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LAW ON SALES AND LEASE

CASE DIGEST COMPILATION PART I

2J
ATTY. SENGA
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G.R. No. L-59266 February 29, 1988

SILVESTRE DIGNOS and ISABEL LUMUNGSOD,


vs.
HON. COURT OF APPEALS and ATILANO G. JABIL,

158 SCRA 378 BIDIN, J.:


FACTS: In July 1965, petioners Spouses Silvestre T. Dignos and Isabela Lumungsod de Dignos
sold their parcel of land in Opon, LapuLapu to private respondent Antonio Jabil. This is for the
sum of P28,000 payable for two installments, with an assumption of indebtedness with the First
Insular Bank of Cebu in the sum of P12,000 and the next installment of P4,000 to be paid in
September 1965. In November 1965, the spouses Dignos sold the same parcel of land for P35,000
to defendants Luciano Cabigas and Jovita L. de Cabigas (spouses Cabigas) who were then US
citizens, and executed in their favor an Absolute Deed of Sale duly registered in the Office of the
Register of Deeds. Upon discovery of the 2nd sale of the subject land, Jabil filed the case at bar in
the CFI of Cebu which rendered its Decision in August 1975 declaring the 2nd sale to the spouses
Cabigas null and void ab initio and the 1st sale to Jabil not rescinded. The CFI of Cebu also ordered
Jabil to pay the remaining P16,000 to the spouses Dignos and to reimburse the spouses Cabigas a
reasonable amount corresponding the expenses in the construction of hollow block fences in the
said parcel of land. The spouses Dignos were also ordered to return the P35,000 to the spouses
Cabigas. Both Jabil and the spouses Dignos appealed to the Court of Appeals, which affirmed in
July 1981 the CFI of Cebus Decision except for the part of Jabil paying the expenses of the
spouses Cabigas for building a fence. The spouses Dignos contested that the contract between
them and Jabil was merely a contract to sell and not a deed of sale.
ISSUE: Whether or not the contract between the parties a contract of sale or a contract to sell?
HELD: The Supreme Court sustained the decision of CA, which stated that all the elements of a
valid contract of sale are present in the document and that the spouses Dignos had no right to sell
the land in question because an actual delivery of its possession has already been made in favor of
Jabil as early as March 1965. It wasFF also found that the spouses Dignos never notified Jabil by
notarial act that they were rescinding the contract, and neither did they file a suit in court to rescind
the sale. There is no showing that Jabil properly authorized a certain Cipriano Amistad to tell
petitioners that he was already waiving his rights to the land in question.
#2
JACOBUS BERNHARD HULST v. PR BUILDERS INC.

FACTS: The Petitioner and his spouse, both Dutch Nationals, entered into a Contract to
Sell with PR Builders, Inc. to purchase a 210-sq m residential unit in the respondent's
townhouse project in Batanagas. When PR Builder's failed to comply with their verbal
promise to complete the project, the spouses Hulst filed a complaint for recession of contract
with interest, damages and attorney's fees before the Housing and Land Regulatory Board
(HLURB), which then was granted. A Writ of Execution was then addressed to the Ex-
Officio Sheriff of the RTC of Tanauan, Batangas, but upon the complaint of the respondent,
the levy was set aside, leaving only the respondent's personal properties to be levied first.
The Sheriff set a public auction of the said levied properties, however, the respondent filed
a motion to quash Writ of levy on the ground that the sheriff made an over levy since the
aggregate appraised value of the properties at P6,500 per sq m is P83,616,000. Instead of
resolving the objection of the respondent's regarding the auction, the Sheriff proceeded with
the auction since there was no restraining order from the HLURB. The 15 parcels of land
was then awarded to Holly Properties Realty at a bid of P5,450,653. On the same day,
the Sheriff remitted the legal fees and submitted to contracts of sale to HLURB, however,
he then received orders to suspend proceedings on the auction for the reason that the market
value of the properties was not fair. There was disparity between the appraised value and
the value made by the petitioner and the Sheriff, which should've been looked into by the
Sheriff before making the sale. While an inadequacy in price is not a ground to annul such
sale, the court is justified to such intervention where the price shocks the conscience.

ISSUE: 1. Whether or not the Sheriff erred in the value that was attached to the properties
during the auction and as well as disregarding the objection made by the respondent's?
2. Whether or not the market value of the said property was inadequate?
3. Whether or not the spouses Hulst's request for damages is actionable?

HELD: No. According to the Rules of Court, the value of the property levied is not
required to be exactly the same as the judgment debt. In the levy of property, the Sheriff
does not determine the exact valuation of the levied property. The Sheriff is left to his
own judgment. He should be allowed a reasonable margin between the value of the property
levied upon and the amount of the execution; the fact that the Sheriff levies upon a little
more than is necessary to satisfy the execution does not render his actions improper. In the
absence of a restraining order, no error can be imputed to the Sheriff in proceeding with
the auction sale despite the pending motion to quash the levy filed by the respondents with
the HLURB. Sheriffs, as officers charged with the task of the enforcement and/or
implementation of judgments, must act with considerable dispatch so as not to unduly delay
the administration of justice. It is not within the jurisdiction of the Sheriff to consider and
resolve respondent's objection to the continuation of the conduct of the auction sale. The
Sheriff has no authority, on his own, to suspend the auction sale. His duty being ministerial,
he has no discretion to postpone the conduct of the auction sale.
No. The HLURB Arbiter and Director had no sufficient factual basis to determine
the value of the levied property. The Appraisal report, that was submitted, was based on
the projected value of the townhouse project after it shall have been fully developed, that
is, on the assumption that the residential units appraised had already been built. Since it is
undisputed that the townhouse project did not push through, the projected value did not
become a reality. Thus, the appraisal value cannot be equated with the fair market value.
No. Under Article 12, Sec.7 of the 1987 Constitution, foreign nationals, the spouses
Hulst, are disqualified form owning real property. However, under article 1414 of the Civil
Code, one who repudiates the agreement and demands his money before the illegal act has
taken place is entitled to recover. Petitioner is therefore entitled to recover what he has
paid, although the basis of his claim for rescission, which was granted by the HLURB,
was not the fact that he is not allowed to acquire private land under the Philippine
Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00,
representing the purchase price paid to respondent. No damages may be recovered on the
basis of a void contract; being nonexistent, the agreement produces no juridical tie between
the parties involved. Further, petitioner is not entitled to actual as well as interests thereon,
moral and exemplary damages and attorney's fees.
#3

Toyota Shaw Inc. v CA


GR No. 116650 May 23, 1995
FACTS: Sosa wanted to purchase a Toyota Car. She met Bernardo, the sales representative of
Toyota. Sosa emphasized to the sales rep that she needed the car not later than 17 June 1989. They
contracted an agreement on the delivery of the unit and that the balance of the purchase price
would be paid by credit financing. The following day, Sosa delivered the down
payment and a Vehicle sales proposal was printed. On the day of delivery, Bernardo called
Sosa to inform him that the car could not be delivered. Toyota contends, on the other hand, that
the Lite Ace was not delivered to Sosa because of the disapproval by B.A. Finance of the credit
financing application of Sosa. Toyota then gave Sosa the option to purchase the unit by paying the
full purchase price in cash but Sosa refused. Sosa asked that his down payment be refunded. Toyota
did so on the very same day by issuing a Far East Bank check for the full amount, which Sosa
signed with the reservation, without prejudice to our future claims for damages. Thereafter, Sosa
sent two letters to Toyota. In the first letter, she demanded the refund of the down payment plus
interest from the time she paid it and for damages. Toyota refused to the demands of Sosa.
ISSUE: Whether or not there was a perfected contract of sale
HELD: What is clear from the agreement signed by Sosa and Gilbert is not a contract of sale. No
obligation on the part of Toyota to transfer ownership of the car to Sosa and no correlative
obligation on the part of Sosa to pay . The provision on the down payment of PIOO,OOO.OO
made no specific reference to a sale of a vehicle. If it was intended for a contract of sale, it could
only refer to a sale on installment basis, as the VSP executed the following day. Nothing was
mentioned about the full purchase price and the manner the installments were to be paid. An
agreement on the manner of payment of the price is an essential element in the formation of a
binding and enforceable contract of sale. This is so because the agreement as to the manner of
payment goes, into the price such that a disagreement on the manner of payment is tantamount to
a failure to agree on the price. Definiteness as to the price is an essential element of a binding
agreement to sell personal property.
#4
Sps. Edrada v. Sps. Ramos

Facts: Sps. Ramos owned 2 fishing vessels, the Lady Lalaine and the Lady Theresa. On April
1, 1996, the parties executed an UNTITLED HANDWRITTEN DOCUMENT acknowledging
Sps. Edradas possession of the vessels and stating therein that the documents pertaining to the
sale will follow, as well as the AGREED PURCHASE PRICE of P900,000. Upon the signing of
the documents, Sps. Edrada delivered 4 postdated checks amounting to P140,000. The first 3
checks were honored while the fourth check for P100,000 was dishonored because of a stop
payment order. On June 3, 1996, Sps. Ramos filed an action against Sps. Edrada for specific
performance with damages before the RTC, praying that the latter be obliged to execute the
necessary Deed of Sale and to pay the balance of P160,000. They alleged further that despite the
UNTITLED HANDWRITTEN DOCUMENT which evinced a contract to buy at the agreed price
of P900,000 for both vessels, but Sps. Edrada failed to pay even after repeated demands were
made. In answer, Sps. Edrada claimed that the document merely embodied an agreement brought
about by the loans they extended to Sps. Ramosthat the latter allowed them to administer the
vessels as a business and should they find it profitable, said vessels would be sold to them for
P900,000. However, they decided to call it quits after spending a hefty sum for the repair and
maintenance of the vessels which were already in dilapidated condition.
RTC: Ruled in favor of Sps. Ramos; ordered Sps. Edrada to pay balance with legal interest.
CA: affirmed RTC

Issue: WON there is a perfected contract of sale.

Held: NO. Before a valid and binding contract of sale can exist, the manner of payment of the
purchase price must first be established as it is essential to the validity of the sale. The fact that
there is a STATED purchase price should not lead to the conclusion that a contract of sale had
been perfected. A contract of sale is perfected when there is concurrence of the wills of the
contracting parties with respect to the object and cause of the contract. In this case, the agreement
merely acknowledged that a purchase price had been agreed upon by the parties. There was NO
MUTUAL PROMISE to buy (on petitioners part) or to sell (on respondents part). Further, the
proviso indicating that the documents pertaining to such sale and agreement of payments between
the partners will follow, CLEARLY manifests LACK of agreement between the parties as to the
terms of contract (i.e., object and cause). At most, the agreement bares only the INTENTION to
enter to either a contract to sell or a contract of sale. Thus, petition is granted. CA ruling reversed
and set aside.
#5
LLOYDS ENTERPRISES V. DOLLETON
Topic: Perfection of a Contract of Sale

FACTS: Respondents spouses Dolleton, were the registered owners of a parcel of land covered by
TCT No. 153554 with a four-door apartment building being leased to various tenants. Respondents
mortgaged the property to a certain Santos to secure a loan in the amount of P100,000.00. Upon
payment of the loa, Santos executed a release and cancellation of the mortgage. The same was
annotated on the TCT. On 15 September 1994, TCT No. 153554 in the name of respondents was
cancelled and a new TCT No. 197220 was issued in the name of Gagan on the basis of a Deed of
Absolute Sale dated 5 August 1994 whereby respondents purportedly sold to Gagan the subject
property for the sum of P120,000.00. On 19 September 1994, Gagan and Gueverra mortgaged said
property with TCT No. 197220 to petitioner LECC for second loan of P542,928.00 and was
annotated on said Title. However, Gagan and Guevarra failed to pay the loan upon maturity. Thus,
petitioner foreclosed mortgaged property being the highest bidder, and was not redeemed within
the one-year period. Hence, ownership was consolidated in favor of petitioner and was issued a
new TCT No. 210363 cancelling TCT No. 197220. Petitioner then sent notices to the apartment
tenants on the transfer of ownership and rentals were not remitted to respondents anymore,
prompting the latter to cause the annotation of an adverse claim on TCT No. 210363. Respondents
prayed among others for the restoration of TCT No. 153554 and nullification of the Deed of
Absolute Sale, and the extrajudicial foreclosure proceedings. They denied having executed the
Deed of Absolute Sale and alleged that they had merely offered to sell to Gagan the subject
property for P900,000.00 on installment basis so that they could pay their loan obligation to Santos.
After Gagan had initially paid P200,000.00, they entrusted the owner's copy of TCT No. 153554
to him. Gagan was unable to pay the balance of the purchase price, rather she caused the fraudulent
cancellation of TCT No. 153554 and the issuance of TCT No. 197220 in her name, and of
eventually using TCT No. 197220 to secure the loans obtained from petitioner. Respondents also
faulted petitioner for failing to make adequate inquiries on the true ownership of the property
considering the suspicious circumstances surrounding Gagan's and Guevarra's request for loan
immediately after the issuance of the new certificate of title. The RTC declared the Deed of
Absolute Sale between Gagan and Dolleton as spurious and directed the reconveyance of the
property to the true and genuine owners, the spouses Dolleton. CA affirmed the decision.

ISSUE: WON there is a perfected Contract of Sale between respondents and Gagan leading to
petitioner being a Mortgagee and Buyer in Good Faith?

