against the same vendors, who,
according to his own averments, took possession of the said property in
December, 1945 through fraud, threat and intimidation, pretending falsely
to be the owners thereof and ejecting the tenants of Hanopol thereon, and
since then had continued to possess the land. Decision declaring him the
exclusive owner of the land in question and ordering therein defendants to
deliver possession thereof was rendered on September 21, 1958.
On the other hand, appellee Pilapil asserts title to the property on the
strength of a duly notarized deed of sale executed in his favor by the same
owners on December 3, 1945, which deed of sale was registered in the
Registry of Deeds of Leyte on August 20, 1948 under the provisions of Act
No. 3344.
Wherefore, the parties respectfully pray that the foregoing stipulation of
facts be admitted and approved by this Honorable Court, without prejudice

to the parties adducing other evidence to prove their case not covered by
this stipulation of facts. 1wph1.t
The case was submitted for decision without any testimonial evidence, both
parties relying exclusively on their documentary evidence consisting, on the
part of Hanopol, of the private instruments alluded to and a copy of the
decision in the reivindicatory case, and on the part of Pilapil, the notarized
deed of sale in his favor bearing annotation of its registration under Act No.
3344. As thus submitted, the trial court rendered the decision adverted to at
the beginning of this opinion, mainly upon the authority of the second
paragraph of Article 15441 of the New Civil Code, which is a reproduction of
Article 1473 of the old Civil Code, the law in force at the time the
transaction in this case took place.
Appellant Hanopol in his appeal from the decision of the trial court presents
two questions of law; firstly, whether or not the judgment in the former case
No. 412 against the vendors Siapos is binding upon the defendant-appellee
as their successor-in-interest; and secondly, whether or not the registration
of the second deed of sale in favor of appellee Pilapil affects his right as the
first vendee.
Under the first assignment of error, the appellant contends that inasmuch
as appellee claims to be the successor-in-interest of the vendors, he is
bound by the judgment rendered against the latter. This contention is
without merit, because it appears from the documentary evidence that
appellee Pilapil derived his right to the land from the sale to him of the said
property on December 3, 1945, long before the filing of the complaint
against the vendors in 1948. He was not made a party in the case against
the Siapos, and there was not even a claim that he had knowledge of said
litigation. He cannot, therefore, be bound by such judgment in view of the
provision of paragraph (b), Section 44 of Rule 39 of the Rules of Court
which speaks of the effect of judgment as follows:
... the judgment so ordered is, in respect to the matter directly
adjudged, conclusive between the parties and their successors in
interest by title subsequent to commencement of the action or special
proceeding, litigating for the same thing and under the same title and
in the same capacity. (Emphasis supplied)

Since Pilapil was not a party to the action and is not a successor-in-interest
by title subsequent to the commencement of the action, having acquired his
title in 1945 and the action filed in 1948, the decision in said case cannot
be binding on him.
Appellant argues under the second issue raised by him that the registration
of Pilapil's notarized deed of sale in 1948 under Act No. 3344 "shall be
understood to be without prejudice to a third party with a better right". He
contends that since at the time the Siapos sold the land in question in 1945
to Pilapil, the former were no longer the owners as they had already sold
the same to appellant since 1938, the first sale to him is a better right which
cannot be prejudiced by the registration of the second sale.
We do not think the quoted proviso in Act No. 3344 justifies appellant's
contention. If his theory is correct, then the second paragraph of Article
1544 of the New Civil Code (formerly Article 1473 of the old Code) would
have no application at all except to lands or real estate registered under the
Spanish Mortgage Law or the Land Registration Act. Such a theory would
thus limit the scope of that codal provision. But even if we adopt this latter
view, that is, that Article 1544 (formerly Article 1473) only applies to
registered land, still we cannot agree with the appellant that by the mere
fact of his having a previous title or deed of sale, he has acquired thereby
what is referred to in Act No. 3344 as the "better right" that would be
unaffected by the registration of a second deed of sale under the same law.
Under such theory, there would never be a case of double sale of the same
unregistered property.
An example of what could be a better right that is protected against the
inscription of a subsequent sale is given in the case of Lichauco v.
Berenguer (39 Phil. 643). The facts in that case are succinctly stated in the
syllabus thereof as follows:
.... In 1882 B sold to S a piece of land. After the sale B continued in
the possession of the land in the capacity of lessee of S through
payment of rent, and continued as such until his death when he was
substituted by the administrator of his property. In 1889 B sold again
the same piece of land to L who leased it to B himself under certain
conditions. Both sales were executed in a public instrument, the one
executed in favor of L being registered only in 1907. Thus, S and L
acquired possession of the land through the same vendor upon the

latter's ceasing to be the owner and becoming the lessee of said S


and L, respectively. HELD: (1) That, with reference to the time prior to
1907, the preference should be in favor of the purchaser who first
took possession of the land, because this possession, according to
the law in force prior to the promulgation of the Civil Code, constituted
the consummation of the contract, and also because afterwards the
Civil Code expressly establishes that possession in such cases
transfers the ownership of the thing sold. (2) That, when a person
buys a piece of land and, instead of taking possession of it, leases it
to the vendor, possession by the latter after the sale is possession by
the vendee, and such possession, in case of a double sale,
determines the preference in favor of the one who first took
possession of it, in the absence of inscription, in accordance with the
provision of article 1473 of the Civil Code, notwithstanding the
material and personal possession by the second vendee. (Bautista
vs. Sioson, 39 Phil. Rep., 615)
.... Because L had to receive his possession from B who was a mere
lessee of S and as such had no possession to give, inasmuch as his
possession was not for himself but in representation of S, it follows
that L never possessed the land..
.... The effect which the law gives to the inscription of a sale against
the efficacy of the sale which was not registered is not extended to
other titles which the other vendee was able to acquire independently
as, in this case, the title by prescription.
It thus appears that the "better right" referred to in Act No. 3344 is much
more than the mere prior deed of sale in favor of the first vendee. In the
Lichauco case just mentioned, it was the prescriptive right that had
supervened. Or, as also suggested in that case, other facts and
circumstances exist which, in addition to his deed of sale, the first vendee
can be said to have better right than the second purchaser.
In the case at bar, there appears to be no clear evidence of Hanopol's
possession of the land in controversy. In fact, in his complaint against the
vendors, Hanopol alleged that the Siapos took possession of the same land
under claim of ownership in 1945 and continued and were in such
possession at the time of the filing of the complaint against them in 1948.
Consequently, since the Siapos were in actual occupancy of the property

under claim of ownership, when they sold the said land to appellee Pilapil
on December 3, 1945, such possession was transmitted to the latter, at
least constructively, with the execution of the notarial deed of sale, if not
actually and physically as claimed by Pilapil in his answer filed in the
present case. Thus, even on this score, Hanopol cannot have a better right
than appellee Pilapil who, according to the trial court, "was not shown to be
a purchaser in bad faith".
WHEREFORE, finding no error in the decision appealed from, the same is
hereby affirmed, with costs against the appellant. So ordered.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18497

May 31, 1965

DAGUPAN TRADING COMPANY, petitioner,


vs.
RUSTICO MACAM, respondent.
Angel Sanchez for petitioner.
Manuel L. Fernandez for respondent.
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 oneeighth 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 attorney's fees and costs.

Answering the complaint, appellee alleged, in the main, that Sammy


Maron's 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 the levy in execution was made on
Sammy Maron's 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 thereon. 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 appeal, 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 Maron's, 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 Sheriff's certificate of final sale in
favor of the Manila Trading and Supply Co. because nobody exercised
the right of redemptions were duly registered. On March 1, 1958, the
latter sold all its rights and title to 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 one-eighth 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 appellee's claim, the deeds of sale executed in his favor
by the Maron's 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. vs.
Garcia, 64 Phil. 506; Reynes, et al. vs. Barrera, et al., 68 Phil. 656; Banco
Nacional, etc. vs. Camus, 70 Phil. 289)
The present case, however, does not fall within either, situation. Here the
sale in favor of appellee was executedbefore the land subject-matter
thereof was registered, while the conflicting sale in favor of appellant was
executedafter the same property had been registered. We cannot,
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 one-eighth 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 retrievably 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 vs. Licuaco, 13
Phil. 357-358; Landig vs. U.S. Commercial Company, G.R. No. L-3597,
July 31, 1951). 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 cannot, therefore, but agree
with the following statement contained in the appealed decision:
... . 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
execution 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.1wph1.t
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 thereon. 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.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-13442 December 20, 1919
NARCISA SANCHEZ, plaintiff-appellant,
vs.
ROQUE RAMOS, defendant-appellee.

Irureta Goyena and Recto for appellant.