HELD: NO. The perfection of the Deed of Sale was not established and the petitioner cannot be a
mortgagee and buyer in good faith. Petitioner failed to verify the actual condition of the property,
particularly as to who is in actual possession and if the premises are leased to third persons, who
is receiving the rental payments therefore. Appellant LECC merely submitted in evidence forms
for credit investigation on the borrower's capacity to pay, there is no showing that they actually
inspected the property offered as collateral. Had precautionary measure been taken, the lending
company's representatives would have easily discovered that the four (4)-door apartment in the
premises being mortgaged is rented by tenants and they could have been provided with information
that plaintiffs-appellees are still the present lessors/owners thereof. Moreover, the circumstance
that the certificate of title covering the property offered as security was newly issued should have
put petitioner on guard and prompted it to conduct an investigation surrounding the transfer of the
property to defendant Gagan. Had it inquired further, petitioner would have discovered that the
property was sold for an unconscionably low consideration of only P120,000.00 when it could
have fetched as high as P900,000.00. A purchaser cannot close his eyes to facts which should put
a reasonable man on his guard and claim that he acted in good faith under the belief that there was
no defect in the title of the vendor. Petitioner is engaged in the business of extending credit to the
public and is, thus, expected to exercise due diligence in dealing with properties offered as security.
The failure of respondent to take such precautionary steps is considered negligence on its part and
would thereby preclude the defense of good faith.
#6
HEIRS OF JESUS M. MASCUANA, represented by JOSE MA. R. MASCUANA,
petitioners, vs. COURT OF APPEALS, AQUILINO BARTE, and SPOUSES RODOLFO
and CORAZON LAYUMAS, respondents.
FACTS: The parties executed a Deed of Absolute Sale on August 12, 1961. In the said deed,
Mascuana, as vendor, sold an undivided 469-square-meter portion of the property for P4,690.00,
with P3,690.00 as down payment, and under the following terms of payment:That the balance of
ONE THOUSAND PESOS (P1,000.00) shall be paid by the VENDEE unto the VENDOR as soon
as the above-portions of Lot 124 shall have been surveyed in the name of the VENDEE and all
papers pertinent and necessary to the issuance of a separate Certificate of Title in the name of the
VENDEE shall have been prepared. In the meantime, a survey was conducted for the co-owners
of Lot No. 124 on July 9, 1962.The portion of the property deeded to Sumilhig was identified in
the said plan as Lot No. 124-B. Meanwhile, Mascuana died intestate on April 20, 1965 and was
survived by his heirs.
On April 24, 1968, Sumilhig executed a Deed of Sale of Real Property on a portion of Lot No.
124-B with an area of 469 square meters and the improvements thereon, in favor of Corazon
Layumas, the wife of Judge Rodolfo Layumas, for the price of P11,000.00. The spouses Layumas
took possession of the property and caused the cutting of tall grasses thereon. Upon the plea of a
religious organization, they allowed a chapel to be constructed on a portion of the property.[9] In
January 1985, the spouses Layumas allowed Aquilino Barte to stay on a portion of the property to
ward off squatters. Barte and his kin, Rostom Barte, then had their houses constructed on the
property. Sometime thereafter, Corazon Layumas wrote Pepito Mascuana, offering to pay the
amount of P1,000.00, the balance of the purchase price of the property under the deed of absolute
sale executed by Mascuana and Sumilhig on August 12, 1961. However, the addressee refused to
receive the mail matter.
On November 17, 1986, the heirs of Mascuana filed a Complaint for recovery of possession of Lot
No. 124-B and damages with a writ of preliminary injunction, alleging that they owned the subject
lot by virtue of successional rights from their deceased father.
The petitioners reiterated their pose that the deed of absolute sale over the property executed by
their father, Jesus Mascuana, as vendor, and Diosdado Sumilhig as vendee, was a contract to sell
and not a contract of sale. They assert that on its face, the contract appears to be a contract to sell,
because the payment of the P1,000.00 balance of the purchase price was subject to a suspensive
condition: the survey of the property, the segregation of the portion thereof subject of the sale, and
the completion of the documents necessary for the issuance of a Torrens title over the property to
and in the name of Sumilhig who was the vendee. The petitioners assert that Sumilhig never paid
the aforesaid amount to the vendor; hence, the obligation of the latter and his predecessors-in-
interest (herein petitioners) to execute a final deed of sale never arose. As such, they aver, title to
the property remained reserved in the vendor and his heirs even after his death. There was no need
for the vendor to rescind the deed or collect the said amount of P1,000.00 under Article 1191 of
the New Civil Code because such a remedy applies only to contracts of sale. The petitioners insist
that Sumilhig never acquired title over the property; he could not have transferred any title to the
respondents. Sumilhig could not have transferred that which he did not own.
ISSUE: WAS THE SALE OF LOT NO. 124-B MADE BY JESUS M. MASCUANA IN FAVOR
OF DIOSDADO SUMILHIG A CONTRACT TO SELL OR CONTRACT OF SALE?
HELD: The petitioners contention has no factual and legal bases. While it is true that Jesus
Mascuana executed the deed of absolute sale over the property on August 12, 1961 in favor of
Diosdado Sumilhig for P4,690.00, and that it was only on July 6, 1962 that TCT No. 967 was
issued in his name as one of the co-owners of Lot No. 124, Diosdado Sumilhig and the respondents
nevertheless acquired ownership over the property. The deed of sale executed by Jesus Mascuana
in favor of Diosdado Sumilhig on August 12, 1961 was a perfected contract of sale over the
property. It is settled that a perfected contract of sale cannot be challenged on the ground of the
non-transfer of ownership of the property sold at that time of the perfection of the contract, since
it is consummated upon delivery of the property to the vendee. It is through tradition or delivery
that the buyer acquires ownership of the property sold. As provided in Article 1458 of the New
Civil Code, when the sale is made through a public instrument, the execution thereof is equivalent
to the delivery of the thing which is the object of the contract, unless the contrary appears or can
be inferred. The record of the sale with the Register of Deeds and the issuance of the certificate of
title in the name of the buyer over the property merely bind third parties to the sale. As between
the seller and the buyer, the transfer of ownership takes effect upon the execution of a public
instrument covering the real property. Long before the petitioners secured a Torrens title over the
property, the respondents had been in actual possession of the property and had designated Barte
as their overseer. Article 1458 of the New Civil Code provides: By the contract of sale, one of the
contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing,
and the other to pay therefor a price certain in money or its equivalent.A contract of sale may be
absolute or conditional. Thus, there are three essential elements of sale, to wit: a) Consent or
meeting of the minds, that is, consent to transfer ownership in exchange for the price; b)
Determinate subject matter; and c) Price certain in money or its equivalent. In this case, there was
a meeting of the minds between the vendor and the vendee, when the vendor undertook to deliver
and transfer ownership over the property covered by the deed of absolute sale to the vendee for
the price of P4,690.00 of which P3,690.00 was paid by the vendee to the vendor as down payment.
The vendor undertook to have the property sold, surveyed and segregated and a separate title
therefor issued in the name of the vendee, upon which the latter would be obliged to pay the
balance of P1,000.00. There was no stipulation in the deed that the title to the property remained
with the vendor, or that the right to unilaterally resolve the contract upon the buyers failure to pay
within a fixed period was given to such vendor. Patently, the contract executed by the parties is a
deed of sale and not a contract to sell. As the Court ruled in a recent case:
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the
parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing
for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of
the lot to respondent. Thus, Art. 1477 provides that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof.
The condition in the deed that the balance of P1,000.00 shall be paid to the vendor by the vendee
as soon as the property sold shall have been surveyed in the name of the vendee and all papers
pertinent and necessary to the issuance of a separate certificate of title in the name of the vendee
shall have been prepared is not a condition which prevented the efficacy of the contract of sale. It
merely provides the manner by which the total purchase price of the property is to be paid. The
condition did not prevent the contract from being in full force and effect:
It bears stressing that in a contract of sale, the non-payment of the price is a resolutory condition
which extinguishes the transaction that, for a time, existed and discharges the obligation created
under the transaction.] A seller cannot unilaterally and extrajudicially rescind a contract of sale
unless there is an express stipulation authorizing it. In such case, the vendor may file an action for
specific performance or judicial rescission.
#7
Sanchez v. Rigos (GR no. L-25494; June 14, 1972)
Topic: Option Contract
FACTS : Nicolas Sanchez and Severina Rigos executed an instrument, entitled Option to
Purchase where Rigos agreed, promised and committed . . . to sell to Sanchez a parcel of land
situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija (as
described in TCT NT-12528) for the sum of P1,510.00 within two (2) years from said date. Such
agreement was executed with the understanding that the said option shall be deemed terminated
and elapsed, if Sanchez shall fail to exercise his right to buy the property within the stipulated
period. Several tenders of payment of sum of P1,510.00 was made by Sanchez within the said
period but these were rejected by Mrs. Rigos. Hence, Sanchez deposited the sum to with the CFI
of Nueva Ecija and instituted the action. Rigos alleged that the contract between the parties is a
unilateral promise to sell, and the same being unsupported by any valuable consideration, by force
of the New Civil Code, is null and void. Lower court ruled in favor of Sanchez presuming the
existence of the consideration under Article 1354. Sanchez maintains that the promise contained
in the contract is reciprocally demandable, pursuant to the first paragraph of said Article 1479.
ISSUE: WON the promisor can withdraw an option to sell, after acceptance, if the option is not
supported by any consideration?
HELD: NO. Acceptance resulted in a perfected contract of sale. The option did not impose upon
Sanchez the obligation to purchase defendant's property. The instrument Option to
Purchase is not a contract to buy and sell. It merely granted plaintiff an option to buy. Under
the provisions thereof, the defendant agreed, promised and committed herself to sell the land
therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that
her aforementioned agreement, promise and undertaking is supported by a consideration distinct
from the price stipulated for the sale of the land. While Art. 1354 applies to contracts in general,
Art. 1479 applies to sales in particular. In order that said unilateral promise may be binding
upon the promisor, Article 1479 requires the concurrence of a condition that the promise be
supported by a consideration distinct from the price. The promisee cannot compel the promisor to
comply with the promise, unless the former establishes the existence of said distinct consideration.
Hence, promisee has the burden of proving such consideration (In here, Rigos has not even alleged
the existence thereof in his complaint). Atkins, Kroll and Co., Inc. v. Cua Hian Tek saw no
distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a
unilateral promise to sell similar to the one sued upon here was involved, treating such promise as
an option which, although not binding as a contract in itself for lack of a separate consideration,
nevertheless generated a bilateral contract of purchase and sale upon acceptance. In the present
case, the trial court found that the plaintiff (Sanchez) had offered the sum of P1,510.00 before
Rigos could withdraw her offer. Since Rigos offer to sell was accepted by Sanchez, before she
could withdraw her offer, a bilateral reciprocal contract to sell and to buy was generated. As a rule,
if the option is given without consideration, it is a mere offer of a contract of sale which is not
binding until accepted. If acceptance is made before withdrawal, it constitutes a binding contract
of sale even though option was not supported by a consideration.
#8
GUZMAN, BOCALING ; CO. v. RAOUL S. V. BONNEVIE
G.R. No. 86150 March 2, 1992
Facts: A 600 sq. m. Parcel of land with 2 buildings constructed thereon was leased to Raoul S.
Bonnevie and Christopher Bonnevie by the administratrix, Africa Valdez de Reynoso, for a period
of one year. The Contract of Lease contained a stipulation giving the lessee first priority, all things
and considerations being equal, to purchase the subject property should the lessor desire to sell the
same. According to Reynoso, she notified the Bonnevies by registered mail that she was selling
the leased premises for P600.000.00 less a mortgage loan of P100,000.00, and was giving them 30
days from receipt of the letter to exercise their right of first priority to purchase the subject
property. She said that in the event that they did not exercise the said right, she would expect them
to vacate the property immediately. Reynoso sent another letter advising them that in view of their
failure to exercise their right of first priority, she had already sold the property to Guzman,
Bocaling ; Co. The Contract of Sale provided for immediate payment of P137,500.00 on the
purchase price, the balance of P262,500.00 to be paid only when the premises were vacated.
Reynoso demanded that the Bonnevies vacate the premises within 15 days for their failure to pay
the rentals for four months. Upon refusal, Reynoso filed a complaint for ejectment against them.
While the ejectment case was pending in the City Court, the Bonnevies filed an action for
annulment of the sale between Reynoso and Guzman, Bocaling ; Co. and cancellation of the
transfer certificate of title in the name of the latter. They also asked that Reynoso be required to
sell the property to them under the same terms and conditions agreed upon in the Contract of Sale
in favor of Guzman, Bocaling ; Co. The City Court thus rendered judgment, ordering the
Bonnevies to vacate the premises and to pay rent, and declaring the deed of sale executed between
Reynoso and Guzman, Bocaling ; Co. to be null and void. The Court of Appeals affirmed the
ruling of the lower court.
Issues: (1) Whether or not the contract of sale is valid insofar as the right of first priority clause is
concerned. (2) Whether or not the contract of sale is voidable.
Held: (1) NO. It was not sufficiently proved that the first letter had indeed been sent to and received
by the Bonnevies which would have enabled them to exercise their right of first priority. Even
assuming that they did, Reynoso would still be guilty of violating the Contract of Lease which
specifically stated that the Bonnevies could exercise the right of first priority, all things and
conditions being equal. The Court read this to mean that there should be identity of the terms and
conditions to be offered to the Bonnevies and all other prospective buyers, with the Bonnevies to
enjoy the right of first priority. The selling price qouted to the Bonnevies was P600,000.00, to be
fully paid in cash less only the mortgage lien of P100,000.00. On the other hand, the selling price
offered to and accepted by the petitioner was only P400,000.00 and only P137,500.00 was paid in
cash while the balance of P272,500.00 was to be paid when the property (was) cleared of tenants
or occupants. Only if the Bonnevies failed to exercise their right of first priority could Reynoso
lawfully sell the subject property to others, and at that only under the same terms and conditions
offered to the Bonnevies. (2) NO. The Contract of Sale was not voidable, but rescissible. Under
Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid may nonetheless be
subsequently rescinded by reason of injury to third persons, like creditors. The status of creditors
could be validly accorded the Bonnevies for they had substantial interests that were prejudiced by
the sale of the subject property to the petitioner without recognizing their right of first priority
under the Contract of Lease. Rescission is a remedy granted by law to the contracting parties and
even to third persons, to secure reparation for damages caused to them by a contract, even if this
should be valid, by means of the restoration of things to their condition at the moment prior to the
celebration of said contract. It is true that the acquisition by a third person of the property subject
of the contract is an obstacle to the action for its rescission where it is shown that such third person
is in lawful possession of the subject of the contract and that he did not act in bad faith. However,
this rule is not applicable in the case before us because the petitioner is not considered a third party
in relation to the Contract of Sale nor may its possession of the subject property be regarded as
acquired lawfully and in good faith.
#9
Riviera Filipina Inc. vs. CA

Facts: Respondent Reyes executed a ten year renewable Contract of Lease with Riviera involving
a 1,018 square meter parcel of land which was a subject of a Real Estate Mortgage executed by
Reyes in favor of Prudential Bank. But the loan with Prudential Bank remained unpaid upon
maturity so the bank foreclosed the mortgage thereon and emerged as the highest bidder at the
public auction sale. Reyes decided to sell the property offered it to Reviera. After seven months,
Riviera offered to buy the property but Reyes denied it and increased the price of the property.
Reyes counsel informed Riviera that he is selling the property for P6,000 per square meter and to
confirm their conversation, Riviera sent a letter stating his interest in buying the property for the
fixed and final price of P5,000 per square meters but Reyes did not accede to said price.

Then Reyes confided to Traballo and the latter expressed interest in buying the said property for
P5,300 per square meter but he did not have enough amount so he looked for a partner. Despite of
the impending expiration of the redemption period of the foreclosed mortgaged property and the
deal between Reyes and Traballo was not yet formally concluded, Reyes decided to approach
Riviera and requested Atty. Alinea to approach Angeles and find out if the latter was still interested
in buying the subject property and ask him to raise his offer for the purchase of the said property
a little higher but Riviera said that his offer is P5,000 per square meter so Reyes did not agree.

Cypress and Trading Corporation, were able to come up with the amount sufficient to cover the
redemption money, with which Reyes paid to the Prudential Bank to redeem the subject property
and Reyes executed a Deed of Absolute Sale covering the subject property. Cypress and Cornhill
mortgaged the subject property to Urban Development Bank. Riviera sought from Reyes, Cypress
and Cornhill a resale of the subject property to it claiming that its right of first refusal under the
lease contract was violated but his attempts were unsuccessful. Riviera filed the suit to compel
Reyes, Cypress, Cornhill and Urban Development Bank to transfer the disputed title to the land in
favor of Riviera upon its payment of the price paid by Cypress and Cornhill.

Issue: Whether or not petitioner can still exercise his right of first refusal.
Held: No. The held that in order to have full compliance with the contractual right granting
petitioner the first option to purchase, the sale of the properties for the price for which they were
finally sold to a third person should have likewise been first offered to the former. Further, there
should be identity of terms and conditions to be offered to the buyer holding a right of first refusal
if such right is not to be rendered illusory. Lastly, the basis of the right of first refusal must be the
current offer to sell of the seller or offer to purchase of any prospective buyer. Thus, the prevailing
doctrine is that a right of first refusal means identity of terms and conditions to be offered to the
lessee and all other prospective buyers and a contract of sale entered into in violation of a right of
first refusal of another person, while valid, is rescissible.
#10
Paranaque Kings Vs. CA

Facts:
PR Catalina L. Santos is the owner of 8 parcels of land located at Paraaque, Metro Manila.
November 28, 1977: a certain Frederick Chua leased the subject property from defendant
Catalina L. Santos, the said lease was registered in the Register of Deeds.
February 12, 1979: Frederick Chua assigned all his rights and interest and participation in
the leased property to Lee Ching Bing, by virtue of a deed of assignment and with the
conformity of defendant Santos, the said assignment was also registered.
August 6, 1979: Lee Ching Bing also assigned all his rights and interest in the leased
property to Paraaque Kings Enterprises, Incorporated by virtue of a deed of assignment
and with the conformity of defendant Santos. Their contract provided that:
"9. That in case the properties subject of the lease agreement are sold or encumbered, Lessors
shall impose as a condition that the buyer or mortgagee thereof shall recognize and be bound
by all the terms and conditions of this lease agreement and shall respect this Contract of
Lease as if they are the LESSORS thereof and in case of sale, LESSEE shall have the first
option or priority to buy the properties subject of the lease;"
September 21, 1988: Catalina Santos sold the eight parcels of land subject of the lease to
defendant David Raymundo for a consideration of P5,000,000.
Upon learning of this fact, the representative of Paranaque King wrote a letter to defendant
Santos, requesting her to rectify the error and consequently realizing the error, she had it
reconveyed to her for the same consideration of P5M.
Only 2 days after Catalina Santos sold her properties did she reply to Paranaque Kings letter
saying period has lapsed.
July 6, 1989: counsel for defendant Santos informed the petitioners Paranaque Kings that
the new owner is RAYMUNDO.
From the preceding facts, it is clear that the sale was simulated and that there was a collusion
between the respondents Santos and Raymundo in the sales of the leased properties
(defendants SANTOS and RAYMUNDO have the same counsel who represented both of
them in their exchange of communication with PKs counsel, a fact that led to the conclusion
that a collusion exist between them, among others)
Petitioner Paranaque demanded from the defendants to rectify their unlawful acts that they
committed, but defendants refused and failed to comply with plaintiffs just and valid
demands.
RTC issued the order dismissing the complaint for lack of a valid cause of action. CA
affirmed in toto.

Issue: Is such right of first refusal enforceable by an action for specific performance? YES
(WON the complaint filed by Paranaque Kings states a valid cause of action. YES)

Held: Paranaque Kings was granted a first option or priority to purchase the subject
property (Based on the Par. 9 of the Lease Contract)
A careful examination of the complaint filed by Paranaque Kings reveals that it sufficiently alleges
an actionable contractual breach on the part of private respondents.

Under paragraph 9 of the contract of lease between respondent Santos and petitioner, the latter was
granted the "first option or priority" to purchase the leased properties in case Santos decided to
sell. If Santos never decided to sell at all, there can never be a breach, much less an enforcement
of such "right."

But on September 21, 1988, Santos sold said properties to Respondent Raymundo without first
offering these to petitioner. Santos indeed realized her error, since she repurchased the properties
after petitioner complained. Thereafter, she offered to sell the properties to petitioner for P15
million, which petitioner, however, rejected because of the "ridiculous" price. But Santos again
appeared to have violated the same provision of the lease contract when she finally resold the
properties to respondent Raymundo for only P9 million without first offering them to petitioner at
such price. Whether there was actual breach which entitled petitioner to damages and/or other just
or equitable relief, is a question which can better be resolved after trial on the merits where each
party can present evidence to prove their respective allegations and defenses.

The basis of the right of first refusal must be the current offer to sell of the seller or offer to
purchase of any prospective buyer.
Only after the optionee fails to exercise its right of first priority under the same terms and within
the period contemplated, could the owner validly offer to sell the property to a third person, again,
under the same terms as offered to the optionee.

The contention of Raymundo that he is not a privy to the contract is untenable


With respect to the contention of respondent Raymundo that he is not privy to the lease contract,
not being the lessor nor the lessee referred to therein, he could thus not have violated its provisions,
but he is nevertheless a proper party. Clearly, he stepped into the shoes of the owner-lessor of the
land as, by virtue of his purchase, he assumed all the obligations of the lessor under the lease
contract. Moreover, he received benefits in the form of rental payments. Furthermore, the
complaint, as well as the petition, prayed for the annulment of the sale of the properties to him.
Both pleadings also alleged collusion between him and respondent Santos which defeated the
exercise by petitioner of its right of first refusal.

In order then to accord complete relief to petitioner, respondent Raymundo was a necessary, if not
indispensable, party to the case. A favorable judgment for the petitioner will necessarily affect the
rights of respondent Raymundo as the buyer of the property over which petitioner would like to
assert its right of first option to buy.

Deed of Assignment included the option to purchase


The provisions of the deeds of assignment with regard to matters assigned were very clear. Under
the first assignment between Frederick Chua as assignor and Lee Ching Bing as assignee, it was
expressly stated that:

. . . . the ASSIGNOR hereby CEDES, TRANSFERS and ASSIGNS to herein ASSIGNEE, all his
rights, interest and participation over said premises afore-described, . . . .
And under the subsequent assignment executed between Lee Ching Bing as assignor and the
petitioner, represented by its Vice President Vicenta Lo Chiong, as assignee, it was likewise
expressly stipulated that;

. . . . the ASSIGNOR hereby sells, transfers and assigns all his rights, interest and participation
over said leased premises, . . . .

One of such rights included in the contract of lease and, therefore, in the assignments of rights was
the lessee's right of first option or priority to buy the properties subject of the lease, as provided in
paragraph 9 of the assigned lease contract. The deed of assignment need not be very specific as to
which rights and obligations were passed on to the assignee. It is understood in the general
provision aforequoted that all specific rights and obligations contained in the contract of lease are
those referred to as being assigned. Needless to state, respondent Santos gave her unqualified
conformity to both assignments of rights.