Sisenando Palarca for appellee.
AVANCEA, J.:
This is an action for the recovery of a piece of land described in the second
paragraph of the complaint. This land is in the defendant's possession and
formerly belonged to Ciriaco Fernandez. On July 1, 1910, Ciriaco
Fernandez sold it to the spouses Marcelino Gomez and Narcisa Sanchez
under pacto de retro for the period of one year. This also was executed in a
public instrument. Marcelino Gomez and Narcisa Sanchez never took
material possession of the land. The period for repurchase elapsed without
the vendor making use of it. On July 3, 1912, Ciriaco Fernandez again sold
the same land, by means of a private document, to Roque Ramos who
immediately took material possession thereof. By applying article 1473 of
the Civil Code, the trial court declared preferable the sale executed to the
defendant and absolved him from the complaint.
By the same article applied by the lower court, we are of the opinion that
the sale executed to the plaintiff must be declared preferable. This article
provides:
ART. 1473. 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
personal property.
Should it be real property, it shall belong to the purchaser who first
recorded it in the registry of deeds.
Should it not be recorded, the property shall belong to the person
who first took possession of it in good faith, or, in default of
possession, to the person who presents the oldest title, provided
there is good faith.
Not one of the documents of sale in this case having been recorded,
preference must be decided in favor of the vendee who first took
possession.lawphi1.net
To what kind of possession does this article refer? Possession is acquired
by the material occupancy of the thing or right possessed, or by the fact

that the latter is subjected to the action of our will, or by the appropriate
acts and legal formalities established for acquiring possession (art. 438,
Civil Code.). By a simple reasoning, it appears that, because the law does
not mention to which of these kinds of possession the article refers, it must
be understood that it refers to all of these kinds. The proposition that this
article, according to its letter, refers to the material possession and
excludes the symbolic does not seem to be founded upon a solid ground. It
is said that the law, in the gradation of the causes of preference between
several sales, fixes, first, possession and then the date of the title and, as a
public instrument is a title, it is claimed that the inference is that the law has
deliberately intended to place the symbolic possession, which the
execution of the public document implies after the material possession.
This argument, however, would only be forceful if the title, mentioned by
this article, includes public instruments, and this would only be true if public
instruments are not included in the idea of possession spoken of in said
article. In other words, the strength of the argument rests in that this
possession is precisely the material and does not include the symbolic.
Consequently, the argument is deficient for it is begging the same question,
because if this possession includes the symbolic, which is acquired by the
execution of a public instrument, it should be understood that the title,
mentioned by the law as the next cause of preference, does not include
public instruments.
Furthermore, our interpretation of this article 1473 is more in consonance
with the principles of justice. The execution of a public instrument is
equivalent to the delivery of the realty sold (art. 1462, Civil Code) and its
possession by the vendee (art. 438). Under these conditions the sale is
considered consummated and completely transfers to the vendee all of the
vendor's rights of ownership including his real right over the thing. The
vendee by virtue of this sale has acquired everything and nothing,
absolutely nothing, is left to the vendor. From this moment the vendor is a
stranger to the thing sold like any other who has never been its owner. As
the thing is considered delivered, the vendor has no longer the obligation of
even delivering it. If he continues taking material possession of it, it is
simply on account of vendee's tolerance and, in this sense, his possession
is vendor's possession. And if the latter should have to ask him for the
delivery of this material possession; it would not be by virtue of the sale,
because this has been already consummated and has produced all its
effects, but by virtue of the vendee's ownership, in the same way as said
vendee could require of another person although same were not the

vendor. This means that after the sale of a realty by means of a public
instrument, the vendor, who resells it to another, does not transmit anything
to the second vendee and if the latter, by virtue of this second sale, takes
material possession of the thing, he does it as mere detainer, and it would
be unjust to protect this detention against the rights to the thing lawfully
acquired by the first vendee.
We are of the opinion that the possession mentioned in article 1473 (for
determining who has better right when the same piece of land has been
sold several times by the same vendor) includes not only the material but
also the symbolic possession, which is acquired by the execution of a
public instrument.
From the foregoing it follows that the plaintiff was the first to take
possession of the land, and consequently the sale executed to him is
preferable.
Wherefore, the judgment appealed from is hereby reversed; the plaintiff is
declared owner of the land in question; and the defendant is ordered to
deliver the possession of the land to the plaintiff. No special findings as to
costs. So ordered.
Arellano, C.J., Torres, Johnson, Araullo and Malcolm, JJ., concur.

Separate Opinions
STREET, J., dissenting:
In my judgment the possession referred to in article 1473 of the Civil Code
is the actual, material and physical possession of the thing sold; and in
applying that provision no account should ever be taken of the symbolic
possession which is supposed to be acquired by the purchaser, under
article 1463 of the Civil Code, when the sale is proved by a public
document.
The authors of the Civil Code have stated three distinct criteria for
determining who has the better right when the same piece of real property
is sold by the same vendor, to two different persons, which are: First,

priority of registration; secondly, in default of registration, the taking of


possession in good faith by the purchaser, and thirdly, in default of both the
preceding factors, mere priority of title.
The only possible purpose which the codifiers could have had in mind in
inserting this article in the Code was to prevent what in many cases
amounts to a fraud upon the innocent second purchaser. The first
purchaser needs no protection, for in the absence of special provisions, he
would always have the superior right by virtue of the priority of his title.
Now, as will be discerned, the danger to the second purchaser consists
precisely in his ignorance of the fact that a prior sale was made, due to the
possible secrecy of the transaction and to the occultation by the parties
thereto of the circumstances which would ordinarily reveal the existence of
such sale.
In order, then, to protect the second purchaser, the authors of the Civil
Code saw fit to state two conditions either of which, when fulfilled, gives the
second purchaser the better right, namely, priority of registration and
priority in the acquisition of possession. These tests must both be
understood to relate to acts extrinsic to the contracts, or documents of sale,
under which the rival purchasers pretend to have acquired title. Otherwise
the whole purpose of the article is defeated.
When a question is made between two person claiming the same land
under documents executed by the same vendor, and the right has to be
determined by the fact of registration, we here have recourse to a test
which is extrinsic to the original act of executing the document and
incapable of occultation. Likewise, when the right is to be determined by
the other test, namely, the taking of possession by one or the other of the
vendees, reference must be had to the taking of material possession as an
act extrinsic to the execution of the contract, or document of sale, under
which possession was taken.
The question as to who has the material possession of a parcel of real
property can usually be ascertained by inspection or inquiry among person
living in the neighborhood, and although the information thus obtained is
less certain and absolute than that which would be revealed by the
registration of title; nevertheless there is a presumption of ownership from
the fact of possession, and a purchaser who, relying on the evidence
supplied by his eyes, pays his money to one who is believed to be the true

owner and takes the material possession from him, should be protected as
against any prior purchaser except the one who may have registered his
title. This was without doubt the intention of the codifiers. Otherwise the
third paragraph of article 1473 would have been so drawn as to read as
follows:
Should it not be recorded, the property shall belong to the
person whose purchase is proved by a public instrument, and if
neither sale be thus proved , to the person who first took possession
of it in good faith, or, in default of possession, to the person who
presents the oldest title, provided there is good faith.
In other words, if the codifiers had intended to create a preferential right
based upon the fact that a contract of sale is executed in the form of a
public instrument, this would have been enumerated among the criteria
expressed in article 1473, as giving the better right.
The omission of the authors of the Code of take this course in framing that
article is significant; and it was doubtless due to a perception of the fact
that the form in which a contract happens to be executed affords no proper
test when the question is between one who claims under that contract and
one who claims under another contract of later date executed by the same
vendor. The court, by the decision made in this case has, we submit,
amended article 1473 by inserting therein a provision antagonistic to the
spirit of that article and destructive of its purpose.
If there were any real publicity incident to the execution of a public
instrument, the result would not be so baleful. But under our existing
notarial system, the acknowledgment of a document before a notary
involves no general publicity; and the inspection so long as it remains in the
hands of the notary. Besides, where there are dozens of notaries
accessible to the public, as in the city of Manila, it would be impracticable
for a person, desirous of purchasing a particular piece of unregistered
property, to ascertain whether or not such property has been the subject of
a prior sale acknowledged before a notary. The impossibility of protecting a
purchaser in good faith from such occult prior transactions is obvious.
THIRD DIVISION
SPOUSES

SAMUEL

ULEP

G.R. No. 125254

(Deceased)
and
SUSANA
REPOGIA-ULEP; SAMUEL ULEP
is substituted by his surviving
spouses SUSANA REPOGIAULEP and his children: SALLY,
RENATO,
RODELIO
and
RICHARD, all surnamed ULEP,
and VALENTINA ULEP,
Petitioners,

Present:
PANGANIBAN, J., Chairman
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES and
GARCIA, JJ.