Ruling: WHEREFORE, the petition is GRANTED. The assailed decisions of the trial court and
Court of Appeals are hereby REVERSED and SET ASIDE. The case is REMANDED to the
Regional Trial Court of Makati for further proceedings.
#11
Lao vs Genato
L 56451 June 19, 1985
Cuevas, J

Facts: Spouses Lao (Juan and Candelaria Lao) were promisees in a Mutual Agreement of Promise
to Sell executed between them and private respondent Sotero B. Dionisio III, son of respondent
Sotero A. Dionisio, Jr who was heir and administrator of the intestate estate of the deceased Rosend
Abuton. Sotero III bound himself to sell the subject property to petitioner. Private respondents,
except Sotero Dionisio III and William Go, are the children and only compulsory heirs of the
deceased.

Administrator Sotero Dionisio, Jr., filed with the Probate Court a Motion for Authority to Sell
certain properties of the deceased to settle the outstanding obligations of the estate. After the lower
court issued an order authorizing Dionisio Jr to sell the therein described properties, Dionisio Jr,
sold the subject property to his son Dionisio III for P75,000. Dionisio III then sold the property to
William Go for P80,000.

Respondent-heir Florida Nuqui, filed a Motion for Annulment/Revocation of the Deeds of


Absolute Sale on the ground that the consideration of the two sales were grossly inadequate as
some would buy the property at a price of P400,000. She further contended that the two sales were
but a single transaction simultaneously hatched and consummated in one occasion and that the
sales were in reality a single deal between the administrator and William Go, because Sotero
Dionisio III is without means or income and so has no capacity to buy the property; and that the
transaction is an evidence of the administrator's intent to defraud the estate and his co-heirs.

Spouses Lao filed a "Manifestation In Intervention of Interest to Purchase Property Authorized by


the Court to be Sold", wherein they alleged that Sotero III, without revealing that the property had
already been sold to William Go, entered into a Mutual Agreement of Promise to Sell with them,
for the amount of P220,000.00 and that they already paid the earnest money in the amount of
P70,000.00.

Judge Genato allowed the interested parties to bid for the property. William Gos offer was the
highest at P282,000. After the bidding, all the parties, with the exception of the Lao spouses and
Dionisio III, submitted for Judge Genatos approval an amicable settlement wherein William Go
will pay the heirs an additional amount of P80,000 and that the heirs will not object to the
confirmation and approval of the sale executed by Dionisio Jr to Dionisio III and the sale of the
property by Dionisio III to William Go. Judge Genato issued an order approving the amicable
settlement, confirming and ratifying the two questioned deeds of sale. The Lao spouses filed a
petition for certiorari to declare Judge Genatos order as null and void. They contend that the deed
of absolute sale executed by the administrator in favor of his son is without consideration.
Therefore, it is fictitious and simulated which cannot be ratified pursuant to Article 1409 of the
Civil Code.
Issue: Whether or not the amicable settlement be annulled

Held: Yes. Sotero Dionisio, Jr. is the Administrator of the estate of his deceased mother Rosenda
Abuton. As such Administrator, he occupies a position of the highest trust and confidence, He is
required to exercise reasonable diligence and act in entire good faith in the performance of that
trust.

The sale was made. But of all people, to his very son Sotero Dionisio III and for the grossly low
price of only P75,000,00, That sale was indubitably shown to be fictitious, it clearly appearing that
Dionisio III has no income whatsoever. In fact, he is still a dependent of his father, administrator
Dionisio, Jr. On top of that, not a single centavo, of the P75,000.00 stated consideration was ever
accounted for nor reported by Dionisio, Jr. to the probate court.

This sale is one of the illegal and irregular transactions that was confirmed and legalized by Judge
Genatos approval of the assailed Amicable Settlement. His order to approve the amicable
settlement violates Article 1409 of the New Civil Code and cannot work to confirm nor serve to
ratify a fictitious contract which is non-existent and void from the very beginning. Therefore, the
amicable settlement was declared null and void by the Supreme Court.
#12
FRONILDA V. RTC
G.R. No. 72306 October 6, 1988

Facts: Julio M. Catolos, deceased, formerly owned 6 parcels of land located in Tanay, Rizal. His
estate was the subject of settlement in CFI Rizal. Francesca Catolos Agnes Catolos Alfonso I.
ForniIda and Asuncion M. Pasamba were some of the legal heirs and were represented in the case
by Atty. Amonoy. A Project of Partition was filed whereby the Controverted Parcels were
adjudicated to Fornilda and Pasamba, which was approved. Fornilda and Pasamba executed a
Contract of Mortgage wherein they mortgaged the Controverted Parcels to Respondent Amonoy
as security for the payment of his attorney's fees. Pasamba and Fornilda died. Since the mortgage
was not paid, respondent Amonoy instituted foreclosure proceedings. The Trial Court ordered the
Pasamba and Fornilda heirs to pay Respondent Amonoy. Subsequently, the controverted parcels
were foreclosed and an auction sale was held with Respondent Amonoy as the sole bidder for
P23,760.0, which was confirmed by the court. To satisfy the deficiency, another execution sale
was conducted with Respondent Amonoy as the sole bidder for P12,137.50.

A year after the judgment in the Foreclosure Case, an action for Annulment of Judgment was filed
before the then CFI Rizal and petitioners were also included as plaintiffs. They allege that the sales
were null and void as being violative of Art. 1491(5) of the Civil Code, which prohibits attorneys
from purchasing, even at a public or judicial auction, properties and rights in litigation, and that
the Trial Court, in the Foreclosure Case, had never acquired jurisdiction over the subject matter of
the action, i.e., the Controverted Parcels. The Trial Court dismissed the Annulment Case holding
that the particular disqualification in Article 1491 of the Civil Code is not of general application
nor of universal effect but must be reconciled with the rule that permits judgment creditors to be
bidders at sheriffs sales, so that Respondent Amonoy was "clearly not prohibited from bidding his
judgment and his acquisitions therefore are sanctioned by law. Upon remand of the Foreclusure
Case to respondent RTC, respondent Sheriff notified petitioners to vacate the premises.

Issue: Whether or not the mortgage constituted on the Controverted Parcels in favor of Respondent
Amonoy comes within the scope of the prohibition in Article 1491 of the Civil Code?

Held: YES. Under Article 1491(5), a lawyer is prohibited from acquiring either by purchase or
assignment the property or rights involved which are the object of the litigation in which they
intervene by virtue of their profession. The prohibition on purchase is all embracing to include not
only sales to private individuals but also public or judicial sales. The rationale advanced for the
prohibition is that public policy disallows the transactions in view of the fiduciary relationship
involved. The transaction involved falls squarely within the prohibition against any acquisition by
a lawyer of properties belonging to parties they represent which are still in suit. For, while the
Project of Partition was approved, it was not until 4 years later that the estate was declared closed
and terminated. At the time the mortgage was executed, therefore, the relationship of lawyer and
client still existed, the very relation of trust and confidence sought to be protected by the
prohibition, when a lawyer occupies a vantage position to press upon or dictate terms to an
harassed client. What is more, the mortgage was executed only eight (8) days after approval of the
Project of Partition thereby evincing a clear intention on Respondent Amonoy's part to protect his
own interests and ride roughshod over that of his clients. From the time of the execution of the
mortgage in his favor, Respondent Amonoy had already asserted a title adverse to his clients'
interests at a time when the relationship of lawyer and client had not yet been severed.
#13

G.R. No. L-26096 February 27, 1979

THE DIRECTOR OF LANDS,


vs.
SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE
LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-
appellants

177 Phil. 467 MAKASIAR, J.:


FACTS: This is an appeal from the order of the Court of First Instance of Cebu dated March 19,
1966 denying the petition for the cancellation of an adverse claim registered by the adverse
claimant on the transfer certificate of title of the petitioners. The adverse claimant, Atty. Alberto
B. Fernandez was the counsel of petitioner, Maximo Abarquez, in Civil Case No. R-6573 of the
Court of First Instance of Cebu, entitled "Maximo Abarquez vs. Agripina Abarquez", for the
annulment of a contract of sale with right of repurchase and for the recovery of the land, which
was the subject matter thereof.
Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent
basis, petitioner, unable to compensate his lawyer whom he also retained for his appeal, executed
a document on June 10, 1961 in the Cebuano- Visayan dialect whereby he obliged himself to give
to his lawyer or one-half (1/2) of whatever he might recover from Lots 5600 and 5602 should the
appeal prosper. The real property sought to be recovered was actually the share of the petitioner in
the estate of his deceased parents and which were partitioned among the heirs.
The case having been resolved and title having been issued to petitioner, adverse claimant waited
for petitioner to comply with his obligation under the document which is delivering the one-half
(1/2) portion of the said parcels of land.
Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of
land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal.
Upon being informed of the intention of the petitioner, adverse claimant immediately took steps
to protect his interest by filing with the trial court a motion to annotate his attorney's lien on TCT
No. 31841 on June 10, 1965 and by notifying the prospective buyers of his claim over the one-half
portion of the parcels of land. Realizing later that the motion to annotate attorney's lien was a
wrong remedy, as it was not within the purview of Section 37, rule 138 of the Revised Rules of
Court, but before the same was denied by the trial court, adverse claimant filed an affidavit of
adverse claim on July 19, 1966 with the Register of Deeds of Cebu.
Notwithstanding the annotation of the adverse claim, petitioner-spouses Maximo Abarquez and
Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two thirds (2/3 of the lands
covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal.
When the new transfer certificate of title No. 32996 was issued, the annotation of adverse claim
on TCT No. 31841 necessarily had to appear on the new transfer certificate of title. This adverse
claim on TCT No. 32996 became the subject of cancellation proceedings filed by herein petitioner
spouses on March 7, 1966 with the Court of First Instance of Cebu.
Issue: 1.Whether or not contract for a contingent fee, basis of the interest of Atty Fernandez, is
prohibited by Article 1491 of the New Civil Code.
2. Whether or not the contract of contingent fee violates Canon 13 of the Canons of
Professional Ethics
3. Whether or not the registration of adverse claim of Atty Fernandez is valid
1. HELD: This contention is without merit. Article 1491 prohibits only the sale or assignment
between the lawyer and his client, of property which is the subject of litigation. As WE
have already stated "The prohibition in said article applies only to a sale or assignment to
the lawyer by his client of the property which is the subject of litigation. In other words,
for the prohibition to operate, the sale or assignment of the property must take place during
the pendency of the litigation involving the property."

A contract for a contingent fee is not covered by Article 1491 because the transfer or
assignment of the property in litigation takes effect only after the finality of a favorable
judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half
(1/2) of whatever Maximo Abarquez might recover from his share in the lots in question,
is contingent upon the success of the appeal.

2. Canon 13 of the Canons of Professional Ethics expressly recognizes contingent fees by


way of exception to Canon 10. For while Canon 10 prohibits a lawyer from purchasing ".
. . any interest in the subject matter of the litigation he is conducting", Canon 13, on the
other hand, allows reasonable contingent fee contract, thus: "A contract for a contingent
fee where sanctioned by law, should be reasonable under all circumstances of the case,
including the risk and uncertainty of the compensation, but should always be subject to the
supervision of a court, as to its reasonableness." The distinction is between buying an
interest in the litigation as a speculation, which Canon 10 condemns, and agreeing, in a
case which the lawyer undertakes primarily in his professional capacity, to accept his
compensation contingent on the outcome.

3. In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any
undue influence or had perpetrated fraud on, or had in any manner taken advantage of his
client, Maximo Abarquez. And, the compensation of one-half of the lots in question is not
excessive nor unconscionable considering the contingent nature of the attorney's fees.
With these considerations, WE find that the contract for a contingent fee in question is not
violative of the Canons of Professional Ethics. Consequently, both under the provisions of
Article 1491 and Canons 10 and 13 of the Canons of Professional Ethics, a contract for a
contingent fee is valid.

An adverse claim may be registered only by whoever claims any part or interest in
registered land adverse to the registered owner, arising subsequent to the date of the
original registration, if no other provision is made in this Act (496) for registering the same.
A contract for a contingent fee being valid, it vested in the adverse-claimant an interest or
right over the lots in question to the extent of one-half thereof. The interest become vested
in adverse claimant after the case was won on appeal because only then did the assignment
of the one half portion of the lots in question became effective and binding. There being
substantial compliance with Section 110 of Act 496, the registration of the adverse claim
is valid. Being valid, its registration should not be canceled because it is only when such
claim is found unmeritorious that the registration thereof may be canceled.
#14
SARSOSA VDA. DE BARSOBIA and PACITA W. VALLAR v VICTORIANO T.
CUENCO

FACTS:
For review is the decision of CA declaring Victoriano T. Cuenco (now the respondent)
as the absolute owner of a coconut land in question. The lot in controversy is a one-half
portion (on the northern side) of two adjoining parcels of coconut land located at Barrio
Mancapagao, Sagay, Camiguin, Misamis Oriental (now Camiguin province), with an area of
29,150 square meters, more or less. The entire land was owned previously by a certain
Leocadia Balisado, who had sold it to the spouses Patricio Barsobia (now deceased) and
Epifania Sarsosa, Filipino citizens. On September 5, 1936, Epifania Sarsosa then a widow,
sold the land in controversy to a Chinese, Ong King Po, for the sum of P1,050.00 .Ong
King Po took actual possession and enjoyed the fruits thereof. On August 5, 1961, Ong
King Po sold the litigated property to Victoriano T. Cuenco (respondent herein), a naturalized
Filipino, for the sum of P5,000.00. On March 6, 1962, Epifania "usurped" the controverted
property, and on July 26, 1962, Epifania (through her only daughter and child, Emeteria
Barsobia), sold a one-half (1/2) portion of the land in question to Pacita W. Vallar, the
other petitioner herein .On September 19, 1962, respondent filed a Forcible Entry case
against Epifania before the Municipal Court of Sagay, Camiguin. The case was dismissed
for lack of jurisdiction since, as the laws then stood, the question of possession could not
be properly determined without first settling that of ownership. On December 27, 1966,
respondent instituted before the Court of First Instance of Misamis Oriental a Complaint
for recovery of possession and ownership of the litigated land, against Epifania and Pacita
Vallar

ISSUE: Whether or not Victoriano Cuenco, a naturalized Filipino is the rightful owner of
the land after buying it from Ong King Po, a Chinese.

HELD:
YES. The SC declared that the sale by Epifania to Ong King Po was void as it is
against public policy under the 1935 Constitution and that Cuenco was the rightful owner
as Epifania is also barred by laches.

Had this been a suit between Epifania and Ong King Po, she could have been declared entitled to
the litigated land.
But the factual set-up has changed. The litigated property is now in the hands of a naturalized
Filipino. It is no longer owned by a disqualified vendee. Respondent, as a naturalized citizen, was
constitutionally qualified to own the subject property. There would be no more public policy to be
served in allowing petitioner Epifania to recover the land as it is already in the hands of a qualified
person.
While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership to
transmit, it is likewise inescapable that petitioner Epifania had slept on her rights for 26 years from
1936 to 1962. By her long inaction or inexcusable neglect, she should be held barred from asserting
her claim to the litigated property.
Respondent, therefore, must be declared to be the rightful owner of the property.
#15
Herrera VS. Luy Kim Guan

1 SCRA 106 (1961)

Doctrine:
The death of the principal does not render the act of an agent unenforceable, where the latter had
no knowledge of such extinguishment.

Facts:

Natividad Herrera is a legitimate daughter of Luis Herrera


Luis Herrera owned three (3) parcels of land and before leaving for China, he executed a Deed
of General Power of Attorney in favor Luy Kim Guan authorizing him to administer and sell
the properties of the latter.
Luy Kim Guan, in his capacity as an attorney-in-fact for Luis Herrera sold the lot 1740 to Luy
chay
Luy Chay then executed a deed of sale in favor of one Lino Bangayan
Luy Kim Guan, acting again as an attorney-in-fact for Luis Herrera sold to Nicomedes Salazar
of the two lots.
Luy Kim Guan Nicomedes Salazar executed a deed of mortgage in favor of Bank of the
Philippines Islands.
Luy Kim Guan and Salazar sold part of the remaining lot to Carlos Cizantos.
Salazar then sold his remaining interest to Lino Bangayan and Luy Kim Guan, both are as co-
owners.
Both Natividad Herrera and Luy Kim Guan admitted that Luis Herrera is now deceased.
The appellants contend that the abovementioned transactions were fraudulent and were
executed after the death of Luis Herrera (principal) when the power of attorney was no longer
operative.
Issue:
WON The transactions were null and void because they are executed after the death of
the principal?
Held:
No, The transactions are not null and void and of no effect. Coming now to the contention
that these transactions are null and void and of no effect because they were executed by the
attorney-in-fact after the death of his Principal, suffice it to say that as found by the lower court,
the date of death of Luis Herrera has not been satisfactorily proven. The only evidence presented
by the Plaintiff-appellant in this respect is a supposed letter received from a certain "Candi", dated
at Amoy in November, 1936, purporting to give information that Luis Herrera (without mentioning
his name) had died in August of that year. This piece of evidence was properly rejected by the
lower court for lack of identification. the other hand, we have the testimony of the witness Chung
Lian to the effect that when he was in Amoy the year 1940, Luis Herrera visited him and had a
conversation with him, showing that the latter was still alive at the time. Since the documents had
been executed the attorney-in-fact one in 1937 and the other in 1939, it is evident, if we are to
believe this testimony, that the documents were executed during the lifetime of the principal. Be
that as it may, even granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no
proof and there is no indication in the record, that the age Luy Kim Guan was aware of the death
of his prince at the time he sold the property. The death of the principal does not render the act of
an agent unenforceable, where the latter had no knowledge of such extinguishment the agency.2
#16

Godinez v. Luen
Facts: The plaintiffs filed a case to recover a parcel of land sold by their father Jose Godinez to
defendant Fong Pak Luen. Said defendant executed a power of attorney in favour of his co-
defendant Kwan Pun Ming, who conveyed and sold the above described parcel of land to co-
defendant Trinidad S. Navata. The latter is aware of and with full knowledge that Fong Pak Luen
is a Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified
to acquire real property; that Fong Pak Luen has not acquired any title or interest in said parcel of
land as purported contract of sale executed by Jose Godinez alone was contrary to law and
considered non-existent. The defendant filed her answer that the complaint does not state a cause
of action since it appears from the allegation that the property is registered in the name of Jose
Godinez so that as his sole property he may dispose of the same; that the cause of action has been
barred by the statute of limitations as the alleged document of sale executed by Jose Godinez on
November 27, 1941, conveyed the property to defendant Fong Pak Luen as a result of which a title
was issued to said defendant; that under Article 1144(1) of the Civil Code, an action based upon a
written contract must be brought within 10 years from the time the right of action accrues; that the
right of action accrued on November 27, 1941 but the complaint was filed only on September 30,
1966, beyond the 10-year period provided by law. The trial court issued an order dismissing the
complaint. A motion for reconsideration was filed by plaintiffs but was denied.

Issue: Whether or not the sale was null and void ab initio since it violates applicable provisions of
the Constitution and the Civil Code.

Held: No. Prescription may never be invoked to defend that which the Constitution prohibits.
However, we see no necessity from the facts of this case to pass upon the nature of the contract of
sale executed by Jose Godinez and Fong Pak Luen whether void ab initio, illegal per se, or merely
prohibited. It is enough to stress that insofar as the vendee is concerned, prescription is unavailing.
But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the
land sold in 1941 is now in the hands of a Filipino citizen against whom the constitutional
prescription was never intended to apply. As earlier mentioned, Fong Pak Luen, the disqualified
alien vendee later sold the same property to Navata, a Filipino citizen qualified to acquire real
property. Navata, as a naturalized citizen, was constitutionally qualified to own the subject
property.
#17

JACOBUS BERNHARD HULST VS. PR BUILDERS


Topic: Special disqualifications (1491, last item)

FACTS: The Petitioner and his spouse, both Dutch Nationals, entered into a Contract to Sell with
PR Builders, Inc. to purchase a 210-sq m residential unit in the respondent's townhouse project in
Batangas. When PR Builder's failed to comply with their verbal promise to complete the project,
the spouses Hulst filed a complaint for rescission of contract with interest, damages and attorney's
fees before the Housing and Land Regulatory Board (HLURB), which then was granted. A Writ
of Execution was then addressed to the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, but
upon the complaint of the respondent, the levy was set aside, leaving only the respondent's personal
properties to be levied first. The Sheriff set a public auction of the said levied properties,
meanwhile, the respondent filed a motion to quash Writ of levy on the ground that the sheriff made
an over levy since the aggregate appraised value of the properties at P6,500 per sq m is
P83,616,000. Instead of resolving the objection of the respondent's regarding the auction, the
Sheriff proceeded with the auction since there was no restraining order from the HLURB. The 15
parcels of land were then awarded to Holly Properties Realty at a bid of P5,450,653. On the same
day, the Sheriff remitted the legal fees and submitted to contracts of sale to HLURB, however, he
then received orders to suspend proceedings on the auction for the reason that the market value of
the properties was not fair. There was disparity between the appraised value and the value made
by the petitioner and the Sheriff, which should've been looked into by the Sheriff before making
the sale. While an inadequacy in price is not a ground to annul such sale, the court is justified to
such intervention where the price shocks the conscience. The case was then decided by the
Supreme Court. It ruled that the contract was a Contract to Sell (see earlier digest). On the
dispositive portion, Court ordered petitioners to return the Php2, 125, 540 in excess of the proceeds
of the auction sale. Petitioner now files a Motion for Partial Reconsideration contending that the
Contract to Sell involved a condominium unit and did not violate the proscription against
ownership of lands by aliens.

ISSUE: Whether or not the Contract to Sell involving a condominium unit does not violate the
constitutional proscription on ownership of lands by aliens?

HELD: YES. Under RA 4726, the Condominium Act, foreign nationals can own real estate
through the purchase of condominium units or townhouses constituted under the Condominium
principle with Condominium Certificates of Title. The said law, in its Section 5, expressly allows
foreigners to acquire condominium units and shares in condominium corporations up to not more
than 40% of the total and outstanding capital stock of a Filipino-owned and controlled corporation.
Hence, the constitutional prohibition does not apply in this case. Accordingly, pronouncements on
the invalidity of the Contract to Sell is set aside and the order to return the excess of the proceeds
of the auction sale is deleted.
#18

DAUS vs Sps De Leon GR 149750


FACTS: Respondent Hermoso de Leon inherited from his father Marcelino de Leon the subject
parcel of land by virtue of a Deed of Extra-judicial Partition. Sometime in the early 1960s,
respondents engaged the services of a certain Atty. Florencio Juan to take care of the documents
of the properties of his parents. Atty. Juan let them sign voluminous documents. After the death of
Atty. Juan, some documents surfaced and most revealed that their properties had been conveyed
by sale or quitclaim to respondent Hermoso's brothers and sisters, and to Atty. Juan and his sisters,
when in truth and in fact, no such conveyances were ever intended by them. Respondent's signature
in the Deed of Extra-judicial Partition with Quitclaim made in favor of Rodolfo de Leon was forged
and later discovered that the land in question was sold by Rodolfo to petitioner Aurora Alcantara.
The trial court ruled in favor of petitioner, holding that respondent's claim was barred by laches,
because more than 18 years had passed since the land was sold. In reversing the RTC, the Court
of Appeals held that laches did not bar respondents from pursuing their claim. Hence, the present
petition. Petitioner argues that, having been perfected, the Contract of Sale executed on December
6, 1975 was thus binding upon the parties thereto.
ISSUE: Whether or not the Perfected Sale brings about delivery (and ownership) to Petitioner
HELD: A contract of sale is consensual. It is perfected by mere consent, upon a meeting of the
minds on the offer and the acceptance thereof based on subject matter, price and terms of payment.
At this stage, the seller's ownership of the thing sold is not an element in the perfection of the
contract of sale.
The contract, however, creates an obligation on the part of the seller to transfer ownership and to
deliver the subject matter of the contract. It is during the delivery that the law requires the seller
to have the right to transfer ownership of the thing sold. In general, a perfected contract of sale
cannot be challenged on the ground of the seller's non-ownership of the thing sold at the time of
the perfection of the contract.
Further, even after the contract of sale has been perfected between the parties, its consummation
by delivery is yet another matter. It is through tradition or delivery that the buyer acquires the real
right of ownership over the thing sold.
Undisputed is the fact that at the time of the sale, Rodolfo de Leon was not the owner of the land
he delivered to petitioner. Thus, the consummation of the contract and the consequent transfer of
ownership would depend on whether he subsequently acquired ownership of the land in
accordance with Article 1434 of the Civil Code. Therefore, we need to resolve the issue of the
authenticity and the due execution of the Extrajudicial Partition and Quitclaim in his favor.
Without the corroborative testimony of the attesting witnesses, the lone account of the notary
regarding the due execution of the Deed is insufficient to sustain the authenticity of this document.
#19
SAMPAGUITA PICTURES, INC vs. JALWINDOR MANUFACTURERS, INC.

Facts: Sampaguita Pictures (Sampaguita) is the owner of the Sampaguita Pictures Building located
in Quezon City. The roofdeck of the building and all existing improvements thereon were leased
by Sampaguita to Capitol; Inc. (Capitol for short), and it was agreed, among other things, that the
premises shall be used by said club for social purposes exclusively for its members and guests;
that all permanent improvements made by the lessee on the leased premises shall belong to the
lessor without any obligation on the part of the lessor to reimburse the lessee for the sum spent for
said improvements; that the improvements made by lessee have been considered as part of the
consideration of the monthly rental and said improvements belong to the lessor; that any
remodelling, alterations and/or addition to the premises shall be at the expense of the lessee and
such improvements belong to the lessor, without any obligation to reimburse the lessee of any sum
spent for said improvements. Capitol purchased on credit from Jalwindor Manufacturers Inc
(Jalwindor) glass and wooden jalousies which were delivered and installed in the leased premises
by Jalwindor, replacing the existing windows. On June 1, 1964, Jalwindor filed with the CFI of
Rizal, Quezon City, an action for collection of a sum of money with a petition for preliminary
attachment against Capitol for its failure to pay its purchases. The parties submitted to the trial
court a Compromise Agreement wherein Capitol acknowledged its indebtedness to Jalwindor and
pending liquidation of the said obligation, all the materials purchased by Capitol will be considered
as security for such undertaking. Subsequently, Capitol was not able to pay rentals, water, electric,
and telephone service to Sampaguita. Likewise, Capitol failed to comply with the terms of the
Compromise Agreement. On July 1965, Sheriff of Quezon City made levy on the glass and wooden
jalousies in question. Sampaguita filed a third-party claim alleging that it is the owner of said
materials and not Capitol. Jalwindor, however, filed an indemnity bond in favor of the Sheriff and
the items were sold at public auction on August 30, 1965 with Jalwindor as the highest bidder.
Sampaguita filed with CFI of Rizal, an action to nullify the Sheriff;s Sale and for the issuance of
a writ of preliminary injunction against Jalwindor from detaching the glass and wooden jalousies.
Issue: Whether or not Capitol is deemed as the owner of the glass and wooden jalousies

Held: YES. When the glass and wooden jalousies in question were delivered and installed in the
leased premises, Capitol became the owner thereof. Ownership is not transferred by perfection of
the contract but by delivery, either actual or constructive. This is true even if the purchase has been
made on credit, as in the case at bar. Payment of the purchase price is not essential to the transfer
of ownership as long as the property sold has been delivered. Ownership is acquired from the
moment the thing sold was delivered to vendee, as when it is placed in his control and possession.
(Arts. 1477, 1496 and 1497, Civil Code of the Phil.) Capitol entered into a lease contract with
Sampaguita in 1964, and the latter became the owner of the items in question by virtue of the
agreement in said contract "that all permanent improvements made by lessee shall belong to
the lessor and that said improvements have been considered as part of the monthly rentals."
When levy or said items was made on July 31, 1965, Capitol, the judgment debtor, was no longer
the owner thereof.
#20
Topic: Concept of Delivery or Tradition
NORKIS DISTRIBUTORS, INC. v. CA ; ALBERTO NEPALES
Facts: Norkis Distributors, Inc. is the distributor of Yamaha motorcycles in Negros Occidental.
Avelino Labajo is the Branch Manager of its Bacolod office. On September 20, 1979, Alberto
Nepales bought from the Norkis- Bacolod branch a brand new Yamaha Wonderbike motorcycle,
then displayed in the Norkis showroom. The price of P7,500.00 was payable by means of a Letter
of Guaranty from DBP-Kabankalan Branch, which Labajo agreed to accept. Credit was then
extended to Nepales for the price of the motorcycle payable by DBP upon release of his motorcycle
loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in
favor of DBP. Labajo issued a Sales Invoice showing that the contract of sale of the motorcycle
had been perfected. Nepales signed the sales invoice to signify his conformity with the terms of
the sale. In the meantime, however, the motorcycle remained in Norkis' possession. The
motorcycle was thereafter registered in the Land Transportation Commission in the name of
Alberto Nepales. A registration certificate was subsequently issued by the Land Transportation
Commission which registration fees were paid by him, as evidenced by an official receipt. The
motorcycle subsequently met an accident. An investigation conducted by the DBP revealed that
the unit was being driven by a certain Zacarias Payba at the time. The unit was a total wreck, but
it was returned and stored inside Norkis' warehouse. On March 20, 1980, DBP released the
proceeds of Nepales' motorcycle loan to Norkis in the total sum of P7,500. As the price of
the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 and
demanded the delivery of the motorcycle. When Norkis could not deliver, he filed an action for
specific performance with damages against Norkis in the RTC. He alleged that Norkis failed to
deliver the motorcycle which he purchased, thereby causing him damages. Norkis answered that
the motorcycle had already been delivered to private respondent before the accident, hence, the
risk of loss or damage had to be borne by him as owner of the unit. RTC ruled in favor of Nepales,
ordering Norkis to deliver a new motorcycle of the same, brand, kind, and quality. The Court of
appeals affirmed the ruling of the RTC.
Issue: Whether or not there had already been a transfer of ownership of the motorcycle to Nepales
at the time it was destroyed.
Held: NO. The issuance of a sales invoice does not prove transfer of ownership of the thing sold
to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost
of the thing sold and has been considered not a bill of sale. In all forms of delivery, it is necessary
that the act of delivery whether constructive or actual, be coupled with the intention of delivering
the thing. The act, without the intention, is insufficient. When the motorcycle was registered by
Norkis in the name of Nepales, Norkis did not intend yet to transfer the title or ownership to him,
but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the
buyer's motorcycle loan. The Letter of Guarantee issued by the DBP, reveals that the
execution in its favor of a chattel mortgage over the purchased vehicle is a pre-requisite for the
approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP would
not approve private respondent's loan application and, consequently, there would be no sale.
The critical factor in the different modes of effecting delivery, which gives legal effect to the act,
is the actual intention of the vendor to deliver, and its acceptance by the vendee. Without that
intention, there is no tradition. The Code imposes upon the vendor the obligation to deliver the
thing sold. The thing is considered to be delivered when it is placed in the hands and possession
of the vendee. (Civil Code, Art. 1462). It is true that the same article declares that the execution
of a public instrument is equivalent to the delivery of the thing which is the object of the contract,
but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the
vendor shall have had such control over the thing sold that, at the moment of the sale, its material
delivery could have been made. It is not enough to confer upon the purchaser the ownership and
the right of possession. The thing sold must be placed in his control. When there is no impediment
whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is sufficient. But if
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to
reality-- the delivery has riot been effects . Article 1496 of the Civil Code which provides that in
the absence of an express assumption of risk by the buyer, the things sold remain at seller's
risk until the ownership thereof is transferred to the buyer, is applicable to this case, for there was
neither an actual nor constructive delivery of the thing sold, hence, the risk of loss should be borne
by the seller, Norkis, which was still the owner and possessor of the motorcycle when it was
wrecked. This is in accordance with the well-known doctrine of res perit domino.
#21

WAYS OF COLLECTING DELIVERY: CONSTRUCTIVE OR LEGAL *PUBLIC


INSTRUMENT

Addison vs. Felix

Facts: Four parcels of land as describe in a public instrument was subject of a contract of sale
between the petitioner and the defendant. Defendant paid 3000 upon the execution of deeds and
promised to pay 2000 on July 15, 1914 and another 5000 (30) days after the issuance of her
certificate of title. The contract was stipulated as follows:
That the defendant is to pay P10 within ten years for trees in bearing and P5 for trees not
in bearing with the condition that it will not exceed the amount of P85,000.

That the purchaser shall deliver 25% of the value of the products "from the moment she
takes possession of them until the Torrens certificate of title be issued in her favor."

Further stipulated was that "within one year from the date of the certificate of title in favor
of Marciana Felix, this latter may rescind the present contract of purchase and sale, in
which case Marciana Felix shall be obliged to return to me, A. A. Addison, the net value
of all the products of the four parcels sold, and I shall obliged to return to her, Marciana
Felix, all the sums that she may have paid me, together with interest at the rate of 10 per
cent per annum."

In 1915, Addison filed a suit to compel the defendant to pay him the P2000 with interest as in the
accordance of the terms of the contract. However, in a form of special defense, Felix alleges that
the petitioner failed to do his obligation of the contract by failing to deliver the parcels of land.
That out of the 4 parcels of land only 2 of it where delivered and that 2/3 of the other half were in
the possession of a third person. She then filed for a declaration of the rescission of the contract,
whereby she prayed that petitioner return her P3000 plus interest and indemnity
Trial Court ruled in favor of defendants, on the grounds that the plaintiff failed to deliver the lands
and in accordance to their stipulation that ". . . within one year from the date of the certificate of
title in favor of Marciana Felix, this latter may rescind the present contract of purchase and sale .
. . ."

Appellate Court disagreed, alleging that the right to elect to rescind the contract was subject to a
condition, namely, the issuance of the title, which in this case has not yet been fulfilled.

Issue: Whether or not delivery of a Public Instrument is equivalent to the delivery of the subject
matter of the sale.

Held: No. The Code imposes upon the vendor the obligation to deliver the thing sold. The thing
is considered to be delivered when it is placed "in the hands and possession of the vendee." (Civ.
Code, art. 1462.) It is true that the same article declares that the execution of a public instruments
is equivalent to the delivery of the thing which is the object of the contract, but, in order that this
symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have
had such control over the thing sold that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the purchaser the ownership and the right of
possession. The thing sold must be placed in his control. When there is no impediment whatever
to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor,
symbolic delivery through the execution of a public instrument is sufficient. But if,
notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and
material tenancy of the thing and make use of it himself or through another in his name, because
such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to
reality the delivery has not been effected.