- versus HONORABLE
COURT
OF
Promulgated:
APPEALS, former Eight Division,
IGLESIA NI CRISTO, MAXIMA
RODICO and spouses WARLITO
October 11, 2005
PARINGIT and ENCARNACION
PARINGIT- GANTE,
Respondents.
x----------------------------------------------------------------------------------x
DECISION
GARCIA, J.:
Under consideration is this petition for review under Rule 45 of the Rules of
Court seeking the reversal and setting aside of the Decision [1] dated August
15, 1995 of the Court of Appeals (CA) in CA-G.R. CV. No. 39333, and its
Resolution[2] dated April 25, 1996, denying petitioners motion for
reconsideration.
The assailed decision modified the June 17, 1991 decision [3] of the
Regional Trial Court at Urdaneta, Pangasinan, Branch 48, in its Civil Case
No. U-3929, an action for Quieting of Title, Reconveyance and Declaration
of Nullity of Titles and Subdivision Plan, with Damages, thereat
commenced by the petitioners against the herein private respondents.
The factual antecedents:

Principal petitioners SAMUEL ULEP, now deceased and substituted by his


heirs, and VALENTINA ULEP are brother-and-sister. Together with their
siblings, namely, Atinedoro Ulep and Rosita Ulep, they are children of the
late Valentin Ulep.
During his lifetime, the father Valentin Ulep owned a parcel of land,
identified as Lot 840 with an area of 3,270 square meters, located at
Asingan, Pangasinan.
Sometime in 1950, the older Ulep sold the one-half (1/2) eastern
portion of Lot 840, comprising an area of 1,635 square meters, to
respondentMaxima Rodico, while the remaining one-half (1/2) western
portion with the same area, to his son Atinedoro Ulep married to Beatriz
Ulep, and to his other daughter Valentina Ulep.
On June 5, 1952, all the transferees of Lot 840, namely, Maxima Rodico
(for the eastern portion) and Atinedoro Ulep and Valentina Ulep (for the
western portion), were jointly issued in their names Transfer Certificate of
Title No. 12525.
On June 18, 1971, Atinedoro Ulep, his wife Beatriz and sister Valentina
Ulep sold the one-half (1/2) portion of the area sold to them by their father
to their brother Samuel Ulep and the latters wife, Susana Repogia-Ulep.
The portion sold to Samuel and Susana has an area of 817.5 square
meters. The document of sale was registered with the Office of the Registry
of Deeds of Pangasinan on February 20, 1973.
Later, an area of 507.5 square meters of the western portion of Lot 840
was sold by the spouses Atinedoro Ulep and Beatriz Ulep to
respondentWarlito Paringit and the latters spouse Encarnacion Gante,
who were then issued TCT No. 12688 on September 23, 1975.
Evidently, all the foregoing transactions were done and effected without an
actual ground partition or formal subdivision of Lot 840.
In June 1977, respondent Iglesia ni Cristo (INC) begun constructing its
chapel on Lot 840. In the process, INC encroached portions thereof
allegedly pertaining to petitioners and blocked their pathways.

This prompted Samuel Ulep and sister Rosita Ulep to make inquiries with
the Office of the Register of Deeds of Pangasinan. To their consternation,
they discovered from the records of said office that a deed of sale bearing
date December 21, 1954, was
purportedly executed by their brother Atinedoro Ulep his, wife Beatriz and
their sister Valentina Ulep in favor of INC over a portion of 620 square
meters, more or less, of Lot 840, and that on the basis of said deed, INC
was issued TCT No. 12689 on September 23, 1975 [4] over the portion
allegedly sold to it by the three. Samuel was further shocked to find out that
on July 9, 1975, an affidavit of subdivision was executed by
respondentsINC, Maxima Rodico and the spouses Warlito Paringit and
Encarnation Gante, on the basis of which affidavit Lot 840 was subdivided
into four (4) lots, namely: (1) Lot 840-A, covered by TCT No. 16205 in his
(Samuels) name that of his wife, Susana Repogia-Ulep; (2) Lot 840-B,
covered by TCT No. 12688 in the names of Warlito Paringit and the latters
wife Encarnacion Gante; (3) Lot-C 840-C, covered by TCT No. 12689 in the
name of INC; and (4) Lot 840-D, covered by TCT No. 12690 [5] in the name
of Maxima Rodico.
Such was the state of things when, on March 29, 1983, in the Regional
Trial Court at Pangasinan, the spouses Samuel Ulep and Susana
Repogia-Ulep, the spouses Atinedoro Ulep and Beatriz Ulep and
their sister Valentina Ulep, filed their complaint for Quieting of Title,
Reconveyance and Declaration of Nullity of Title and Subdivision Plan with
Damages against respondents INC, Maxima Rodico and the spouses
Warlito Paringit and Encarnacion Gante. In their complaint, docketed as
Civil Case No. U-3929, the Uleps basically alleged that they and
respondents are co-owners of Lot 840 in the following proportions:
1,635 square meters to Maxima Rodico;
817.5 square meters to spouses Samuel Ulep and Susana
Repogia-Ulep;
507.5 square meters to spouses Warlito Paringit and
Encarnacion Gante;
210 square meters to spouses Atinedoro Ulep and Beatriz Ulep,
and Valentina Ulep;

100 square meters to Iglesia Ni Cristo.[6]


In the same complaint, the spouses Atinedoro Ulep and Beatriz Ulep
and their sister Valentina Ulep denied having executed a deed of sale in
favor of INC over a portion of 620 square meters of Lot 840, claiming that
their signatures appearing on the deed were forged. At the most, so they
claimed, what they sold to INC was only 100 square meters and not 620
square meters. Petitioners Samuel Ulep and Valentina Ulep, along with the
spouses Atinedoro Ulep and Beatriz Ulep, likewise averred that the subject
lot was subdivided without their knowledge and consent.
In their common Answer, respondents Maxima Rodico and the spouses
Warlito Paringit and Encarnacion Gante maintained that the segregation of
their shares was known to petitioners and that it was done with the consent
of Samuel Ulep himself.
For its part, INC, in its separate Answer, asserted that it purchased from the
spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina Ulep
the portion containing 620 square meters of Lot 840 on December 21,
1954, as evidenced by a deed of sale duly registered with the Registry of
Deeds of Pangasinan.
During the pendency of the proceedings in Civil Case No. U-3929,
Atinedoro Ulep died. Less than a month thereafter, or more specifically on
November 16, 1987, Atinedoros widow Beatriz Ulep and their children
executed a deed of renunciation, thereunder waiving all their rights and
interests over Lot 840 and relinquishing the same in favor of the spouses
Samuel Ulep and Susana Repogia-Ulep.[7]
Eventually, in a decision dated June 17, 1991, the trial court rendered
judgment, as follows:
There being no res adjudicata in this case as already
decided by the Court of Appeals, this Court renders judgment
as borne out by the evidence presented in favor of the
[petitioners] and against the [respondents], ordering the latter
and all persons claiming title under them to vacate and
surrender a portion of 520 sq. m. of the land in question in favor
of the [petitioners] in such a way that [respondent] INC owns
only 100 sq. m.; declaring and annulling the following
documents;

1. Deed of sale dated December 21, 1954 allegedly


executed by plaintiffs-spouses Atinedoro Ulep
and Beatriz Aguilar and Valentina Ulep in
favor of [respondent] INC, (Exh. A);
2. TCT No. 12689 issued to Iglesia Ni Cristo (Exh.
K-1);
3. The affidavit of confirmation of subdivision, (Exh.
K and Exh. 2); and
4. TCT No. 12605 (Exh. K-4) and a new TCT No. be
issued to include the original 817.5 sq. m. in
favor of Samuel Ulep and Susan Repogia;
Declaring Lot No. 840 to be owned by the following
parties in the following proportions:
(a)

1,635 sq. m. eastern portion


to [respondent] Maxima Rodico already
covered by TCT No. 12690 (Exh. K-3);

(b)

817.5 sq. m. to [petitioners]


Samuel Ulep and Susana Repogia and a new
TCT to be issued;

(c)

of 210 sq. m. to [petitioners]


Samuel Ulep and Susana Repogia; and the
other one-half or 105 sq. m. to [petitioner]
Valentina Ulep in accordance with Exh. C, a
deed of renunciation executed by the heirs of
Atinedoro Ulep who died in 1987 and his
surviving spouse Beatriz Aguilar and a new
Transfer Certificate of Title be issued;

(d)

507.5 sq. m. to [respondents]


Warlito Paringit and Encarnacion Gante,
already covered by TCT No. 12688 (Exh. K2);

(e)

100 sq. m. to [respondent]


Iglesia Ni Cristo; and a new title to be issued;

and ordering the Register of Deeds of Pangasinan, to issue


new Transfer Certificate of Title in favor of [petitioners] Samuel
Ulep and Susana Repogia covering 817.5 sq. m.; and another
new Transfer Certificate of Title covering 105 sq. m. in favor of
Valentina Ulep and the other of 210 sq. m. or 105 sq. m. in
favor of Samuel Ulep and Susana Repogia pursuant to Exh. C;
and still another new Transfer Certificate of Title covering 100
sq. m. in favor of Iglesia Ni Cristo and for the latter to pay the
costs.
SO ORDERED.[8] (Words in bracket ours).
Dissatisfied, respondent INC interposed an appeal to the Court of Appeals
(CA), which appellate recourse was thereat docketed as CA-G.R. CV No.
39333. For their part, respondents Maxima Rodico and the spouses Warlito
Paringit and Encarnacion Gante opted not to appeal.
As stated at the threshold hereof, the appellate court, in its Decision
dated August 15, 1995, modified that of the trial court, thus:
WHEREFORE, premises considered, the appealed
judgment is MODIFIED as above indicated. Accordingly, the
decretal portion of said judgment should read as follows:
1. The Deed of Absolute Sale dated December 21, 1954
executed by plaintiffs-spouses Atinedoro Ulep and
Beatriz Aguilar and Valentina Ulep in favor of
[respondent] INC is declared valid (Exh. K-1).
2. Lot No. 840 is declared as owned by the following
parties in the following proportions:
(f)

1,635 sq. m. eastern portion to


[respondent] Maxima Rodico already
covered by TCT No. 12690 (Exh. K-3);

(g)

297.5 sq. m. to [petitioner]-spouses


Samuel Ulep and Susana Repogia;

(h)

of 210 sq. m. to [petitioner]-spouses


Samuel Ulep and Susana Repogia; and

the other one-half or 105 sq. m. to


Valentina Ulep in accordance with Exh.
C, a deed of renunciation executed by
the heirs of Atinedoro Ulep who died in
1987 and his surviving spouse Beatriz
Aguilar;
(i)

507.5 sq. m. to [respondents] Warlito


Paringit and Encarnacion Gante,
already covered by TCT No. 12688
(Exh. K-2);

(j)

620 sq. m. to [respondent] INC,


already covered by TCT No. 12689
(Exh. K-1).

3. TCT No. 16205 registered in the names of [petitionerspouses] Samuel and Susan Ulep (Exh. K-4) is annulled.
The Register of Deeds of Pangasinan is ordered to issue
a new TCT in favor of [petitioner-spouses] Samuel Ulep and
Susana Repogia covering only 297.5 sq. m.; and another new
TCT covering 105 sq. m. in favor of Valentina Ulep and the
other of 210 sq. m. or 105 sq. m. in favor of [petitioner-spouses]
Samuel Ulep and Susana Repogia pursuant to Exh.
C. No Costs.
SO ORDERED.[9] (Words in brackets ours).
In so ruling, the Court of Appeals explained:
There is no adequate evidentiary demonstration in the
record that the deed of sale (dated December 21, 1954
executed by Atinedoro Ulep, his wife Beatriz and sister
Valentina Ulep in favor of INC over the 620 square-meter area
of the western portion of Lot 840) is void and inefficacious on
account of forgery.

As a public instrument which enjoys the presumption of


regularity, clear and convincing evidence is necessary to
contradict the terms thereof.
xxx xxx xxx
In the present case, the biased, interested testimony of
[petitioners] cannot overcome the evidentiary force of the deed
of sale which was acknowledged before a notary public, and
hence, a public document.
xxx xxx xxx
The sale of 620 sq. m. in favor of [respondent] INC
executed by vendors Atinedoro and Valentina Ulep is dated
December 21, 1954, while the sale of 817.50 sq. meters by the
same vendors to [petitioners] Samuel and Susana Ulep was
made on June 18, 1971. [Respondent] INC registered its 620
sq. meters on December 21, 1954 by reason of which TCT No.
12689 was issued in its name. [Petitioner-spouses] Samuel and
Susana Ulep registered the land sold to them on February 9,
1977 and TCT No. 16205 was issued in their names. Evidently,
applying Article 1544, [petitioner] INCs ownership and title over
the 620 sq. meters prevail. The land consisting of 620 sq.
meters was first sold to INC and its title was registered first.
Thus, the same vendors could have sold only the remaining
297.50 sq. meters of Lot 840 to [petitioner-spouses] Samuel
and Susana Ulep and TCT No. 16205 issued in the latters
name for 817.50 sq. meters is null and void. There is no
evidence that [respondent] INC is guilty of bad faith in acquiring
the 620 sq. meters portion of Lot 840. (Words in bracket ours).
Their motion for reconsideration having been denied by the same
court in its equally challenged Resolution of April 25, 1996, petitioners are
now with us via the present recourse, faulting the appellate court as
follows:
I.
THE HONORABLE COURT OF APPEALS ERRED IN NOT
AFFIRMING THE DECISION DATED JUNE 17, 1991 (ANNEX

A) OF THE TRIAL COURT, REGIONAL TRIAL COURT, FIRST


JUDICIAL REGION, BRANCH 48, URDANETA PANGASINAN
IN CIVIL CASE NO. 3929.
II.
AND IN THE ALTERNATIVE, THE HONORABLE COURT OF
APPEALS ERRED IN NOT AWARDING PETITIONERS
SAMUEL ULEP AND SUSANA REPOGIA THE AREA OF 817.5
SQUARE METERS AND IN NOT REDUCING THE SHARE OF
PRIVATE RESPONDENTS, SPOUSES WARLITO PARINGIT
AND ENCARNACION GANTE FROM 507.5 SQUARE
METERS TO 197 SQUARE METERS.[10]
Petitioners initially submit that the factual findings of the trial court
should not have been disturbed by the appellate court, the same being
entitled to great weight and respect.
We have consistently held that factual findings of the Court of
Appeals and other lower courts are, as a rule, final and conclusive upon
this Court, except, inter alia, where their findings are at odd with each other,
[11]
as here.
Simply put, the issue before us is whether or not the Court of Appeals
committed reversible error in modifying the decision of the trial court.
Evidently, the issue necessitates an inquiry into the facts. While, as a
rule, factual issues are not within the province of this Court, nonetheless, in
light of the conflicting factual findings of the two (2) courts below, an
examination of the facts obtaining in this case is in order.
Petitioners contend that respondent INC is entitled to only 100 square
meters and not 620 square meters of the western portion of Lot 840. To
them, the deed of sale conveying 620 square meters thereof to INC was
void as the signatures of the vendors therein, namely, the spouses
Atinedoro Ulep and Beatriz Ulep and Valentina Ulep, were forged. They
submit that what should instead be upheld was the sale of 817.5 square
meters in their favor by the same vendors.

As the Court sees it, the present controversy is a classic case of


double sale. On December 21, 1954, Atinedoro Ulep, his wife Beatriz Ulep
and sister Valentina Ulep sold the disputed area (620 square-meter) of Lot
840 to INC. Subsequently, on January 18, 1971, a second sale was
executed by the same vendors in favor of spouses Samuel Ulep and
Susana Ulep. The Court is, therefore, called upon to determine which of the
two groups of buyers has a better right to the area in question.
Article 1544 of the Civil Code provides the statutory solution:
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 immovable


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.[12]
Jurisprudence teaches that the 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 aforequoted provision of the Civil Code. Such
knowledge of the first buyer does not bar him from availing of his rights
under the law, among them to register first his purchase as against the
second buyer. 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 the same provision of the Civil Code for the second buyer
to be able to displace the first buyer; before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout
(i.e. 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.[13]
Per records, the sale of the disputed 620 square-meter portion of Lot 840 to
respondent INC was made on December 21, 1954 and registered with the
Registry of Deeds of Pangasinan on January 5, 1955. In fact, INC was
issued a title over the same portion on September 23, 1975. On the other
hand, the conveyance to the spouses Samuel Ulep and Susana RepogiaUlep happened on January 18, 1971 and the spouses registered their
document of conveyance only on February 22, 1973.[14]
Clearly, not only was respondent INC the first buyer of the disputed
area. It was also the first to register the sale in its favor long before
petitioners Samuels and Susanas intrusion as second buyers. Although
Samuel and Susana thereafter registered the sale made to them, they did
so only after 18 years from the time INC caused the registration of its own
document of sale.
Registration means any entry made in the books of the Registry
which records solemnly and permanently the right of ownership and other
real rights.[15] However, mere registration is not sufficient. Good faith must
concur with registration, else registration becomes an exercise in futility.
[16]
In the instant case, the registration made by respondent INC of its deed
of sale more than satisfies this requirement. The same thing cannot be said
of petitioners Samuel Ulep and Susana Ulep. Said petitioners, by their own
admission, were aware that there existed an agreement between INC and
vendors Atinedoro Ulep, his wife Beatriz and sister Valentina Ulep involving
a portion of 100 square meters of Lot 840. Knowledge of such transaction
should have put the spouses Samuel Ulep and Susana Ulep upon such
inquiry or investigation as might be necessary to acquaint them with the
possible defects in the title of their vendors. They should have acted with

that measure of precaution which may reasonably be required of a prudent


man in a similar situation. After all, good faith, or the lack of it, is, in the last
analysis, a question of intention. But in ascertaining the intention by which
one is actuated on a given occasion, courts are necessarily controlled by
the evidence as to the conduct and outward acts by which 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. [17] Hence, proof of such knowledge overcomes the presumption
of good faith.
Here, the spouses Samuel Ulep and Susana Ulep were fully aware,
or could have been, if they had chosen to inquire, of the rights of INC under
the deed of sale duly annotated on the common title of the spouses
Atinedoro Ulep and Beatriz Ulep and Valentina Ulep. Verily, the sale to INC
should prevail over the sale made to spouses Samuel and Susana because
INC was the first registrant in good faith.
Petitioners allegation of forgery relative to the deed of sale executed
on December 21, 1954 by the spouses Atinedoro Ulep, his wife Beatriz and
sister Valentina Ulep over the 620 square-meter portion of Lot 840 cannot
be sustained. As a rule, forgery cannot be presumed and must be proved
by clear, positive and convincing evidence, the burden for which lies on the
party alleging it. The fact of forgery can only be established by a
comparison between the alleged forged signature and the authentic and
genuine signature of the person whose signature is theorized to have been
forged.[18]
Here, petitioners claim of forgery is unsupported by any substantial
evidence other than their own self-serving testimonies. As it were, they
failed to present handwriting experts and other persons familiar with the
handwriting of the spouses Atinedoro Ulep, his wife Beatriz and sister
Valentina Ulep that would show that their signatures appearing in the
questioned deed of sale in favor of respondent INC were forged. Due to the
technicality of the procedure involved in the examination of forged
documents, the expertise of questioned document examiners is usually
helpful. These handwriting experts can help determine fundamental,
significant differences in writing characteristics between the questioned and
the standard or sample specimen signatures, as well as the movement and
manner of execution strokes.