The execution of a public instrument is sufficient for the purposes of the abandonment made by
the vendor; but it is not always sufficient to permit of the apprehension of the thing by the
purchaser.
It is evident, then, in the case at bar, that the mere execution of the instrument was not a fulfillment
of the vendors' obligation to deliver the thing sold, and that from such non-fulfillment arises the
purchaser's right to demand, as she has demanded, the rescission of the sale and the return of the
price. (Civ. Code, arts. 1506 and 1124.)
Inasmuch as the rescission is made by virtue of the provisions of law and not by contractual
agreement, it is not the conventional but the legal interest that is demandable.
#22
TEN FORTY REALTY V. CRUZ| Panganiban
G.R. No. 151212 | September 10, 2003
FACTS:
Petitioner filed an ejectment complaint against Marina Cruz(respondent) before the MTC.
Petitioner alleges that the land indispute was purchased from Barbara Galino on December 1996,
andthat said land was again sold to respondent on April 1998;
On the other hand, respondent answer with counterclaim that never was there an occasion when
petitioner occupied a portion of the premises. In addition, respondent alleges that said land was a
public land (respondent filed a miscellaneous sales application with the Community Environment
and Natural Resources Office) and the action for ejectment cannot succeed where it appears that
respondent had been in possession of the property prior to the petitioner;
On October 2000, MTC ordered respondent to vacate the land and surrender to petitioner
possession thereof. On appeal, the RTC reversed the decision. CA sustained the trial courts
decision.
ISSUE/S:
Whether or not petitioner should be declared the rightful owner of the property.
HELD:
No. Respondent is the true owner of the land.1) The action filed by the petitioner, which was an
action for unlawful detainer, is improper. As the bare allegation of petitioners tolerance of
respondents occupation of the premises has not been proven, the possession should be deemed
illegal from the beginning. Thus, the CA correctly ruled that the ejectment case should have been
for forcible entry. However, the action had already prescribed because the complaint was filed on
May 12, 1999 a month after the last day forfiling;2) The subject property had not been delivered
to petitioner; hence, it did not acquire possession either materially or symbolically. As between
the two buyers, therefore, respondent was first in actual possession of the property.
As regards the question of whether there was good faith in the second buyer. Petitioner has not
proven that respondent was aware that her mode of acquiring the property was defective at the
time she acquired it from Galino. At the time, the property which was public land had not been
registered in the name of Galino; thus, respondent relied on the tax declarations thereon. As shown,
the formers name appeared on the tax declarations for the property until its sale to the latter in
1998. Galino was in fact occupying the realty when respondent took over possession. Thus, there
was no circumstance that could have placed the latter upon inquiry or required her to further
investigate petitioners right of ownership.
DOCTRINE/S: Execution of Deed of Sale; Not sufficient as delivery. Ownership is transferred
not by contract but by tradition or delivery. Nowhere in the Civil Code is it provided that the
execution of a Deed of Sale is a conclusive presumption of delivery of possession of a piece of
real estate. The execution of a public instrument gives rise only to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is not effected, because of a legal
impediment. Such constructive or symbolic delivery, being merely presumptive, was deemed
negated by the failure of the vendee to take actual possession of the land sold. Disqualification
from Ownership of Alienable Public Land.
Private corporations are disqualified from acquiring lands of the public domain, as provided under
Section 3 of Article XII of the Constitution. While corporations cannot acquire land of the public
domain, they can however acquire private land. However, petitioner has not presented proof that,
at the time it purchased the property from Galino, the property had ceased to be of the public
domain and was already private land. The established rule is that alienable and disposable land of
the public domain held and occupied by a possessor personally or through predecessors-in-
interest, openly, continuously, and exclusively for 30 years is ipso jure converted to private
property by the mere lapse of time.
RULING:
The Supreme Court DENIED the petition.
#23
RUDOLF LIETZ V. CA
G.R. No. 122463 December 19, 2005

FACTS: Respondent Agapito Buriol previously owned a parcel of unregistered land situated at
San Vicente, Palawan. On August 15, 1986, respondent Buriol entered into a lease agreement with
Flavia Turatello and respondents Turatello and Sani, all Italian citizens, involving one (1) hectare
of Buriols property. The lease agreement was for a period of 25 years, renewable for another 25
years. The lessees took possession of the land after paying respondent Buriol a down payment of
P10,000.00. The lease agreement, however, was reduced into writing only in January 1987. On
November 17, 1986, respondent Buriol sold to petitioner Rudolf Lietz, Inc. the same parcel of land
for the amount of P30,000.00. Petitioner later discovered that respondent Buriol owned only four
(4) hectares, and with one more hectare covered by lease, only three (3) hectares were actually
delivered to petitioner. Thus, petitioner instituted a complaint for Annulment of Lease with
Recovery of Possession against respondents and Flavia Turatello. The complaint alleged that with
evident bad faith and malice, respondent Buriol sold to petitioner five (5) hectares of land when
respondent Buriol knew for a fact that he owned only four (4) hectares and managed to lease one
more hectare to respondents Tiziana Turatello and Paola Sani. Respondents filed separate answers
raising similar defenses of lack of cause of action and lack of jurisdiction over the action for
recovery of possession. Respondents Turatello and Sani also prayed for the award of damages and
attorneys fees. After trial, the court rendered judgment dismissing both petitioners complaint and
respondents counterclaim for damages. Petitioner and respondents Turatello and Sani separately
appealed, the CA affirmed the dismissal of petitioners complaint and awarded respondents
Turatello and Sani damages and attorneys fees. Petitioner contends that it is entitled to the
corresponding reduction of the purchase price because the agreement was for the sale of five (5)
hectares although respondent Buriol owned only four (4) hectares.

ISSUE: Whether or not petitioner is entitled to reduction of the purchase price?

HELD: NO. As correctly noted by the trial court and the Court of Appeals, the sale between the
petitioner and respondent Buriol involving the latters property is one made for a lump sum. The
Deed of Absolute Sale shows that the parties agreed on the purchase price on a predetermined area
of five hectares within the specified boundaries and not based on a particular rate per area.

In accordance with Article 1542, there shall be no reduction in the purchase price even if the area
delivered to the petitioner is less than that stated in the contract. In the instant case, the area within
the boundaries as stated in the contract shall control over the area agreed upon in the contract.
However, the discrepancy must not be substantial. A vendee of land, when sold in gross or with
the description more or less with reference to its area, does not thereby ipso facto take all risk of
quantity in the land. The use of such words in designating quantity covers only a reasonable excess
or deficiency.

#24
G.R. No. 170405 February 2, 2010
RAYMUNDO S. DE LEON,
vs.
BENITA T. ONG
FACTS: On March 10, 1993, Raymundo S. De Leon (petitioner) sold 3 parcels of land to Benita
T. Ong(respondent). The said properties were mortgaged to a financial institution; Real Savings
& Loan Association Inc. (RSLAI). The parties then executed a notarized deed of absolute sale with
assumption of mortgage. As indicated in the deed of mortgage, the parties stipulated that
the petitioner (de Leon) shall execute a deed of assumption of mortgage in favor of Ong
(respondent)after full payment of the P415,000. They also agreed that the respondent (Ong) shall
assume the mortgage. The respondent then subsequently gave petitioner P415,000 as partial
payment. On the other hand, de Leon handed the keys to Ong and de Leon wrote a letter to inform
RSLAI that Ong will assume the mortgage. Thereafter, the respondent took repairs and made
improvements in the properties. Subsequently, respondent learned that the same properties were
sold to a certain Viloria after March 10, 1993 and changed the locks, rendering the keys given to
her useless. Respondent proceeded to RSLAI but she was informed that the mortgage has been
fully paid and that the titles have been given to the said person. Respondent then filed a complaint
for specific performance and declaration of nullity of the second sale and damages. The
petitioner contended that respondent does not have a cause of action against him because the sale
was subject to a condition, which requires the approval of RSLAI of the mortgage. Petitioner
reiterated that they only entered into a contract to sell. The RTC dismissed the case. On appeal,
the CA upheld the sale to respondent and nullified the sale to Viloria. Petitioner moved
for reconsideration to the SC.

ISSUE: Whether or not the parties entered into a contract of sale or a contract to sell?

HELD: In a contract of sale, the seller conveys ownership of the property to the buyer upon the
perfection of the contract. The non-payment of the price is a negative resolutory condition.
Contract to sell is subject to a positive suspensive condition. The buyer does not acquire ownership
of the property until he fully pays the purchase price. In the present case, the deed executed by
the parties did not show that the owner intends to reserve ownership of the properties. The
terms and conditions affected only the manner of payment and not the immediate transfer of
ownership. It was clear that the owner intended a sale because he unqualifiedly delivered and
transferred ownership of the properties to the respondents.
#25
ASSET PRIVATIZATION TRUST vs T.J. ENTERPRISES

FACTS:
Asset Privatization Trust was a government entity created for the purpose to conserve, to
provisionally manage and to disposed assets of the government institutions. Petitioner acquired from
Development Bank of the Philippines machinery and refrigeration equipment. It was stored in a
compound that is being leased. Selling the items as is where is basis.
Petitioner and respondent entered in absolute deed of sale machinery and refrigeration equips lot 2 3 5.
Respondent paid full amount. Respondent demanded delivery of items. Respondent were able to take
lot 3 and 5, but the whole of lot 2. They were barred from hauling by the employees of the lessee.
Respondent filed a case, but was later able to get the remaining materials. However, it was found to be
damage and have missing materials.

ISSUE: whether there was a constructive delivery of the machinery and equipment upon the execution
of the deed of absolute sale between petitioner and respondent?

HELD: The ownership of a thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof. The thing sold shall be understood as delivered when it is placed in the control and
possession of the vendee.

As a general rule, when the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred. And with regard to movable property, its delivery may also
be made by the delivery of the keys of the place or depository where it is stored or kept. In order for the
execution of a public instrument to effect tradition, the purchaser must be placed in control of the thing
sold.

However, the execution of a public instrument only gives rise to a prima facie presumption of delivery.
Such presumption is destroyed when the delivery is not affected because of a legal impediment. It is
necessary that the vendor shall have control over the thing sold that, at the moment of sale, its material
delivery could have been made.]Thus, a person who does not have actual possession of the thing sold
cannot transfer constructive possession by the execution and delivery of a public instrument.
In this case, there was no constructive delivery of the machinery and equipment upon the execution of
the deed of absolute sale or upon the issuance of the gate pass since it was not petitioner but Creative
Lines which had actual possession of the property. The presumption of constructive delivery is not
applicable as it has to yield to the reality that the purchaser was not placed in possession and control of
the property.

#26
SAN LORENZO DEVELOPMENT CORPORATION VS. CA
G.R. NO. 124242, January 21, 2005

Facts:
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta. The latter made a downpayment of fifty thousand pesos (P50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by Babasanta. He demanded the
execution of a Final Deed of Sale in his favor so he may effect full payment of the purchase price;
however, the spouses declined to push through with the sale. They claimed that when he requested
for a discount and they refused, he rescinded the agreement. Thus, Babasanta filed a case for
Specific Performance.
On the other hand, San Lorenzo Development Corporation (SLDC) alleged that on 3 May
1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it in a
Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and for value
and therefore it had a better right over the property in litigation.

Issue:
Who between SLDC and Babasanta has a better right over the two parcels of land?

Ruling:
An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses
Lu is a contract to sell and not a contract of sale.
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand
pesos (P50,000.00) from Babasanta as partial payment of 3.6 hectares of farm lot. While there is
no stipulation that the seller reserves the ownership of the property until full payment of the price
which is a distinguishing feature of a contract to sell, the subsequent acts of the parties convince
us that the Spouses Lu never intended to transfer ownership to Babasanta except upon full payment
of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his
repeated requests for the execution of the final deed of sale in his favor so that he could effect full
payment of the price, Pacita Lu allegedly refused to do so. In effect, Babasanta himself recognized
that ownership of the property would not be transferred to him until such time as he shall have
effected full payment of the price. Doubtlessly, the receipt signed by Pacita Lu should legally be
considered as a perfected contract to sell.
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of
the purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Glaringly
absent from the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never
acquired obligatory force.
There was no double sale in this case because the contract in favor of Babasanta was a
mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual nor constructive
delivery as his title is based on a mere receipt. Based on this alone, the right of SLDC must be
preferred.

#27
Perpetua Abuan, et al v. Eustaquio Garcia, et al
Facts: On August 7, 1953, petitioners Perpetua Abuan et al. sold a parcel of rice land to defendants
Eustaquio Garcia et al. through a Deed of Absolute Sale. A TCT was issued to defendants. Later,
petitioners filed an action to recover the land, alleging the sale was tainted with fraud and was
without consideration. Reaching an amicable settlement, the parties entered into an "Agreement"
dated February 28, 1955, under which defendants paid P500 as partial payment of the purchase
price of the land, and promised to pay the balance of P1,500 on or before April 30, 1955, with a
grace period of 30 days. The Agreement also stated that it "shall supersede all previous agreements
or contracts heretofore entered into..." Plaintiffs instituted the present action on March 4, 1960.
Defendants moved to dismiss, on the ground that plaintiffs' right of action was already barred,
because the five-year redemption period had already expired. Section 119 of the Public Land Law
provides: Every conveyance of land acquired under the free patent or homestead provisions, when
proper, shall be subject to repurchase by the applicant, his widow, or legal heirs, for a period of
five years from the date of conveyance. Plaintiffs argue that the period should be counted from the
date of full payment (May 1965) since it was on this date that the contract was consummated.
CFI Nueva Vizcaya dismissed the complaint, fixing the starting date as February 28, 1955,
when the Agreement was entered into. CA certified the case to SC.
SC: "Conveyance" means transfer of ownership; it means the date when the title to the land is
transferred from one person to another. The 5-year period should, therefore, be reckoned with from
the date that defendants acquired ownership.

When did defendants legally acquire ownership of the land?


Upon execution of the Deed of Absolute Sale (August 7, 1953). Dismissal affirmed.

Under Art. 1498, When the sale is made through a public instrument, as in this case, the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from
the deed the contrary does not appear or cannot be clearly inferred. This manner of delivery is
common to personal as well as real property. It is clear, therefore, that defendants acquired
ownership to the land in question upon the execution of the Deed of Absolute on August 7, 1953.
The Agreement of February 28, 1955, only superseded the deed as to the terms and conditions of
payment. The Agreement did not operate to revest the ownership of the land in the plaintiffs.
Assuming arguendo that the Deed is null and void as petitioners allege, we can consider the date
of the Agreement at the latest, as the time within which ownership is vested in the defendants.
While it is a private instrument the execution of which could not be construed as constructive
delivery under Art. 1498, Art. 1496 explicitly provides that ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him "in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee." The intention to give possession
(and ownership) is manifest in the Agreement, especially considering the following circumstances:
(1) the payment of part of the purchase price, there being no stipulation in the agreement that
ownership will not vest in the vendees until full payment of the price; and (2) the fact that the
agreement was entered into in consideration of plaintiffs' desistance, as in fact they did desist, in
prosecuting their reinvindicatoria action, thereby leaving the property in the hands of the then and
now defendants as owners thereof, necessarily. This was delivery brevi manu permissible under
Articles 1499 and 1501 of the New Civil Code. In the absence of an express stipulation to the
contrary, the payment of the price is not a condition precedent to the transfer of ownership, which
passes by delivery of the thing to the buyer.

#28
PERFECTO DY V. CA
Topic: Delivery

FACTS: The petitioner, Perfecto Dy and Wilfredo Dy are brothers. Wilfredo Dy purchased a truck
and a farm tractor through financing extended by Libra Finance and Investment Corporation
(Libra). Both truck and tractor were mortgaged to Libra as security for the loan. The petitioner
wanted to buy the tractor from his brother so, he wrote a letter to Libra requesting that he be
allowed to purchase from Wilfredo Dy the said tractor and assume the mortgage debt of the latter.
It was approved. Wilfredo Dy executed a deed of absolute sale in favor of the petitioner over the
tractor in question. At this time, the subject tractor was in the possession of Libra Finance due to
Wilfredo Dys failure to pay the amortizations. Despite the offer of full payment by the petitioner
to Libra for the tractor, the immediate release could not be effected because Wilfredo Dy had
obtained financing not only for said tractor but also for a truck and Libra insisted on full payment
for both. Petitioner convinced his sister to buy the truck. A PNB check was issued in the amount
of P22,000.00 in favor of Libra, thus settling in full the indebtedness of Wilfredo Dy with the
financing firm. Libra insisted that it be cleared first before releasing the chattels. Meanwhile, Civil
Case entitled Gelac Trading, Inc. v. Wilfredo Dy, a collection case to recover the sum of
P12,269.80 was pending in another court. On the strength of an alias writ of execution issued, the
provincial sheriff was able to seize and levy on the tractor which was in the premises of Libra in
Carmen, Cebu. The tractor was subsequently sold at public auction where Gelac Trading was the
alone bidder. Later, Gelac sold the tractor to one of its stockholders, Antonio Gonzales. It was only
when the check was that the petitioner learned about GELAC having already taken custody of the
subject tractor. Petitioner filed an action to recover the subject tractor against GELAC Trading.
The RTC ruled in favor of the petitioner but CA reversed the decision. It held that the tractor in
question still belonged to Wilfredo Dy when it was seized and levied by the sheriff.

ISSUE: WON there was already a delivery to petitioner of the subject property at the time of the
questioned execution so as to render him the owner?

HELD: YES. Article 1496 of the Civil Code states that the ownership of the thing sold is acquired
by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497
to 1501 or in any other manner signifying an agreement that the possession is transferred from the
vendor to the vendee. The Court agrees with the petitioner that Articles 1498 and 1499 are
applicable in the case at bar. In the instant case, actual delivery of the subject tractor could not be
made. However, there was constructive delivery already upon the execution of the public
instrument, the deed of sale, pursuant to Article 1498 and upon the consent or agreement of the
parties when the thing sold cannot be immediately transferred to the possession of the vendee
(Article 1499).

#29
Industrial Textile Manufacturing vs LPJ Enterprises
FACTS: Sometime in October, 1970, Cesar Campos, a Vice-President of petitioner Industrial
Textile Manufacturing Company of the Philippines (or Itemcop, for brevity), asked Lauro
Panganiban, Jr., President of respondent corporation, if he would like to cooperate in an
experiment to develop plastic cement bags. Panganiban acquiesced. On December 29, 1970,
Campos sent Panganiban a letter proclaiming dramatic results in the experiment. Consequently,
Panganiban agreed to use the plastic cement bags. Four purchase orders (P.O.s) were thereafter
issued, to wit:
DATE NUMBER OF BAGS UNIT COST AMOUNT
5 January 1971 53,800 P.83 P44,654.00
24 February 1971 11,000 .90 9,900.00
15 March 1971 41,000 .92 37,720.00
6 April 1971 10,000 .92 9,200.00
TOTAL: P101,474.00
At the trial on the merits, respondent admitted its liability for the 53,800 polypropylene lime
bags covered by the first purchase order. With respect to the second, third, and fourth purchase
orders, respondent, however, denied full responsibility therefor. Respondent said that it will pay,
as it did pay for, only the 15,000 plastic bags it actually used in packing cement. As for the
remaining 47,000 bags, the workers of Luzon Cement strongly objected to the use thereof due to
the serious health hazards posed by the continued seepage of cement dust. Thereafter, petitioner
was asked to take back the unused plastic bags. Considering however, that the bags were in the
cement factory of respondent's supplier, petitioner maintained that it was respondent's obligation
to return the bags to them. Apparently, this was not done and so petitioner demanded payment
for the said bags.
ISSUE: Whether or not respondent may return the bags to the petitioner
HELD: It is beyond dispute that prior to respondent's transaction with petitioner, the bags were
already tested and the results thereof, albeit initially unsuccessful, were nevertheless favorably
considered after due alterations were made. Verily, it is on the basis of such experimental
findings that respondent agreed to use the plastic cement bags and thereafter issued the purchase
orders heretofore mentioned. Significantly, the quantity of bags ordered by respondent also
negates its position that the bags were still under experimentation. Indeed, if it were so, the bags
ordered should have been considerably lesser in number and would normally increase as the
suitability of the plastic bags became more definite. Likewise, it is worthy to note that as of the
date of petitioner's third delivery on March 19, 1971, respondent has received a total of 52,000
bags. By then, it was very probable that the problems alluded to by respondent could no longer
be resolved, thus, only 15,000 bags were actually used and 37,000 bags were already considered
unfit for packing cement. Under such predicament, it was but logical for respondent to cancel
then the fourth purchase order for another 10,000 bags. Surprisingly, respondent still accepted
the same upon delivery on April 17, 1971 and remitted its payments until May 3, 1971. When
petitioner sent letters demanding the full payment of the bags, respondent simply declared that it
did not receive any because it transferred its offices to another place. In the meantime, the bags
remained in the custody of Luzon Cement, respondent's supplier and virtually a stranger as far as
petitioner is concerned. It is for this reason that petitioner may not be expected to just pull out its
bags from Luzon Cement.
Finally, the conditions which allegedly govern the transaction according to respondent may not
be considered. The trial court correctly observed that such conditions should have been distinctly
specified in the purchase orders and respondent's failure to do so is fatal to its cause. We find that
Article 1502 of the Civil Code, invoked by both parties herein, has no application at all to this
case. The provision in the Uniform Sales Act and the Uniform Commercial Code from which
Article 1502 was taken, clearly requires an express written agreement to make a sales contract
either a "sale or return" or a "sale on approval". Parol or extrinsic testimony could not be
admitted for the purpose of showing that an invoice or bill of sale that was complete in every
aspect and purporting to embody a sale without condition or restriction constituted a contract of
sale or return. If the purchaser desired to incorporate a stipulation securing to him the right of
return, he should have done so at the time the contract was made. On the other hand, the buyer
cannot accept part and reject the rest of the goods since this falls outside the normal intent of the
parties in the "on approval" situation. In the light of these principles, We hold that the transaction
between respondent and petitioner constituted an absolute sale. Accordingly, respondent is liable
for the plastic bags delivered to it by petitioner.