Petitioners insist that the conveyance of only 100 square meters to


INC was in fact evidenced by a deed of sale notarized by a certain Atty.
Benjamin Fernandez.[19] However, they sorely failed to produce in court the
said alleged deed of sale. They could have, at the very least, presented
Atty. Fernandez to prove the existence of that deed, but they did not. The
only plausible conclusion is that no such deed exists.
On the other hand, to bolster its claim of ownership, respondent INC
presented the December 21, 1954 deed of sale executed in its favor by the
spouses Atinedoro and Beatriz Ulep and Valentina Ulep over a portion of
620 square meters of Lot 840. To be sure, INCs deed of sale was duly
notarized by Atty. Bernabe Salcedo Calimlim. [20] Generally, a notarized
document carries the evidentiary weight conferred upon it with respect to its
due execution, and documents acknowledged before a notary public have
in their favor the presumption of regularity.[21] Thus, the notarized deed of
sale executed on December 21, 1954 by Atinedoro Ulep, his wife Beatriz
and sister Valentina Ulep over the contested area in favor of respondent
INC deserves full credence and is valid and enforceable in the absence, as
here, of overwhelming evidence to the contrary.
In a last-ditch but futile attempt to persuade the Court, petitioners
alternatively pray that INCs portion of 620 square meters of Lot 840,
assuming that INC is entitled to it, should be taken from the western portion
of the same lot sold to respondent spouses Warlito Paringit and
Encarnacion Gante, and not from them. To petitioners, the share of the
spouses Warlito and Encarnacion should accordingly be reduced from
507.5 square meters to only 197 square meters.
We note, however, that petitioners never raised before the trial court
nor before the appellate court the issue of Warlitos and Encarnacions
entitlement to 507.5 square meters. Quite the contrary, petitioners even
alleged in their complaint that the spouses Warlito Paringit and
Encarnacion Gante are owners of 507.5 square meters of Lot 840. They
never questioned the spouses ownership of said portion. This issue was
only posed by petitioners in the instant petition before this Court. It is
certainly too late for them to raise said issue for the first time at this late
stage of the proceedings.

Points of law, theories, issues and arguments not brought to the


attention of the lower court need not be, and ordinarily will not be,
considered by a reviewing court, as these cannot be raised for the first time
on appeal. Basic considerations of fair play, justice and due process
underlie the rule. It would be unfair to the adverse party who would have no
opportunity to present evidence in contra to the new theory, which it could
have done had it been aware of it at the time of the hearing before the trial
court.[22]
Of course, this rule admits of certain exceptions. For one, issues of
lack of jurisdiction, though not raised below, may be considered by the
reviewing court as they may be raised at any stage. For another, the
reviewing court may also consider an issue not properly raised during trial
when there is plain error. Likewise, it may entertain such arguments when
there are jurisprudential developments affecting the issues, or when the
issues raised present a matter of public policy.[23] Unfortunately for
petitioners, however, none of these exceptions exists in this case. It is thus
too late in the day for petitioners to raise in this recourse the sale made by
the spouses Atinedoro Ulep and Beatriz Ulep of the 507.5 square-meter
area of Lot 840 to the spouses Warlito Paringit and Encarnacion Gante. To
allow petitioners to do so would be utterly unfair to the latter.
WHEREFORE, the petition is DENIED and the assailed decision and
resolution of the Court of Appeals AFFIRMED in toto.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-11907

February 27, 1919

FAUSTINO LICHAUCO, ET AL., plaintiffs-appellants,


vs.
JOSE BERENGUER, ET AL., defendants-appellees.
Sumulong & Estrada for appellants.
Ramon Salinas for appellees.
AVANCEA, J.:
On July 26, 1882, by a public instrument (Exhibit A-1) Macario Berenguer
and to, Cristino Singian with right of repurchase for an indefinite time the
land in question which is described as parcel one in the complaint.
On October 7, 1889, by means of another public instrument, Macario
Berenguer sold the same and to Cornelia Lauchangco with right of
repurchase for the term of two years. It was stipulated that Macario
Berenguer would take the land under a lease, paying an anual rent
therefor, either in cash or in sugar at the option of Cornelia Lauchangco. It
was also stipulated that all the fruits of the land would be stored in Cornelia
Lauchangco's enfraderia(sugar packing house) in this city and the
proceeds thereof would be applied to the payment of the price of the
repurchase (Exhibit A). This sale was registered in 1907.
It appears that on September 2, 1890, Macario Berenguer, by virtue of a
public instrument, sold again the land in question with pacto de retro to
Cristiano Singian at a higher price but the amount paid on account of the
sale of 1882 was considered as a part of the price. In the document
wherein appears this contract, it is said that Cristiano Singian accepts the
purchase in the name and representation of Anselmo Singian of whom he
was the tutor. The contract does not express the period for the redemption
(Exhibit A-1.)
On February 20, 1904, Anselmo Singian sold in an absolute sale, also by
as public instrument, the same land to Macario Berenguer. Anselmo
Singian states in this contract that the land was acquired by him form
Macario Berenguer himself by virtue of the above-mentioned contract of
1890 through his (Anselmo's) tutor, Cristiano Singian. It was stipulated that
the price of this sale should be paid within the period of eight years and

that, if it be not completely paid on the expiration of the term, the ownership
of the land should revert to Anselmo Singian (Exhibit X).
The parties to this action are: Faustino Lichauco and others, in their
capacity as heirs of Cornelia Lauchangco, as plaintiff; Jose Berenguer,
administrator of the estate of Macario Berenguer, and Anselmo Singian in
his own behalf, as defendants.
The plaintiffs pray that the sale of the land executed by Macario Berenguer
in favor of Cornelia Lauchangco be declared absolute or that the defendant
Jose Berenguer be obliged to pay to the plaintiffs the sum of P3,000, the
price of the repurchase, with legal interest thereon from October 7, 1891,
and the amount of P9,236.86, as rents due, as well as the amounts which
would be due until the execution of the sentence with the corresponding
interests. The defendants Jose Berenguer prays that he be absolved from
the complaint and that the plaintiffs be obliged to execute in this favor the
document of repurchase of the land. The defendant Anselmo Singian prays
that the sale of the land executed by Macario Berenguer in favor of
Cornelia Lauchangco be declared null and void and that he be declared
absolute owner of the said land.
The trial court absolved owner of the said land, finding as to costs and from
this judgment the plaintiffs appealed.
From what has been said, it appears that the land in question had been
twice sold by Macario Berenguer: the first sale was made in 1882 in favor
of Cristino Singian and the second, in 1889, in favor of Cornelia
Lauchangco, predecessor in interest of the plaintiffs. The question to be
decided is, which of these two sales is to be preferred. Both were executed
by means of public instruments. Considering the facts in connection with
the time prior to 1907, it follows that, since neither of these instruments was
inscribed, the preference should be in favor of the purchaser who first took
possession of the land, inasmuch as this possession, according to the law
in force prior to the promulgation of the Civil Code, constituted the
consummation of the contract, and also inasmuch as the civil Code (article
1473) expressly provides that possession in such cases transfers the
ownership of the thing sold. The trial court accepted the fact that the
defendant Anselmo Singian, by himself and through a representative, took
possession of the land since its sale in 1882 and has been continuing in

this possession up to the present time. There is evidence in the record


which establishes the conclusion, and there is no proof to the contrary.
It appears that after the sale in 1882 to Cristino Singian, the land was held,
under a lease through payment of an annul rent, by Macario Berenguer
until his death, and even after his death the administrator of his property
continued the lease under the same conditions until two years before this
action was filed. It does not appear whether, after the sale, Cristiano
Singian first took possession of the land and then leased it to Macario
Berenguer or the land was immediately leased after the sale without the
lease having been preceded by direct possession on the party of the
purchaser, Cristino Singian. But, as regards the basis upon which this
decision rests, we accept the second alternative as true. It appears also
that when the same land was sold in 1889 by same Macario Berenguer to
Cornelia Lauchangco, the latter did not also take a direct possession of it
but agreed to lease it to Macario Berenguer under certain conditions. It thus
appears that both Cristino Singian and Cornelia Lauchangco in like manner
took possession of the land through the same vendor, when the latter on
ceasing to be the owner became the lessee of each of the former
respectively. this court has held that when a person buys a piece of land
and, instead of taking possession of it, give it under a lease to the vendor,
possession therefore by the later after the sale is possession by the
vendee, and such possession, in case of a double sale, determine the
preference in favor of the one who first took possession of it, in the
absence of inscription, in accordance with the provision of article 1473 of
the Civil Code and notwithstanding the material and personal possession
by the second vendee. (Bautista vs. Sioson, p. 615, ante.) This doctrine is
with greater reason applicable to this cae in that the possession by the
second vendee, granting that he had it, was under the same conditions as
that of the first vendee. Therefore, in determining the preference between
both sales by reason of the priority of possession, supposing that both
vendees had such possession in the same manner as we have indicated,
the decision must necessarily be in favor of the sale to Cristiano Singian
who first enjoyed such possession.
But we can still say that Cornelia Lauchangco never had in the manner
indicated the possession of the land. She had to derive this possession
from Macario Berenguer. It is true that it was stipulated in the sale to her
that Berenguer would cease to be the owner and would be her lessee, but
there is a lack of juridical reality to suppose the this was equivalent to a