#30
Teran(plaintiff) vs Villanueva (defendants)
Topic: Other rules on delivery: Sale of Real Estate made up of lump sum
Facts: On October 6, 1928, parties executed a deed of sale whereby defendants sold to plaintiff for
P4000 the parcel of land described as containing an area of 34 hectares, 52 ares and 43 centares.
The plaintiff brought this action for rescission of the contract, with damages, upon discovering that
the parcel of land contained only about ten hectares. The defendants from their late father, Mariano
Villanueva, inherited this land, with the same area stated in the contract. The same area appears in
the tax declaration given to the plaintiff by an agent of the defendants, named Rafael Villanueva.
The latter, accompanied by the plaintiff, inspected the land. Villanueva pointed out some of the
boundaries, as they did not go over all of them. Without further investigating the area of the land,
the plaintiff agreed to purchase it for P4000 paying the amount and taking possession thereof. The
plaintiff alleges that
after the 1928 harvest he discovered that the boundaries pointed out to him by Rafael Villanueva
were not the real ones, and, in order to ascertain the exact area of the land, he went to the
cadastral office in Malinao and got a sketch of the property, which shows that the land in question
contains only 10 hectares, and not thirty-four, as appears in the deed of sale.
Evidently this is a sale of real estate with area and boundaries given, for a lump sum and not so
much per unit of measure, provided for in article 1471 of the Civil Code.
Issue: Whether or not the deed of sale in this case may be rescinded
Held: No. Whenever a certain real estate is sold for a lump sum the rule in law is that there shall
be no increase or decrease in price even if the area or extent is found to be more or less than that
in the contract. But, if the vendor cannot deliver to the vendee all that is included within the
boundaries stated in the contract the latter has the option either to reduce the price in proportion to
the deficiency, or to set aside the contract.
In this case the Civil Code presumes that the purchaser had in mind a determinate piece of land,
and that he ascertained its area and quality before the contract was perfected. If he did not do so,
or if, having done so, he made no objection and consented to the transaction, he can blame no
one but himself; and, because, as Professor Antonio Gomez says, it is presumed that he intended
to buy a determinate object, any proof of misrepresentation will not avail him, neither will it vitiate
the transaction. (Scaevola, supra.) If the sale was made for a lump sum, the cause of the contract
is the thing sold, irrespective of area or quantity, the real estate as defined by the stipulated
boundaries, known in law as the
cuerpo cierto. If all that is included within the stipulated boundaries is not delivered, then the object
of the contract, its cause so far as the vendee is concerned, is not delivered: hence, he is entitled to
rescind it. He may however think (and of this there can be no judge but himself), that although he
did not receive the land within the stipulated boundaries, he would like to have it: hence, his right
to enforce the contract with the corresponding decrease in price as provided an article 1471. One
who contracts for the purchase of real estate in reliance on the representations and statements of
the vendor as to its character and value, but after he has visited and examined if for himself, and
has had the means and opportunity of verifying such statements, cannot avoid the contract on the
ground that they were false or exaggerated."
The plaintiff had ample opportunity to investigate the conditions of the land he was purchasing,
without the defendants doing anything to prevent him from making as many inquiries as he deemed
expedient, for which reason he cannot now allege that the vendors made false representations.

Lastly, the parties did not consider the area as an essential element of the contract, and there is no
evidence of the negotiations leading up to the sale of the land, or that the parties fixed the price at
so much per hectare, for which reason the contract is valid and binding upon the parties to it.

#31

Topic: Other rules on delivery


Rules in case of double sale
CONSOLIDATED RURAL BANK (CAGAYAN VALLEY), INC. v. CA and HEIRS OF
TEODORO DELA CRUZ
Facts: Rizal, Anselmo, Gregorio, Filomeno and Domingothe Madrid brothers, were the
registered owners of a piece of land situated in San Mateo, Isabela. The SUBJECT LOT of this
case is Lot No. 7036-A- 7, with an area of 5,958 sq. m., a subdivision of Lot No. 7036-A. First
Sale: In 1957, Rizal Madrid sold part of his share of the subject lot to Aleja Gamiao and Felisa
Dayag by virtue of a Deed of Sale, to which his brothers Anselmo, Gregorio, Filomeno and
Domingo offered no objection as evidenced by their Joint Affidavit. The deed of sale was not
registered with the Office of the Register of Deeds of Isabela. However, Gamiao and Dayag
declared the property for taxation purposes in their names. Subsequently, Gamiao and Dayag sold
the southern half of the subject lot, denominated as Lot No. 7036-A- 7-B, to Teodoro dela Cruz,
and the northern half, identified as Lot No. 7036-A- 7-A, to Restituto Hernandez. Thereupon,
Teodoro dela Cruz and Restituto Hernandez took possession of and cultivated the portions of the
property respectively sold to them. Later, Restituto Hernandez donated the northern half to his
daughter, Evangeline Hernandez-del Rosario. The children of Teodoro dela Cruz continued
possession of the southern half after their fathers death. Second Sale: In a Deed of Sale, the Madrid
brothers conveyed all their rights and interests over subject lot to Pacifico Marquez, which the
former confirmed. The deed of sale was registered with the Office of the Register of Deeds of
Isabela. Subsequently, Marquez subdivided the subject lot into eight (8) lots (Lot Nos. 7036-A- 7-
A to 7036-A- 7-H), for which TCTs were issued to him. On the same date, Marquez and his spouse,
Mercedita Mariana, mortgaged 4 subdivisions of subject lot (Lot Nos. 7036-A- 7-A to -D) to the
Consolidated Rural Bank (CRB) to secure a loan of P100,000. These deeds of real estate mortgage
were registered with the Office of the Register of Deeds. Marquez then mortgaged a subdivision
of the subject lot to the Rural Bank of Cauayan (RBC) to secure a loan of P10,000. As Marquez
defaulted in the payment of his loan, CRB caused the foreclosure of the mortgages in its favor and
the lots were sold to it as the highest bidder. Later, Marquez sold another subdivision to Romeo
Calixto. Claiming to be null and void the issuance of TCTs covering the 8 subdivisions; the
foreclosure sale of mortgaged lots; the mortgage to RBC; and the sale to Calixto, the Heirs of
Teodoro dela Cruzrepresented by Edronel dela Cruz, filed a case for reconveyance of the
southern portion of the original lot (Lot No. 7036-A) and damages against Marquez, Calixto, RBC
and CRB. Marquez alleged that apart from being the first registrant, he was a buyer in good faith
and for value. He also argued that the sale executed by Rizal Madrid to Gamiao and Dayag was
not binding upon him, it being unregistered. CRB and RBC insisted that they were mortgagees in
good faith and that they had the right to rely on the titles of Marquez which were free from any
lien or encumbrance. The RTC declared Marquez as the lawful owner of the subject lot after
applying Art. 1544. The CA reversed the ruling of the RTC and declared the First Sale as valid,
and the Second Sale and subsequent mortgages null void. It noted that while Marquez was the first
registrant, there was no showing that the registration of the deed of sale in his favor was coupled
with good faith. Anent the mortgagees RBC and CRB, the Court of Appeals found that they merely
relied on the certificates of title of the mortgaged properties. They did not ascertain the status and
condition thereof according to standard banking practice. For failure to observe the ordinary
banking procedure.
Issue: Whether or not the Second Sale is valid.
Held: NO. Article 1544 is not applicable in this case as it contemplates a case of double or multiple
sales by a single vendor. More specifically, it covers a situation where a single vendor sold one
and the same immovable property to two or more buyers. It is necessary that the conveyance must
have been made by a party who has an existing right in the thing and the power to dispose of it. It
cannot be invoked where the two different contracts of sale are made by two different persons, one
of them not being the owner of the property sold. And even if the sale was made by the same
person, if the second sale was made when such person was no longer the owner of the property,
because it had been acquired by the first purchaser in full dominion, the second purchaser cannot
acquire any right. The subject property was not transferred to several purchasers by a single
vendor. In the first deed of sale, the vendors were Gamiao and Dayag whose right to the subject
property originated from their acquisition thereof from Rizal Madrid with the conformity of all the
other Madrid brothers in 1957, followed by their declaration of the property in its entirety for
taxation purposes in their names. On the other hand, the vendors in the other or later deed were the
Madrid brothers but at that time they were no longer the owners since they had long before
disposed of the property in favor of Gamiao and Dayag. In a situation where not all the requisites
are present which would warrant the application of Art. 1544, the principle of prior tempore, potior
jure or simply "he who is first in time is preferred in right," should apply. The only
essential requisite of this rule is priority in time; in other words, the only one who can invoke this
is the first vendee. Undisputedly, he is a purchaser in good faith because at the time he bought the
real property, there was still no sale to a second vendee. In the instant case, the sale to the Heirs
by Gamiao and Dayag, who first bought it from Rizal Madrid, was anterior to the sale by the
Madrid brothers to Marquez. The Heirs also had possessed the subject property first in time. Thus,
applying the principle, the Heirs, without a scintilla of doubt, have a superior right to the subject
property. Moreover, it is an established principle that no one can give what one does not have
nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell,
and the buyer can acquire no more than what the seller can transfer legally. In this case, since the
Madrid brothers were no longer the owners of the subject property at the time of the sale to
Marquez, the latter did not acquire any right to it. In any event, assuming arguendo that Article
1544 applies to the present case, the claim of Marquez still cannot prevail over the right of the
Heirs since according to the evidence he was not a purchaser and registrant in good faith.
#32
OTHER RULESON DELIVERY: RULES IN CASE OF DOUBLE SALE

Leoncio and Barrera vs. CA, et al.

Facts: Azalia Salome (Salome) owned a house and lot in Makati City which she mortgaged to
Country Bankers Insurance and Surety Company to secure a P10,000 loan. On April 19, 1989,
Leoncio and Enriqueta Barrera (spouses Barrera) filed a complaint against one Rosendo Palabasan,
alleging that they had been in possession of the property since 1962 by virtue of a Deed of Sale
with Assumption of Mortage which lacked notarization, and by another Deed of Sale with
Assumption of Mortage, this time notarized, with Salome, pursuant to which, they settled the
latters loan; the spouses further allege that they failed to redeem the property due to the sale and
certificate granted to Palabasan (and his spouse Bella).

Palabasan, on the other hand, contends that the property was sold to him on July 1, 1966 and he
had paid Salomes loan; and that spouses Barrera were only lessees of Salome, and later on
executed a contract of lease with him in 1970.

The trial court ruled that it was a case of double sale under Article 1544 of the Civil Code, deciding
in favor of Palabasan. However, the appellate court found that the common-law husband of
Salome, who testified after the latters death, showed that he was not aware of the transaction
entered into in 1966; but, also, that the counsel of spouses Barrere admitted that the transaction in
1962 did not materialize due to the mortgage.

Issue: Whether or not Palabasan is the owner of propert in question.


Whether or not there was double sale of an immovable property covered by Article 1544
of the Civil Code.
Held: Yes. Spouses Barrera failed to show sufficient evidence to win over the evidences showed
by Palabasan, more so that is a rule that a certificate of title issued is an absolute and indefeasible
evidence of ownership of the property in favor of the person whose name appears therein, and is
binding and conclusive upon the whole world.

No. Spouses Barrera, aside from the sale in 1962 not being materialized, failed to show that they
have actually paid the Salomes loan which was, apparently, a condition on the sale they contend
to have pursued on March 31, 1996; thus, there is no sale with the spouses, but only with Palabasan.

#33
SIGAYA v. MAYUGA
G.R. NO. 143254
August 18, 2005

Good faith on the second buyer is destroyed when he has actual knowledge of facts or
circumstances that affects the title

FACTS: A parcel of land owned by Dionisia Alorsabes was sold to Juanito Fuentes while the
remainder was inherited by her children. Each of the heirs sold their share of portions to the the
respondents. However, a document entitled Extra-Judicial Partition with Deed of Sale was
uncovered wherein the heirs of Dionisia purportedly sold their shares in favor of Teodulfo Sigaya
through a Deed of Sale.
Later on, the petitioners filed a case for recovery of possession against the respondents arguing
that they have the right of ownership and possession over the property. The respondents answered
that the Deed of Sale in favor of Teodulfo was null and void as it is based on a fictitious extra-
judicial settlement considering that two of the heirs were illiterate. Hence, they were fraudulently
made to sign as vendees. The Regional Trial Court ruled in favor of the respondents believing that
the evidence of actual occupation and possession of the respondents had been satisfactorily proven.
The Court of Appeals affirmed the decision of RTC.
In appealing to the Supreme Court, the petitioners aver that Teodulfo purchased the property from
Francisco, one of the heirs, who was in possession of an OCT of the property named after Dionisia.
Relying on the instrument and after inspecting the land and seeing nobody occupied the same,
Teodulfo bought the land and had the title subsequently issued in his name. In this manner,
Teodulfo was an innocent purchaser in good faith and also a victim of misrepresentation.

ISSUE: Whether or not a person dealing with a registered land can safely rely on the correctness
of the Certificate of Title issued.

HELD: The Court ruled against the petitioners.


According to the Court, although general rule provides that every person dealing with registered
land may safely rely on the correctness of the certificate of title, the rule shall not apply when the
party has actual knowledge of facts and circumstances that would impel a reasonably cautious man
to make such inquiry or when the purchaser has knowledge of defect or lack of title in his vendor
or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the
property.
In the present case, it shows that the respondents had actual possession of the portions of land
conveyed to them the heirs of Dionisia. A witness for the respondents testified that he even
accompanied Francisco and Teodulfo to the different houses of the respondent as Teodulfo was
going to buy the property from Francisco. Seeing that there were occupants in the property, by
itself, the Court cannot sustain good faith claimed by the petitioners.

#34
MARTINEZ V. CA
G.R. No. 123547. May 21, 2001

FACTS: Sometime in February 1981, private respondents Godofredo De la Paz and his sister
Manuela De la Paz, married to Maximo Hipolito, entered into an oral contract with petitioner
Rev. Fr. Dante Martinez, then Assistant parish priest of Cabanatuan City, for the sale of a lot
located in Cabanatuan. At the time of the sale, the lot was still registered in the name of Claudia
De la Paz, mother of private respondents, although the latter had already sold it to private
respondent Manuela de la Paz by virtue of a Deed of Absolute Sale. Private respondent Manuela
subsequently registered the sale in her name. When the land was offered for sale to petitioner,
private respondents De la Paz were accompanied by their mother, since petitioner dealt with the
De la Pazes as a family and not individually. They assured him that the lot belonged to Manuela
De la Paz. It was agreed that petitioner would give a downpayment of P3,000.00 to private
respondents De la Paz and that the balance would be payable by installment. After giving the
downpayment, petitioner started the construction of a house on the lot, with the written consent
of the then registered owner, Claudia de la Paz. Petitioner likewise began paying the real estate
taxes. Since then, petitioner and his family have maintained their residence there and eventually
completed the payment of the lot. owever, private respondents De la Paz never delivered the
Deed of Sale they promised to petitioner.
In the meantime, in a Deed of. Absolute Sale with Right to Repurchase, private respondents De
la Paz sold three lots with right to repurchase the same within one year to private respondents
spouses Reynaldo and Susan Veneracion for the sum of P150,000.00. One of the lots sold was
the lot previously sold to petitioner. Petitioner discovered that the lot he was occupying with his
family had been sold to the spouses Veneracion after receiving a letter from private respondent
Reynaldo Veneracion claiming ownership of the land and demanding that they vacate the
property and remove their improvements thereon. Petitioner, in turn, demanded through counsel
the execution of the deed of sale from private respondents De la Paz and informed Reynaldo
Veneracion that he was the owner of the property as he had previously purchased the same from
private respondents De la Paz

ISSUE: Whether or not private respondents Veneracion are buyers in good faith of the lot in
question as to make them the absolute owners thereof?