delivery of possession, because on that date Berenguer had no possession


which he could transfer, inasmuch as he was then a mere lessee of the
former vendee, Cristino Singian, and therefore his possession was not for
himself but in representation of the latter.
At all events, if it be interpreted that, in case of a double sale and in the
absence of inscription, the preference between both can not be
determined, according to article 1473 of the Civil Code, by the possession
which the stipulation implies that vendor ceases to become owner and
becomes the lessee of the vendee, it follows that, for the purposes of this
article, neither Cristino Singian nor Cornelia Lauchangco took possession
of the land. Under this supposition the preference between both sales shall
also have to be decided in favor of that made to Cristino Singian, because
it is of a prior date. (Art. 1473, Civil Code.)
As has been stated, Macario Berenguer sold the land to Cristino Singian in
1882 and in 1890 he again sold it to Cristino Singian in his capacity as tutor
of Anselmo Singian. The plaintiffs contend that according to this sale to
defendant Anselmo Singian was effected only in 1890 and therefore was
not anterior to that made to Cornelia Lauchangco in 1889. We believe that
this conclusion is erroneous. After the sale of 1882, Macario Berenguer
took from Cristino Singian some more money which amounted to P6,000
and this fact impelled him to make the sale in 1890 in which it was
stipulated that the amount paid in the sale of 1882 plus the P6,000
subsequent given by Cristino Singian to Macario Berenguer be considered
as part of the price received. it is true that in the sale of Cristino Singian in
1882 it was not stated that he acted in his capacity as tutor of Anselmo
Singian, but it appears that with the latter's money the former paid the price
in both sales. What really appears is that the second sale was made with
the object of aggregating, as part of the price, the amount of P6,000
received subsequently by Macario Berenguer for the purposes of the
purchase and not for the transmission of the ownership which was already
affected. We accept as a fact that both the sale of 1882 and that of 1890
were made in favor of Anselmo Singian.
The registry in 1907 of the sale to Lauchangco does not alter the aspect of
the question involved. From the time Singian took possession of the land
up to that date twenty-five years had elapsed. Thus, on the date in which
the registry was made, Singian had acquired the ownership of the land by
prescription. The registry could have destroyed the efficacy of the sale to

Singian but not the legal effects of his possession. The effect which the law
gives to the registry of a sale, in case of a double sale, against the efficacy
of the sale that was not registered does not extend to the other titles which
the other vendee may have gained independently, as the little of
prescription in this case. And thus, even supposing that the sale to Singian,
for lack of registry, had lost all its efficacy, in itself, as a title transferring
ownership as against the sale to Lauchangco which was registered, still
there remains for Singian the title of prescription which has not been
destroyed by another to the contrary.
The fact that in 1904 Anselmo Singian in turn sold the land in question to
Macario Berenguer does not affect the merits of the case. In the said sale it
was agreed that Berenguer would pay the stipulated price within the period
of eight years and if, at the expiration of the eight years, the amount should
not have been completely paid, the ownership of the land would revert to
the vendor. It does not appear that no payment on account of this price has
been made and inasmuch as this payment should be proved by him who is
obliged to do so, we accept as a fact that it was not so made. Under such
circumstances, whatever effect may be attributed to the sale during the
said period of eight years, which was fixed for the payment of the price,
cannot be given such effect after the expiration of the said period, without
the price having been paid. At all events, the ownership of the land sold
reverted to the vendor.
We have reached the conclusion that the sale to Anselmo Singian
represented by his tutor Cristino Singian was valid and produced the effect
of transferring in his favor the ownership of the land in question. And, even
disregarding the proper effect of this sale, the defendant Anselmo Singian
has also acquired the ownership of the land by prescription.
Having reached the conclusion and as the action of the plaintiff against the
defendant Berenguer is entirely based upon the efficacy of the sale of the
same land made in favor of Cornelia Lauchangco, we have to hold also that
the complaint against the latter is improper.
Therefore, we hereby affirm the judgment appealed form in so far as it
absolves the defendants from the complaint with the costs against the
appellants. So ordered.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-20046

March 27, 1968

ROMEO PAYLAGO and ROSARIO DIMAANDAL, petitioners,


vs.
INES PASTRANA JARABE and THE HONORABLE COURT OF
APPEALS, respondents.
M. de la Cruz for petitioners.
M.G. Garcia for respondents.
REYES J.B.L.,:
This is an appeal by certiorari from the decision of the Court of
Appeals affirming the lower court's decision in the case of Romeo Paylago,
et al. vs. Ines Pastrana Jarabe, CA-G.R. No. 25031-R, promulgated on
June 6, 1962. (Civil Case No. R-709 of the Court of First Instance of
Oriental Mindoro).
The entire lot involved in this suit was originally covered by
Homestead Patent issued on June 7, 1920 under Act No. 926 and later
under OCT No. 251 of the Registry of Deeds of Mindoro, issued on June
22, 1920 in the name of Anselmo Lacatan. On May 17, 1948, after the
death of Anselmo Lacatan, TCT No. T-728 (which cancelled OCT No. 251)
was issued in the name his two sons and heirs, Vidal and Florentino
Lacatan. Vidal Lacatan died on August 27, 1950.
On March 23, 1953, Vidal Lacatan's heirs, namely, Maximo, Tomas
and Lucia Lacatan, executed a deed of sale (Exh. C) in favor of the
spouses Romeo Paylago and Rosario Dimaandal, plaintiffs-petitioners
herein, over a portion of the entire lot under TCT No. T-728, which portion
is described as follows:
North Provincial Road;
East Property of Romeo Paylago;

South Property of Florentino Lacatan;


West Provincial Road (Nabuslot-Batingan);
containing an area of 3.9500 hectares.
On October 6, 1953, Florentino Lacatan also died, leaving as his
heirs his widow and three children, Felipe, Rosita and Florencia Lacatan.
On December 31, 1953, the said children of Florentino Lacatan likewise
executed a deed of sale (Exh. D) in favor of the same vendees over
another portion of the same lot described as follows:
North Provincial Road (Calapan-Pinamalayan);
East Heirs of Sotero Mongo;
South Aniceta Lolong;
West Heirs of Vidal Lacatan;
with an area of 2.8408 hectares.
On March 2, 1954, by virtue of the registration of the two deeds of
sale (Exhs. C and D), a new TCT No. T-4208 covering the total area of
6.7908 hectares was issued in favor of plaintiffs-petitioners, the Paylago
spouses. A subsequent subdivision survey for the purpose of segregating
the two aforementioned portions of land described in the deeds (Exhs. C
and D) as well as in the new TCT No. T-4208, however, disclosed that a
portion (one half hectare) of the total area purchased by plaintiffspetitioners and indicated in the sketch Exh. B at a point marked Exh. B-1
was being occupied by defendant-respondent. Hence, the action to recover
possession and ownership of the said portion.
Vis-a-vis the foregoing undisputed facts, the trial court and the Court
of Appeals found that a portion of land in question which is described as
follows:
North Provincial Road;
East Apolonio Lacatan;
South Anselmo Lacatan;
West Valentin Lastica;
and with an area of one half hectare is indicated in the sketch of
subdivision plan marked Exh. B-1 of Exh. B; that on November 27, 1938,
the said portion of land was purchased by Hilario Jarabe, late husband of

defendant-respondent, from one Apolonio Lacatan, which sale is evidenced


by an unregistered deed of sale (Exh. 6); that Apolonio Lacatan, in turn,
bought the same in 1936 from Anselmo Lacatan, the original registered
owner in whose favor OCT No. 251 and later TCT No. T-4208 were issued;
that the first deed of sale, also unregistered, executed by Anselmo Lacatan
in favor of Apolonio Lacatan was lost during the Japanese occupation; that
the herein defendant-respondent has been in possession of the said
portion continuously, publicly, peacefully and adversely as owner thereof
from 1938 up to the present; and, that the herein plaintiffs-petitioners knew,
nay, admitted in a deed of lease, paragraph 3 (Exh. 4), that defendantrespondent has been in possession of the premises since 1945.
After trial, the lower court held that plaintiffs-petitioners were not
purchasers in good faith and, accordingly, rendered judgment in favor of
defendant-respondent, declaring the latter as owner of the land in question
with the right to retain possession of the same. The decision was
affirmed in toto by the Court of Appeals.
From the evidence adduced by the parties evolved the issue: Who
has a better right in case of double sale of real property, the registered
buyer or the prior but unregistered purchaser?
This Court has formulated in no uncertain terms the general principle
governing the matter: as between two purchasers, the one who has
registered the sale in his favor, in good faith, has a preferred right over the
other who has not registered his title, even if the latter is in the actual
possession of the immovable property (Mendiola v. Pacalda, 10 Phil. 705;
Veguillas v. Jaucian, 25 Phil. 315; Po Sun Tun v. Price, 54 Phil. 192).
Indeed, the foregoing principle finds concrete bases in the pertinent
provisions of the New Civil Code, Article 1544, providing that if the same
immovable property should have been sold to different vendees, "the
ownership shall belong to the person acquiring it who in good faith first
recorded it in the registry of property."
There is no question that the sales made in favor of plaintiffspetitioners were registered while the alleged sale executed in favor of
defendant-respondent was not. Applying the foregoing principle of law to
the instant case, it is now contended by plaintiffs-petitioners that their
certificate of title must prevail over defendant-respondent, and that the

courts below correspondingly committed error in deciding the case to the


contrary.
But there is more than meets the eye in the case at bar. While
plaintiffs-petitioners have a registered title, it cannot be denied that their
acquisition and subsequent registration were tainted with the vitiating
element of bad faith. It was so found by both the Court of First Instance and
the Court of Appeals, and their finding is conclusive upon us. Thus, in
Evangelista vs. Montao, 93 Phil. 275, 279, this Court ruled:
Both the Court of First Instance and the Court of Appeals
absolved the defendants, having found and declared after weighing
the evidence that the plaintiff, was not a purchaser in good faith. That
this conclusion is a finding of fact and, being a finding of fact, not
subject to review, is too plain to admit of argument.
Both Courts below found that petitioners knew beforehand that the
parcel of land in question was owned by defendantrespondent.1wph1.t
In its decision the Court of Appeals declared that "plaintiffs herein
were aware of that peaceful, continuous and adverse possession of
defendant since 1945, because this fact is admitted by said plaintiffs in a
deed of lease, paragraph 3 (Exhibit 4) covering a portion of the entire lot,
and situated just across the road from the land in question." (Dec., C. App.,
p. 4).
Considering that the boundaries of the lands that the petitioners
Paylago purchased in 1953 and 1954 were well defined, they must have
known that the portion occupied by the defendant-respondent under claim
of ownership and leased to them by the latter was included in the
description. And coupled with their knowledge that defendant-respondent
purchased the same from Apolonio Lacatan, plaintiffs-petitioners should
have inquired and made an investigation as to the possible defects of the
title of the Lacatan heirs over the entire lot sold to them, granting that the
latter's certificate of title was clear. This, they failed to do. They cannot now
claim complete ignorance of defendant-respondent's claim over the
property. As was well stated in one case, "a purchaser who has knowledge
of facts which should put him upon inquiry and investigation as to possible
defects of the title of the vendor and fails to make such inquiry and

investigation, cannot claim that he is a purchaser in good faith and has


acquired a valid title thereto". (Sampilo vs. Court of Appeals, 55 O.G. No.
30, p. 5772). To the same effect is the following doctrine laid down by the
Supreme Court in the case of Leung Yee v. F.L. Strong Machinery Co. &
Williamson, 37 Phil. 644. Said the Court:
One who purchases real estate with knowledge of a defect or
lack of title in his vendor cannot claim that he has acquired title
thereto in good faith, as against the true owner of the land or of 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
of the title of his vendor. A purchaser cannot close his eyes to facts
which should put a reasonable man upon his guard and then claims
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 vendor's title, will not make him an
innocent purchaser for value, if it afterwards develops that the title
was 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.
The fundamental premise of the preferential rights established by
Article 1544 of the New Civil Code is good faith (Bernas v. Bolo, 81 Phil.
16). To be entitled to the priority, the second vendee must not only show
prior recording of his deed of conveyance or possession of the property
sold, but must, above all, have acted in good faith, that is to say, without
knowledge of the existence of another alienation by his vendor to a
stranger (Obras Pias v. Ignacio, 17 Phil. 45; Leung Yee v. F.L. Strong
Machinery Co., et al., op. cit.; Emas v. De Zuzuarregui, et al., 53 Phil. 197).
Short of this qualifying circumstance, the mantle of legal protection and the
consequential guarantee of indefeasibility of title to the registered property
will not in any way shelter the recording purchaser against known and just
claims of a prior though unregistered buyer. Verily, it is now settled
jurisprudence that knowledge of a prior transfer of a registered property by
a subsequent purchaser makes him a purchaser in bad faith and his
knowledge of such transfer vitiates his title acquired by virtue of the later
instrument of conveyance which was registered in the Registry of Deeds

(Ignacio v. Chua Hong, 52 Phil. 940; Gustilo, et al. v. Maravilla, 48 Phil.


442; Ramos, et al. v. Dueno, et al., 50 Phil. 786). The registration of the
later instrument creates no right as against the first purchaser. For the
rights secured under the provisions of Article 1544 of the New Civil Code to
the one of the two purchasers of the same real estate, who has secured
and inscribed his title thereto in the Registry of Deeds, do not accrue, as
already mentioned, unless such inscription is done in good faith (Leung Yee
v. F.L. Strong Machinery Co., et al., op. cit.). To hold otherwise would
reduce the Torrens system to a shield for the commission of fraud (Gustilo,
et al. v. Maravilla, op. cit.).
Plaintiffs-petitioners cited the case of Bacolod-Murcia Milling Co.,
Inc. v. De la Rama, et al., G.R. No. L-4526 September 1959, to disprove
bad faith ascribed to them. But the citation does not fit with the facts of the
present case. It is to be noted that the second purchaser in the De la Rama
case had no knowledge of the previous sale and possession of the first
purchaser at the time he (second purchaser) acquired the property involved
therein. "(T)here is nothing in the complaint which may in any way indicate
that he knew such possession and encumbrance when he bought the
property from its owner." Plaintiffs-petitioners in the instant case, however,
had knowledge of defendant-respondent's claim of ownership over the land
in question long before they purchased the same from the Lacatan heirs.
They were even told, as previously intimated, that defendant-respondent
bought the land from Apolonio Lacatan. Thus, it could easily be
distinguished that the second purchaser in the De la Rama case acted with
good faith, i.e., without knowledge of the anterior sale and claim of
ownership of the first vendee, whereas, plaintiffs-petitioners herein acted
with manifest bad faith in buying the land in question, all the while knowing
that defendant-respondent owns the same. Such knowledge of defendantrespondent's ownership of the land is more than enough to overthrow the
presumption of good faith created by law in favor of plaintiffs-petitioners.
This being the case, we cannot just close our eyes and blindly stamp our
approval on the argument of plaintiffs-petitioners that they have the better
right simply because their title is registered and as such is indefeasible.
Plaintiffs-petitioners also contend that the identity of the land in
question has not been established. Again, we disagree. Evidence of record,
both oral and documentary, unequivocally show that the said portion of land
can be identified and segregated, and has been in fact identified and
segregated (Exh. B-1), from the entire lot covered by TCT No. T-4208 (Exh-

A) issued in the names of plaintiffs-petitioners. The boundaries of the same


have been clearly indicated as that planted by madre cacao trees. Even the
surveyor hired by plaintiffs-petitioners was able to fix the said boundaries in
such a manner as to definitely and accurately segregate the premises from
the adjoining property. How could plaintiffs-petitioners now argue that the
land has not been identified when the Supreme Court itself says that what
really defines a piece of land is not the area mentioned in the description
but the boundaries (Sanchez v. Director of Lands, 63 Phil. 378; Buizer v.
Cabrera, etc., 81 Phil. 669; Bayot v. Director of Lands, 98 Phil. 935)?
Besides, the area has been also established as one-half hectare.
Another collateral question raised by plaintiffs-petitioners is the
admission by the courts a quo of secondary evidence to establish the
contents of the first unregistered deed of sale executed by Anselmo
Lacatan in favor of Apolonio Lacatan when the loss or destruction of the
original document, according to them, has not been established. Again, the
findings of the Court of Appeals destroy this assertion of petitioners (Dec.,
p. 5):
Undeniably the alleged unregistered document could no longer
be examined by the parties in court, because it was lost but its
original, however, upon, the trial court's findings which we have no
reason to question has been sufficiently proved as having existed.
As observed by this Supreme Court, "the destruction of the
instrument may be proved by any person knowing the fact. The loss may
be shown by any person who knew the fact of its loss, or by any one who
has made, in the judgment of the court, a sufficient examination of the
place or places where the document or papers of similar character are kept
by the person in whose custody the document lost was, and has been
unable to find it; or has made any other investigation which is sufficient to
satisfy the court that the instrument is indeed lost." (Michael & Co. v.
Enriquez, 33 Phil. 87). And "it is not even necessary to prove its loss
beyond all possibility of mistake. A reasonable probability of its loss is
sufficient, and this may be shown by a bona fide and diligent search,
fruitlessly made, for it in places where it is likely to be found." (Government
of P.I. v. Martinez, 44 Phil. 817). And after proving the due execution and
delivery of the document, together with the fact that the same has been lost
or destroyed, its contents may be proved, among others, by the recollection
of witnesses (Vaguillas v. Jaucian, 25 Phil. 315).