HELD: NO. A purchaser who is aware of facts which should put a reasonable man upon his
guard cannot turn a blind eye and later claim that he acted in good faith. The fact that there are
persons, other than the vendors, in actual possession of the disputed lot should have put the
purchaser on inquiry as to the nature of the builders right over the property. Mere reliance on the
assurance of a third person regarding the assertion that the lot had not been previously sold to
another purchaser does not meet the standard of good faith required under Article 1544

#35
Spouses Amancio et al. v. Court of Appeals, et al. G.R. No. 152627. September 16, 2005. Chico-
Nazario, J .:
FACTS: A parcel of land situated in Marikina was previously owned by the Sarmiento spouses by
virtue of a deed of absolute sale executed on July 17, 1972. The subject land was mortgaged by
the Sarmiento spouses to Carlos Moran Sison as a security for a sixty-five thousand three hundred
seventy pesos and 25/100 loan obtained by the Sarmiento spouses from Mr. Sison. Upon failure
of the Sarmiento spouses to pay the loan, Mr. Sison initiated the extra-judicial foreclosure sale of
the mortgaged property, and the said property was foreclosed. Jose Puzon purchased the same
property in an auction sale conducted by the Municipal Treasurer of Marikina for non-payment of
taxes. After paying P3,400.00, he was issued a certificate of sale and caused it to be registered in
the Registry of Deeds of Marikina. No redemption having been made by the Sarmiento spouses, a
final bill of sale was issued in his favor. On August 16, 1986, Mr. Puzon sold the property in
question to herein plaintiff-appellee. By virtue of such sale, a transfer certificate of title over the
subject property was issued in favor of the plaintiff-appellee. Records show that Mr. Puzon assured
the plaintiff-appellee that he will take care of the squatters in the subject property by filing an
ejectment case against them. However, Mr. Puzon failed to comply with his promise.
ISSUE: Is there good faith on the part of the purchaser?
HELD: Verily, every person dealing with registered land may safely rely on the correctness of the
certificate of title issued therefor and the law will in no way oblige him to go behind the certificate
to determine the condition of the property. Thus, the general rule is that a purchaser may be
considered a purchaser in good faith when he has examined the latest certificate of title. An
exception to this rule is when there exist important facts that would create suspicion in an otherwise
reasonable man to go beyond the present title and to investigate those that preceded it. Thus, it has
been said that a person who deliberately ignores a significant fact, which would create suspicion
in an otherwise reasonable man, is not an innocent purchaser for value. 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. The fact that private
respondent RRC did not investigate the Sarmiento spouses claim over the subject land despite its
knowledge that Pedro Ogsiner, as their overseer, was in actual possession thereof means that it
was not an innocent purchaser for value upon said land. Article 524 of the Civil Code directs tha t
possession may be exercised in ones name or in that of another. In herein case, Pedro Ogsiner had
informed RRC that he was occupying the subject land on behalf of the Sarmiento spouses. Being
a corporation engaged in the business of buying and selling real estate, it was gross negligence on
its part to merely rely on Mr. Puzons assurance that the occupants of the property were mere
squatters considering the invaluable information it acquired from Pedro Ogsiner and considering
further that it had the means and the opportunity to investigate for itself the accuracy of such
information.

#36
36.Lillian N. Mercado, Cynthia M. Fekaris, And Julian Mercado, Jr., Represented By Their
Attorney-In-Fact, Alfredo M. Perez, Vs. Allied Banking Corporation
FACTS: Perla executed a Special Power of Attorney in favor of her husband, Julian Mercado over
several pieces of real property registered under her name, authorizing the latter to performseveral
acts. On the strength of the aforesaid SPA, Julian obtained a loan from the respondent. Still using
the subject property as security, Julian obtained additional loan from the respondent. It appears,
however, that there was no property identied in the SPA and registered with the Registry of
Deeds. What was identied in the SPA instead was the property dierent from the one used as
security for loan. Julian defaulted on the payment of his loan obligations. Thus, respondent
initiated extra-judicial foreclosure proceedings over the subject property which was subsequently
sold at public auction wherein respondent was the highest bidder.
ISSUE:WON there IS a valid mortgage constituted over the subject property
HELD: It was Julian who obtained the loan obligations from respondent which he secured with
the mortgage of the subject property. The property mortgaged was owned by his wife Perla,
considered a third party to the loan obligations between Julian and respondent. It was, thus, a
situation recognized by the last paragraph of Article 2085 of the Civil Code that third persons who
are not parties to the principal obligation may secure the latter by pledging or mortgaging their
own property. There is no question therefore that Julian was vested with the power to mortgage
the pieces of property identied in the SPA, however, the subject property was not among those
enumerated therein. Julian was not conferred by Perla with the authority to mortgage the subject
property under the terms of the SPA, the real estate mortgages Julian executed over the said
property are therefore unenforceable

#37
Alejandro Gabriel and Alfredo Gabriel, v. Spouses Pablo Mabanta et al.
G.R. No. 142403. March 26, 2003

Sandoval-Gutierrez, J.:

Facts:
Spouses Pablo and Escolastica Mabanta were the registered owners of two lots located in
Patul and Capaltitan, Santiago, Isabela, with an area of 512 and 15,000 square meters, covered by
Transfer Certificates of Title (TCT) Nos. 72705 and 72707, respectively. On October 25, 1975,
they mortgaged both lots with the Development Bank of the Philippines (DBP) as collateral for a
loan of P14,000.00.

Five years thereafter or on September 1, 1980, spouses Mabanta sold the lots to Susana Soriano
by way of a Deed of Sale of Parcels of Land With Assumption of Mortgage.[4] Included in the
Deed is an agreement that they could repurchase the lots within a period of two (2) years.

Spouses Mabanta failed to repurchase the lots. But sometime in 1984, they were able to convince
Alejandro Gabriel to purchase the lots from Susana Soriano. As consideration, Alejandro delivered
to Susana a 500-square meter residential lot with an actual value of P40,000.00 and paid spouses
Mabanta the sum of P5,000.00. On May 15, 1984, spouses Mabanta executed a Deed of Sale with
Assumption of Mortgagein favor of Alejandro. For her part, Susana executed a document entitled
Cancellation of Contract whereby she transferred to Alejandro all her rights over the two lots.
Alejandro and his son Alfredo cultivated the lots. They also caused the restructuring of spouses
Mabantas loan with the DBP. However, when they were ready to pay the entire loan, they found
that spouses Benito and Pura Tan had paid it and that the mortgage was already cancelled
On August 18, 1985, Benito Tan and Alejandro Tridanio, a barangay official, approached
Alejandro to refund to him the P5,000.00 he paid to spouses Mabanta. Alejandro refused because
Tan was unwilling to return the formers 500-square meter lot delivered to Susana as purchase
price for the lots. Thereafter, spouses Tan tried to eject Alejandro from the lot covered by TCT
No. 72707.

On September 17, 1985, Alejandro and Alfredo filed with the Regional Trial Court, Branch 21,
Santiago, Isabela a complaint (involving the lot covered by TCT No. 72707) for specific
performance, reconveyance and damages with an application for a preliminary injunction against
spouses Mabanta, spouses Tan, the DBP and barangay officials Dominador Maylem and Alejandro
Tridanio. In due time, these defendants filed their respective answers.

During the proceedings, it turned out that it was spouses Tans daughter, Zenaida Tan-Reyes who
bought one of the lots (covered by TCT No. 72707) from spouses Mabanta on August 21, 1985.
Not having been impleaded as a party-defendant, she filed an answer-in-intervention alleging that
she is the registered owner of the lot covered by TCT No. 72707; that she purchased it from spouses
Mabanta in good faith and for value; that she paid their loan with the DBP in the amounts of
P17,580.88 and P16,845.17 per Official Receipts Nos. 1749539 and 1749540, respectively; that
the mortgage with the DBP was cancelled and spouses Mabanta executed a Deed of Absolute
Sale in her favor; and that TCT No. T-72707 was cancelled and in lieu thereof, TCT No. T-
160391 was issued in her name.

On April 12, 1991, the trial court rendered its Decision sustaining the right of Alejandro and
Alfredo Gabriel over the lot covered by TCT No. 72707 (now TCT No. T-160391)

Issue: Whether or not the second sale of the disputed lot executed by spouses Mabanta in favor of
Zenaida Tan-Reyes is valid under Article 1544 of the Civil Code.

Held: We have consistently held that in cases of double sale of immovables, what finds relevance
and materiality is not whether or not the second buyer was a buyer in good faith but whether or
not said second buyer registers such second sale in good faith, that is, without knowledge of any
defect in the title of the property sold. In Salvoro vs. Tanega, we had the occasion to rule that if
a vendee in a double sale registers the sale after he has acquired knowledge that there was a
previous sale of the same property to a third party or that another person claims said property in a
previous sale, the registration will constitute a registration in bad faith and will not confer upon
him any right.

Mere registration of title is not enough, good faith must concur with the registration. To be entitled
to priority, the second purchaser must not only establish prior recording of his deed, but must have
acted in good faith, without knowledge of the existence of another alienation by the vendor to the
other. In the old case of Leung Yee vs. F. L. Strong Machinery, Co. and Williamson, this Court
ruled: One who purchases a 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 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 a defect exists,
or his willful closing of his eyes to the possibility of the existence of a defect in his vendors title
will not make him an innocent purchaser for value, if it afterwards develops that the title was in
fact defective, and it appears that he had such notice of the defect as would have led to its discovery
had he acted with that measure of precaution which may reasonably be required of a prudent man
in a like situation.

In fine, we hold that respondent Zenaida Tan-Reyes did not act in good faith when she bought the
lot and had the sale registered.

#38
Ten Forty Realty v. Cruz

Doctrine: The execution of public instrument gives rise only to a prima facie presumption of
delivery, presumption is destroyed when the delivery is not effected because of a legal impediment
of failure to take actual possession of the property sold.

Facts: An ejectment suit was filed by petitioner Ten Forty against Marina Cruz alleging that the
former is the true and absolute owner of a parcel of land and residential house located in #71 18 th
St., E.B.B. Olongapo City with an area of 324 square meters having acquired said property from
Barbara Galino by virtue of Deed of Absolute Sale. After few years, petitioner Ten Forty learned
that same property was sold to Cruz who immediately occupied the property. Failure to arrive at
an amicable settlement, a demand letter was sent to respondent Cruz to vacate and pay reasonable
amount for the occupation of the same, however, Cruz refused to vacate the premises. A
counterclaim was submitted by respondent contending that petitioner is not qualified to the
property being a public land, that Galino did not sell the property to petitioner but merely obtained
a loan from Veronica Lorenzana, president of the corporation, no allegation as to the prior
possession of petitioner of the subject land wherein Galino was the actual possessor when it was
sold and vacated the premises in favor of the respondent. MTCC ruled in favor of petitioner and
ordered respondent to vacate the property and surrender the possession thereof to Ten Forty. RTC
reversed MTCCs decision and ruled that the execution of Deed of Absolute Sale in favor of
petitioner Ten Forty without actual transfer of the physical possession did not have the effect of
making the petitioner the owner of the property because there was no delivery of the object of the
sale. An appeal was submitted to Court of Appeals which sustained the ruling of RTC.

Issue: Whether or not delivery occurred upon the execution of Deed of Sale to warrant possession
over the subject land.

Held: Art. 1498 lays down the rule that an execution of public instrument shall be equivalent to
the delivery of the thing that is the object of the contract if, from the deed, the contrary does not
appear or cannot be clearly inferred. Ownership is transferred not by contract but by actual
delivery, Civil Code did not indicate that the execution of Deed of Sale is a conclusive presumption
of delivery of possession of real estate. Supreme Court held that the execution of public instrument
is a prima facie presumption of delivery and may be destroyed when actual delivery is not effected
because of a legal impediment. Petitioner Ten Forty never acquired the property from the time it
was sold to the corporation since Galino remained in possession of the subject land and later
vacated it after the second sale to Cruz, hence, it remained under the control and possession of
Galino and was never transferred to petitioner. Tax declarations of Galino and Cruz represented
an adverse claim over the unregistered property and derogated its claim of control and possession
of the subject land.

#39

G.R. NO. 124242, January 21, 2005


SAN LORENZO DEVELOPMENT CORPORATION
VS.
CA
FACTS: On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent
Pablo Babasanta. The latter made a downpayment of fifty thousand pesos (P50,000.00) as
evidenced by a memorandum receipt issued by Pacita Lu of the same date. Several other payments
totaling two hundred thousand pesos (P200,000.00) were made by Babasanta. He demanded the
execution of a Final Deed of Sale in his favor so he may effect full payment of the purchase price;
however, the spouses declined to push through with the sale. They claimed that when he requested
for a discount and they refused, he rescinded the agreement. Thus, Babasanta filed a case for
Specific Performance. On the other hand, San Lorenzo Development Corporation (SLDC) alleged
that on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been
sold to it in a Deed of Absolute Sale with Mortgage. It alleged that it was a buyer in good faith and
for value and therefore it had a better right over the property in litigation.
ISSUE: Who between SLDC and Babasanta has a better right over the two parcels of land?
RULING: An analysis of the facts obtaining in this case, as well as the evidence presented by the
parties, irresistibly leads to the conclusion that the agreement between Babasanta and the Spouses
Lu is a contract to sell and not a contract of sale. The receipt signed by Pacita Lu merely states that
she accepted the sum of fifty thousand pesos (P50,000.00) from Babasanta as partial payment of
3.6 hectares of farm lot. While there is no stipulation that the seller reserves the ownership of the
property until full payment of the price which is a distinguishing feature of a contract to sell, the
subsequent acts of the parties convince us that the Spouses Lu never intended to transfer ownership
to Babasanta except upon full payment of the purchase price. Babasantas letter dated 22 May
1989 was quite telling. He stated therein that despite his repeated requests for the execution of the
final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu allegedly
refused to do so. In effect, Babasanta himself recognized that ownership of the property would not
be transferred to him until such time as he shall have effected full payment of the price.
Doubtlessly, the receipt signed by Pacita Lu should legally be considered as a perfected contract
to sell. The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of
the purchase price. There being an obligation to pay the price, Babasanta should have made the
proper tender of payment and consignation of the price in court as required by law. Glaringly
absent from the records is any indication that Babasanta even attempted to make the proper
consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never
acquired obligatory force. There was no double sale in this case because the contract in favor of
Babasanta was a mere contract to sell; hence, Art. 1544 is not applicable. There was neither actual
nor constructive delivery as his title is based on a mere receipt. Based on this alone, the right of
SLDC must be preferred.

#40
Premiere Development Bank vs Yambao, Rodriguez, Morales
FACTS: Two (2) different persons with exactly the same name, i.e., Vicente T. Garaygay, each
claimed exclusive ownership of Lot 23 by virtue of an owners duplicate certificate each had
possession of during the period material covering said lot. On April 17, 1979, one of the two
Vicente T. Garaygays, a resident of Cebu City (executed a deed of sale over the lot described in
and covered by his TCT No. 9780 (693) in favor of his nephew, Joselito P. Garaygay. The other
Vicente T. Garaygay, a resident of Rizal sold to Liberto G. Yambao and Jesus B. Rodriguez the
same property. Buyers Yambao and Rodriquez would later sell a portion of their undivided
interests on the land to Jesus D. Morales. Then came the June 11, 1988 fire that gutted a portion
of the Quezon City hall and destroyed in the process the original copy of TCT No. 9780 (693) on
file with the Registry of Deeds of Quezon City. One Engr. Felino Cortez of the Land
Registration Authority (LRA) did the follow-up on the application. After due proceedings, the
LRA issued an order of reconstitution. Meanwhile, or on May 26, 1989, the deed of sale
executed by Garaygay of Cebu in favor of his nephew Joselito was registered, paving the
issuance in the latters name of TCT No. 12183. Lot 23 was subdivided into three (3) lots,
namely: Lot 23-A, Lot 23-B and Lot 23-C. Joselito posthaste sold Lot 23-A to Lilian Toundjis
who, pursuant to a Contract to Sell executed on March 23, 1990 undertook to pay Joselito the P.5
Million balance of the P2.5 Million purchase price once she is placed in possession of a fenced-
off property. And, for shares of stock, Joselito assigned on February 26, 1991, the other two (2)
lots, i.e., Lot 23-B and Lot 23-C to Century Realty and Development Corporation (Century
Realty) which mortgage the same to Premiere Development Bank, Inc. (Premiere Bank) to
secure a P2.5 Million loan. Clashing claims of ownership first came to a head when, sometime in
May 1990, Liberato G. Yambao and his agents forcibly prevented Joselitos hired hands from
concrete-fencing the subject property. The police and eventually the National Bureau of
Investigation (NBI) entered into the picture. RTC decided in favor of Garaygay of Rizal. CA
affirmed. Toundjis claimed as an innocent purchaser and so does Premiere bank for having relied
on the Certificate of Title of Garaygay of Cebu.
ISSUE: Whether or not Toundjis and Premiere bank may rely on the face of Certificate of Title
upon sale presented to them to validly acquire rights over the land.
HELD: Both defining documents, Exhibit 1 and Exhibit B, appear to have been issued by the
appropriate Registry of Deeds and as such would ordinarily enjoy the guarantees flowing from
the legal presumption of regularity of issuance. It may not be idle to speculate, though, that fraud
or other improper manipulations had been employed along the way, with likely the willing
assistance of land registry official/s, to secure what for the nonce may be tagged as the other title.
Consistent with the presumption of regularity of issuance, however, the authenticity of one copy
has to be recognized.
The categorical conclusion of the Court of Appeals confirmatory of that of the trial court is that
Exhibit B is genuine and that Garaygay of Rizal is a real person. On the other hand, Exhibit 1
was adjudged spurious. These factual determinations as a matter of long and sound appellate
practice must be accorded great weight, and, as rule, should not be disturbed on appeal save for
the most compelling and cogent reasons.
However, unlike Exhibit B, Exhibit 1 contained entries and other uncommon markings or
features which could not have existed without human intervention. Although any one of them
may perhaps not be appreciable in isolation, these features and/or markings, taken together,
indeed put the integrity of Exhibit 1 under heavy cloud and indeed cast doubt on its genuineness.
The irregularities listed in the appealed decision may be summed up in the following wise: xxxx
1. Two (2) Victory stamps issued after liberation were strangely pasted on the seal of Garaygay
of Cebus title Exhibit 1 - when such stamps were not yet in existence when such title was entered
in the Registry of Deeds of Manila on June 14, 1944;2. Exhibit 1 was prepared on Judicial Form
No. 109-D Revised June 1945, which came into circulation after June 14, 1944; 3. Exhibit 1
bears the handwritten figure 9780 in ink above the typewritten number 693. There is no initial to
suggest that the handwritten number 9780 over the typewritten title number 693 was officially
authorized; xxxx
Other than paying taxes from 1949 to 1990 Garaygay of Cebu and this holds true for his nephew
Joselito - did not appear before the current stand-off to have exercised dominion over Lot 23. For
one, it has not been shown that Garaygay of Cebu was at any time in possession of the property
in question, unlike his namesake from Rizal who managed to place the property under the care of
certain individuals who built semi-permanent structure-dwelling houses thereon without so much
of a protest from Garaygay of Cebu or his nephew Joselito after the latter purportedly bought the
property. For another, neither Garaygay of Cebu nor his nephew Joselito ever instituted any
action to eject or recover possession from the occupants of Lot 23. This passivity bespeaks
strongly against their claim of ownership. It has been said that a partys failure to raise a
restraining arm or a shout of dissent to anothers possession for an unreasonably long period is
simply contrary to his claim of ownership. As the Court sees it, the Deed of Sale was a simulated
transaction because both JOSELITO and his uncle admit this was a joint venture to sell the
property in question.
A study of the record shows that Lot. 23-A that Toundjis contracted to buy from Joselito carried
an annotation that it was administratively reconstituted. Records also indicate that Toundjis knew
at the time of the sale that Joselito did not have possession of the lot inasmuch as she agreed to
pay the balance of the purchase price as soon as the seller can fence off the property and
surrender physical possession thereof to her. Likewise acceptable is the appellate courts holding,
citing Republic vs. Court of Appeals, that a purchaser of a property cannot be in good faith
where the title thereof shows that it was reconstituted. Noted with approval, too, is the appellate
courts observation that the contract to sell which is unregistered and not annotated at the back of
the title of the property [cannot adversely affect appellees] for the reason that under Sec. 51 of
PD 1529 (Property Registration Act), the act of registration shall be the operative act to convey
or affect the land in so far as third parties are concerned.
Premiere Bank cannot also be accorded the status of an innocent mortgagee for value. Hence,
when Premiere inspected the property xxx, it was aware of the existence of Rodriquez adverse
claim. This is admitted by Premieres witness xxx. The adverse claim of Rodriquez annotated
declares that he is the vendee of the land described. Premiere is aware of the existence of these
structures as can be seen in its real estate report. Said report states that there are shanties erected
in the property in dispute. But despite the existence of alleged shanties which are in fact and in
truth big structures, two of them being concrete buildings, Premiere Bank proceeded in the
execution of the mortgage contract. xxx. If the land mortgaged is in the possession of a person
other than the mortgagor, the mortgagee is required to go beyond the certificate of title and make
inquiries as to the rights of the actual possessors. Failure to do so would make him a mortgagee
in bad faith