Finding that the facts and the law support the same, it is our opinion,
and so hold, that the appealed decision should be, as it is hereby affirmed.
Costs against petitioners spouses Paylago and Dimaandal.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 92871 August 2, 1991


MARIA P. VDA. DE JOMOC, ET AL., petitioners,
vs.
THE COURT OF APPEALS, REGIONAL TRIAL COURT OF MISAMIS
ORIENTAL, 10th Judicial Region, Br. 25,respondents.
G.R. No. 92860 August 2, 1991
SPOUSES LIM LEONG KANG & LIM PUE KING, petitioners,
vs.
MAURA SO & HON. COURT OF APPEALS (Eleventh
Division), respondents.
Pablito C. Pielago, Nemesio G. Beltran, Federico C. Villaroya and Medardo
P.
Millares for petitioners in G.R. No. 92860.
Manolo S. Tagarda for petitioners in G.R. No. 92871.
Jose Ngaw collaborating counsel for the petitioners in G.R. No. 92871.

GUTIERREZ, JR., J.:p


The main issue raised in these consolidated petitions is whether or not
private respondent Maura So abandoned or backed out from the
agreement for the purchase of a lot belonging to the heirs of Pantaleon

Jomoc, so that the subsequent sale to petitioner spouses Lim is null and
void.
The subject lot in Cagayan de Oro City forms part of the estate of the late
Pantaleon Jomoc. Because it was fictitiously sold and transferred to third
persons, petitioner Maria P. Vda. Jomoc, as administratrix of the estate and
in behalf of all the heirs, filed suit to recover the property before the trial
court of Misamis Oriental in Civil Case No. 4750. Mariano So, the last of
the transferees and the husband of Maria So, intervened. The case was
decided in favor of Jomoc and was accordingly appealed by Mariano So
and one Gaw Sur Cheng to the Court of Appeals. In February 1979,
pending the appeal, Jomoc executed a Deed of Extrajudicial Settlement
and Sale of Land (Exhibit "A") with private respondent for P300,000.00. The
document was not yet signed by all the parties nor notarized but in the
meantime, Maura So had made partial payments amounting to P49,000.00.
In 1983, Mariano So, the appellant in the recovery proceeding, agreed to
settle the case by executing a Deed of Reconveyance of the land in favor
of the heirs of Pantaleon Jomoc. The reconveyance was in compliance with
the decision in the recovery case and resulted in the dismissal of his
appeal. On February 28, 1983, the heirs of Jomoc executed another extrajudicial settlement with absolute sale in favor of intervenors Lim Leong
Kang and Lim Pue filing. Later, Maura So demanded from the Jomoc family
the execution of a final deed of conveyance. They ignored the demand.
Thus, private respondent Maria So sued petitioners-heirs for specific
performance to compel them to execute and deliver the proper registrable
deed of sale over the lot. The case was docketed as Civil Case No. 8983.
So then filed a notice of lis pendens with the Register of Deeds on
February 28, 1983. It was on the same date, February 28, 1983, allegedly
upon the Jomocs' belief that Maura So had backed out from the transaction
that the Jomocs executed the other extrajudicial settlement with sale of
registered land in favor of the spouses Lim for a consideration of
P200,000.00 part of which amount was allegedly intended to be returned to
Maura So as reimbursement. The spouses Lim, however, registered their
settlement and sale only on April 27, 1983.
The Jomocs as defendants, and the spouses Lim as intervenors alleged
that complainant Maura so backed out as evidenced by an oral testimony
that she did so in a conference with the Jomocs' lawyers where she

expressed frustration in evicting squatters who demanded large sums as a


condition for vacating. They alleged the lack of signatures of four of the
heirs of Jomoc and Maura So herself as well as the lack of notarization.
The lower court, finding that there was no sufficient evidence to show
complainant-respondents' withdrawal from the sale, concluded that: (1) the
case is one of double sale; (2) the spouses-intervenors are registrants in
bad faith who registered their questioned deed of sale long after the notice
of lis pendens of Civil Case No. 8983 was recorded.
On appeal, the trial court decision was affirmed except for the award of
moral and exemplary damages and attorney's fees and expenses for
litigation. Hence, these petitions.
The petitioners' allegation that the contract of sale by Maria P. Jomoc with
private respondent is unenforceable under the Statute of Frauds, is without
merit. The petitioners-heirs, in their brief before the appellate court,
admitted that the extrajudicial settlement with sale in favor of Maura So is
valid and enforceable under the Statute of Frauds.
Of importance to the Court is the fact that the petitioners do not deny the
existence of Exhibit "A"; including its terms and contents, notwithstanding
the incompleteness in form. The meeting of the minds and the delivery of
sums as partial payment is clear and this is admitted by both parties to the
agreement. Hence, there was already a valid and existing contract, not
merely perfected as the trial court saw it, but partly executed. It is of no
moment whether or not it is enforceable under the Statute of Frauds, which
rule we do not find to be applicable because of partial payment of the
vendee's obligation and its acceptance by the vendors-heirs. The contract
of sale of real property even if not complete in form, so long as the
essential requisites of consent of the contracting parties, object, and cause
of the obligation concur and they were clearly established to be present, is
valid and effective as between the parties. Under Article 1357 of the Civil
Code, its enforceability is recognized as each contracting party is granted
the right to compel the other to execute the proper public instrument so that
the valid contract of sale of registered land can be duly registered and can
bind third persons. The complainant respondent correctly exercised such
right simultaneously with a prayer for the enforcement of the contract in one
complaint.

The Court finds no cogent reason to reverse the factual finding of the
Regional Trial Court and the Court of Appeals that private respondent did
not subsequently abandon her intention of purchasing the subject lot.
The facts reveal an agreement between the contracting parties to Exhibit
"A" to the effect that "the consideration of P300,000.00 or whatever balance
remains after deducting the advanced payments thereon, shall be paid
upon the termination of (Mariano So's) appeal in the case involving the
property in question." (G.R. No. 92871, Rollo, p. 123). The finding is
supported by substantial evidence. As reasoned by both courts, even if the
sums paid by Maura So were allegedly intended to expedite the dismissal
of the appeal of Mariano So, such payment only indicates interest in
acquiring the subject lot. In addition, the claim by the defendants-petitioners
that the payments were for the gathering of the several heirs from far
places to sign Exhibit "A" confirms respondent Maura So's continuing
interest. The terms of Exhibit "A" and the actual intention of the parties are
clear and no reform requiring parole evidence is being sought to elucidate
the intention further. The oral evidence offered by defendants-petitioners to
show a subsequent refusal to proceed with the sale cannot be considered
to reverse the express intention in the contract. Moreover, the two courts
below had definite findings on this factual issue and we see no reason to
reject and reverse their conclusion.
The petitioners contend that the trial court and the appellate court erred in
declaring as void the subsequent deed of extra-judicial settlement with
spouses Lim since specific performance and not annulment of contract due
to existence of double sale, was the thrust of the complaint. This argument
is untenable. The issue of double sale had to be resolved to determine
whether or not complainant Maura So was entitled to the reliefs prayed for
There was no hard evidence to show that the vinculum or contractual
relation between petitioners-heirs and Maura So had been cut-off. Yet,
petitioners-heirs sold the same lot to spouses Lim. The case therefore
requires us to discern who has the better right to the property.
Article 1544 of the Civil Code provides:
xxx xxx xxx

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.
xxx xxx xxx
In view of this provision, the two courts below correctly ruled that the
spouses Lim do not have a better right. They purchased the land with full
knowledge of a previous sale to private respondent and without requiring
from the vendors-heirs any proof' of the prior vendee's revocation of her
purchase. They should have exercised extra caution in their purchase
especially if at the time of the sale, the land was still covered by TCT No.
19648 bearing the name of Mariano So and was not yet registered in the
name of petitioners- heirs of Pantaleon Jomoc (Original Records, p. 80),
although it had been reconveyed to said heirs. Not having done this,
petitioners spouses Lim cannot be said to be buyers in good faith. When
they registered the sale on April 27, 1983 after having been charged with
notice of lis pendens annotated as early as February 28, 1983 (the same
date of their purchase), they did so in bad faith or on the belief that a
registration may improve their position being subsequent buyers of the
same lot. Under Article 1544, mere registration is not enough to acquire
new title. Good faith must concur. ( Bergado v. Court of Appeals, 173 SCRA
497 [1989]; Concepcion V. Court of Appeals, G.R. No. 83208, February
6,1991)
Considering the failure of the petitioners to show that the findings of the two
courts below are not supported by substantial trial evidence or that their
conclusions are contrary to law and jurisprudence, we find no reversible
error in the questioned decision.
WHEREFORE, the petitions are hereby DISMISSED for lack of merit. The
decision of the Court of Appeals dated September 13, 1989 and its
resolution dated April 2, 1990 are AFFIRMED.
SO ORDERED.