#41
Ulep vs. CA Topic: Other rules on delivery: in case of double sale
Facts: Principal petitioners Samuel Ulep, Valentina Ulep, and Atinedoro Ulep are children of late
Valentin Ulep. During his lifetime, the father Valentin Ulep owned a parcel of land, identified as
Lot 840 located at Asingan, Pangasinan. Sometime in 1950, older Ulep sold of the land(eastern
portion) to Maximo Rodico, while the remaining half(western portion) to his son, Atinedoro Ulep
and daughter Valentina. TCT were then issued under their names. On January 18, 1971, they sold
the half portion of the area sold to them by their father to their brother Samuel Ulep and wife
Susana Ulep. Later, on December 21, 1954, an area of 507.5sq.m of the western portion was sold
to respondent Warlito Paringit and Encarnacion Grante by spouses Atinedoro and Beatriz Ulep.
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
petitionersand 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 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 onthe basis of said deed, INC was
issued TCT. An affidavit of subdivision was also executed by respondents INC, Maxima Rodico
and the spouses Warlito Paringit and Encarnation Gante This prompted spouses Samuel Ulep and
Susana Repogia-Ulep, the spouses Atinedoro Ulep and Beatriz Ulep and their sister Valentina
Ulep, to file 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. Spouses Atinedoro and Beatriz and Valentina
denied having executed a deed of sale in favour of INC claiming that their signatures appearing on
the deed were forged. At most, they claimed, what they sold to INC was only 100 square meters
and not 620 square meters. INC asserted that it purchases the portion containing 620 sq.m of Lot
840 as evidence by a deed of sale registered with the Registry of Deeds of Pangasinan.
Issue: Whether or not this case involves a double sale [If yes, whether INC has a better right than
petitioners]
Held: YES 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. 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 buyer's 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 buyer's rights) from the time of acquisition until the title is
transferred to him by registration, or, failing registration, by delivery of possession. 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 Repogia-Ulep happened on January 18,
1971 and the spouses registered their document of conveyance only on February 22, 1973. 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 Samuel's and Susana's 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. In the instant case, the registration made by respondent INC of its deed of
sale more than satisfies this requirement.

#42
Caram v Laureta
Topic: Other rules on delivery Rules in case of double sale CODIDI MATA, CELESTINO,
LUCIA, INGRACIO, PIO, MARCELO, MELETON, RICARDA, PAGAKAN, and CARING,
all surnamed MATA, and duly represented by their attorney-in- fact ISIDRO SEMBRANO v.
CA and HEIRS OF CLARO L. LAURETA G.R. No. 103476 November 18, 1999
Facts: Sometime in 1940, Sps. Marcos and Codidi Mata, predecessors-in- interest of petitioners,
were granted a homestead patent over a parcel of land situated in Tagum, Davao del Norte
containing an area of 4.5777 hectares. An OCT No. 3019 was subsequently issued in their favor.
First Sale: Marcos Mata executed a Deed of Absolute Sale conveying the ownership of the subject
lot in favor of Claro L. Laureta, the predecessors-in- interest of the Heirs of Laureta. Second Sale:
Mata executed another document selling the same property to Fermin Caram, Jr., who caused the
cancellation of OCT No. 3019. In lieu thereof, TCT No. 140 was issued in Carams name. Thus,
Laureta filed before the CFI-Tagum an action to declare the first sale of the subject lot in his favor
valid and the second sale thereof to Caram void. CFI-Tagum ruled for Laureta and declared the
first sale as valid, and the second sale, null and void. The CA affirmed the decision of the CFI.
Meanwhile, an action for reconveyance before the RTC was instituted by the Heirs of Mata as
against the Heirs of Laureta.
Issues: (1) Whether or not the second sale is valid.
(2) Whether or not further litigation concerning the same is barred by res judicata.
Held: (1) NO. The first sale in favor of Laureta prevails over the sale in favor of Caram. Although
the sale to Laureta was voidable, as it was procured by force, the same was cured when, after the
lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file
an action for annulment or to set up the nullity of the contract as a defense in an action to enforce
the same. Such pronouncement in the prior case cannot be construed in any other way but that the
Court affirmed the validity of the sale of the subject property in favor of Laureta as against the sale
of the same to Caram, which was categorically declared as void. Furthermore, by ordering the
dismissal of a prior civil case, the validity of the first sale was again upheld.
(2) YES. The foregoing rulings in the earlier related cases, which had long attained finality,
upholding the validity of the sale of the subject property in favor of Laureta effectively foreclosed
any further inquiry as to its validity in view of the doctrine of res judicata. Conclusiveness of
judgment bars the relitigation of particular facts or issues in another litigation between the same
parties on a different claim or cause of action. Although the action instituted by petitioners in the
lower court in this case (action for reconveyance) is different from the actions they instituted in
the earlier cases, the concept of conclusiveness of judgment still applies because under this
principle & the identity of causes of action is not required but merely identity of issues.

#43
De Leon vs Ong
GR No. 170405 February 2, 2010
Facts:
De Leon sold 3 parcels of land to Ong. The properties were mortgaged to Real Savings and Loan
Association. The parties executed a notarized deed of absolute sale with assumption of mortgage.
The deed of Assumption of mortgage shall be executed in favor of Ong after the payment of
415K. Ong complied with it. De Leon handed the keys of to Ong and informed the loan company
that the mortgage has been assumed by Ong. Ong made some improvements in the property.
After sometime, Ong learned that the properties were sold to Viloria and changed the locks to it.
Ong went to the mortgage company and learned that the mortgage was already paid and the titles
were given to Viloria. Ong filed a complaint for the nullity of second sale and damages. De Leon
contended that Ong does not have a cause of action against him because the sale was subject to a
condition which requires the approval of the loan company and that he and Ong only entered a
contract to sell.
Issue:
Whether or not the parties entered into a contract of sale

Ruling:
Yes, the parties entered into a contract of sale. In a contract of sale, the seller conveys ownership
of the property to the buyer upon the perfection of the contract. The non-payment of the price is
a negative resolutory condition. Contract to sell is subject to a positive suspensive condition. The
buyer does not acquire ownership of the property until he fully pays the purchase price. In the
present case, the deed executed by the parties did not show that the owner intends to reserve
ownership of the properties. The terms and conditions affected only the manner of payment and
not the immediate transfer of ownership. It was clear that the owner intended a sale because he
unqualifiedly delivered and transferred ownership of the properties to the respondent

#44
CONDITIONS AND WARRANTIES: CONDITION CONCEPT

Palanca vs. Director of Lands

Facts: The case stems from the opposition of one Roman Santos of the application for registration
of one Carlos Palanca, of a parcel of land marked lot No. 2 in the Province of Bulacan, the latter
claiming the eastern portion of the said lot.

Carlos Palanca acquired Lots no. 1 and 2, composing of the Hacienda of Sapawang Cawayan
from Felipe Buncamino Suntay who bought the same from sisters Irene and Consuelo Mojica. In
this sale, however, the seemed that a portion of land was excluded, which portion was later sold
by the sisters to Ramon Santos. However, Carlos Palanca contends that the excluded portion of
land was actually meant to be included in the sale to him as the sale was to be understood to cover
the hacienda as a whole. He roots it back from the leasing of Song Fo & Company of a small part
of the land from Benito Mojica, wherein the Company would have the right to purchase tuba which
was produced from the whole land, and erect a structure thereof; the contract did not describe the
area and boundaries of the land and undeniable pertained to the whole.

After the death of Bentijo, his heirt and judicial administratic, Irene Mojica, cancelled the contract
with the Company and entered into a new agreement for lease of the entire property, and the
Company later assigned to Carlos Palanca all their rights to the leased land and that should the
property be sold to the lessee, he should have the right to subrogate himself to the right of the
purchaser within thirty days if he so desired. This second contract, however, excluded the portion
of the land claimed by Ramon Santos.

Issue: Whether or not the portion of the land was meant to be included in the sale to Carlos
Palanca.

Held: Yes. Evidence shows that the exclusion was not the intention of the parties as the second
contract recited that the entire Hacienda of Sapawang Cawayan was the subject matter and thus,
included even the portion of the land sold to Ramon Satnos. Furthermore, before the term of the
lease expired, Mr. Grey, administrator of the the estate of Benito Mojica and successor of Irene
Mojica, asked the court to extend the lease and described the property including the portion once
excluded. Also, when Irene and Consuelo Mojica sold the property to Felipe Buencamino Suntay,
said property was actually mortgaged to the Philippine National Bank for P11,000 in its entirety.
This being so, it is true that the whole property, including the property in question, was sold to
Carlos Palanca.

Thus, there is a double sale. Nevertheless, the whole land must still be adjudged to Carlos Palanco
though his and Suntays registrations failed to include the portion in question. This is due to the
finding of bad faith in the part of Santos who, apparently, registered the said portion with
knowledge that it was already under a claim.
#45
Sigaya vs Mayuga
GR 143254 August 18, 1995
Austria-Martinez, J.

FACTS: Dionisia Alorsabes owned a three hectare land in Dao, Capiz, denominated as Lot 3603.
A portion of it was sold to Juanito Fuentes while the remainder was inherited by her children(Paz
Dela Cruz, Rosela Dela Cruz, and Consorcia Arroja) and her grandson, Francisco Abas, in
representation of his deceased mother. Paz and Consorcia sold their share of portions to
respondents Balleriano Mayuga and Honoratio De Los Santos respectively. However, a document
entitled Extra-Judicial Partition with Deed of Sale was uncovered wherein the heirs of Dionisia
purportedly sold their shares in favor of Francisco Abas. Francisco then executed a Deed of Sale
over Lot 3603 in favor of Teodulfo Sigaya. Thus, the title over Lot 3603 was cancelled and a new
one was issued in the name of Teodulfo Sigaya.
Later on, the petitioners, who are the widow and children of Teodulfo Sigaya filed a case for
recovery of possession of the land against the respondents arguing that they have the right of
ownership and possession over the property. The respondents answered that the Deed of Sale in
favor of Teodulfo was null and void as it is based on a fictitious extra-judicial settlement
considering that two of the heirs(Paz Dela Cruz and Rosela Dela Cruz) were illiterate. Hence, they
were fraudulently made to sign as vendees. The Regional Trial Court ruled in favor of the
respondents The Court of Appeals affirmed the decision of RTC.
Petitioners appeal to the Supreme Court and contended that Teodulfo purchased the property from
Francisco, one of the heirs, who was in possession of an OCT of the property named after Dionisia.
Relying on the instrument and after inspecting the land and seeing nobody occupied the same,
Teodulfo bought the land and had the title subsequently issued in his name. In this manner,
Teodulfo was an innocent purchaser in good faith and also a victim of misrepresentation.
On the other hand, respondents submit that Teodulfo relied on a title that is not in the name of his
transferor, Francisco, but on its registered owner, Dionisia, who was already deceased at the time
of the supposed sale to Teodulfo. They conclude that since the right of the supposed transferor was
not shown in the title but merely on a Deed of Extra-Judicial Settlement with Sale, which turned
out irregular, it was incumbent upon Teodulfo to examine further the extent of the right of the
supposed transferor and why there were a lot of occupants in the land in dispute; his failure to do
so operates against his favor and those of his successors-in-interest
ISSUE:Whether or not it is enough for petitioners to rely on the face of the certificate of title in
dealing with the contested property.
HELD: No.
According to the Court, although general rule provides that every person dealing with registered
land may safely rely on the correctness of the certificate of title, the rule shall not apply when the
party has actual knowledge of facts and circumstances that would impel a reasonably cautious man
to make such inquiry or when the purchaser has knowledge of defect or lack of title in his vendor
or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the
property.
In the present case, respondents presented Rolly Daniel, which the trial court considered as a
credible witness, who testified that not only were respondents in actual possession of their
respective portions prior to 1960, he even accompanied Francisco and Teodulfo to the different
houses of respondents sometime between 1976 to 1978 as Teodulfo was going to buy the portion
of Francisco. There being occupants of the property, the Court cannot ascribe good faith to
Teodulfo who has not shown any diligence in protecting his rights. A purchaser cannot simply
close his eyes to facts which should put a reasonable man on his guard and then claim that he acted
in good faith under the belief that there was no defect in the title of his vendor.

#46
Yap Kim Chuan v. Tiaoqui G.R. No. 10006, September 18, 1915 Torres, J.:
FACTS: The plaintiff in this case is a lessee of the defendant. During the period of lease, his
merchandise was damaged due to leaks in the roof of the storeroom in the leased building. For this
reason, he asked the defendant-lessor to indemnify him for damage caused by the leaks in the roof.
The defendant-lessor, on the other hand, argued that the building being occupied by the plaintiff
was new and was built based on standard required by the government. The leak was due to a
torrential rain the heaviest from the month of January of that year. He further argued that the leak
was not solely caused by the heavy rain but also due to improper location of said merchandise
inside the building.
ISSUE: Can the lessor be held liable for indemnity for the damage caused to the goods of lessee?
Did he fail to perform his obligations as lessor?
HELD: No. Article 1562 of the Civil Code reads: "If, at the time of the lease of the estate, the
condition of the same was not mentioned, the law presumes that the lessee received it in good
condition, unless there be proof to the contrary." Moreover, there is no evidence in the case that
he failed in the performance of the obligations he assumed in executing the lease, nor does there
appear to have been stipulated therein the liability now imputed to him. The fact is that neither the
lessor no the lessees knew that the roof was defective and was going to leak when it rained, for
they only became aware of the leaks during the rainstorm; and therefore only on the hypothesis
that the lessor had known of such defect and had concealed it from the plaintiffs could he be held
responsible for the consequences thereof on account of the leakages that occurred. Indeed lessor
is liable for warranty against any hidden defects. But this liability for warranty of the thing leased
does not amount to an obligation to indemnify the tenant for damages, which is only to be allowed
when there is proof that the lessor acted with fraud and in bad faith by concealing to the lessee.

#47

Jerry T. Moles V. Intermediate Appellate Court And Mariano M. Diolosa


FACTS: Jerry Moles bought from Mariano Diolosa owner of Diolosa Publishing House a linotype
printing machine (secondhand machine). Moles promised Diolosa that will pay the full amount
after the loan from DBP worth P50,000.00 will be released. Private respondent on return issued a
certication wherein he warrated that the machine was in A-1 condition, together with other
express warranties. After the release of the of the money from DBP, Petitioner required the
Respondent to accomplish some of the requirements. On which the dependant complied the
requirements on the same day. On November 29, 1977, petitioner wrote private respondent that
the machine was not functioning properly. The petitioner found out that the said machine was not
in good condition as experts advised and it was worth lesser than the purchase price. After several
telephone calls regarding the defects in the machine, private respondent sent two technicians to
make necessary repairs but they failed to put the machine in running condition and since then the
petitioner wan unable to use the machine anymore.
ISSUES 1. WON there is an implied warranty of its quality or tness.
2. WON the hidden defects in the machine is sucient to warrant a rescission of the contract
between the parties.
HELD 1. It is generally held that in the sale of a designated and specic article sold as secondhand,
there is no implied warranty as to its quality or tness for the purpose intended, at least where it is
subject to inspection at the time of the sale. On the other hand, there is also authority to the eect
that in a sale of secondhand articles there may be, under some circumstances, an implied warranty
of tness for the ordinary purpose of the article sold or for the particular purpose of the buyer. Said
general rule, however, is not without exceptions. Article 1562 of our Civil Code, which was taken
from the Uniform Sales Act, provides: "Art. 1562. In a sale of goods, there is an implied warranty
or condition as to the quality or tness of the goods, as follows: Where the buyer, expressly or by
implication, makes known to the seller the particular purpose for which the goods are acquired,
and it appears that the buyer relies on the seller's skill or judgment (whether he be the grower or
manufacturer or not), there is an implied warranty that the goods shall be reasonably t for such
purpose;" 2. We have to consider the rule on redhibitory defects contemplated in Article 1561 of
the Civil Code. A redhibitory defect must be an imperfection or defect of such nature as to
engender a certain degree of importance. An imperfection or defect of little consequence does not
come within the category of being redhibitory. As already narrated, an expert witness for the
petitioner categorically established that the machine required major repairs before it could be used.
This, plus the fact that petitioner never made appropriate use of the machine from the time of
purchase until an action was led, attest to the major defects in said machine, by reason of which
the rescission of the contract of sale is sought. The factual nding, therefore, of the trial court that
the machine is not reasonably t for the particular purpose for which it was intended must be
upheld, there being ample evidence to sustain the same. At a belated stage of this appeal, private
respondent came up for the rst time with the contention that the action for rescission is barred by
prescription. While it is true that Article 1571 of the Civil Code provides for a prescriptive period
of six months for a redhibitory action, a cursory reading of the ten preceding articles to which it
refers will reveal that said rule may be applied only in case of implied warranties. The present case
involves one with an express warranty. Consequently, the general rule on rescission of contract,
which is four years shall apply. Considering that the original case for rescission was led only one
year after the delivery of the subject machine, the same is well within the prescriptive period. This
is aside from the doctrinal rule that the defense of prescription is waived and cannot be considered
on appeal if not raised in the trial court, and this case does not have the features for an exception
to said rule.

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